MRS.PRABHABEN K. GALA,MUMBAI vs. ITO WARD-23(1)(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NOs. 3942 & 3943/MUM/2018 (A.Ys: 2009-10 & 2010-11) Mrs. Prabhaben K. Gala v. Income Tax Officer 14, Village Road, Bhandup (W) Ward No. 23(1)(3) Mumbai – 400 078 C-10, Bandra Kurla Complex Bandra (E), Mumbai – 400 051 PAN: AETPG 8582 Q (Appellant) (Respondent) Assessee by : Shri V.D. Parmar Department by : Shri Chaitanya Anjaria

Date of Hearing : 03.06.2019 Date of Pronouncement : 26.07.2019

O R D E R PER C.N. PRASAD (JM) 1. These two appeals are filed by the assessee challenging the order of the Learned Commissioner of Income Tax (Appeals)–40, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 02.01.2018 for the A.Ys. 2009-10 and 2010-11 in sustaining the validity of assessment order and also the additions/disallowance made in the assessment towards bogus purchases.

2 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 2. In so far as the validity of assessment is concerned, briefly stated the facts are that the assessee filed returns of income for the A.Ys. 2009-10 and 2010-11 and the returns were processed u/s. 143(1) of the Act. Subsequently by way of issue of notice dated 12.03.2014 and 30.03.2014 the assessments for the A.Ys. 2009-10 and 2010-11 respectively were reopened. The reopened assessments were completed on 15.09.2014 and 16.09.2014 for the A.Y. 2009-10 and 2010-11 respectively u/s. 143(3) r.w.s. 147 of the Act by bringing to tax the non-genuine purchases from various parties referred in the Assessment Order. Before the Ld.CIT(A) the assessee challenged the validity of the reassessment order made u/s. 143(3) r.w.s. 147 of the Act contending that in the absence of issue of notice u/s. 143(2) of the Act the reassessment order made u/s. 147 of the Act is bad in law.

3 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala assessment relying on the decision of the Pune Bench of the Tribunal in the case of Chawara Educational Trust v. ITO [66 taxmann.com 127].

4 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala within limitation fixed under the Act. It is submitted that the Hon'ble High Court held that in the absence of issue of the notice under the proviso to section 143(2) within a period of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to the block assessment after the period of limitation was barred and the entire proceedings in pursuance of such notice is null and void.

5 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 8. In the case before me the Ld. DR could not produce any evidence

to show that notice u/s. 143(2) was in fact issued and served on the assessee before completion of reassessment.

notice u/s. 143(2) of the Act. It has been held that omission on the part of the Assessing Authority to issue notice u/s. 143(2) cannot be a procedural irregularity and the same is not curable. It has been held that the

requirement of issue of notice u/s. 143(2) of the Act cannot be dispensed with.

6 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala mandatory. The ITAT has taken into consideration the relevant provisions and has also taken into consideration the judgment of the Apex Court and relying on the said judgments, the ITAT has held that notice under Section 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot proceed to make an inquiry on the return filed in compliance with the notice issued under Section 148.”

