MBS JEWELLER PRIVATE LIMITED,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-3, HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No. 330/H/2018 Assessment Year: 2010-11 MBS Impex Pvt. Ltd., Vs. Dy. Commissioner of Hyderabad. Income-tax, Central Circle – 3(1), PAN – AACCM 2968E Hyderabad. (Appellant) (Respondent) ITA No. 331/H/2018 Assessment Year: 2010-11 MBS Jeweller Pvt. Ltd., Vs. Dy. Commissioner of Hyderabad. Income-tax, Central Circle – 3(1), PAN – AAECM 7050M Hyderabad. (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao Revenue by: Shri Y.V.S.T. Sai, CIT-DR Date of hearing: 13/12/2021 Date of pronouncement: 07/01/2022

O R D E R PER L.P. SAHU, A.M.: These appeals filed by the assessees are directed against CIT(A), Tirupati’s orders dated 19/12/2017 for AY

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2010-11 involving proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short “the Act. Since the grounds and facts are identical in both these appeals, they were clubbed and heard together and, therefore, a common order is passed for the sake of convenience.

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findings specified in the special audit report is warranted. 9. The Ld. CIT (A) erred in holding, among other things, that the appellant's book results are not verifiable and that the AO has taken a reasonable view considering the wastage found at the time of search, de horse the special audit report obtained ul s 142(2A) of the Act. 10. The Ld. CIT (A) erred in holding, among other things, that the general explanation filed by the appellant computing the wastage at lower percentage, without any evidence is not acceptable, de horse the special audit report obtained u/s 142(2A) of the Act. 11. The Ld. CIT (Al erred in holding, among other things, that the contents of the special auditor's report are not acceptable evidence as the appellant could not explain with any documentary evidence in respect of the discrepancy between stock found at the time of search and the stock accounted as on the date of search 12. The Ld. CIT (Al erred in rejecting the additional grounds of appeal filed before him. 13. The Ld. CIT (Al ought to have decided the issue alter adjudicating on the additional grounds of appeal filed. 14. The appellant may add or alter or amend or modify or substitute or delete and / or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.

2.1 The assessee also filed a petition dated 09/05/2019 for the admission of the following additional grounds relying on the judgement of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383;

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“15. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd v. CIT (1998) 229 ITR 383 (SC), the Hon'ble ITAT has jurisdiction to examine the question of law which has been taken before the IT AT for the first time though not taken before the first appellate authority. 16. The Ld. CIT (A) ought to have annulled the assessment made u/s 143(3) of the Act dated 17.08.2012 on the ground that no notice u/s 143(2) of the Act has been issued and served on the assessee for the assessment year under consideration. 17. The Ld. CIT (A) ought to have followed the ratio laid down by the Apex Court in the case of ACIT & Am. v MI s. Hotel Blue Moon in Civil Appeal No.1198 of 2010 dated 02.02.2010 and annulled the impugned assessment before completion of which no notice u/s 143(2) of the Act has been issued.

ITA No. 331/Hyd/2018 “1. The order of the Ld. Commissioner of Income Tax (Appeals) is erroneous both on facts and in law. 2. The Ld. CIT (A) erred in dismissing the appeal of the appellant, without appreciating the facts of the case. 3. The Ld. CIT (A) erred in relying on the findings of the Assessing Officer without considering the submissions made by the appellant. 4. The Ld.CIT (A) erred in upholding the AO's decisions without appreciating the submissions made by the appellant.

