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Income Tax Appellate Tribunal, DELHI BENCH ―F‖: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A), Noida dated 01.10.2014 for the Assessment Year 2010-11. 2. The assessee has raised the following grounds of appeal:-
1. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in not declaring the impugned assessment as nullity and void ab initio even after the admission on : a. At page 13 of impugned order that "In view of facts as discussed above I find that the assessment in this case has been framed in casual manner in violation of principles of natural justice wherein AO has passed a non speaking order " there by making colossal additions of Rs 12.90 crores in high handed manner; b. At page 16 of the impugned order that " From the facts as discussed above there is no doubt that there is dispute of ownership over the seized material on the basis of which assessment was completed in the hands of the appellant who has categorically claimed that neither the seized material nor premises from where the material was seized belong to him and that according to the appellant these belong to M/s Gayatri Developwell Pvt Ltd which claim has not been controverted by the AO" Invalid addition of Rs 12.90 crores on basis of dumb/unrelated loose documents admittedly not belonging to appellant Page | 1
2. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in not deleting the tenuous addition of Rs 12.90 crores which is ex facie unmerited even after Ld CIT-A holding tenacious view in the same order that there is no available material and basis to link the appellant with extant loose documents after which only available course of action was to delete the gargantuan addition forthwith.
3. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in not when following uncontroverted facts are considered in juxtaposition and side by side: a. That at no stage Ld AO confronted the back material/loose documents to appellant despite specific request in this regard; b. That appellant has thoroughly denied the contents of loose documents and stated they only pertain to M/s Gayatri Developwell (P) Ltd who was also subjected to same search action and its assessment has been parallelly completed at Agra on 30.12.2011 by ACIT Central Circle Agra; c. That appellant has no capacity to earn the assessed income in as much as appellant is merely non working non executive director in primary raided parties M/s Gayatri Developwell (P) Ltd etc and has no role to play in day to day operations of these companies; d. That appellant has no business to maintain extant loose documents and nothing incriminating was unearthed from extensive search that appellant is engaged in any sort of business; e. That extant documents were sized from business premises of another legal entity where appellant has modicum role being M/s Gayatri Developwell (P) Ltd; f. That remand report dated lg.08.2013 (CIT-A order page g) and Id AO clarification dated 26.08.2014 (page *4 & page 15 CIT-A order) fully supports appellant's version that extant documents do not belong to him; g. That even Ld CIT-A has written to concerned CIT Central Circle Kanpur during appellate proceedings in specific connection with ownership of extant documents, which has not controverted appellant's contention nor has stated otherwise to AO's remand report (supra) etc; h. That no hidden asset was found from possession of appellant i. That even after finding that order of Gayatri Developwell (supra) is erroneous and prejudicial to revenue and needs to be corrected vis a vis non consideration of extant loose documents it is amazing that Ld CIT-A has not deleted the felonious addition from appellant's hands.” 3. The brief fact of the case shows that a search and seizure operation was carried out on Assotech Group of cases on 24.02.2010. Assessee was one o of the entity of that group. Consequently, notice u/s 153A of the Income Page | 2 Tax Act, 1961 was issued on 14.09.2011 and the assessee filed return of income in response thereto on 15.11.2010 declaring income of Rs. 10,40,390/-. Assessment u/s 153A of the Act was passed on 30.12.2011 determining the total income of Rs. 130040390/-. Substantial additions were made to the income of the assessee of Rs. 12.90 crores. The assessee challenged the same before the ld CIT (A), Noida, who has passed a detailed order on 01.10.2014 dismissing the appeal of the assessee. Therefore, the assessee is in appeal before us.
During the course of hearing, the assessee has raised three additional grounds of appeal. ―1. That assessment framed under section 153A for subject period u/s 153A/143 (3) of the act which does not fall u/s 153A (6 years specified period), and which assessee (date of search u/s 132 is 24/2/2010) is plainly invalid, accordingly, orders passed thereon by the learned AO and the learned CIT – A entire proceedings are void ab initio and so same deserves to be quashed.
That assessment framed under section 153A for subject period Under section 153A/143 (3) of the act vide order dated 30/12/2011, without mandatory issuance and service of relevant notice u/s 143 (2) as nullity as only two notices were issued (as admitted in assessment order), one being notice u/s 142 (1) on 14/9/2011 and other being questionnaire dated 25/11/2011 under section 142 (1), and accordingly order passed thereon by the learned AO and the learned CIT – A and entire proceedings are void ab initio and so same deserves to be quashed.