7 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala “12. The Court first proposes to consider the question as to whether in terms of the proviso to Section 292BB of the Act, the Assessee was precluded, at the stage of the proceedings before the ITAT, from raising a contention regarding failure of the AO to issue a notice under Section 143(2) of the Act. The legal position appears to be fairly well settled that Section 292BB of the Act talks of the drawing of a presumption of service of notice on an Assessee and is basically a rule of evidence. In Commissioner of Income Tax v. Parikalpana Estate Development (P.) Ltd. (supra) in answering a similar question, the Court referred to its earlier decision in Commissioner of Income Tax v. Mukesh Kumar Agrawal (2012) 345 ITR 29 (All.) and pointed out that Section 292BB of the Act was a rule of evidence which validated service of notice in certain circumstances. It introduces a deeming fiction that once the Assessee appears in any proceeding or has cooperated in any enquiry relating to assessment or reassessment it shall be deemed that any notice under any provision of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and the Assessee in those circumstances would be precluded from objecting that a notice that was required to be served upon him under the Act was not served upon him or not served in time or was served in an improper manner. It was held that Section 292BB of the Act is a rule of evidence and it has nothing to do with the mandatory requirement of giving a notice and especially a notice under Section 143(2) of the Act which is a notice giving jurisdiction to the AO to frame an assessment. The decision of the Allahabad High Court in Manish Prakash Gupta v. Commissioner of Income Tax (supra) is also to the same effect. 13. In Pr. CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra), this Court has also discussed the distinction between a failure to 'issue' notice and a failure to 'serve' a notice on an Assessee. It was held, after noticing the decisions of the Allahabad High Court in Commissioner of Income Tax v. Rajeev Sharma (2011) 336 ITR 678 and Commissioner of Income-tax-II, Lucknow v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All.) and the decision of the Madras High Court in Sapthagiri Finance & Investments v. Income Tax Officer (2013) 90 DTR (Mad) 289), that Section 292 BB of the Act would apply insofar as failure of 'service' of notice was concerned and not with regard to the failure to 'issue' notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act. 14. Consequently, the Court does not find merit in the objection of the Revenue that the Assessee was precluded from raising the point concerning the non-issuance of notice under Section 143 (2) of the Act in the present case in view of the proviso to Section 292BB of the Act. 15. The Court also finds merit in the contention of the Assessee that in any event as far as AYs 2005-06 to 2007-08 is concerned, Section 292BB of the Act would not apply since it is prospective in its application, i.e., applicable from AY 2008-09 onwards. The legal position in this regard appears to be well settled as explained in CIT v. Kuber Tobacco Producers P. Ltd. (supra) and Commissioner of Income Tax v. Mohammad Khaleeq (supra). 16. As regards the objection of the Revenue to the ITAT permitting the Assessee to raise the point concerning non-issuance of notice under Section 143(2) of the Act for the first time in the appeal before the ITAT, the Court is of the considered view that in view of the settled legal position that the requirement of issuance of such notice is a jurisdictional one, it does go to the root of the matter as far as the validity of the reassessment proceedings under Section 147/148 of the Act is concerned. It raises a question of law as far as the present cases are concerned since it is not in dispute that prior to finalisation of the reassessment orders, notice under Section 143(2) of the Act was not issued by the AO to the

8 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala Assessee. With there being no fresh evidence or disputed facts sought to be brought on record, and the issue being purely one of law, the ITAT was not in error in permitting the Assessee to raise such a point before it. This finds support in the decision of the Supreme Court in National Thermal Power Co. Ltd. v. Commissioner of Income Tax (supra) and the decision of this Court in Gedore Tools (P) Ltd. v. Commissioner of Income Tax (supra). 17. On the question of whether the notice under Section 143(2) of the Act was in the facts and circumstances mandatory, Mr. Sahni sought to distinguish the long line of decisions including the recent decision of this Court in Pr. CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra) on the ground that there was no occasion for the AO to issue any notice under Section 143 (2) of the Act since the Assessee had, in fact, not filed a return. He submitted that the original return was filed in the 'Saral Form' which had since been replaced with a different form for filing of returns. Consequently, the said return could not have been treated as a return filed pursuant to the notice issued to the Assessee under Section 148 of the Act. He further submitted that with no discrepancy having been found by the AO in the returns for AYs 2005-06 till 2007-08, which were processed under Section 143 (1) of the Act, there was no occasion for the AO to issue a notice under Section 143 (2) of the Act. Mr. Sahni submitted that in the circumstances, the action of the AO in finalising the reassessment orders without notice under Section 143 (2) of the Act was justified. 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. 19. The Court is unable to accept the submission of the Revenue that in the present case, no return was filed by the Assessee pursuant to the notice issued to it under Section 148 of the Act. If after receiving the letter dated 1st April 2011 of the Assessee the AO was of the view that the return originally filed in the Saral Form could not be treated as the return pursuant to the notice under Section 148 of the Act, then he should have drawn the attention of the Assessee to that fact. In the present case all that the AO did was to send a notice under Section 142 (1) of the Act. The Assessee was not made aware as to why he was required to file a return. Had a notice been issued to him under Section 143 (2) of the Act, the AO would have been obliged to let the Assessee know why he was being asked to file a return notwithstanding his letter dated 1st April 2011. In the circumstances, the Assessee was justified in proceeding on the basis that it had not committed any default in communicating to the AO that the return already filed should be treated as the return filed pursuant to the notice under Section 148 of the Act. 20. 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 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.

