DCIT 10(2)(1), MUMBAI vs. JYOTHY LABORATORIES LTD, MUMBAI

The above titled appeals by the Revenue and the cross objections by the assessee have been preferred against the order dated 30.09.2016 of the Commissioner of Income Tax (Appeals)

The Ld. A.R., at the outset, submitted that assessee as a respondent in appeal before Tribunal can support the order appealed against on any of the ground decided against him even though no independent appeal or cross objection has been filed by it. The Ld. A.R. drew our attention to rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 wherein it has been made clear that respondent in appeal before the Tribunal can support the order appealed against on any of the grounds even without filing an appeal.

The Ld. A.R. placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Pr. CIT vs. Sun Pharma Industries Ltd. (2018) 408 ITR 517 wherein the Hon’ble Court has affirmed the view that rule 27 of the Rules entitles the respondent to defend the order before Tribunal on all grounds including the ground which may be against him even though the order appealed against him had otherwise been decided in his favour. The Ld. A.R. referred to the affidavit of the assessee filed

The Ld. A.R. vehemently submitted before the Bench that though there is no need to take the above additional ground separately as the ground No.1 taken in the cross objection challenges the validity of assessment framed under section 143(3) read with section 147 but out of abundant caution the assessee has taken the aforesaid additional ground. The Ld. A.R. submitted before the bench that the aforesaid ground is of a legal nature and assessee is at liberty to take the said ground at any stage in the appellate proceedings. The Ld. A.R. also submitted that the admission of said ground does not require any verification of facts as the issue is arising out of the assessment records and is purely of legal nature. The Ld. A.R.

Having perused the additional ground and after hearing both the parties, we observe that the issue raised by the assessee’s sr. counsel Shri S.E. Dastur is purely of legal nature and can be raised at any stage in the appellate proceedings. We have allowed sufficient time as requested by the ld DR in order to ascertain the fact whether the notice u/s 143(2) was issued or not .The ld. DR filed a report from the AO in which he has stated that from the assessment records it appears that no notice u/s 143(2) was issued to the assessee. With this background we therefore are inclined to admit the additional ground raised by the assessee that assessment is invalid or not for the want of said notice. The case of the assessee is fully covered by the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra) wherein it has been held that the assessee can raise a legal issue at any stage in the appellate proceedings and the appellate authorities have the power to admit and adjudicate the same as the purpose of providing the judicial frame work, appellate mechanism in the judicial frame work is to afford the assessee an opportunity to defend its case

The facts in brief are that the assessee is a public limited company and is engaged in the business of manufacturing and marketing of fabric whiteners, soaps, detergents, mosquito repellants, scrubbers, body care and incense sticks. The return of income was filed on 08.10.2010 during the relevant assessment year declaring an income of Rs.52,64,25,870/- under the normal provisions of the Act and book profit of Rs.101,07,76,594/- under section 115JB of the Act. The original assessment was completed vide order dated 06.12.2012 framed under section 143(3) assessing the income at Rs.52,95,50,180/- under the normal provisions of the Act and Rs.101,69,41,130/- under section 115JB of the Act by making certain additions/disallowances. Thereafter, a notice under section 148 of the Act was issued on 21.03.2014 of the Act which was served on the assessee on 24.03.2014. The assessee complied with the said notice vide letter dated 26.03.2014 requesting the AO to treat the original return filed by the applicant on 08.10.2010 as return filed in response to notice issued under section 148 of the Act. The assessee also requested the AO to provide the reasons recorded for initiating reassessment proceedings under section 147 of the Act which were duly provided to the assessee. The main issue on which the assessment was sought to be reopened was the wrong allowance of deduction of Rs.40,14,24,036/- under section 80IC in respect of Uttaranchal unit in the original assessment order. Thereafter, the assessment was framed on

In the appellate proceedings, the Ld. CIT(A) decided the issue in favour of the assessee on merit of the case. Thereafter, the assessee sought the examination of assessment records and tax files and upon such inspection it was found that no copy of notice under section 143(2) was available on its record and the assessee claimed that no such notice was issued and served upon it during the course of reassessment proceedings.

Now the assessee challenges the validity and jurisdiction of the AO in framing the assessment under section 143(3) read with section 147 of the Act dated 24.09.2015 on the ground that mandatory notice under section 143(2) was not issued and served upon the assessee. The Ld. A.R. submitted that the non issuance of notice under section 143(2) goes to the root of the assessment and is not a procedural defect but renders the entire assessment as nullity in the eyes of law. In defence of his argument the Ld. A.R. relied on the following judicial decisions: 1. CIT Vs Laxman Das Khandelwal (2019) 108 taxmann.com 183(SC) 2. ACIT v. Hotel Blue Moon: [2010] 188 Taxman 113 (SC) 3. ACIT v. Geno Pharmaceuticals Ltd.: [2013] 32 taxmann.com 162 (Bombay) 4. PCIT v. Silver Line: [2016] 65 taxmann.com 137 (Delhi) 5. Ajaysingh Gajanansingh Gour v. ITO: ITA No.398/Nag./2017 (Nagpur- Trib)

The Ld. A.R., therefore prayed before the Bench that the assessment so framed by the AO under section 143 read with section 147 dated 24.09.2015 be quashed as invalid and without jurisdiction as the same suffers from the incurable defects of

The Ld. D.R., on the other hand drew the attention of the Bench to the letter dated 29.07.2019 wherein it has been stated that subsequent to the raising of additional ground a reference was made to the AO to clarify whether notice under section 143(2) was issued in this case in the reassessment proceedings under section 147 of the Act. The Ld. D.R. stated that the AO informed that notice issued under section 143(2) as well as proof of services of notice is not available on record, therefore, the Ld. D.R. left the issue to the wisdom of the Bench by placing these facts before the Bench.

We have heard the rival submissions of both the parties and perused the material on record including the impugned order and reply of the Revenue dated 29.07.2019. We observe from the facts before us and the rival submissions made before us that there is no controversy as to non issuance and non service of notice under section 143(2) of the Act in the reassessment proceedings. In this background of the case, we are of the view that assessment so framed by the AO without issuing notice under section 143(2) is invalid and liable to be quashed. Accordingly, we hold that the assessment framed by the AO under section 143(3) read with section 147 of the Act dated 24.09.2015 is without jurisdiction and is invalid. The case of the assessee is squarely covered by the various decisions relied and referred to above as in the case of ACIT vs. Geno Pharmaceuticals Ltd. (supra) the Hon’ble Bombay High Court has held that where no notice under section 143(2) has been 8 & 7283/M/2016 CO Nos.78 & 79/M/2018 M/s. Jyothy Laboratories Ltd. issued while making assessment under section 143(3) read with section 147, the assessment so framed is bad in law as the AO can not proceed to make an enquiry on the return filed in compliance to the notice issued under section 148 of the Act and thus dismissed the appeal of the Revenue by holding that no substantial question of law arose out of the appeal of the Revenue. Similarly, in the case of CIT vs. Laxman Das Khandelwal (2019) 108 taxmann.com 183 (SC) the Hon’ble Apex Court has held that no notice under section 143(2) was ever issued by the Department, therefore, the finding rendered by High Court and the Tribunal and the conclusion arrived at were correct and there is no reason to take a different view in the matter. Pertinent to mention that Hon’ble Madhya Pradesh High Court in the case of CIT vs. Laxman Das Khandelwal (supra) has held that AO had no valid jurisdiction to pass the assessment order as the very foundation of assessment proceeding is bad in law and hence these proceedings culminated in the assessment order as well as impugned order stand quashed and thus dismissed the appeal of the Revenue.

After taking into consideration the facts of the case vis-à- vis the ratio laid down by the Hon’ble Supreme Court and various High Courts, we are of the considered view that the assessment proceedings and the consequent reassessment order dated 24.09.2015 passed under section 143(3) read with section 147 are bad in law as the mandatory notices under section 143(2) was not issued. Accordingly, we quash the proceedings initiated by the AO under section 147 and also the reassessment order.

Since we have already allowed the issue on the additional ground raised

Resultantly, the cross objections of the assessee are partly allowed and the appeals of the Revenue are dismissed. Order pronounced in the open court on 22.10.2019.