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Income Tax Appellate Tribunal, PUNE “B” BENCH, PUNE
Before: HON’BLE SHRI S. S. VISWANETHRA RAVI & SHRI G. D. PADMAHSHALI
॥ आयकर अपीलीय न्यायाधिकरण, पुणे “बी” न्यायपीठ, पुणे में ॥ IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE “B” BENCH, PUNE BEFORE HON’BLE SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.175/PUN/2020 & CO No. 23/PUN/2022 धििाारण वर्ा / Assessment Year : 2008-2009 Dy. Commissioner of Income Tax, Circle-7, Pune . . . . . . . अपीलार्थी / Appellant बिाम / V/s. PAN International, 347, AFL House, Off Dhole Patil Rd, Behind Hotel Meru, Pune – 411 001 . . . . . . . प्रत्यर्थी / Respondent PAN: AABFP4234F & Cross Objector द्वारा / Appearances Assessee by : Shri Sharad Vaze Revenue by : Shri M. G. Jasnani सुनवाई की तारीख / Date of conclusive Hearing : 09/12/2022 घोषणा की तारीख / Date of Pronouncement : 09/12/2022 आदेश / ORDER PER G. D. PADMAHSHALI, AM; The Revenue challenges the order of Commissioner of Income Tax (Appeals)-8, Pune [for short “CIT(A)”] dt. 06/11/2019 passed u/s 250 of the Income-tax Act, 1961 [for short “the Act”] quashing the order of assessment dt. 10/03/2014 passed u/s 143(3) r.w.s. 147 by the Dy. Commissioner of Income Tax, Circle 1(2), Pune[for short “AO”] for the assessment year [for short “AY”] 2008-09 on technical-cum-legal ground. ITAT-Pune Page 1 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 2. The substantive ground of present litigation lies in a narrow compass as to whether non issuance of statutory notice u/s 143(2) in a reassessment proceeding is saved by section 292BB of the Act?
Before taking up the grounds for adjudication, let us first voice the facts emanating from case records are; 3.1 The assessee is a resident firm engaged in the business of manufacturing of machined components and exports thereof and trading in glass epoxy-sheets and machine tools etc., which filed its original return of income [for short “ITR”] for AY 2008-09 declaring total income of ₹2,18,63,170/- and then revised to ₹2,03,60,733/- on 06/03/2009. The ITR was initially processed summarily u/s 143(1) and subsequently subjected to scrutiny u/s 143(3), which eventually culminated accepting the revised income retuned in its revised ITR filed.
3.2 Afterwards, the case of the assessee was reopened by service of notice u/s 148 dt. ITAT-Pune Page 2 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 22/03/2013 for violation of provisions of chapter XVII of the Act in context of non-deduction of taxes [for short “TDS”] from the expense claimed. In response thereto the assessee filed a written its submission to treat revised ITR filed on 06/03/2009 as ITR in response to notice u/s 148 of the Act. Considering the same the Ld. AO made an addition of ₹69,60,093/- by disallowing certain expenses u/s 40(a)(ia) of the Act for non- deduction of taxes therefrom and reassessed the taxable income u/s 143(3) r.w.s. 147 of the Act at ₹2,73,20,830/-.
3.3 Aggrieved thereby the assessee challenged the addition on legal as well meritare grounds before the first appellate authority [for short “FAA”], who in turn finding force in the contention of the assessee, based on the remand report confirming the non-issuance of notice u/s 143(2) in reassessment proceedings, adjudicated the matter in favour of the respondent assessee.
ITAT-Pune Page 3 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 3.4 The revenue not convinced with the adjudication of the Ld. FAA, came up in an appeal before this tribunal agitating against the relief accorded to assessee on the following grounds and seeking indulgence for reversal of relief; “1. On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in law by deciding the case merely on technical grounds and ignoring the verification of the submitted documents regarding its authenticity & merits of the case.
On the facts and circumstances of the case and in Law, the Ld. CIT(A) was not justified in deleting the addition made u/s 40(a)(ia) of the Income Tax Act, 1961 Since, as per the provisions of section 40(a)(ia) of the Income Tax Act, 1961 TDS needs to be deducted on the amount of Rs. 30,333/- paid on account of advertisement expenses, Rs. 66,89,349/- paid on account of commission and brokerage & Rs. 2,40,411/- paid on account of interest on unsecured loans.
On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in law by ignoring, the decision of the Hon’ble Supreme Court in the case of Palam Gas Service Vs CIT [CIVIL APPEAL NO. 5512 OF 2017], wherein it was held that as per the provisions of section 40(a)(ia) of the Income Tax Act, 1961 TDS required to be made on payments of interest, commission or brokerage, fees for professional services or fees for technical services to residents, and payments ITAT-Pune Page 4 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 to a resident contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section(1) of section 200 and in accordance with the other provisions of Chapter XVII-B. While deciding the issue the Hon’ble Supreme Court has confirmed the decision of the Hon’ble Punjab & Haryana High Court, in the case of P.M.S. Diesels & Ors. 4. On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in law by ignoring, the decision of the Hon’ble Punjab & Haryana High Court in the case of M/s Josh Builders & Developers (P.) Ltd. Vs PCIT [[2016] 389 ITR 314], wherein it was held that as per the provisions of section 292BB Where an assessee has appeared in any proceeding or co-operated in any enquiry relating to an assessment or reassessment, 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. 5. Even though the tax effect is Rs. 23,65,737/- the case falls under the exception 3(c) of amendment letter Dated 20/08/2018 to para 10 circular No.3 of 2018 Dated 11/07/2018. Hence this appeal. 6. The appellant craves to add, amend or alter any other grounds at the time of hearing.”
ITAT-Pune Page 5 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 3.5 The respondent assessee also on the other hand preferred a Cross-objection thereagainst supporting the adjudication of Ld. FAA on following grounds; “1.In the facts and circumstances of the case and in law it may please be held that the learned C.I.T.[A] has rightly deleted the addition of Rs.69,60,093.00 made by the learned assessing officer and the appeal filed by the department may please be dismissed.
In the facts and circumstances of the case and in law, it may please be held that the decision the of Hon. Punjab and Haryana High Court in the case of M/s Josh Builders and Developers Pvt Ltd v/s PCIT reported in 389 ITR 214 relied upon by the department regarding the interpretation of the Section 292BB of the I.T. Act 1961 is not a good law and hence the impugned appeal may please be dismissed with cost and exemplary damages.
The respondent assessee may please be awarded substantial cost of the appeal” 4. In the course of physical hearing, the learned representative for the revenue [for short “DR”] summarised the facts of the case and adverting to section 292BB of the Act, submitted that, the respondent assessee duly co-operated in ITAT-Pune Page 6 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 reassessment proceeding without objecting the non- issuance of statutory notice and for the reason doctrine of estoppel shall come into play in the light of decision of Hon’ble High Court of Punjab & Haryana in the case of “Josh Builders and Developers Pvt Ltd Vs PCIT” reported in 389 ITR 214. Au contraire the learned representative of the assessee [for short “AR”] adverting to various case laws, has strongly placed his reliance on the orders of Ld. FAA in seeking dismissal of appeal filed by the revenue with substantial cost for not following the judicial discipline and needlessly dragging the assessee into litigation.
After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short “ITAT-Rules”] perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position and forewarned to parties present.
ITAT-Pune Page 7 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 6. The substantive legal ground challenging the non- issuance of statutory notice u/s 143(2) in a reassessment proceedings where the respondent through its written letter dt. 25/06/2014 communicated that its revised ITR filed on 06/03/2009 be treated as ITR in-response to notice u/s 148 for the purpose of reassessment u/s 147, is bad in law and without jurisdiction, finds merit in the evince of positive remand report of the Ld. AO confirming de- fact the non-issuance of statutory notice u/s 143(2) after the assessee has filed its return in pursuance of notice u/s 148 of the Act, which is accentuated at para 6.6 of the appellate order and which read as; “In this regard it is humbly submitted that on perusal of case records, no notice under section 143(2) has been found. Hence it is submitted that the copy of notice under section 143(2) as requested by your good self cannot be provided by the undersigned.” (Emphasis supplied) 7. In the light of above, we are mindful to hold that, where the assessment including re-assessment is to be carried out in variation of returned income, the service of statutory notice u/s 143(2) must precede ITAT-Pune Page 8 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 and as a snow ball effect, in the absence of issuance of any such statutory notice u/s 143(2), the assessment including re-assessment jurisdiction fails and consequently any assessment or reassessment carried out turns contra-legem, this view finds fortified by the decision of Hon’ble Delhi High Court in the case of “PCIT Vs Paramount Biotech Industries Ltd” reported in 398 ITR 701, wherein their lordship vide para 18-19 have categorically held that; “18. The wording of Section 143(2)(ii) of the Act, which is applicable in the present case, requires the AO to be satisfied on examining the return filed that prima facie the Assessee has “understated the income” or has “computed excessive loss” or has “underpaid the tax in any manner”. The AO has the discretion to issue a notice under Section 143 (2) if he considers it “necessary or expedient” to do so. This exercise by the AO under Section 143 (2) of the Act is qualitatively different from the issuance of a notice under Section 142(1) of the Act, which as noted hereinbefore, is in a standard proforma.
The proposal to reopen an assessment under Section 147 of the Act is to be based on reasons to be recorded by the AO. Such reasons have to be communicated to the Assessee. However, merely because the Assessee participates in the proceedings pursuant to such notice ITAT-Pune Page 9 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 under Section 148 of the Act, it does not obviate the mandatory requirement of the AO having to issue to the Assessee a notice under Section 143(2) of the Act before finalising the order of the reassessment.” (Emphasis supplied)
Insofar as the co-operation of the respondent assessee in reassessment proceedings vis-à-vis application provisions of section 292BB is concerned, the similar issue was came up before the Hon’ble Supreme court in the case of “CIT Vs Lakshman Das Khandelwal” reported in 417 ITR 325 wherein their lordship considering its earlier decision in the case of “ACIT Vs Hotel Blue Moon” reported at 321 ITR 362, laid down the law regarding the question whether notice under Section 143 (2) of the Act would be mandatory for the purpose of making an assessment under the said provision and thereafter, considered the question whether Section 292BB which came into effect on and from 01/04/2008 has effected any change. It has been held that the law on the point as regards applicability of notice under Section 143 (2) of the Act is quite clear in the decision in the case of
ITAT-Pune Page 10 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 Hotel Blue moon supra. However, considering the impact of Section 292BB on the issue, it has been held that; “According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in the said section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, t be noted that the section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the Department. It is only the infirmities in the manner of service of notice that the section seeks to cure. The section is not intended to cure complete absence of notice itself.” (Emphasis supplied)
To hit the nail on the head, the aforestated judgment has a direct bearing on the facts of the present case. In the light of this judgment, it is clear that the infirmities in the manner of service of notice alone would be amenable to u/s 292BB of the Act, but not the complete absence of notice itself, consequently the non-issuance of statutory notice u/s
ITAT-Pune Page 11 of 12
PAN International ITA No.175/PUN/2020 & CO.No. 23/PUN/2022 A.Y. 2008-09 143(2), dehors the jurisdiction to re-assess any income u/s 147 of the Act, for the reason we decline to interfere with the order of Ld. FAA, ergo we dismiss the ground number 1 of the present appeal which in turn renders other grounds of revenue and all the grounds of cross-objection as infructuous.
Resultantly, the appeal of the Revenue and the Cross-objection of the assessee are DISMISSED in aforestated terms, with no cost. In terms of rule 34 of ITAT Rules, the order is pronounced in the open court on this Thursday 9th day of December, 2022.
-S/d- -S/d- S. S. VISWANETHRA RAVI G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; ददनाांक / Dated : 9th day of December, 2022. आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr. CIT-1, Pune (MH-India) 4. The CIT(A)-8, Pune (MH-India) 5. DR, ITAT, Pune Bench ‘B’, Pune 6. गार्ड फ़ाइल / Guard File. आदेशानुसार / By Order, वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादधकरण, पुणे / ITAT, Pune.
ITAT-Pune Page 12 of 12