9 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala AO then issued a notice to it under Section 142(1) of the Act. The Assessee thereafter appeared before the AO and stated that the original return filed should be treated as the return filed in response to the notice under Section 148 of the Act. In those circumstances, the High Court observed that if there was some explanation that was required to be offered by the Assessee, notwithstanding the above submission made by it, the AO ought to have issued a notice under Section 143(2) of the Act. The Madras High Court observed: "Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act." 22. The decisions of the Allahabad High Court in Commissioner of Income Tax v. Rajeev Sharma(supra) and Commissioner of Income-tax-II, Lucknow v. Salarpur Cold Storage (P.) Ltd. (supra) also reiterate the above legal position. As far as this Court is concerned, the decision in Director of Income Tax v. Society For Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del) and the recent decision in Pr. CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra) hold likewise. 23. With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143(2) of the Act, the ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable.”

104] the Hon'ble Calcutta High Court held that when the Assessing Officer

completed the assessment u/s. 143(3) r.w.s. 147 of the Act without issuing

any notice u/s. 143(2) of the Act, re-assessment order passed was legally

unsustainable and the same could not be justified by invoking the

provisions of section 292BB of the Act. While holding so, the Hon'ble High

Court held as under: -

10 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala “11. Apropos the second question framed above, it is necessary that Section 292BB of the Act be noticed in its entirety:

"292BB Notice deemed to be valid in certain circumstances - Where an assessee has appeared in any proceeding or cooperated in any inquiry 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 and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was - (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee had raised such objection before the completion of such assessment or reassessment." 12. Even if the provision does not carry a non-obstante clause, since Section 292BB is a provision of general application, it would be applicable in all situations; but only in so far as it proclaims to operate. Section 292BB of the Act, read in the context of several provisions of the Act which mandatorily require notices to be issued in divers situations, cannot be said to have dispensed with the issuance of such notices altogether. Section 292BB must be understood to cure any defect in the service of the notice and not authorise the dispensation of a notice when the appropriate interpretation of a provision makes the notice provided for thereunder to be mandatory or indispensable.

The two substantial questions of law are answered accordingly as follows: (1) If the time for issuance of the notice under Section 143(2) of the Act has expired or the time for completing the reassessment proceedings under Section 153(2) of the Act has run out, the failure to issue such notice under Section 143(2) of the Act would result in the entire proceedings, including any order of assessment, to be quashed. (2) Section 292BB of the Act does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the defect of service of such notice if an objection in such regard is not taken before the completion of the assessment or reassessment. In addition, it is held that in the light of the Supreme Court dictum in Hotel Blue Moon, the view expressed in Humboldt Wedag India Pvt. Ltd is per incuriam and, as such, not good law.”

11 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 13. Similar view has been taken by the Mumbai Bench of the Tribunal

in the case of M/s. Kanchanjunga Implex Pvt. Ltd., v. ITO in ITA.No.

6057/Mum/2013 dated 23.09.2015.

5626/Del/2012 dated 30.03.2017 the Coordinate Bench of this Tribunal

held as under: -

“9. We have heard the rival submissions and carefully considered the same on this issue. We noted that this Tribunal vide order dated 28.11.2016 directed the Departmental Representative to produce the assessment record on the next date of hearing on 31.1.2017, but no such record was produced by the ld. D.R. and therefore the case was adjourned to 31.1.2017 and ultimately it was adjourned for 16.3.2017. When the Bench asked the ld. D.R. to produce the record to prove whether any notice under section 143(2) of the Act has been issued or served on the assessee, the ld. D.R. was fair enough to admit that he has written to the Assessing Officer but the Assessing Officer has stated that the record has been misplaced and is not traceable. We are of the view that once this Tribunal has directed the Revenue to produce the record with regard to the assessment so that it can be verified whether notice under section 143(2) of the Act has been issued and served on the assessee before completing the assessment under section 147/148 of the Act, the Revenue was bound to produce the record. But the Revenue could not produce the record and just explained in the Bar that the record has been misplaced. Under these circumstances, we are bound to take an adverse inference in view of the provisions of section 114 of the Evidence Act to the effect that had the assessment record been produced, the same would have gone against the interest of the Revenue. Our aforesaid view is duly supported by the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Motor General Finance Ltd., 254 ITR 449 (Delhi). Respectfully following the decision of the Hon'ble jurisdictional High Court, we hold that no notice under section 143(2) of the Act has been issued or served on the assessee before completion of assessment under section 147/148 of the Act. Once this inference is drawn, the contention of the ld. A.R. of the assessee was that non-issuance and service of notice under section 143(2) of the Act before completion of the assessment under section 147/148 of the Act makes the assessment invalid and void ab-initio and in this regard he has placed reliance on the following decisions:- 1. Kuber Tobacco Products vs. DCIT, 117 ITD 273 (SB) 2. CIT vs. Jai Shiv Shankar Traders, 383 ITR 448 (Del) 3. Alpine Electronics vs. Director General Income Tax, 341 ITR 247.

12 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 11. After hearing the rival submission and going through the orders of the authorities below as well as the case laws relied on by both the parties, we noted that the issue involved is duly covered in favour of the assessee by the decision of the Hon'ble jurisdictional High Court in the case of Principal CIT vs. Jai Shiv Shankar Traders Pvt. Ltd., 383 ITR 448 (Del) which is binding on us. In this decision, we noted that the Hon'ble High Court discussed the decision of the Hon'ble Delhi High Court in the case of CIT vs. Madhya Bharat Energy Corporation Ltd. (supra) on which the ld. D.R. has relied on. The Hon'ble Delhi High Court did not agree and distinguished the decision of the Hon'ble Delhi High Court in the impugned case. The facts involved in the case of Principal CIT vs. Jai Shiv Shankar Traders Pvt. Ltd. (supra) are similar to the case of the assessee. In this decision, the Hon'ble jurisdictional High Court has dealt with this issue as under:- “7. The Assessee’s further appeal has been allowed by the ITAT by the impugned order. Relying, inter alia, on the decision of the Supreme Court in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 and a plethora of judgments of the High Courts, the ITAT concluded that for completing the assessment under Section 148 of the Act compliance with the procedure under Section 143 (2) was mandatory. It was held that if notice was not issued to the Assessee before completion of the re-assessment, then such reassessment was not sustainable in law. 8. When this appeal was first listed before this Court on 29th July, 2015 reliance was placed by Ms Suruchi Aggarwal, learned Senior Standing counsel for the Revenue on the decision of this Court in ‘Commissioner of Income Tax v. Madhya Bharat Energy Corporation Ltd. (2011) 337 ITR 389 ) Del which purported to hold that non-issue of notice under Section 143(2) of the Act on an Assessee prior to completion of the reassessment would not be fatal to the reassessment. She also sought to distinguish the decision in ACIT v. Hotel Blue Moon (supra) on the ground that it pertained to a block assessment. 9. Dr Rakesh Gupta, learned counsel appearing for the Assessee, at the outset drew the attention of this Court to an order passed by this Court on 17th August, 2011 in Review Petition No.441/2011 in ITA No.950/2008 (CIT v. Madhya Bharat Energy Corporation) whereby this Court reviewed its main judgment in the matter rendered on 11th July 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under Section 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17th February, 2011 after noticing that in the said case that no notice under Section 143(2) had ever been issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned. 10. Ms Aggarwal nevertheless urged that notwithstanding the above position, the decision of this Court in CIT v. Vision Inc. (2012) 73 DTR 201 (Del) would apply. The said judgment held that since on the facts of that case the Assessee had been properly served with the notice under Section 143(2) of the Act within the statutory time limit prescribed under the proviso thereto, the ITAT should not have set aside the re-assessment in toto. Ms Aggarwal placed reliance on Section 292BB of the Act and urged that the Assessee having not raised any objection about non service of the notice under Section 143(2) of the Act either at any time before the AO or prior to, or during the reassessment proceedings, the Assessee was precluded from raising such an objection in the subsequent stages of the proceedings.

