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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri P.M. Jagtap & Shri Siddhartha Nautiyal
आदेश/ORDER
PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-1, Vadodara in Appeal no. CAB- 1/70/2014-15 vide order dated 07/09/2015 passed for the assessment year 2011-12.
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The assessee has taken the phone grounds of appeal:-
“1. The Ld. CIT (A) erred on facts and in law in confirming action of Ld. Assessing Officer in making assessment u/s 143(3) on the strength of issuance of notice u/s 153A which itself was invalid, contrary to the provisions of the Act and void ab-initio as assessment year under reference is search year to which provisions of section 153A do not apply.
The Ld. CIT (A) erred on facts and in law in confirming action of Ld. Assessing Officer in making assessment u/s 143(3) without appreciating that/no notice u/s 143(2) ^as issued to the appellant within the time prescribed under the Act.
The Ld. CIT (A) erred on facts and in law in holding the assessment order passed u/s 143(3) by Ld. the Assessing Officer to be an assessment order passed u/s 153A r.w.s. 143(3) of the Act.
The Ld. CIT (A) erred on facts and in law in making assessment by violating principles of natural justice and without giving any proper opportunity to the appellant before completing assessment. Entire exercise by the Ld. Assessing Officer was to keep appellant engaged with frequent notices issued just before the time barring date/
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The Ld. CIT (A) erred on facts and in law in confirming action of the Ld. Assessing Officer in making additions made to the returned income without appreciating that appellant had already disclosed incomes to the extent belonging to the appellant as a consequence of search in return furnished u/s 139 of the Act.
The Ld. CIT (A) erred on facts and in law in confirming addition of Rs. 9,30,00,000/- solely on the basis of statement recorded u/s 132(4) of the Act but without any corroborative evidence against the appellant.
The Ld. CIT (A) erred on facts and in law in confirming addition of Rs. 22,05,147/- on account of alleged unexplained jewellery.
The Ld. CIT (A) erred on facts and in law in confirming addition of Rs. 31,18,767/- on account of alleged unaccounted marriage expenses.”
The brief facts of the case are that the search under section 132(1) of the Act was conducted on 11-02-2011 i.e. financial year 2010-11 relevant to assessment year 2011-12. In terms of section 153B(b) of the Act, the assessment for assessment years from 2005-06 to 2010-11 has to be finalised under section 153A of the Act, and for assessment year 2011-12, being the year of search, assessment was to be made under section 143(3) of the Act. The search action was completed on the assessee on 15-03-2011. The
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assessee furnished its return of income under section 139 of the Act on 30- 03-2012 (though as per the assessment order, the assessee filed its return of income u/s 153A on 01-02-2013). The assessment was completed on the assessee under section 143(3) of the Act on 31-03-2013, making various additions to the returned income of the assessee.
In appeal before Ld. CIT(Appeals), the assessee took a technical plea challenging the validity of the assessment order on the ground that the AO did not issue notice under section 143(2) of the Act, which in the instant facts was required to be issued on or before 30-09-2012 i.e. six months from the end of the financial year in which the return of income was filed by the assessee. The assessee submitted that there is no mention of issuance of notice under section 143(2) of the Act on or before 30-09-2012 in the assessment order. Accordingly, the assessment order framed for the impugned assessment year is void ab initio.
In appeal, technical ground was dismissed by Ld. CIT(Appeals) with the following observations:
“3.2. I have considered the appellant's submissions and the facts of the case as narrated by the AO in his assessment order. The appellant's first contention is that since, the search proceedings were concluded on 11.02.2011, the current assessment year i.e. AY 2011-12 is not covered u/s 153A(a) and 153B(b) of the Act and therefore no notice u/s 153A was required to be issued to the appellant. Since, the appellant had furnished his return of income u/s 139 of the act on
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30.03.2012 and no notice u/s. 143(2) has been issued by the AO in relation to the return furnished on 30.03.2012, within the time period specified under the Act, hence income offered in return u/s 139 of the Act has become final and cannot be disturbed. Accordingly, the assessment u/s 153A of the Act is required to be declared invalid. Identical issue has been decided by the Indore Bench of ITAT in its decision in the case of Susheei Kumar Jain 127 ITD (Indore) in favour of Revenue. After discussing the provisions of section 153A, 1533 & 153C of the Act in detail, the Bench has held that the assessment for previous year in which search was initiated u/s 132 has to be done in accordance with the provisions of Section 153A/153B of the Act. The relevant observations of the Bench are as follows: "Thus, absence of requirement of issue of notice under sect/on 153A for the year of search, does not result into an inference that assessment of previous year of search is to be made as per the normal provisions of the Act, specially when state of provisions of section 153A is not different from scope of provisions of section 143 for making assessment of total income of such year. It may further be added that in case, any notice under section 153 A is issued in case of such previous year, the same should be construed as issued under section 142(1) as the scope of these two provisions on the aspect of requiring the assesses to file the return is same. Even otherwise, under the new scheme, total income has to be computed as per the normal provisions of the Act and tax, interest and penalty also is to be
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levied as per the general provisions of the Act applicable to such assessment year, hence, there cannot be any prejudice to the assessee merely because an Assessing Officer proceeds to make an assessment in case of year of search as per the provisions of section 153 A read with section 153B, particularly when time-limit of service of notice under section 143(2), subject to provisions of section J53B, would also be applicable. [Para 15]
As per Explanation (/), time-limit prescribed under section 153B for completion of assessment under section 153 A is to override the time-limit provided for completion of assessment under section 143 or 144 in section 153. The heading of section 153B is 'time limit for completion of assessment under section 153 A'. It is a settled principle that heading of a particular section also indicates about nature and scope of such provision and if viewed in this perspective, then, it would again be dear that assessment of the previous year, in which search took place, is required to be completed as per the provisions of section 153A, read with section 153B. In this regard, memorandum explaining the Finance Bill, 2000 as reported in 260 ITR (St.) 219-221, also mentions that provisions of sections 153A, 153B and 153C were inserted to provide for assessment in the case of search or making requisition. [Para 16]
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The settled position of law is that if there is no ambiguity then, literal construction should be given effect as such although which may result into hardship. However, in the context of instant dispute, the provisions of law did not appear so clear or unambiguous as was evident from the discussion made hereinabove. In this regard, it may further be pointed out that if the assessee's view that the assessment for the financial year wherein such search under section 132 took place or requisition was made under section 132A, had to be completed as per the normal provisions of the Act, then provisions of section 153B(l)(b) would become redundant. Further, there would a/so arise a possibility of such assessment being treated as time barred under section 153B(l)(b) because as per the provisions of section 153, the time limit for completion of assessment under section 143(3) is more than the normal time limit available to the Assessing Officer for completing the assessment under section 153A read with section 153B. Further, if the assessment of search year is to be completed under section 143 as such, then, there appears no reason as to why such assessment should be completed within the time limit prescribed under section 153B(l)(b) and not within the time limit prescribed under section J 53, [Para 17]
Further, the provisions of section 153C(2) also provide for completion of assessment in respect of the person other than the person referred to in section 153A in the manner provided in
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section 153A. No doubt, the provisions of section 153C(2) provide for specific situations wherein the assessment in respect of the assessment year relating to the previous year in which search is conducted under section 132 or requisition is made under section 132A has to be made in the manner provided in section 153A. However, where the Assessing Officer having jurisdiction over such other person receives the books of account or documents, etc. before the due date of furnishing the return of income for such assessment year, then also, the assessment would be completed in the manner provided under section 153A because in that case, the Assessing Officer can assess/reassess under section 153C(1) in routine course. Thus, it was opined that if under specific circumstances as provided under section 153C(2) assessment of a person covered under section 153C has to be completed in the manner provided in section 153A then, there should not be any doubt that the assessment in case of a searched person for the year of search has to be completed under section 153A read with section 153B. [Para 18]
In view of the aforesaid, It was to be held that the Commissioner (Appeals) was not correct in law in holding that assessment for the previous year in which search took place or requisition was made had to be completed under the normal provisions of the Act. [Para 19]"
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3.2.1. Hence, following this decision, these contentions of the appellant are rejected and it is held that the AO has rightly made the assessment for. AY 2011-12 u/s 153A of the IT Act, 1961.”
Before us, the assessee challenged the order of Ld. CIT(Appeals) upholding the assessment order and dismissing the assessee’s appeal on the ground of jurisdiction. We observe that the Tribunal directed the assessee to file Affidavit confirming that no notice under section 143(2) of the Act was served on the assessee in hearing dated 24-04-2018 and the same was furnished by the assessee on 03-05-2018. Further, the Tribunal vide order sheet dated 16-10-2018 sought for production of the assessment records to ascertain the factual position and also advised the Department to offer comments filed by the Affidavit of the assessee. Further vide order sheet entry dated 11-07-2022, the Tribunal noted that the Department has filed an application seeking adjournment on the ground that the details called from the AO has not yet been received. The DR further stated that the report from the AO regarding issuance of notice under section 143(2) was awaited. The Bench further noted that in the Affidavit of the assessee, it has been specifically asserted that no service of notice under section 143(2) of the Act has been done before completion of assessment. We therefore observe that even till date of hearing, the Department has not been able to produce any documents/assessment records to substantiate that notice under section 143(2) of the Act was issued/served upon the assessee prior to completion of assessment. Before us, the counsel for the assessee submitted that till date, the Department has not been able to produce any records to show that notice under section 143(2) of the Act was issued/served upon the assessee prior to
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completion of assessment under 143(2) of the Act. He drew our attention to page 8 of the paper book, which is notice issued under section 142(1) of the Act dated 11-01-2013 and submitted that this is the first notice issued by the Department asking the assessee to file return of income. However, the assessee had already filed its return of income on 30-03-2012, afact not controverted by the Department. Accordingly, it is evident that no notice under section 143(2) of the Act was issued/served upon the assessee before 30-09-2012 i.e. within six months from the end of the financial in which the return of income was filed by the assessee. The counsel for the assessee relied upon various judicial precedents on the subject, which have held that in respect of the assessment for the year in which search was carried out on the assessee, issuance of notice under section 143(2) of the Act is a mandatory requirement. In response, the DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order. The DR also placed on record various judgements to the effect that if the assessee, having not raised any objection with regard to issuance and service of notice during assessment proceedings and rather, without any objection, has voluntarily taken part in such proceedings, he could not seek annulment of assessment proceedings on the ground of non-service of notice. Further, DR also placed on record certain judgements to the effect that where in course of a assessment proceedings, various notices were issued to assessee and it was granted a proper opportunity of hearing, mere omission to mention section 143(2) literally in any one of the notices so issued, would not invalidate the assessment order.