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evidence in support of its explanation on difference in cash before the A.a and as well before the Ld. CIT(A). 13. The Ld.CIT (A) erred in upholding addition of Rs. 1,21,11,673/- towards unaccounted sales without appreciating the facts of the case. 14. The Ld. CIT (A) ought to have appreciated the fact that the A.O erred in arriving unaccounted sales of the appellant at Rs. 34,60,47,806/-. 15. The Ld. CIT (A) ought to have appreciated the fact that the A.O erred in computation of difference in value of the stocks. 16. The Ld.CIT (A) ought have appreciated the fact that while computing the difference in value of the stock the A.O erred in valuing opening stock without following same analogy adopted for computation of value of closing stock. 17. The Ld.CIT (A) ought to have appreciated the fact that the A.O made an addition of Rs. 1,21,11,673/- on notional basis without proving receipt of such income by the appellant. 18. The Ld.CIT (A) ought to have appreciated the fact that the A.O computed value of closing stock ignoring the wastage of 12 % to 18 % in the line of business being carried out by the appellant. 19. The Ld.CIT (A) ought to have appreciated the fact that the A.O erred in recasting the books of accounts by revaluing value of stock in trade without rejecting the books u/s 145(3) of the Act. . "as Pvt. Ltd. 20. Without prejudice to other grounds, The Ld.CIT (A) erred in upholding decision of the AO in estimating profit of the appellant at 3.5% of the amount of Rs.

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34,60,47,806/- which has been treated by the AO as unaccounted sales. 21. The Ld. CIT (A) erred in confirming profit of 3.5 % on sales which is on the higher side. 22. The Ld.CIT (A) ought to have appreciated the fact that the AD made an addition of Rs. 1,21,11,673/ _ without any evidence to show 'that the appel1ant had earned such income. 23. The Ld. CIT (A) ought to have appreciated the fact that the appel1ant has not concealed any income and hence the initiation of penalty u/ s 217 AAA is not justified. 24. The Ld. CIT (A) ought to have appreciated the fact that the appellant has neither concealed particulars of income nor furnished inaccurate particulars of income and therefore initiation of penalty proceeded u/ s 271(1)( c) is not justified. 25. The appellant may add or alter or amend or modify or substitute or delete and / or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.

2.2 The assessee also filed a petition dated 04/11/2020 for the admission of the following additional grounds relying on the judgement of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383; “26. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd v. CIT (1998) 229 ITR 383 (SC), the Hon'ble IT AT has jurisdiction to examine the question of law

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which has been taken before the IT A T for the first time though not taken before the first appellate authority. 27. The Ld. CIT(A) ought to have annulled the assessment made ul s 143(3) of the Act dated 14.08.2012 on the ground that no notice ul s 143(2) of the Act has been issued and served on the assessee for the assessment year under consideration. 28. The Ld. CIT (A) ought to have followed the ratio laid down by the Apex Court in the case of ACIT & Anr. v MI s. Hotel Blue Moon in Civil Appeal Ko.1198 of 2010 dated 02.02.2010 and annulled the impugned assessment before completion of which no notice ul s 143(2) of the Act has been issued and served on the assessee for the assessment year under consideration.

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28/11/2005 and other statutory notices were issued to the assessee. The AO completed the assessment assessing the income of the assessee at Rs. 15,74,14,571/- by making an addition of Rs. 7,89,00,746/- on account of unaccounted sales.

7.1 Further, he submitted that before taking up the case for scrutiny, the AO is required to issue notice u/s 143(2)

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for acquiring his jurisdiction and for this proposition. He also submitted that the notice u/s 143(2) must be issued in time as per prescribed tine. This assessment for this impugned year searched year therefore the assessment will be completed u/s 143(3), therefore, it is mandatory for the assessing officer to issue notice within time, he relied on the judgment of the Apex Court in the case of ACIT & Anr. Vs. M/s Hotel Blue Moon reported in [2010] 188 Taxman 113 (SC). The ld. AR filed paper books containing pages 1 to 40, the details of which are as under:

7.2 He also filed a paper book containing pages 1 to 121 of compilation of case laws in support of assessees’ cases.

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which is internal document of the department cannot be taken as a proof of non-service of notice u/s 143(2). 2. It is humbly submitted that common hearings for all the years together are normally held in case of search assessments. In the present case also, a common notice u/s 142(1) was issued on 18.11.2011 for A.Y. 2004-05 to 2010-11 seeking filing of return. A separate notice was issued on 17.10.2011 for the present assessment year calling for return of income. The assessee filed return of income on 07.12.2011 in response to the said notices. Thereafter notices were issued on various occasions, It is also humbly submitted that on 09.07.2012 a fresh opportunity of hearing was also granted to the assessee to explain his case. It is humbly submitted that no specified form is prescribed under the Act for notices u/s 143(2) and the notice dated 09.07.2012 which is common for all years clearly provide the opportunity of hearing as required u/s 143(2). It is also humbly submitted that the AO mentioned in his assessment order that notice u/s 143(2) was issued on 18.04.2011 and the assessee did not challenge this fact before the AO or the CIT(Appeals). 3. It is submitted that the assessee did not raise the issue either before the AO or CIT(Appeals). On the other hand, in the ground no. 3 raised by the assessee before the CIT(Appeals) it is clearly stated that the assessee fully cooperated in providing all the required information to notices u/s 143(2) and 142(1) of IT Act. 1961 passed from time to time. Once the assessee himself admitted that opportunity u/s 143(2) was granted, there is no merit in raising the issue before the Hon’ble ITAT based on an ill maintained order sheet. 4. It is also humbly submitted that the assessee was not prevented in raising the matter while filing the appeal itself. When the matter involves deliberation on facts and when the assessee is contradicting his own grounds before the CIT(Appeals), he is not entitled to raise a

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ground which is not raised before the lower authorities. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of Gurjargravures P Ltd. (SC) (Ill ITR 1). Reliance is also placed on the decision of jurisdictional High Court in the case of Begum Noor Banu (AP) (69 Taxman 565). It is also humbly submitted that in case of Premium Capital Market & Investment Ltd. (MP) (151 Taxman 194), the Hon’ble High Court of Madhya Pradesh held that whether a particular notice is served or not is not a pure question of law. Therefore, the reliance by the assessee on the judgement of Hon’ble Supreme Court in the case of NTPC Limited is misplaced and the assessee is not entitled to raise the additional grounds on 14.05.2019 much after the appeal is filed. 5. It is also humbly submitted that on 27.12.2017 an order u/s 143(3) rws 147 was passed by the AO confirming the income assessed as per order u/s 143(3) dated 17.08.2012. Apparently, the assessee did not prefer appeal on the order u/s 147. Therefore, the present appeal is infructuous as the order u/s 143(3) got merged into order u/s 147 dated 27.12.2017. 6. It is also humbly submitted that additional evidence in the form of order of SEBI with regard to manipulation of share price of M/s Gold Stone Technologies Private Limited was filed by the undersigned on 13.05.2019. As the manipulation of share price of said company coupled with settlement of liabilities made by the assessee on behalf of Dr. P S Prasad is material for the assessee and hence the additional ground may kindly be admitted under Rule 29 of Income Tax (Appellate) Tribunal Rules, 1963. 7. On the grounds taken by the assessee, the following submissions are made. It is humbly submitted that it is a false assertion on the part of the assessee to state that audited books of the assessee were accepted by the AO and no defects were found. On the contrary, the

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additions were precisely made on account of the fact that the transactions in the books do not reflect the true transactions undertaken by the assessee. 8. On the face of mounting evidence, it is also incorrect on the part of the assessee to state that the seized documents are dumb material. On the other hand, the seized documents clearly indicate a well thought out scheme of unaccounted transactions entered into by the assessee. It is also humbly submitted that the CIT(Appeals) was correct in rejecting the additional grounds filed by the assessee because the assessee made mere averments and did not produce any cogent evidence. 9. On the issue of deficit stock of jewellery, it is submitted that during the search proceedings there was a clear difference between the book stock and the stock as physically available. It is humbly submitted that in the letter dated 06.06.2010 which was filed by the AR of the assessee on 29.06.2010 before DDlT (Investigation) Unit-1(1). Hyderabad, with regard to the difference in stock, the assessee stated that" the details of gold lying with karigars and others cannot be given in view of its sensitiveness, delicacy and of business secrecy. "This letter is signed by the director of the assessee Mr. Sukesh Gupta and copy of the same is available at Pg. No.8 to 11 of this paper book. From the above, it is clear that the claim made by the assessee that the certain stock was lying with goldsmiths karigars and customers was only an alibi to cover the deficit stock and the assessee was bound to prove the existence of such stock, and he failed. The profit rate of 3.5 per cent adopted by the AO is also based on the letter of Mr. Sukesh Gupta filed on 29.06.2010 stating that a margin of 3.5 per cent is disclosed on sales as per previous practice. Therefore, the claim made by the assessee that the profit percentage has to be taken at 0.58 per cent is devoid of merit. It is also submitted that the claim of wastage at 12 to 18 per cent is very high in the gold