13 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 11. Dr Rakesh Gupta for the Assessee on the other hand placed reliance on a large number of decisions of the High Courts apart from the decision of the Supreme Court in ACIT v. Hotel Blue Moon (supra). He submitted that the failure to issue a notice under Section 143(2) of the Act subsequent to the Assessee having informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act, was fatal to the order of re-assessment. 12. The narration of facts as noted above by the Court makes it clear that no notice under Section 143(2) of the Act was issued to the Assessee after 16th December 2010, the date on which the Assessee informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act. 13. In DIT v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del), this Court invalidated an reassessment proceedings after noting that the notice under Section 143(2) of the Act was not issued to the Assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under Section 143(2) of the Act only after the return filed by the Assessee is actually scrutinised by the AO. 14. The interplay of Sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court. In CIT v. Rajeev Sharma (2011) 336 ITR 678 (All.) it was held that a plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under Section 143(2) of the Act. It was observed: “the provisions contained in sub-Section (2) of Section 143 is mandatory and the legislature in their wisdom by using the word 'reason to believe' had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the AO to serve a notice under sub-Section 2 of Section 143 assigning reason therein. In absence of any notice issued under sub-Section 2 of Section 143 after receipt of fresh return submitted by the Assessee in response to notice under Section, the entire procedure adopted for escaped assessment, shall not be valid.” 15. In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. (2014) 50 Taxmann.com 105 (All) it was held as under: “10. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act,

14 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala however, carves out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292 BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under Section 143 (3) of the Act, it is necessary to issue a notice under Section 143 (2) of the Act and in the absence of a notice under Section 143 (2) of the Act, the assumption of jurisdiction itself would be invalid.” 16. In the same decision in v. Salarpur Cold Storage (P.) Ltd.(supra), the Allahabad High Court noticed that the decision of the Supreme Court in ACIT v. Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.” 17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2013) 90 DTR 289 (Mad). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000- 01. However, the Assessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act. Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. It was observed that: "Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act.” 18. As already noticed, the decision of this Court in CIT v. Vision Inc. proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of “service” of notice was concerned and not with regard to failure to “issue” notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act.

15 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 19. The resultant position is that as far as the present case is concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment. 20. Consequently, there is no legal infirmity in the impugned order of the ITAT. No substantial question of law arises. The appeal is dismissed.” 12. Respectfully following the aforesaid decision, we quash the assessment framed by the Assessing Officer.”

The Hon'ble High Court held that the failure by the Assessing Officer

to issue a notice to the assessee u/s. 143(2) of the Act subsequent to the

letter when the assessee made a statement before the Assessing Officer

to the effect that the original return filed should be treated as a return

pursuant to the notice u/s. 148 of the Act is fatal to the order of the

reassessment.

Clothing Company Pvt. Ltd., v. DCIT in ITA.No. 3599/Mum/2016 dated

20.12.2017 held as under: -

“5. We have heard the rival submissions, perused the orders of the authorities below and the case laws relied upon. Before coming to the merits of the addition/disallowance, the preliminary issue in this case is regarding the invalid issue of service of notice u/s. 143(2) of the Act. On a reading of the Ld.CIT(A) order, it is an admitted fact that notice u/s. 143(2) dated 19.01.2015 was issued and served on the assessee in the course of Assessment Proceedings. Proviso to section 143(2)(ii) mandates that no notice shall be served on the assessee after the expiry of six months from the end of the Financial Year in which the return is furnished. In this case the return of income was furnished by the assessee on 20.09.2011 for the Assessment Year 2011-12 and the period for issue of notice u/s. 143(2)(ii) expired on 30.09.2012 i.e. six months from the end of the Financial Year in which return was furnished by the assessee. In the Remand proceedings also the Assessing Officer stated that notice u/s.143(2) dated 19.01.2015 was issued and served on the assessee. 6. In the case of CIT v. M/s. Salarpur Cold Storage (Pvt.) Ltd (supra) the Hon'ble Allahabad High Court considered a situation where the notice was issued beyond the period specified in the section and in such circumstances whether such notice is valid and consequent Assessment Order is valid or not. It was held that where the Assessing Officer fails to issue a notice within a period of six months as specified in the provisions of clause (ii) of Section

16 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala 143(2) of the Act the assumption of the jurisdiction u/s. 143(3) of the Act would be invalid. While coming to such conclusion the Hon'ble Allahabad High Court also considered the decision of the ACIT v. M/s. Hotel blue Moon [321 ITR 362] and held as under: - “Under clause (ii) of sub-section (2) of Section 143, the Assessing Officer is required to serve, on the assessee, a notice requiring him to attend the office or to produce evidence on which the assessee may rely in support of the return, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner. Under the proviso to clause (ii), it has been specified that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Service on the assessee of a notice within the period prescribed by the proviso presupposes the issuance of a notice for, it is only when a notice is issued, that it can be served. Thereafter, the provisions of sub-section (3) of Section 143 of the Act stipulate that on the date specified in the notice issued under clause (ii) of sub-section (2) of Section 143 of the Act, the Assessing Officer shall, after hearing the evidence as the assessee may produce and considering such other evidence as he may require and upon taking into account all relevant material, by an order in writing make an assessment of the total income or loss of the assessee. The jurisdiction of the Assessing Officer to make an assessment under Section 143(3)(ii) of the Act is premised on the issuance of a notice under clause (ii) of Section 143(2) of the Act. The proviso to clause (ii) of sub- section (2) of Section 143 of the Act stipulates that a notice must be served on the assessee no later than the expiry of six months from the end of the financial year in which the return has been furnished. If a notice is not even issued within the period of six months from the end of the financial year in which the return is furnished, there would be no occasion to serve it upon the assessee within the stipulated period. In the present case, the facts which are not in dispute are that the assessee had filed its return of income on 30 September 2008 for AY 2008-09. The notice under Section 143 (2) of the Act ought to have been issued by 30 September 2009 which was the date of the expiry of the period of six months from the end of the financial year in which the return was furnished. A notice was, however, issued on 6 October 2009 much beyond the period of six months. In such a situation, there could be no occasion to serve the notice within six months since the very act of issuance was beyond six months. Now, it is in this background that it would be necessary to consider the provisions of Section 292 BB of the Act. Section 292 BB provides as follows: -

"292 BB. Where an assessee has appeared in any proceeding or co- operated in any inquiry 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 and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."

17 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act, however, carves out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292 BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under Section 143 (3) of the Act, it is necessary to issue a notice under Section 143 (2) of the Act and in the absence of a notice under Section 143(2) of the Act, the assumption of jurisdiction itself would be invalid. This principle is no longer in doubt having due regard to the law laid down by the Supreme Court in the decision in Assistant Commissioner of Income Tax & Another Vs. M/S Hotel Blue Moon. While construing the provisions of Chapter XIV-B of the Act in relation to block assessments, the Supreme Court in that decision considered the effect of Section 143 (2) of the Act. The Supreme Court held as follows: - "...But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.

The Supreme Court has, therefore, clearly held that the omission on the part of the Assessing Officer to issue a notice under Section 143(2) of the Act is not a procedural irregularity and is not curable. The requirement of a notice under Section 143(2) of the Act cannot be dispensed with.

In our view, where the Assessing Officer fails to issue a notice within the period of six months as spelt out in the proviso to clause (ii) of Section 143 (2) of the Act, the assumption of jurisdiction under Section 143 (3) of the Act would be invalid. This defect in regard to the assumption of jurisdiction cannot be cured by taking recourse to the deeming fiction under Section 292 BB of the Act. The fiction in Section 292 BB of the Act overcomes a procedural defect in regard to the non-service of a notice on the assessee, and obviates a challenge that the notice was either not served or that it was not served in time or that it was served in an improper manner, where the assessee has appeared in a proceeding or cooperated in an enquiry without raising an objection. Section 292 BB of the Act cannot come to the aid of the revenue in a situation where the issuance of a notice itself was not within the prescribed

18 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala period, in which event the question of whether it was served correctly or otherwise, would be of no relevance whatsoever. Failure to issue a notice within the prescribed period would result in the Assessing Officer assuming jurisdiction contrary to law.” 7. In the case on hand we see that the notice u/s. 143(2) itself is dated 19.01.2015 which is beyond the date prescribed for issue of notice i.e. 30.09.2012. In such circumstances the Assessing Officer could not have issued any notice prior to 30.09.2012. Therefore, admittedly in this case as the notice u/s. 143(2) was issued beyond 30.09.2012 and in view of the decision of the Hon'ble Allahabad High Court the Assessing Officer could not have assumed jurisdiction in the absence of valid issue of notice u/s. 143(2) of the Act. Thus, respectfully following the said decision, we hold that there is no valid issue of notice u/s. 143(2) of the Act in this case and consequently the Assessment Order passed u/s. 143(3) is a nullity. Hence we quash the Assessment Order passed u/s. 143(3) r.w.s. 147 of the Act. As we have held that the Assessment Order is a nullity we are not adjudicating the grounds on merits as they become only academic.”

CIT v. Ms. Malvika Arun Somaiya [2 taxmann.com 144] held as under: -

“1. We have heard the learned Counsel appearing for the parties. 2. While challenging the order of the Tribunal dated 27-9-2007, it is contended that the Assessee having not filed any fresh returns in response to the notice under section 148 of the Income Tax Act, the Tribunal erred in holding that notice under section 143(3)(2) ought to have been served upon the assessee before taking any further proceedings and on this basis question of law raised is that the Tribunal has erred in interpreting section 143(3) of the Income Tax Act and has incorrectly come to the conclusion that the order of assessment was in violation of the statutory provisions. 3. In our view, the findings recorded by the Tribunal do not call for any interference in face of the judgment of this Court in the case of CWT v. HUF of H.H. Late J. M. Scindia [2008] 174 Taxman 1 and the judgment of the Rajasthan Court in the case of Tiwari Kanhaiya Lal v. CIT [1985] 154 ITR 109. No question of law much less substantial question of law arises for determination. Appeal dismissed. No order as to costs.”

As could be seen from the above the facts in this case are that the

assessee did not file fresh return of income in response to notice u/s. 148

of the Act and the assessment was completed without issuing notice

u/s.143(2) of the Act. The Tribunal held that Assessing Officer ought to

have served notice u/s.143(2) of the Act before taking any further

proceedings. The Hon'ble High Court rejected the appeal of the Revenue

19 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala and affirmed the order of the Tribunal. The facts in the above case are identical to the facts in the present case on hand and this decision squarely applies.

Order pronounced in the open court on the 26th July 2019

Sd/- (C.N. PRASAD) JUDICIAL MEMBER Mumbai / Dated 26/07/2019 Giridhar, Sr.PS

20 ITA NOs. 3942 & 3943/MUM/2018 Mrs. Prabhaben K. Gala

Copy of the Order forwarded to: 1. The Assessee 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.

//True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum