VIPUL VIJAY CHOPDA,,PUNE vs. INCOME TAX OFFICER,,

The brief facts of the case as emanating from records are : The assessee is engaged in the business of Manufacturing and Trading of Tapping Attachment, Quick Change Tap Adopters and Holders, Keyless Drills Chucks, Collet Chucks, Side Lock Holders. On the basis of information received from Maharashtra Sales Tax Department that the assessee is one of the beneficiaries from the Hawala operators engaged in providing bogus entries and invoices, the Assessing Officer reopened assessment of the assessee u/s. 147 of the Act. In reassessment proceedings the Assessing Officer held that the assessee has indulged in bogus purchases from Hawala dealers. The assessee has failed to produce/file confirmations from the following suspicious dealers i.e. M/s. Purvi Sales Agency Pvt. Ltd., M/s. Dhruv Sales Corporation, M/s. Palsons Sales Agency Pvt. Ltd., M/s. Park Distributor Pvt. Ltd. and M/s. Dhaval Enterprises. The assessee has failed to substantiate genuineness of purchases and the dealers. The Assessing Officer rejected the books of account of assessee and made addition of Rs.47,92,903/-, the entire bogus purchases.

Shri K. Srinivasan appearing on behalf of the assessee submitted that reopening of assessment in the case of assessee is bad in law as it suffers from legal infirmities. Narrating the sequences of events the ld. AR submitted that the notice u/s. 148 was issued to the assessee on 24-03- 2014. In response to the said notice the assessee vide communication dated 28-03-2014 informed the Assessing Officer that the original return filed on 31-07-2009 may be treated as return in response to the notice. The assessee also asked for the reasons recorded for reopening. Since, the reasons were not provided to the assessee, the assessee vide communication dated 13-10-2014 again requested the Assessing Officer to furnish the reasons recorded for reopening. The reasons for reopening were provided to the assessee on 16-10-2014. The assessee vide communication dated 07-11-2014 raised objections against the reasons recorded for reopening the assessment. The Assessing Officer vide order dated 26-02-2015 disposed of the reasons in a summary manner. The order was served on assessee on 27-02-2015 and thereafter within a short span of three working days passed the assessment order u/s. 147 r.w.s. 148 on 03-03-2015. The ld. AR submitted that the assessment order has been passed in violation of the time line enumerated by the Hon’ble Bombay High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax & Anr. reported as 296 ITR 90. The Hon’ble High Court has categorically held that where the Assessing Officer does not accept the objections, he shall not proceed further within a period of four weeks from the date of receipt of service of the said order on objections, on

On the other hand Shri Pankaj Garg representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals).

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered various decisions and documents placed on record by the ld. AR. The assessee in appeal has assailed reassessment proceedings on two legal grounds : i. Sufficient time not afforded to the assessee in seeking the remedy against rejection of objections. ii. Challenging the validity of reopening in the absence of valid notice u/s. 143(2) of the Act.

For deciding the issues it would be relevant to have sequence of dates and events : Date Events 24-03-2014 Notice u/s. 148. 28-03-2014 Return filed in response to notice. Sought reasons from the Assessing Officer for reopening the assessment. 13-10-2014 Reminder for providing copy of reasons recorded for reopening.

A perusal of the sequence of events show that the procedure laid down by the Hon’ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors. reported as 259 ITR 19 has been followed by the Assessing Officer as well as the assessee. However, the Assessing Officer has shown undue haste in passing the assessment order after rejecting the objections of assessee against the reasons for reopening. The Hon’ble Bombay High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax & Anr. (supra) has held that where the Assessing Officer does not accept the objections, he shall not proceed further in the matter within a period of four weeks from the date of receipt of the order on the objections, by the assessee. In the present case, we find that the Assessing Officer disposed of objections raised by the assessee in respect of reopening vide order dated 26-02-2015 which was ostensibly served on the assessee on 27-02-2015. 28-02-2015 and 01-03-2015 were closed holiday on account of Saturday and Sunday. The Assessing Officer proceeded with the assessment and passed assessment order u/s. 143(2) r.w.s. 148 on 03-03-2015. The Assessing Officer proceeded on to finalize the assessment in absolute violation of the time line fixed by the Hon’ble Jurisdictional High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax & Anr. (supra). A

The second objection raised by the assessee against reopening is the absence of valid statutory notice u/s. 143(2) of the Act. The ld. AR has drawn our attention to the remand report dated 07-06-2016 page pages 18 and 19 of the paper book. A perusal of the remand report shows that the Assessing Officer has admitted that the limitation for service of notice u/s. 143(3) in the present case ended on 30-09-2014. No such notice u/s. 143(2) issued before 30-09-2014 is available on record. The only notice u/s. 143(2) the Assessing Officer referred to was issued on 09-02-2015 i.e. much after the date of expiry of limitation for issuing such notice. The proviso to section 143(2) specifically states that no notice under Clause (ii) shall be served on the assessee after the expiry of six months form the end of the financial year in which the return is furnished. In the present case, the assessee filed return of income in response to notice u/s. 148 on 28- 03-2014. Thus, the limitation for service of notice u/s. 143(3)(ii) ended on

The Hon’ble Delhi High Court in the case of Alpine Electronics Asia Pte Ltd. Vs. DGIT reported as 341 ITR 247 has held that notice u/s. 143(2) issued beyond time limit would rendered the assessment invalid. Similar view has been taken by the Hon’ble Bombay High Court in the case of ACIT Vs. Geno Pharmaceuticals Ltd. reported as 214 Taxman 83 and in the case of Commissioner of Income Tax Vs. Abacus Distribution Systems (India) Pvt. Ltd. (supra).

The Revenue has taken an objection that since the assessee has participated in the assessment proceedings and has not raised any objection, the provisions of section 292BB would create estoppel against the assessee for raising objection against the validity of notice u/s. 143(2) of the Act. We are of considered view that the objection raised by the Revenue is devoid on any merit. The assessee has filed objection against the assessment proceedings in the absence of notice u/s. 143(2) vide letter dated 20-10-2014 at page 5 of the paper book. The assessee objected to time barring notice u/s. 143(2) even prior to filing objections on reasons for reopening.

The Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Abacus Distribution Systems (India) Pvt. Ltd. (supra) has held that where notice u/s. 143(2) is not validly served the assessment order will not be saved by section 292BB of the Act. Thus, the assessment order suffers from legal short comings as mentioned above hence, the same is not sustainable in the eye of law. Consequently, the proceedings arising

Since, we have set aside the assessment order, the grounds raised by the assessee on merits of the addition have become academic and hence, not deliberate upon.

In the result, the impugned order is set aside and the appeal of assessee is allowed.