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Income Tax Appellate Tribunal, “SMC-A” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
M/s. Kamlesh H Shah (HUF), E-201, Renaissance Temple The Income Tax Bell, Officer, 25/1, Industrial Suburb, vs. Ward – 6 (3) (2), Yeshwantpur, Bangalore. Bangalore – 560 022. PAN: AAEHK0217R APPELLANT RESPONDENT Appellant by : Smt. Suman Lunkar, CA Respondent by : Smt. Padmameenakshi, JCIT (DR) Date of hearing : 06.12.2018 Date of Pronouncement : 21.12.2018 O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee and the same is directed against theorder of ld. CIT (A)-7, Bangalore dated 02.04.2018 for Assessment Year 2008-09.
The grounds raised
by the assesseeare as under.
1. The learned Assessing Officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The impugned orders being bad in law, void ab-initio are required to be quashed. 2.1 In any case, the conditions precedent for the issue of notice u/s. 148 of the Act being absent, the re-opening of assessment becomes bad in law and consequently the order as passed/confirmed being also bad in law is required to be quashed. 2.2 In any case the assessing officer having not complied with legal provisions / procedure for reopening / reassessment, the consequential order becomes bad in law and liable to be quashed. 2.3 In any case, non furnishing of reasons recorded for re opening in spite of several requests renders the re assessment bad in law and such an order is liable to be quashed. 2.4 In any case, the finding of the authorities below that the reasons for re opening were given vide letter dated 05/02/2015 is wholly erroneous and such finding is to be rejected. 2.5 In any case, the re-opening of assessment merely on the basis of thirdparty information and not based on independent/enquiry application of mind by the assessing officer renders the assessment Page 2 of 7 bad in law and such an order is liable to be quashed 3. In any case, the non service of notice u/s 143(2) of the Act makes the entire assessment null and void and the learned CIT (A) instead of quashing the order in toto has erred in confirming the same. The orders as passed being void ab initio and such orders are liable to be quashed. 4.1 In any case the order passed in gross violation of the principles of natural justice and fair play, especially in the absence of the cross examinations of the persons whose averments are sought to be relied upon by the Assessing Officer while passing the order, makes the order totally bad in law and liable to be cancelled. 4.2 The learned Commissioner of Income tax (Appeals) has instead of quashing the Ilk impugned order, has just confirmed the order of Assessing Officer without properly considering the fact and circumstances of the case, arguments of the appellant and the law applicable. 4.3 In any case and without prejudice, the orders passed by the authorities below being contrary to binding dictum of the jurisdictional High Court are bad in law and are liable to be quashed.
5. The assessing officer had in any case, erred in treating a sum of Rs.14,75,096/- being Long Term Capital Gain earned on sale of shares as 'Income from other sources' and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The action of authorities below has no support in law; is contrary to facts and evidence available and therefore deserves to be rejected. 6.1 In any case and without further prejudice, the authorities below have erred in: a) Taxing/ confirming the Long Term Capital Gain earned on sale of shares as income under the head Income from other sources. b) Not considering the fact that the appellant had earned Long term capital gain(STT suffered) on sale of shares and such gain was eligible for exemption u/s 10(38) of the Act. c) Holding without basis that the transactions in shares are fraudulent d) Alleging without any basis that the appellant has obtained accommodation entries and appellant's own money come back in the guise of capital gains. The conclusions / observations of authorities below being totally erroneous and without basis both on facts and law is to be disregarded. 6.2 The several observations made and various conclusions drawn by the lower authorities in the course of order are without basis and evidence and are made/drawn on surmises, probabilities and conjectures. Such observations and conclusions by quasi-judicial authorities have no support in law and deserve to be rejected in toto. 6.3 In any case, the learned CIT(A) has erred in making observations that: i) The copy of the statement of Sri Mukesh Choksi was given to the appellant for rebuttal. ii) The transactions done were not through accredited brokers. The Observations of CIT (A) being wholly erroneous on facts, without Page 3 of 7 any basis and such observations are to be rejected.
The appellant had actually sold shares through demat account and had earned CapitalGain thereon and same needs to be accepted as such.
The appellant denies the liability to pay interest. The interest having been levied erroneously is to be deleted.
In view of the above and other grounds to be adduced at the time of hearing, it is requested that the impugned order be quashed or at least the income from Long Term Capital Gain earned on sale of shares as returned by the appellant be accepted, the assessment of Long Term Capital Gain on sale of shares as Income from Other Sources be deleted and theinterest levied be also deleted.”
At the very outset, it was submitted by ld. AR of assessee that in the present case, no notice u/s. 143(2) was issued and served on the assessee within the prescribed time. In this regard, she drawn my attention to para no. 5.3 to 5.5 of the order of CIT(A) and submitted that as per these paras, it can be seen that before CIT(A), the assessee has placed reliance on the judgment of Hon’ble Apex Court rendered in the case of ACIT & Anr. Vs. Hotel Blue Moon as reported in [2010] 321 ITR 362. But the ld. CIT(A) has decided the issue against the assessee by following the judgement of Hon’ble Kerala High Court rendered in the case of Padinjarekara Agencies (P.) Ltd. Vs. CIT as reported in [2017] 85 taxmann.com 129 (Kerala). She submitted that there is no dispute on the fact that the notice as required u/s. 143(2) was not issued and served on the assessee within the prescribed time. She submitted that therefore, as per this judgement of Hon’ble Apex Court rendered in the case of ACIT &Anr. Vs. Hotel Blue Moon (supra), it should be held that the present assessment order is bad in law. As against this, the ld. DR of revenue supported the orders of authorities below. She also submitted copy of letter dated 05.02.2015 issued by the AO to the assessee and submitted that it is stated in this letter by the AO that notice u/s. 143(2) and 142(1) and a hearing notice giving an opportunity u/s. 144 is enclosed. At this juncture, the bench wanted to see the said notice u/s. 143(2) stated by the AO as enclosed with letter dated 05.02.2015 issued by the AO to the assessee. In reply, it was submitted by ld. DR of revenue that the said notice is not readily available.
I have considered the rival submissions. First of all, I reproduce the relevant paras from the order of CIT(A) being para nos. 5.3 to 5.5 as per which this issue was decided by CIT(A). The same are as under.
Page 4 of 7 “5.3 The appellant has raised ground contending that the proceedings under section 147 and the order passed under section 143(3) without issue of notice in time under section 143(2) are invalid, bad in law and liable to be quashed. He hascited a number of judicial decisions including the decision of the [TAT, Bangalore and Honorable SC in the case of Hotel Blue Moon [2010] 321 ITR 362. The submissions of the appellant have duly been considered. The AO issued notice u/s 148 of the Act on 29-03-2014 after recording the reasons for the same and after obtaining due approval from the range head. The assessee has acknowledge the receipt of notice u/s 148 vide his letter dated 07-04- 2014 to the AO in which hehas informed about change of hisaddress. Further, theassesseerequestedfor reasons recorded which was provided by the AO on 05-02-2015. Subsequently, the assessee filed the return of income on 07-05-2014. It is noted that the assessee had not filed the return or income for the AY 2007-08 and the return was only filed after receiving the notice u/s 148. Subsequently, notices have been issued by the AO and in compliance of which the assessee has filed details and submissions and has appeared on different dates before the AO during the assessment proceedings. 5.4 The purpose-of issuing notice u/s 143(2) is that the assessee is given an opportunity to produce any evidence and details on which it may rely in support of the return of income filed by it. However, in the case of the appellant it is apparent that the AO has given due opportunity to the assessee and has issued notices and has also provided the reasons recorded to the assessee. The assessee has filed letters and submissions before the AO and has participated in the assessment proceedings. It is seen that the appellant has acknowledged the receipt of notice u/s 148 vide letter filed before AO on 07-04-2014. Vide another letter filed on the same date, the appellant has requested for extension of time of 30 days to file his return of income. Further, in reply to notice of the AO dated 05-02- 2015, the appellant vide letter dated 06-02-2015has requested for adjournment of one week of the hearing fixed on 12-02-2015 due to his travel out of town. Further, vide letter dated 19-02-2015, the appellant has requested for time to file the written submission. Thus, it is observed that the appellant has been given adequate opportunity to make his representation before the AO. Therefore, it cannot .be said that failure on the part of the AO to mention any of the notice as issued under section 143(2) has deprived the appellant any opportunity to furnish any details or evidence before the AO. A similar situation was dealt by the Honorable Kerala HC in the case of Padinjarekara Agencies (p) Ltd 85 taxmann.com 129 where, after considering the decision in the case of Blue Moon (supra), it has been held that when various notices were issued to the assessee and it was granted a proper opportunity of hearing, mere omission to mention section 143(2) literally in any one of notices so issued would not invalidate assessment order. The relevant part of the decision of the Honorable HC is reproduced below: 9. Section 147 of the Income Tax Act provides for assessment of Page 5 of 7 income escaping assessment. Such assessment has to be in terms of Section 148, which provides for recording of reasons and issue of notice where income has escaped assessment. This Section, inter alia, provide that before making an assessment, reassessment or re-computation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish a return of his income which is assessable under the Act during the previous year corresponding to the relevant assessment year and that the provisions of the Act shall so far as may be applied accordingly as if such a return where such a return required to be furnished under Section 139. In the context of the assessment under Section 147 courts have taken the view that notice under Section 147(2) is required to be issued to the assessee. See in this connection, the judgment of the Delhi High Court in Alphine Electronics Asia PTE Ltd. v. Director General of Income Tax and others [2012] 341 ITR 247 vide paragraph 24 thereof.
Section 143(2) shows that the purpose of issuing a notice thereunder is to require the assessee to produce, or cause to be produced, any evidence on which the assessee may rely, in support of the return filed by him. That a notice under Section 143(2) is a mandatory requirement and is not an empty formality has been clarified by the Apex Court in its judgment in Hotel Blue Moon (supra) and that judgment has been followed by this court in the judgment in Travancore Diagnostics (P) Limited (supra).
However, insofar as this case is concerned, question to be considered is whether the omission to mention Section 143(2) literally in any one of the notices issued to the assessee would invalidate the assessment order. While in this context, it is relevant to take note of the Division Bench judgment of this court in K.J.Thomas v. Commissioner of Income Tax [2008] 301 ITR 301 [Ker], where a Division Bench of this court has held thus: “The appellant himself had produced annexure A-I which is the reply filed by him pursuant to the details called for by the Assessing Officer. It is seen from annexure A-I that the entire questions raised and considered in the reassessment was answered by the assessee. However, the assessee has written in paragraph 7 of the said reply that he was not issued any notice under Section 143(2) of the Act. In the normal course, a detailed reply in this nature is furnished only after issuing a notice under section 143(2) of the act. In any case, we find that after the assessee filed annexure A I reply, no further notice is required, because reply was already filed by the appellant. The procedure under Section 143(2) of the Act is to ensure that an adverse order is issued only after proper opportunity is given to the assessee. In this case, it is conceded that the assessee got opportunity to file reply and detailed reply was in fact filed and the reassessment notice and the final order were also issued within the time limit prescribed under Page 6 of 7 the Act.”
From the above, it is obvious that the procedure under Section 143(2) is intended to ensure that an adverse order is passedagainst the assessee only after affording the assessee a proper opportunity. Therefore, the question to be considered is whether the assessee in this case had such an opportunity. It is in this context, the notices that were issued to the assessee assumes importance. Reading of the reasons recorded and communicated to the assessee, Annexure E notice posting the case, and Annexure I notice, show that the assessee was put on notice the inadmissibility of the reduction from the total income made by it and the assessee by its Annexure C objections, F reply and the reply filed by it to Annexure I notice had justified the deduction made by it. Further before Annexure K assessment order was passed, the assessee was afforded an opportunity of hearing also. Evidently, therefore, the assessee had ample notice of the case it had to answer and the assessee availed of those opportunities by answering the case against it. In such a situation, we are not prepared to think that there was absence of notice under Section 143(2) or that any prejudice was caused to theassessee in defending the case against it. We are not, therefore, prepared to think that the assessment order is invalid on the ground contended by the assessee.
In such circumstances, answering the aforesaid question of law in favour of the Revenue and against the assessee this appeal is dismissed. 5.5 In view of above discussion, the contentions of the appellant regarding non issue of notice u/s 143(2) is not sustainable.”
From the above paras reproduced from the order of CIT (A), it is seen that in fact, before ld. CIT (A), the assessee placed reliance on this judgement of Hon’ble Apex Court rendered in the case of ACIT & Anr. Vs. Hotel Blue Moon (supra). But the issue was decided by CIT(A) by following the judgement of Hon’ble Kerala High Court rendered in the case of Padinjarekara Agencies (P.) Ltd. Vs. CIT (supra) on this basis that the purpose of notice u/s. 143(2) is this that the assessee is given an opportunity to produce any evidence and details on which it may rely in support of the return of income filed by it and in the present case, it is apparent that the AO has given due opportunity to the assessee and has issued notices and has also provided the reasons recorded to the assessee and in reply, the assessee filed letters and submissions before the AO and has participated in the assessment proceedings. But the ld. CIT(A) has failed to note this vital aspect of the Page 7 of 7 matter that without issuing notice u/s. 143(2), the AO does not get jurisdiction and in the absence of jurisdiction, the assessment order passed by AO is bad in law. The judgement of Hon’ble Apex Court is squarely applicable and as per this judgement, the assessment is bad in law. Before me also, the ld. DR of revenue could not produce copy of notice said to have been issued by AO u/s. 143(2) although she has produced covering letter in which it is stated that notice u/s. 143(2) is enclosed but in the absence of copy of the said notice u/s. 143(2), it has to be accepted that no notice u/s. 143(2) was issued by AO and served on the assessee within the prescribed time. Hence, respectfully following this judgement of Hon’ble Apex Court rendered in the case of ACIT &Anr. Vs. Hotel Blue Moon (supra), I hold that the present assessment order is bad in law and therefore, I quash the same. In view of this decision, other grounds raised
by assessee do not require any adjudication.
6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the date mentioned on the caption page.