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trade are not acceptable. It is also humbly submitted that as per the statement made by Mr. Sukesh Gupta recorded u/s 132(4) on 11.03.2010, the gross profit in the trade varies from 3 to 5 per cent. As all the expenditure is already claimed in the books, and hence the adoption of profit at the rate of 3.5 per cent is justified. 10. It is also humbly submitted that apparently the sale of stock was not accounted in the books and the amounts were diverted for purchase of lands from Dr. P.S. Prasad of the Gold Stone Group and also settlement of liabilities towards shares as unaccounted consideration in lieu of purchase of land. It is humbly submitted that during search incriminating material was seized with regard to the unaccounted transactions. Details of some of the documents are mentioned below. There is an unsigned and undated agreement, a memorandum of settlement dated 25.01.2010 and an undated memorandum wherein the clear fact of purchase of land coupled with dealing in shares, cash etc for Rs. 230 crores is clearly evident. From the unsigned memorandum at pages 23-24 of this paper book, it is also evident that account of Gold Stone Group is also maintained by the assessee indicating settlement to third parties in cash and kind. A hand written agreement dated 19.02.2010 also confirms this fact. From the sheets indicating settlement dated 25.01.2010, it can also be seen that diamonds and pearls etc were paid in lieu of losses incurred in manipulation of shares of Mis Gold Stone Technologies Private Limited. It is clearly evident from the seized record that as per the instructions of Dr. P.S.Prasad, Mr. Sukesh Gupta (on behalf of the assessee) has settled the amounts due to various parties for losses incurred in the manipulation of share price. Share purchase agreements with the share holder of Mis. Gold Stone Technologies Private Limited were also seized during the search. Transfer of land to assessee group is also evident from various sale deeds.

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In response to question no. 15, he admitted that he could not submit stock reconciliation as called for. From the unsigned memorandum available at pages 23- 24 of this paper book (which is copy of seized record), it is seen that it is written at clause 7(iii) " that the costs and sums payable by the party of FIRST PART to the third parties both listed an un foreseen claimants shall be paid by the party of SECOND PART through Shri P. Murli Mohan Rao CA on behalf of them and the same is subject to account and payable from the total consideration payable to the party of FIRST PART or its nominees." This shows that the learned AR was mentioned as a person acting on behalf of the assessee group to facilitate payments towards settlement of third party liabilities of Gold Stone Group. Hon'ble ITAT may kindly take notice of the fact that there is conflict of interest of learned AR with reference to the transactions between assessee group and Gold Stone Group. 13. It is also submitted that Shri Bhandhakavi Phani Madhav, Director of M/s. Summit Communications Private Limited in his statement u/s 131 dated 21.04.2010 stated that details of the transactions are known to Mr. Sukesh Gupta only. 14. In light of the above, it is humbly submitted that there is a clear unaccounted sale of jewellery by the assessee to divert the amounts for transactions related to purchase of land of 98 acres from the Gold Stone Group and also settlement of liability of third parties. 15. It is also submitted that the grounds taken by the assessee that in the special audit report u/s 142(2A), no addition has been suggested on account of estimation on deficit stock and the accounts have no defect are devoid of merit. The special audit report does not discuss physical verification of stock or physical verification of wastage. The fact that there was heavy stock difference coupled with unaccounted transactions