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We have heard the rival contentions and perused the material on record. We observe that despite several opportunities, the DR has not been able to place on record any documents/assessment records/evidence which shows that notice under section 143(2) of the Act was issued/served upon the assessee at any time prior to completion of assessment. The assessee has filed a specific Affidavit to the effect that no notice under 143(2) of the Act was issued/served upon the assessee during the course of assessment proceedings i.e. prior to completion of assessment. The DR has not placed on record any documents to contradict the Affidavit filed by the assessee regarding non-service/non-issuance of notice under section 143(2) of the Act. The Hon'ble Supreme Court in the case of CIT v. Lakshman Das Khandelwal [2019] 108 taxmann.com 183/266 Taxman 171/417 ITR 325, held that it is clear that the infirmities in the manner of service of notice alone would be amenable to under section 292BB, but not the complete absence of notice itself; Notice issued beyond the period of limitation partakes the character of absence of notice itself in the eye of law and as such, section 292BB would not save such a notice de hors the limitation prescribed. The Hon'ble Supreme Court in the case of ACIT v. Hotel Blue Moon [2010] 188 Taxman 113 (SC)held that service of notice on the assessee under section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income-tax Act, 1961. The Supreme Court held that for determination of undisclosed income for a block period under provisions of section 158BC, provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment can be made without issuing notice under section 143(2) of the Act. The Karnataka High Court in the case of PCIT v.
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Cherian Abraham [2022] 137 taxmann.com 73 (Karnataka)held that that the notice issued within the period of limitation, if found not served on the assessee within the stipulated period, i.e., defective service of notice cannot invalidate the assessment, or in other words, the existence of the notice well within the period of limitation prescribed under the provision is sine qua non for invoking section 292BB. The Ahmedabad ITAT in the case of SBG Infrastructure LLP v. DCIT [2021] 130 taxmann.com 319 (Ahmedabad - Trib.)held that where Assessing Officer passed ex parte assessment order under section 144, however, did not issue any notice under section 143(2), assessment order was to be quashed and set aside. The Hon'ble Gujarat High Court in the case of PCIT v. Devendranath G. Chaturvedi [2017] 83 taxmann.com 141 (Gujarat) held that where assessee, in response to notice issued under section 158BC, filed a return after long delay, however, said return was not discarded as invalid, in such a case, if Assessing Officer wanted to frame assessment at higher income, he was bound to issue a notice under section 143(2). In the case of Sukhini P. Modi [2014] 52 taxmann.com 50 (Gujarat), the Hon'ble Gujarat High Court has held that where procedure prescribed of issuance of notice under section 143(2) had not been followed at all, assumption of jurisdiction of issuance of notice of reopening itself would not be sustainable. Again the Gujarat HC in the case of CIT v. Bharat G. Patel [2014] 43 taxmann.com 90 (Gujarat)held that omission on part of Assessing Officer to issue notice under section 143(2) within time prescribed cannot be a procedural irregularity and same is not curable, and therefore, requirement of notice cannot be dispensed with. The Hon'ble Delhi High Court in the case of PCIT v. Silver Line [2016] 65 taxmann.com 137 (Delhi)held that merely
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because assessee participated in proceedings pursuant to notice under section 148, it would not obviate mandatory requirement of Assessing Officer to issue assessee a notice under section 143(2) before finalizing order of reassessment. The Hon'ble High Court Gujarat High Court in the case of Panorama Builders (P.) Ltd [2014] 45 taxmann.com 159 (Gujarat) held that Section 292BB is only confined to service of notice and does not apply to issuance of notice. In the case of Narendra Singh v. ITO [2011] 9 taxmann.com 227 (Agra), the ITAT held that in pursuance of return filed by assessee under section 153A, service of notice as per provisions of section 143(2) within prescribed time is mandatory. Therefore, in absence of service of such a notice, Assessing Officer cannot make addition and he is bound to accept income as returned by assessee. Thus, in light of the of the above rulings, in our considered view, since the Ld. Assessing Officer did not issue/serve notice under section 143(2) of the Act before completion of assessment under section 143(3) of the Act, the assessment order framed is void. The Ld. DR has not brought anything on record to substantiate that notice under section 143(2) of the Act was either issued/served on the assessee prior to completion of assessment. In view of the above, we are of the view that the assessment order is invalid in the eyes of law in absence of a valid issuance and service of notice under section 143(2) of the Act. In the result, appeal of the assessee is allowed on jurisdiction. Accordingly, we are not discussing the merits of the case.
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In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 19-10-2022
Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 19/10/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद