Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, KOLKATA BENCH “B”, KOLKATA
ORDER
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER This appeal filed by the assessee against the order dated 03.10.2015 passed by CIT(A)-2, Kolkata for AY 2010-11 u/s 144/147/143(3) of the Income Tax Act, 1961 (in short “Act”).
Heard both parties and perused the material available on record. The contention of the Ld.AR is that the penalty imposed by the AO u/s 271(1)(b) of the Act and confirmed by the CIT(A) is liable to be cancelled on the ground the base on which the satisfaction recorded in the assessment was annulled for not issuing notice u/s 143(2) in the prescribed time. The AO initiated proceedings u/s 271(1)(b) of the Act was annulled by the CIT(A) vide its order dated 08.502.18 and referred to last paragraph of the said order. On perusal of the said order, it is noted that the assessee challenged assessment completed u/s 144/147/143(3) of the Act dated 27.03.2015 before the CIT(A) in quantum appeal. As pointed out by the Ld.AR, CIT(A) by placing reliance on the ratio laid down by the Hon’ble Supreme Court in the case of Hotel Blue Moon & Hon’ble High Court of Madras in the case of C.Palaniappan annulled the assessment order dated 27.03.2015. The relevant portion is reproduced herein under for ready- reference:-
“I find that, it is admitted position that notice u/s. 143(2) of the Act was not issued within the prescribed time i.e. within six months from the end of the year in which the return was filed and in this case it was to be issued before 30th Sept, 2014. I find that the Hon'ble Apex Court in the case of Hotel Blue Moon (Supra) has held that procedure of section 143(2) is mandatory and to be followed in an assessment Hon'ble Apex Court held as under (summarized): • While notice u/s. 143(2) is not necessary if the AO accepts the return as filed, the notice within the prescribed time is mandatory if the AO proposes to make an assessment u/s. 158BC r.w.s. 143(3). Omission to issue notice u/s. 143(2) is not a procedural irregularity and the same is not curable and, the requirement of notice u/s 143(2) cannot be dispensed with. If the intention of the legislature was to exclude the provisions of s.143 (2), legislature would have indicated that. • In Circular No. 717 dated 14.8.1995 the CBDT has directed that the AO “shall proceed to determine the undisclosed income of the block period and the provisions of s.142, sub-section (2) and (3) of s. 143 and s. 144 shall apply accordingly". This circular clarifies the requirement of law in respect of service of notice u/s. 143(2). The circular is binding on the department though not on the Court. In view of the above admitted facts that no notice u/s. 143(2) of the Act was issued within the prescribed time from the date of filing of return, the ratio laid down by Hon'ble Apex Court in the case of Hotel Blue Moon (supra) and by Hon'ble Madras High in the case of C. Palaniappan (supra) and also by Hon'ble Calcutta High Court in the case of Ma Kamakhyaya Enterprises (supra) are exactly on similar circumstances, I am of the considered view that the reassessment was framed without issuing notice u/s. 143(2) of the Act within the prescribed time limit from the date of filing of return is without jurisdiction. Section 143(2) incorporates the rule of audi alterem partem. The words “shall serve on the assessee a notice” occurring in section 143(2) imply a duty to be performed and the word “shall” cannotes that the provisions are mandatory and non-compliance of the same goes to vitiate the order of assessment itself. Even the provisions will apply to reassessment proceedings as held by Hon’ble Madras High Court in the case of Palaniappan (supra). Accordingly, I hereby annulled the assessment order and this ground of appeal is allowed.”
3. We find basing on the satisfaction as recorded by the AO under the assessment proceedings initiated penalty proceedings u/s 271(1)(b) of the Act. In our opinion, the satisfaction required by the AO to initiate penalty Page | 2
(ASSESSMENT YEAR-2010-11) proceedings are no more in existence in view of the finding of CIT(A) in quantum appeal. Therefore, as rightly pointed out by the Ld.AR, the penalty as imposed by the AO u/s 271(1)(b) of the Act and confirmed by the CIT(A) is liable to be cancelled. Therefore, in view of the discussion made herein above, the penalty imposed u/s 271(1)(b) of the Act, is cancelled. The impugned order passed by the CIT(A) is set aside. Thus, Ground Nos. 1 to 4 raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 20.03.2019.