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of diversions of funds clearly indicate that there are unaccounted sale. It is also humbly submitted that CIT(Appeals) rightly rejected the additional grounds raised by the assessee because they were not supported by any credible evidence. Besides when the assessee did not produce any evidence during the assessment proceedings and did not show compliance, he cannot bring in further evidence in support of his claims before the appellate authorities. Reliance in this regard is placed on the following decisions: a. Decision of High Court of Allahabad in the case of Ram Prasad Varma Vs. CIT[1979] (2 Taxman 469 (AIL)) b. Decision of ITAT Agra Bench in the case of Shivangi Steel P Ltd. Vs. ACIT Central Circle [2014] (42 taxmann.com 393). c. Decision of High Court of Madras in the case of CIT Vs. Krishnaveni Ammal [1986] (158 ITR 826). d. Decision of ITAT Chennai Bench in the case of Kanniappan Murugadoss Vs. ITO Non Corporate ward 7(4), Chennai [2017] (79 taxmann.com 244). e. Decision of High Court of Andhra Pradesh in the case of A K Babu Khan Vs. Commissioner of Wealth Tax [1976] (102 ITR 757).

8.1 The ld. DR also filed compilation of case laws containing pages 1 to 222, the details of which are as under:

Left space intentionally

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8.2 The ld. DR also filed a petition for filing additional evidence by way of paper book, the details of which are as under:

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8.3. As the said additional evidence is by way of orders, the same are admitted.

8.4 In the rejoinder the ld. AR submitted that the whole written submissions relied by the ld. DR will not support the case of the revenue. In this case no notice u/s 143(2) of the Act. was issued at all for the relevant assessment year, therefore, the entire assessment is non-Est in the eyes of law.

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along with Sri P. Murali Mohan Rao, CA and AR of the assessee appeared from time to time and filed the information.”

9.1 On perusal of the above paras, it is observed that the assessee has filed return of income on 07/12/2011 declaring income of Rs. 7,85,13,825/- and notices u/s 143(2) and 142(1) along with questionnaire were issued on 18/11/2011. But on perusal of the paper books filed by the ld. AR of the assessee, we find that the assessee has filed its return of income on 30/10/2010 in ITR Form – 6 declaring income of Rs. 7,85,13,825/- and on behalf of the assessee company, the same was digitally signed by assessee’s Director Shri Sukesh Gupta, a copy of which is available in the paper book at page 1. Since this is a searched year, the assessee was required to file its return of income u/s 139(1) of the Act and assessment has to be completed by the AO u/s 143(3) of the Act and not as per section 153A of the Act.. The assessing officer has completed the assessment u/s 143(3) of the Act. but, it is mandatory to issue notice u/s 143(2) of the Act within the stipulated time as prescribed in the IT Act. The assessee has filed its original return of income on 13/10/2010 and, therefore, notice u/s 143(2) was required to be issued and served within 6 months from the end of the relevant AY in which the assessee has filed return of income . As per the assessment order at para No. 02 quoted supra, the AO has mentioned that the assessee has filed return of income on

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17/10/2011 is contradictory because this is a searched year and the assessee has to file its return of income as per section 139 to which the assessee has filed return of income originally on 14/10/2010 and the assessments had to be completed on the basis of return filed by the assessee on 14/10/2010 as per the IT Act as well as notices u/s 143(2) ought to have been issued within the stipulated time which is within six months from the end of the relevant AY in which the return of income has been filed by the assessee. Therefore, we do not agree with the facts mentioned by the AO at para No. 2 in the assessment order. The ld. DR was unable to produce any documentary evidence to establish that the notice u/s 143(2) was issued by the AO within the stipulated time. He merely relied on the letter dated 09/07/2012 issued by DCIT, Central Circle – 3, which is placed at page No. 5 of the paper book. The case law relied upon by the ld. AR of the assessee ACIT & Anr. Vs. M/s Hotel Blue Moon cited supra wherein it was held that the AO is required to issue notice u/s 143(2) for acquiring his jurisdiction and this case is squarely applicable to the case of the assessee. In view of our above observations, we hold that the AO has not issued notice u/s 143(2) to the assessee and, therefore, the entire assessment made without issuing the notice u/s 143(2) is void-ab-initio. Therefore, the entire assessment made by the AO is not a valid assessment in the eyes of the law and the same is hereby annulled.

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9.2 Similar issue came up for consideration before the coordinate bench of this Tribunal in the case of Sukesh Gupta in ITA No. 332/Hyd/2010 for AY 2010-11 vide its order dated 23/12/2021, wherein on the similar facts and circumstances of the case, the coordinate bench held as under: “8. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The ld. DR has raised objections that the assessee cannot challenge the legal issue regarding the issuance of notice U/s 143(2) at this stage due to he had accepted before the CIT (A) in his written submissions is not tenable because the legal issue can be challenged at any stage of appeal as decided by the Hon’ble Supreme Court in the case of National Thermal Power Co., Limited Vs. CIT 229 ITR 383 (SC). We therefore accept the arguments advanced by the Authorised Representative (AR) of the assessee in regard to the issuance and legality of the notice U/s 143(2) of the Income Tax Act. 1961. This assessment year is searched assessment year therefore the assessment shall be completed U/s 143(3) of the Income Tax Act. 1961 to which the AO has done. As facts noted above from the assessment order and written synopsis submitted by CIT DR produced before us, it is clear that the notice has been issued by the assessing officer (AO) before filling of the return of income . The submission of CIT-DR is also not tenable that the assessee has himself has accepted before the CIT (A) that the notice U/s 143(2) has been issued for want of any evidence. The Section 292BB will not apply here in this case also because there is no proof of documents or emanating from the record that the notice U/s 143(2) had been issued. Similar issue has been decided by the coordinate bench of this Tribunal in the case of Anurag Gupta in ITA No. 114/Hyd/2020 vide order dated

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15/11/2021, wherein the coordinate bench has held as under: “7. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. As per the assessment order notices u/s 143(2) and 142(1) along with questionnaire were issued to the assessee on 18th November, 2011 calling for information. As per the order sheet filed by the ld. AR, which is placed on record, clearly shows that there is no issuance of the 143(2) notice. Even, if we go through the assessment order, assessee filed his return of income on 7th December, 2011 in response to the notice u/s 142(1) dated 26/10/2010, whereas, notices u/s 143(2) & 142(1) were issued on 18th November, 2011, the date of which is before filing of the return of income, how is it possible to issue a notices before filing of return of income. The assessee also filed his return of income u/s 139(1) of the Act on 30/08/2010 under the acknowledgment No. 4400001008/Ward – 4(4). Even if we correlate the notice u/s 143(2) with the assessment order, the issue of notice is time barred. This is a search year, in which, assessment has been framed u/s 143(3) of the Act, but, the assessment has not been framed u/s 153A. Therefore, even if notice issued u/s 143(2) is time barred or not issued at all or notice u/s 143(2) is invalid in the eye of law, the assessment framed u/s 143(3) will not survive. As held by the Hon’ble High Court of Madras in the case of B. Kubendran Vs. DCIT, [2021] 126 Taxmann.com 107 (Madras.), notice u/s 143(2) is not required to be issued in the cases where assessments framed u/s 153A, but, in the present case, assessment has been framed u/s 143(3), therefore, as per the statute notice u/s 143(2) is mandatory to be issued by the jurisdictional AO, which is absent in this case. Therefore, non-issuance of a valid notice u/s

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143(2) of the Act, the entire assessment framed by the AO is void-ab-initio. Accordingly, we set aside the order of the CIT(A) and quash the order passed by the AO.” 8.1 We also refer to the judgment of the Hon’ble Gujarat High Court in the case of PR. CIT Vs Marck Biosciences Ltd. (Gujarat High Court), Appeal Number : Tax Appeal No. 1374 of 2018, Date of Judgement/Order : 04/02/2019, Related Assessment Year : 2005-06, wherein the Hon’ble Court has held as under:

“13. For the purpose of better understanding of the controversy in issue, it may be germane to refer to the provisions of sub-section (2) of section 143 of the Act, which as it stood at the relevant time when the notice under section 148 of the Act was issued reads thus: “143. Assessment (1) xxxxxx (2) Where a return has been furnished under section 139, or in response to a notice under sub- section (1) of section 142, the Assessing Officer shall,— (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;

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(ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.” 14. On a plain reading of the above provision, it is manifest that it contemplates that when an assessee files a return under section 143 of the Act, and the Assessing Officer finds that any claim as described therein is inadmissible, he is required to serve a notice to the assessee specifying particulars of such claim and a date on which he should produce or caused to be produced, any evidence or particulars specified therein on which the assessee may rely in support of such claim. 15. Section 292BB of the Act reads thus; “292BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or re-assessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was – (a) not served upon him; or (b) not served upon him in time; or