That assessment framed u/s 153A for subject period u/s 153 A/ 143 (3) of the act vide order dated 30/12/2011 is bad in law, as same has been made without providing seized material to assessee before making addition in form of show cause notice et cetera, and without providing as to how same results in undisclosed income in hands of the assessee (specially when it is now admitted that said documents to guide 3 develop well private limited as per remand report dated 19/8/2013) and accordingly, orders passed thereon by the learned AO and CIT appeal and entire proceedings are void ab initio and so same deserves to be quashed. 5. The ld AR submitted that these additional grounds of appeal are with respect to the jurisdictional issues and they go to the root of the matter. He submitted that the first ground, which is being raised is that assessment u/s 153A of the Act, was passed without issue and service of notice u/s Page | 3 143(2) of the Act within the time limit prescribed. He therefore, submitted that such an order is a nullity. He stated that this ground is legal ground in nature and does not require any fresh investigations of facts. He therefore, stated that it may be admitted and adjudicated. 6. The ld DR vehemently objected to the additional grounds raised
by the assessee.
7. We have carefully considered the contentions of both the parties and found that the assessee has raised the jurisdictional issue which goes to the root of the whole assessment and impugned appeal, further, no separate new facts are required to be investigated, therefore, we admit the additional grounds raised by the assessee.
8. In the additional ground raised by the assessee the only contention raised by him is that that notice u/s 143 (2) of the act before passing any assessment order u/s 153A read with section 143 (3) as per order dated 30/12/2011 was never issued. He stated that the assessee has filed return u/s 139 on 15/11/2010 declaring income of INR 1040390/– consequent to search on 24/2/2010. As the search was conducted in financial year 2009 – 10 the relevant assessment year being AY 201—11. In the impugned appeal, AY is also AY 2010 – 2011. He stated that only notice that has been issued is u/s 142 (1) dated 14/9/2011 and notice u/s 142 dated 25/11/2011. He referred to both the notices, which are placed at paper book page number 16 and 12 –
13. He stated that section 153A does not cover such year i.e. present assessment year 2010 – 11, which is to be framed u/s 143 (3) of the income tax act. Hence, for this assessment year the learned assessing officer before proceeding to make an assessment should have issued notice u/s 143 (2) of the income tax act, which is never issued. He therefore stated that the order is void and a nullity. He submitted that case of the assessee is squarely covered by the decision of the honourable Allahabad High court in case of Monis Iqbal dated 28/07/2017 & Rajkumar Jaiswal 28/02/2017 . Therefore, he submitted that the issue squarely covered in favour of the assessee on this aspect. He also referred to the remand report dated 23/6/2014 and 19/8/2013 wherein it has been clearly stated that only two notices have been issued.
In short he stated that notice u/s 143 (2) of the act was never served on the assessee.
The learned CIT DR vehemently objected to the submission of the assessee and stated that notice u/s 142 (1) dated 14/9/2011 was issued to the assessee, which is placed at page number 12 of the paper book. She further referred to the notice u/s 142 (1) and questionnaire dated 25/11/2011 which is placed at page number 13 to 15 of the paper book. She further stated that the summons u/s 131 of the income tax act was issued to the assessee on 27/12/2011, which is placed at page number 16 and 17 of the paper book. Therefore, she submitted that before making an assessment the learned assessing officer has given an adequate opportunity to the assessee, which is the purpose of issuing any notice. She therefore stated that all these notices have been served on assessee, which has been responded by the assessee, therefore the main intention of the issue of the notice u/s 143 (2) of the income tax, the assessing officer has fulfilled act. Therefore, on this basis the assessment cannot be held to be a nullity.
She further referred to the provisions of section 292B and 292BB of the income tax act. She submitted that notices issued under the provisions of the act are valid and under certain circumstances. She further placed on record the letter dated 10/4/2018 submitted by the Deputy Commissioner of income tax, Noida (AO) to the Commissioner of income tax (departmental representative) – 6 New Delhi. She referred to para number 3 of that letter and response to the assessing officer in para number 4.
She further relied upon the following judicial precedents to support the case of the revenue a. Padinijrekara Agencies P Ltd VIT 398 ITR 381 b. Sumitra Menon V CIT 315 ITR 111 c. Josh Builders & Developers P Ltd V PCIT 9/9/2016 d. Ashok Chaddha V ITO 337 ITR 399 e. DCIT V K M Nagraj 82 taxann.com 170 f. CIT V Harsingha Gutkha P Ltd 44 taxmann.com 101 g. P M Abdulla ITA 1224/Bang/2012 h. Tarsem Singla V DCIT 385 ITR 138 ( P & H )
She further stated that the honourable Karnataka High Court in the case of CIT vs Shri Durga Enterprise 44 taxmann.com 442 has held that validity of notice u/s 148 read with section 292B is valid as it has been responded in letter and spirit and participated in the proceedings by assessee. Therefore it was stated by her that in case the assessee has participated in the assessment proceedings and is responding to several notices in its letter and spirit the assessment order despite non-issue of notice u/s 143 (2) of the act cannot be held to be invalid.
