MOUREEN CAMARA,PANAJI vs. ASSESSMENT CENTRE, INCOME TAX DEPARTMENT, DELHI

The Learned Commissioner of Income Tax (Appeals) erred in not perusing the written response made online and the enclosures thereto.

We have heard the rival parties on the limited legal issue of non-issue/service of statutory notice u/s 143(2) of the Act and subject to rule 18 of ITAT-Rules 1963 perused material placed on record, considered the facts in the light of settled legal position.

We note that, the re-assessment in this case was initiated by the Ld. JAO vide notice dt. 26/04/2019 in response to which the appellant communicated the Ld. JAO to treat her original return filed u/s 139 of the Act to be the return for the purpose of re-assessment. ITAT-Panaji Page 6 of 16 Moureen Camara Vs NFeAC AY: 2016-17 6. The said communication was also filed online on 18/05/2020 annexing thereto the physical copy filed with Ld. JAO at the ‘Dak Counter’. The Ld. NFeAC however ignoring the aforestated communication has advanced the re-assessment proceedings and completed the assessment to the best of judgment u/s 144 of the Act for appellant’s twin failure (i) failure to file return of income in response to notice issued u/s 148 of the Act and (ii) failure to attend 142(1) & 144 notices and thus failed to explain satisfactorily nature & source of expenditure etc. By such best judgement assessment framed u/s 147 r.w.s. 144 r.w.s. 144B of the Act the Ld. NFeAC assessed the total income of the appellant assessee for the year under consideration at ₹65,63,530/- which inter-alia includes; (i) income of ₹6,72,450/- declared by the appellant in her original return and plus (ii) addition of ₹58,91,080/- as unexplained expenditure (being 50% of ₹1,17,82,160/-).

In a case where notice u/s 148 of the Act is issued to an assessee requiring him/her to file a return within prescribed date, in such case there is no provision in the Act, which empowers assessing officer on his own ITAT-Panaji Page 9 of 16 Moureen Camara Vs NFeAC AY: 2016-17 volition to treat a return filed by assessee which was summarily processed u/s 143(1) of the IT Act, as a return filed pursuant to a notice issued u/s 148 of the Act. However, where an assessee by written representation declares or intimates that his/her earlier return which was processed earlier summarily u/s 143(1) of the Act to be treated as filed pursuant to notice u/s 148 of the Act, then assessing officer is left with no option but (i) either to accept such returned income without variation or (ii) service of notice u/s 143(2) of the before resorting to scrutiny for making any variation to such summarily processed returned income in advancing to reassessment.

It is well settled law that, where a valid return of income is filed by an assessee and is standing on record for the purpose of either regular assessment or re-opened assessment, for the purpose of making any variation therein qua scrutiny, not only mere issue of statutory notice u/s 143(2) of the Act is mandatory but more ITAT-Panaji Page 10 of 16 Moureen Camara Vs NFeAC AY: 2016-17 importantly service of such notice to such assessee. Thus the service of statutory notice u/s 143(2) of the Act is sine qua non for non-acceptance of returned income in any assessment proceedings. That is say in absence of service of such statutory notice upon an assessee, both the scrutiny of such return and consequential variation (if any) de-facto suffers from jurisdiction and per-se renders invalid, therefore as such proceedings deserves to be quashed in limine .

The Hon’ble Bombay High Court in the case of ‘ACIT Vs Geno Pharmaceuticals Ltd.’ [2013, 214 Taxman 83 (Bom)] held that notice u/s 143(2) of the Act is mandatory, and in absence of such service, the Assessing Officer cannot proceed to make an inquiry on return filed in compliance with notice issued u/s 148 of the Act. In this case a new contention/ground ‘that the notice u/s 143(2) of the Act is mandatory and it is not a procedural irregularity for the purpose of reassessment’ ITAT-Panaji Page 11 of 16

In ‘CIT Vs Salman Khan’ [ITA 508 of 2010 (Bom)] their Hon’ble Lordship have reiterated its ratio laid in ‘CWT Vs JM Scindia HUF’ [300 ITR 193] that, where a return in pursuance of reopening notice u/s 148 of the Act is filed & stands valid on record, it is mandatory for the assessing officer to issue statutory notice u/s 143(2) of the Act for making inquiries thereinto to vary the income returned for the purpose of reassessment. The failure to do so renders the re-assessment void.

No doubt, where any assessment or reassessment had an effect of increase in returned income or reduction in retuned loss or otherwise underpayment of taxes is detected, and in view of section 5A of the Act only 50% of such variation is assessed in the hands of individual assessee and leaving balance 50% thereof to be assessed ITAT-Panaji Page 12 of 16 Moureen Camara Vs NFeAC AY: 2016-17 in the hands of spouse of such individual assessee. The Revenue is free to do so u/s 147 of the Act. However while resorting to provisions of section 147 of the Act to assess such 50% balance variation in the hands of spouse of such individual assessee, the Revenue is duty bond to adhere to due process of law, which otherwise required for making any valid assessment under the Statute.

In the present case, in consequence of husband ‘Melwyn Camara’s assessment, the Ld. JAO after recording reasons and obtaining prior approval from competent authority has validly initiated & assumed the reassessment jurisdiction u/s 147 of the Act. Pursuant thereto the appellant assessee by written representation (physical & through e-proceedings) requested the Ld. JAO to treat original return filed by her as the return for the purpose of re-assessment. The reassessment making 50% of balance addition towards unexplained ITAT-Panaji Page 13 of 16 Moureen Camara Vs NFeAC AY: 2016-17 expenditure u/s 69C of the Act however was made without first serving the statutory notice u/s 143(2) of the Act. The failure upon the Ld. JAO to issue and serve the statutory notice on appellant assessee separately in reopened assessment is fatal and cannot be validated by pressing into service the provisions of section 5A of the Act on the pretext that the statutory notice u/s 143(2) of the Act was validly served earlier in husband ‘Melwyn Camara’s assessment’.

The provisions of section 5A of the Act merely empowered the Ld. JAO for valid initiation of reassessment proceedings against the appellant assessee. Once initiated validly, such proceedings were separately subjected to all the necessary & statutory compliance of law for making reassessment in the hands of appellant assessee. Statutory compliance (if any) adhered in husband ‘Melwyn Camara’s assessment’ cannot ratify non-compliance in the appellant’s case. ITAT-Panaji Page 14 of 16 Moureen Camara Vs NFeAC AY: 2016-17 16. The Revenue’s plea that by participation appellant waived-off service of notice in our considered view has no legs to stand because the appellant’s participation in proceedings cannot be sacrosanct for the assumption jurisdiction. In the case of ‘PCIT Vs Silver Line’ [2016, 383 ITR 455 (Del)] similar issue dealt with regard to issue of notice vis-a-vis participation on behalf of assessee in the proceedings without issue of 143(2) notice is worth noticing as could be seen from the following; ‘The proposal to reopen an assessment under section 147 of the Income-tax Act, 1961, is to be based on reasons to be recorded by the Assessing Officer. Such reasons have to be communicated to the assessee. 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 Assessing Officer having to issue to the assessee a notice under section 143(2) of the Act before finalising the order of reassessment. A reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the Assessing Officer to the assessee under section 143(2). 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.’ (Emphasis supplied) ITAT-Panaji Page 15 of 16 Moureen Camara Vs NFeAC AY: 2016-17 17. As solidified from the records by the Revenue there was no notice issued u/s 143(2) of the Act to the appellant assessee separately, in the event the reassessment proceedings were without jurisdiction, hence unsustainable in law and therefore deserves to be quashed in view of judicial precedents cited (supra), ergo ordered accordingly. Since the re-assessment proceedings on legal jurisdictional ground is held as invalid, void ab initio, all remaining contentions/grounds raised have become academic in nature, hence, the same are not adjudicated upon.

The appeal of the assessee in result stands ALLOWED. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on date mentioned herein before.