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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI A.D. JAIN & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The above titled cross appeals three by the assessee and one by the Revenue have been preferred against the orders dated 22.11.2011, 11.10.2012 and 21.07.2009 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2004-05.
ITA No.920/M/2012 2. The assessee has raised the following grounds of appeal: “1. On the facts, and in the circumstances of the case, and in law, the learned CIT(A) erred in not holding that the notice under Section 148 of the Act was invalid and bad in law.
On the facts, and in the circumstances of the case, and in law, the learned CIT(A) erred in upholding the action of the learned AO of reassessing the income under Section 147 of the Act.
On the facts, and in the circumstances of the case, and in law, the learned CIT(A) erred in upholding the learned AO's action of withdrawal of deduction for depreciation of Rs. 10,500,000/-.”
The assessee has also raised additional grounds which are as under:-
“4. On the facts and in the circumstances of the case and in law, the reassessment order passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (Act) dated 31 December 2009 is bad in law and void ab initio since statutory notice under Section 143(2) of the Act was not issued/served upon the Appellant.”
3 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. 3. We would like to adjudicate first the legal issue raised by the assessee by way of additional ground vide letter dated 08.12.2017. As is apparent from the above, the legal issue relates to non issuance and non service of statutory notice under section 143(2) of the Act and consequently the assessee has challenged the validity of assessment order passed under section 143(3) read with section 147 of the Act dated 31.12.2009.
The Ld. A.R. submitted before the Bench that the additional ground being raised before the Hon'ble forum is purely a jurisdictional and legal issue and goes to the root of the matter and would be essential for judicious disposal of the appeals. The Ld. A.R. prayed before the Bench that the powers as provided in rule 11 of ITAT Rules may kindly be exercised and the grounds raised may kindly be admitted. The Ld. A.R. stated that though the ground was not raised before the authorities below and is being raised for the first time before this Hon’ble Forum, however, the non raising of ground was neither deliberate nor contumacious but arising out of legal position which has come to the notice of the assessee only recently and therefore the same has been filed immediately before this Hon’ble Forum. In defence of his arguments, the Ld. A.R. relied on the following decisions: 1. Jute Corporation of India vs. CIT 187 ITR 688 (SC) 2. National Power Thermal Corporation Ltd. vs. CIT (1998) 220 ITR 383 (SC) 3. CIT vs. Prithvi Brokers and Shareholder (2012) 349 ITR 336 (Bombay)
The Ld. A.R. finally prayed that in view of the ratio laid down in the above decisions the additional ground raised by the
4 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. assessee may kindly be admitted for the proper dispensation of the substantial justice.
The Ld. D.R., on the other hand, opposed strongly the additional ground filed by the assessee by submitting that the said ground was never raised before the authorities below or in the memorandum of appeal filed before the ITAT and therefore the same may kindly be dismissed.
After hearing both the parties and perusing the material on record, we observe that the legal issue raised is in respect of non issuance and non service of notice under section 143(2) of the Act is purely a jurisdictional and legal issue and goes to the root of the matter and therefore, we are inclined to admit the same for adjudication. The case of the assessee is also supported by the ratio laid down by the Hon’ble Supreme Court in the case of Jute Corporation of India vs. CIT (supra), National Power Thermal Corporation Ltd. vs. CIT (supra) and CIT vs. Prithvi Brokers and Shareholder (supra) and accordingly the additional ground raised by the assessee is hereby admitted.
The Ld. A.R. submitted before the Bench that the mandatory statutory notice under section 143(2) of the Act was not issued and not served upon the assessee. The Ld. A.R. submitted before the Bench that while reopening the assessment under section 147 of the Act the AO has failed to issue the notice under section 143(2) of the Act. The Ld. A.R. submitted that in absence of non issuance of statutory notice, the AO can not proceed to compute the income in the reassessment proceedings. The Ld. A.R. submitted that the order passed
5 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. under section 143(3) read with section 147 of the Act is therefore without jurisdiction and is bad in law as the Revenue has not complied with the mandatory issuance of notice under section 143(2) of the Act. The Ld. A.R. submitted that the said lapse on the part of the AO is not a procedural irregularity and is not curable as the requirement of notice under section 143(2) can not be dispensed with. 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 31.12.2009 be quashed as invalid and without jurisdiction as the same suffers from the incurable defects of non issuance and non service of notice under section 143(2) of the Act.
The Ld. D.R. submitted before the Bench that on 10.01.2019 the revenue was directed by the Bench to ensure the presence of AO with the assessment records so that the fact could be ascertained from the record whether the notice under section 143(2) of the Act was issued or not. Accordingly, the case was posted for hearing on 25.02.2019 and thereafter the case was adjourned on several occasions. The Ld. D.R. on
6 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. 25.09.19 informed the Bench that though the assessment records were not available with the AO and therefore the same could not be produced. However, the Ld. D.R. submitted that the fact is mentioned in the assessment order itself that notice under section 143(2) dated 06.07.2007 was served upon the assessee on 06.07.2007. The Ld. D.R. submitted that since the fact stands mentioned in the assessment order therefore it can be reasonably presumed that the said notice was issued and served upon the assessee. The Ld. D.R. again reiterated his inability to produce the assessment record before the Bench and 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. We observe from the facts before us and the rival submissions made before us that there is controversy as to non issuance and non service of notice under section 143(2) of the Act in the reassessment proceedings. In order to verify the fact whether the notice under section 143(2) of the Act was issued or not, on 10.01.2019 the ld DR was asked to ensure the presence of the AO along with the assessment records. Accordingly, the case was posted for hearing on 25.02.2019 and thereafter the case was adjourned on several occasions. The Ld. D.R. on 25.09.19 informed the Bench that though the assessment records were not available with the AO and therefore the same could not be produced, however, the Ld. D.R. submitted that the fact is mentioned in the assessment order itself that notice under section 143(2) dated 06.07.2007 was served upon the assessee on 06.07.2007. Since the revenue has failed to
7 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. produce the assessment records despite granting several opportunities , we are left with no alternative but to take an adverse inference against the revenue that no notice was ever issued or served upon the assessee. In this background of the case, we are of the considered 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 31.12.2009 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 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
8 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. 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. 11. 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 31.12.2009 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 consequent reassessment order. The additional ground is allowed. Since we have decided the additional ground in favour of the assessee other grounds need no adjudication. Resultantly, appeal is partly allowed. ITA No.855/M/2013 A.Y. 2004-05 12. Since we have already quashed the assessment order in ITA No.920/M/2012, therefore, consequently the penalty order confirmed by Ld. CIT(A) which is challenged in this appeal does not survive. Accordingly, the appeal of the assessee is allowed. ITA No.5455/M/2009 (Revenue’s appeal) & ITA No.5496/M/2009 (Assessee’s appeal) 13. The issue involved in these appeals is identical to one as decided by us in ITA No.920/M/2012 wherein we have quashed the assessment order framed on account of non issuance/service of notice under section 143(2) of the Act. Our decision on the said appeal would mutatis mutandis apply to these appeals as well. Accordingly, the assessment framed by the AO under section 143(3) read with section147 of the Act is quashed and appeal of the assessee is allowed on the
9 ITA No.855/M/2013 & ITA No.5455/M/2009 & ors. M/s. Oracle Financial Services Software Ltd. jurisdictional issue. Consequently, the Revenue appeal in ITA No.ITA No.5455/M/2009 becomes infructuous and is accordingly dismissed.
Order pronounced in the open court on 17.12.2019.
Sd/- Sd/- (A.D. Jain) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 17.12.2019. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order
Dy/Asstt. Registrar, ITAT, Mumbai.