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(c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.” 16. From the language employed in section 292BB of the Act, it emerges that a notice would be deemed to be valid in the three circumstances provided therein, namely, where the assessee has participated in the proceedings it would not be permissible for him to raise objection that (i) the notice was not served upon him; or (ii) was not served upon him in time; or (iii) was served upon him in an improper manner. 17. Thus, all the circumstances contemplated under section 292BB of the Act are in a case where a notice has been issued, but has either not been served upon the assessee or not served in time or has been served in an improper manner. The said provision clearly does not contemplate a case where no notice has been issued at all. 18. The Supreme Court in case of CIT v. Hotel Blue Moon (supra) held thus: “21. We may now revert back to Section 158BC(b) which is the material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads that: “158BC. (b) the assessing officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply;” An analysis of this sub-section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by

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following the procedure like issue of notice under sections 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The assessing officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the notice under sections 143(2)/142, the assessing officer is authorized to complete the assessment ex parte under section 144. 22. Clause (b) of section 158BC by referring to sections 143(2) and (3) would appear to imply that the provisions of section 143(1) are excluded. But section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143(2). However, if an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with.” 19. Thus, the Court held that if an assessment has to be completed under section 143(3) read with section 158BC of the Act, then notice under section 143(2) of the Act should be issued within a period of one year from the date of filing of block return. The Court held that omission on the part of the Assessing Officer to issue notice under section 143(2) of the Act cannot be said to be a procedural irregularity and the same is not curable, and therefore, the requirement of notice

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under section 143(2) of the Act cannot be dispensed with. 20. In the facts of the present case also, if the contention of the appellant were to be accepted, it would amount to dispensing with the notice under section 143(2) of the Act in view of the fact that it is an admitted position that no such notice had been issued after the return of income was filed by the assessee. After the filing of the return of income, unless a notice under section 143(2) of the Act is issued to the assessee, he would have no means of knowing as to whether or not the Assessing Officer has accepted the return of income as filed by him. As held by the Supreme Court in the above decision, omission to issue a notice under section 143(2) of the Act is not a procedural irregularity and is not curable. It is, therefore, mandatory to issue notice under section 143(2) of the Act. 21. At this juncture, reference may also be made to the contents of the Central Board of Direct Taxes Circular No.549 dated 31.10.1989, which finds reference in the decision of this Court in case of CIT v. Mahi Valley Hotels & Resorts (supra), which has been reproduced in paragraph 8.5 hereinabove. A perusal of the above circular indicates that if an assessee, after furnishing the return of income, does not receive a notice under section 143(2) of the Act from the Department within the prescribed period, then he can take it that the return filed by him has become final and no scrutiny proceedings could be started in respect of that return. This is the kind of significance that has been attached to a notice under section 143(2) of the Act by the Central Board of Direct Taxes itself. 22. Section 292BB of the Act provides for a deeming provision that any notice under any provision of the Act, which is required to be served

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upon the assessee, has been duly served upon him in time, in accordance with the provisions of the Act. In the opinion of this Court, this section would be applicable where a notice has, in fact, been issued and a contention is raised that such notice has not been served upon the assessee or has not been served in time or has not been served properly, namely, where there is a defect in the service of notice. This provision does not apply to a case where no notice has been issued at all. In the facts of the present case, at the cost of repetition, it may be stated that no notice under section 143(2) of the Act has been issued after the assessee had filed its return of income and hence, section 292BB of the Act would not be attracted. 23. In the light of the above discussion, this Court does not agree with the view adopted by the Punjab and Haryana High Court in case of Commissioner of Incometax v. Ram Narain Bansal (supra). Insofar as the decision of the Madras High Court in case of Venkatesan Raghuram Prasad Incometax officer, Non- Corporate Ward2(3), Chennai (supra) is concerned, that was a case where notice was in fact, issued, but it was contended that such notice was not served properly. Therefore, the said case was a case of defective service of notice, which would be squarely covered by the provisions of section 292BB of the Act. The said decision, therefore, has no applicable to the facts of the present case. 24. In the light of the fact that non issuance of a notice under section 143(2) of the Act is not a procedural irregularity, the same cannot be cured under section 292BB of the Act and hence, the assessment order passed without issuance of notice under section 143(2) of the Act, would be rendered invalid. The Tribunal as well as the Commissioner (Appeals), therefore, did not

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commit any error in holding that the notice issued prior to the filing of the return of income was invalid and that, in absence of a valid notice under section 143(2) of the Act, the assessment order was rendered invalid.

8.2. In the case under consideration, the AO has not issued a notice u/s 143(2) and even the ld. D.R. also could not bring on record any copy of the notice issued by the assessing officer or any proof of service of notice U/s 143(2) of the Income Tax Act, 1961 as mentioned above. The provisions of section 292BB also do not support the revenue because in the impugned case there is no documentary evidence to show that there was a notice issued U/s 143(2) of the I.T. Act. 1961. Even in the assessment order, the AO has mentioned the notice has been issued before filling of the return of income. Considering all the attending facts and respectfully following the ratio laid down in the aforesaid judgments as well as the decision of the coordinate bench cited supra, we hereby set aside the order of the CIT(A) and hold that the entire assessment framed by the AO is void-ab-initio for non-issuance of a notice u/s 143(2) of the Act. Accordingly, the legal grounds raised by the assessee are allowed. 9. Further, we observe from the assessment order the assessment has been made on a protective basis, but, it is not clear whether any assessment has been framed in substantive basis in case of other/s. As observed from the assessment order at page 14 of the top para, which is reproduced below: “Considering the fact that the lands are held by Dr. P.S. Prasad through his group companies and also in view of the fact that the major entities involved in these transactions are subject matter of audit uls 142(2A) of the LT. Act., { (i) Mis MBS Impex P Ltd., (ii) Mis MBS Jewellers P Ltd (iii) Aashi Realtors P Ltd (iv) M/s Goldstone Exports p Ltd subject to outcome of the same the amount of

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Rs. 1,76,11,00,000/- is assessed protectively in the hands of the assessee.” 9.1 when the assessments in other/s assessee’s cases are not framed on substantive basis, how the protective assessment can be framed in the case of the assessee on hand. Therefore, in our considered opinion, the assessment framed on protective basis in the case of the assessee does not stand in the eyes of law. 10. As we have quashed the assessment order on both counts as per our observations vide Para Nos. 8 & 9 supra, the grounds raised by the assessee on merits are not required to be adjudicated. 11. In the result, appeal of the assessee is allowed in above terms.” 9.3 Considering all the attending facts and respectfully following the ratio laid down in the aforesaid judgment as well as the decision of the coordinate bench cited supra, we hereby set aside the order of the CIT(A) and hold that the entire assessment framed by the AO is void-ab-initio for non-issuance of a notice u/s 143(2) of the Act. Accordingly, the legal grounds raised by the assessee are allowed.

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12,36,47,554/-. On perusal of the assessment order, the AO has mentioned at para No. 2 that notice u/s 143(2) had been issued on 18/11/2011, which is beyond the prescribed time. Therefore, the notice issued u/s 143(2) is not a valid in the eyes of the Income tax law. Therefore, following the conclusions drawn in ITA No. 330/Hyd/2018 in the case of MBS Impex Pvt. Ltd., (supra), we hold that the entire assessment framed by the AO is void-ab-initio for non-issuance and serving of a notice u/s 143(2) of the Act to the assessee, in this case also.

Sd/- Sd/- (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 7th January, 2022. kv

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Copy to : 1 MBS Impex Pvt. Ltd., 2 MBS Jeweller Pvt. Ltd., C/o P. Murali & Co., CAs, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad – 82 DCIT, Central Circle - 3(1), Hyderabad. 3 4 DCIT, Central Circle - 3, Hyderabad 5 CIT(A), Tirupati 6 Pr. CIT – Central Circle, Hyderabad ITAT, DR, Hyderabad. 7 Guard File. 8