She further submitted that non-compliance of a procedural law will not make the assessment order void or illegal. She submitted that assessee has been put to the notice of the assessment which is the sum and substance of for the reasons for issuance of notice u/s 143 (2) of the act, therefore it is merely a procedural law, even otherwise the assessee assessee has been put to notice which is admitted by the assessee, therefore it cannot be held to be invalid. She relied on the decision of the honourable Supreme Court in the case of JK steel Ltd vs Union of India 1970 AIR 1173. 14. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, on perusal of letter dated 10/4/2018 of the learned assessing officer the facts are very clear that in para number 3 of the letter the learned assessing officer has stated that assessment was framed under section 143 (3) of the act and the 1st notice u/s 142 (1) for the filing of income tax return was issued on 14/9/2011 which was inadvertently mentioned as notice under section 153A of the act. The learned AO further stated that impugned year is such year and the assessment was correctly framed u/s 143 (3) of the act. The learned AO further stated that notice u/s 153A of the act for the year was never issued to the assessee. Further in para number four of the learned assessing officer stated that with regard to the issue of notice u/s 143 (2) of the act that in the assessment order the issue of notice u/s 143 (2) of the act is not mentioned. He further stated that from the record of assessment year 2010 – 11, it was also not found. However he put a writer that there may be additional folder for the year under consideration which is being traced and the evidence of service of the notice u/s 143 (2) of the act will be submitted at the earliest. The above letter was dated 10/4/2018 and even till the time of passing of this order, the revenue did not produce any such notice issued under section 143 (2) of the act. Therefore now it is evident that no such notice was issued u/s 143 (2) of the act.
Now the first dispute in the impugned appeal is whether the assessment was required to be framed u/s 143 (3) of the act or under section 153A of the act. The learned assessing officer himself stated in letter dated 10/4/2018 that the assessment was framed u/s 143 (3) of the act and the assessment was correctly framed under that section. To support his contention the AO is further held that notice u/s 153A of the act for the year was never issued to the assessee. Therefore the main contention of the assessing officer is that such assessment order in the impugned appeal is passed u/s 143 (3) of the act.
According to the provisions of section 153A of the income tax act the assessment under this section is required to be made of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisitioned is made. In the present case, the date of search is 24/2/2010. Therefore, the relevant assessment year is 2010 – 11. Prior to assessment year 2010 – 11, the AO should frame assessment order u/s 153A of the income tax act of 6 assessment years. Admittedly for the assessment year 2010 – 11, the assessment should have been framed u/s 143 (3) of the income tax act.
Therefore if the assessment order as held by the learned assessing officer is passed under section 143 (3) of the income tax act than, it is mandatory that the notice u/s 143 (2) of the act should have been issued to the assessee. The provisions of issue of notice u/s 143 (2) of the act are mandatory. The notice specifies the only requirement for the issue of notice is a satisfaction on the part of the learned assessing officer that it is necessary or expedient for him to verify the correctness and completeness of the return filed by the assessee. The assessment order passed without issuing such statutory notice cannot be upheld.
Now we also take the issue that even if the assessment order is not passed u/s 143 (3) of the act but under section 153A of the act then whether notice u/s 143 (2) of the income tax act should have been issued to the assessee before making any assessment order or not. On this issue the honourable Delhi High Court in 20 taxmann.com 387 (Delhi) (2012) in Ashok Chaddha V Income tax officer has held that there is no specific provision in the act requiring the assessment made under section 153A to be after issuance of notice u/s 143 (2) of the income tax act it has been held that the use of the words ―so far as may be‖ cannot be stretched to the extent of mandatory issue of notice u/s 143 (2) of the act. The honourable High Court further stated that specific notice is required to be issued under clause (a) of subsection (1) of section 153A calling upon the person search or requisitioned to file return and that being so, no further notice u/s 143 (2) can be contemplated for assessment u/s 153A of the act.
However Honourable Allahabad High Court in Monis Iqbal and Rajkumar Jaiswal ( Supra) has held that even in assessment u/s 153A of the act the notice u/s 143 (2) of the act is required to be issued which is a mandatory requirement. Admittedly, the assessee is falling under the jurisdiction of honourable Allahabad High Court; therefore, the decision of the honourable Allahabad High Court binds us.
In case of the decision of the honourable allow High Court in CIT vs her ‗the private limited 44 taxmann.com 101 there was a service of the notice at the registered office of the assessee company. Therefore it was not the case of non-issue of the notice. And therefore the honourable High Court applied the provisions of section 29 2BB and stated that when the assessee has participated voluntarily in the appellate proceedings and assessment proceedings it may be a irregular but not invalid.
Further Honourable Calcutta High court in [2018] 409 ITR 132 (Cal) in PRINCIPAL COMMISSIONER OF INCOME-TAX v. OBEROI HOTELS PVT. LTD. Has held that If the time for issuance of the notice under section 143(2) of the Income-tax Act, 1961 has expired or the time for completing the reassessment proceedings under section 153(2) has run out, the failure to issue such notice under section 143(2) would result in the entire proceedings, including any order of assessment being quashed. It was further held that Section 292BB does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the