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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI P.M. JAGTAP, V.P & SHRI S. S. GODARA, JM
Per Shri S. S. Godara: These two assessee’s appeals for assessment year2005-06 arise against the Commissioner of Income Tax– Burdwan’s separate orders dated 21.06.2016& 16.12.2015 in Case No.150/CIT(A)/W-1/Suri/2010-11 and Case No.91/CIT(A)/Asl/Ward-1/Suri/2012-13, involving proceedings u/s 147/143(3) &154/147/143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
Heard both the parties. Case files perused.
It emerges at the outset that these two appeals suffer from 345 days’ delay in filing. It is pleaded in assessee’s condonation petition/affidavit dated 16.10.17 that his accountant in charge dealing with tax matters had quit the job without handing over all connected documents which could be found only in the year 2017. All these solemn averments have gone unrebutted from the Revenue’s side. It is fair enough in neither disputing the above factual averments nor the case law Collector, Land Acquisition vs. Mst. Katji & Ors
Sri Ujjal Dutta I.T.A Nos.2208 & 2209/Kol/2017
[1987] 167 ITR 0471 (SC) the cause of substantial justice prevails over all technical aspects. We thus treat this 345 days’ delay in filing as neither intentional nor deliberate but on account of communication gap between assessee and the concerned staff member quitting the job. Both these appeals are taken up for adjudication on merits therefore.
We first come to assessee’s appeal ITA No.2208/Kol/2017 involving former round of assessment proceedings u/s 147/143(3) framed on 23.11.2010. We notice that apart from the assessee’s first three substantive grounds raised in this former appeal pleading violation of principles of natural justice followed by disallowances/additions on merits, he has filed an additional ground seeking to annul the impugned assessment/reassessment that “for that the assessment order is bad in law in view of non-issuance of notice u/s 143(2) of the I.T. Act 1961 and therefore be quashed.
Learned counsel quotes hon’ble apex court’s decision in National Thermal Power Corporation Ltd. vs. CIT (1998) 29 ITR 383 (SC) holding that all the relevant facts qua this legal issue form part of records and therefore, the assessee is entitled to raise his additional ground. The Revenue vehemently opposes the assessee’s additional ground that the same cannot be allowed to be raised at this belated stage. We find no force in Revenue’s foregoing technical argument. Hon’ble apex court’s decision (supra) as well the tribunal in the M/s All Cargo Global Logistics Ltd. vs. DCIT (2012) 137 ITD 26 (Mum) conclude that we can very well entertain an additional ground in order to determine correct tax liability of an assessee provided all the relevant facts are already on record. Suffice to say, the assessee’s only plea is that the Assessing Officer completed his reassessment on 23.11.2010 without issuing section 143(2) notice. The same fact is very much verifiable from the assessment order itself. We thus admit assessee’s foregoing additional ground going to root of the matter.
Sri Ujjal Dutta I.T.A Nos.2208 & 2209/Kol/2017
We now advert to the relevant assessment/reassessment order dated 23.11.2010. The Revenue’s case as per page 2 of the reassessment in question is that the Assessing Officer had issued section 143(2) notice on 27.04.2010 i.e. before 14.05.2010 when the assessee chose to file his return in response to section 148 notice. There is no other section 143(2) notice which can be stated to have been issued by the Assessing Officer. The question that arises for our apt adjudication in this backdrop is as to whether such a section 143(2) notice issued before filing of return could be treated as sufficient compliance of a scrutiny assessment or not. We make it clear that hon’ble apex court’s landmark decision in ACIT vs. Hotel Blue Moon (2010) 3 SCC 259(SC) settled the law that any assessment framed in absence of section 143(2) notice is not sustainable and deserves to be quashed. This tribunal’s coordinate bench’s decision in Kamla Devi Sharma vs. ITO ITA No.1026/JP/2016 dated 06.02.2018 takes note of hon’ble Delhi high court’s decision in PCIT-08 vs. Shri Jai Shiv Shankar traders Pvt. Ltd. 383 ITR 448 - (Delhi) to hold that section 143(2) notice has to be issued after filing of the return only as under:
“In this case, notice u/s 148 was issued on 30.03.2010, in response to which no return of income was filed. On 01.10.2010, Ld.AO issued notice u/s 143(2), which was duly served. Subsequently notices u/s 142(1) were also issued on certain occasions. Authorized representative of assessee, on 16.12.2010 presented and stated that return of income filed u/s 139 may be treated as furnished in response to notice u/s 148. Assessment was completed vide order dated 31.12.2010, in that situation also, the Hon'ble Court held that AO ought to have issued notice after 16.12.2010, in absence of which assessment was held invalid. In our case also, the return was filed after the issue of notice u/s 142(1), thus is squarely covered by the decision of Hon'ble Delhi high court, as stated above. Further reliance is placed on the following: 323 ITR 249 - DIT V/s Society for Worldwide Inter Bank Financial Telecommunications (Delhi) (Case laws Paper book pages 49-50) Assessment - Enquiry - Notice - Only upon Examination of Return - Notice u/s 143(2) served upon assessee before filing of Return - Not valid - Assessment completed on basis of Notice invalid - Income Tax Act, 1961, s. 143(2) 90 DTR 289 - Saptha Giri Finance & Investments V/s ITO (Madras) Reassessment -- Validity - Absence of notice u/s 143(2) - In completing the assessment u/s 148, compliance of the procedure laid down under ss. 142 and 143(2) is mandatory - Once the admitted fact that beyond notice u/s 142(1), there was no notice issued u/s 143(2) and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to s. 148, there was total failure on the part of the Revenue from complying with the procedure laid down u/s 143(2) which is mandatory -- In the absence of notice u/s 143(2), reassessment could not be held to be validly made. 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 the assessment year 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 Page | 3
Sri Ujjal Dutta I.T.A Nos.2208 & 2209/Kol/2017
before the Assessing Officer 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 Assessing Officer found that there were problems with the return which required explanation by the assessee then the Assessing Officer 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(3) 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 under section 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 under section 148 of the Act and the Officer had also noted that the same would be considered for completing of 11 ITA 1026/JP/2016_ Kamla Devi Sharma Vs ITO assessment, would show that the Assessing Officer 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 under section 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 under section 143(2) of the Act."
Recently Jaipur bench of ITAT in the case of Cameron (Singapore) Pte Ltd Vs. ADIT in ITA No. 2/JP/14 vide orders dt. 27/7/2017 held that where notice u/s 143(2) is not served upon the assessee within the stipulated time period, the consequent order passed cannot be sustained. In that case though the notice u/s 143(2) was issued but the same was not served upon the assessee within the stipulated time period however, in our case the notice u/s 143(2) was never served upon the assessee.
The Hon'ble ITAT Delhi bench in the case of DR. S.B. KALIDHAR Vs. ITO in ITA No. 1082/Del/2016 dated 27.11.2017 has given a finding in favour of the assessee, by placing reliance on the decision of the Hon'ble ITAT, SMC-2, Delhi Bench dated 16.10.2015 passed in ITA Nos. 4171- 4175/Del/2015 ((AY 2003-04) in the case of Ms. Meenakshi Aggarwal vs. ITO & Ors(Case laws paper book pages 7-9) in which reliance was placed on the decision of the Hon'ble ITAT, 'C' Bench, Bangalore dated 10.10.2014 in the case of Shri GN Mohan Raju vs. ITO passed in ITA No. 242 & 243(Bang)2013, wherein it was held as under:
"7. This brings us to the crux of the issue i.e. whether notices under section 143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified U/s 143(2) of the Act. That issue of a notice u/s 143(2) of the Act, is mandatory even in a re-assessment proceeding initiated u/s 148 of the Act has been clearly laid down by the Hon'ble Delhi High Court in the case of M/s Alpine Electronics Asia PTE Ltd., (supra). Hon'ble Delhi High Court had reached this conclusion after considering the decision of the Hon'ble Apex Court in the case of Hotel Blue Moon (supra). At para-24 of the judgment their Lordship has held that Section 143(2) was applicable to a proceedings u/s 147/148 also, since proviso to section 148 of the Act, granted certain specific liberties to the revenue, with regard to extension of time for serving such notices. No doubt, Hon'ble Madras High Court in the case of Areva T and D India Ltd., (supra) had held that issue of 12 ITA 1026/JP/2016_ Kamla Devi Sharma Vs ITO notice u/s 143(2) was procedural in nature. However, Co-ordinate Bench in the case of M/s Amit Software Technologies Pvt. Ltd., (supra) after considering the decision of the Hon'ble Madras High Court as well as Delhi High Court had held that Section 143(2)of the Act, was a mandatory requirement and not a procedural one.
Once notice u/s 148 of the Act, issued to the assessee required it to file a return within 30 days from the date of service of such notice. There is no provision in the Act, which would allow an AO to treat the return which was already subject to a processing u/s 143(1) of the IT Act, as a return filed pursuant to a notice subsequently issued u/s 148 of the Act. However, once an assessee itself declare before the AO that his earlier return could be treated as filed pursuant to notice u/s 148 of the IT Act, three results can follow. Assessing Officer can either say no, this will not be accepted, you have to file a fresh return or he can say that 30 days time period being over I will not take cognizance of your request or he has to accept the request of the assessee and treat the earlier returns as one filed pursuant to the notice u/s 148 of the IT Act. In the former two scenarios, AO has to follow the procedure set out for a best of judgment assessment and cannot make an assessment under section 143(3). On the other hand, if the AO chose to accept assessee's request, he can indeed make an assessment under section 143(3). In the case before us, assessments were completed under section 143(3) read with section 147. Or in other words AO accepted the request of the assessee. This in turn makes it obligatory to issue notice u/s 143(2) after the request by the assessee to treat his earlier return as filed in pursuance to notices u/s 148 of the IT Act was received. This request, in the given case, has been made only on 05- 10-2010. Any issue of notice prior to that date cannot be treated as a notice on a return jiled by the assessee pursuant to a notice u/s 148 of the Act. Or in other words, there was no valid issue of notice u/s 143(2) of the IT Act, and the assessments were done without following the mandatory requirement u/s 143(2) of the IT Act. This in our opinion, render the subsequent proceedings all invalid"
In view of above judicial pronouncements, it is submitted that so far as assessee furnished return of income u/s 148, Ld.AO was duty bound to issue notice u/s 143(2) of the Act. And the non-issuance of notice u/s 143(2) was not a procedural error which could have been corrected in the wake of deeming provisions of sec 292BB of the
Sri Ujjal Dutta I.T.A Nos.2208 & 2209/Kol/2017
Act. Thus, in the case of assessee, since no notice was issued u/s 143(2), it is prayed that assessment completed u/s 143(3)/ 147 deserves to be Quashed 13 ITA 1026/JP/2016_ Kamla Devi Sharma Vs ITO
On the other hand, the ld DR has relied on the orders of the authorities below and pleaded that the order of the ld. CIT(A) may be sustained.
The Bench have heard both the sides on this issue and perused the material available on the record. The Hon'ble Delhi High Court in the case of Pr.CIT Vs Jai Shiv Shankar Traders Pvt. Ltd. 383 ITR 0448 (Delhi), in the similar circumstances, has held as under:
"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. (Para 12) 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. (Para 17) As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad 14 ITA 1026/JP/2016_ Kamla Devi Sharma Vs ITO 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. (Para 18) The resultant position was that as far as the present case was 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, was fatal to the order of re-assessment. (Para 19) Consequently, there was no legal infirmity in the impugned order of the ITAT. No substantial question of law arises. The appeal was dismissed." (Para 20) Thus, the facts of the assessee's case are similar to the facts of the case involved in the decision of the Hon'ble Delhi High Court wherein it has been categorically held that the issue of notice U/s 143(2) in re-assessment proceedings, prior to finalizing re-assessment order, cannot be condoned by referring to Section 292BB and is fatal to the order of re-assessment. Respectfully following the same, we hereby set aside the order of the authorities below and allow the grounds No. 1 to 4 of the assessee's appeal.”
Learned Departmental Representative at this stage submitted that the section 292BB comes into play here wherein the Assessing Officer’s notice is deemed valid in certain circumstances when an assessee participates in the corresponding proceedings without raising any objection. We quote hon’ble apex court’s yet another decision in 2019 (8) TMI 660 CIT vs. Laxman Das Khandelwal holds that this statutory provision does not correct the Assessing Officer’s inaction in not issuing section 143(2) notice during the course of assessment. We therefore adopt the foregoing coordinate bench’s detailed reasoning mutatis mutandis to quash the impugned reassessment dated 23.11.2010. The assessee’s former appeal ITA No.2208/Kol/2017 is accepted. That being the
Sri Ujjal Dutta I.T.A Nos.2208 & 2209/Kol/2017
case, rectification proceedings are taken recourse by the Assessing Officer u/s 154 of the Act forming subject matter of the latter appeal ITA No.2209/Kol/2017 have no legs to stand. The same are also quashed. All other substantive grounds raise in both these appeals on merits are rendered infructuous.
These two assessee’s appeals are allowed in above terms.
Order is pronounced in the open court on 27.11.2019.
Sd/- Sd/- (P. M. Jagtap) (S. S. Godara) VICE-PRESIDENT JUDICIAL MEMBER कोलकाता /Kolkata; �दनांक/ Date:27/11/2019 (RS, Sr.PS)
आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to : 1. The Appellant - Sri Ujjal Dutta 2. The Respondent - ITO, Ward-3(1), Suri आयकरआयु�त(अपील) / The CIT(A), Kolkata [sent through email] 3. आयकरआयु�त/ CIT 4. 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, कोलकाता/ DR, ITAT, Kolkata [sent through email] गाड�फाईल / Guard file. 6. स�या�पत��त