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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI ANUBHAV SHARMADr. Arvind Taneja,
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2011-12, arises out of the order of the Commissioner of Income Tax (Appeals)-20, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10413/2018-19 dated 24.09.2019 against the order of assessment passed u/s 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 25.12.2018 by the Assessing Officer, ACIT, Circle61(1), New Delhi (hereinafter referred to as „ld. AO‟).
The assessee has raised the following grounds of appeal :-
That on the facts and Rs. E circumstances of the case the learned Commissioner of Income Tax (Appeals ) has erred in law while upholding the unjustified unwarranted, unlawful, additions of Rs 23,04,167/- to the Long Term capital gains, the additions being part of the bonafide claim of cost of improvement incurred by the assessee in the past the land and building transferred during the relevant previous year in complete of the provisions of the Income Tax Act.
The assessee has raised the additional grounds of appeal:-
"1. That on the facts and circumstances of the case and in law, the assessment order dated 25.12.2018 passed by the Assessing Officer ("AO") under section 147/143(3) of the Income-tax Act, 1961 (the "Act") in the case of the Appellant for Assessment Year ("A.Y.") 2011-12 is without jurisdiction, bad in law and void ab initio because the assumption of jurisdiction under section 147 of the Act for the Assessment Year 2011-12 is illegal, bad in law and void ab initio on the following grounds:
(i) there is no rational belief regarding escapement of income apparent from the reasons; (ii) the reopening is purely based on borrowed satisfaction; (iii) the reopening has been made only for the purpose of verification; and (iv) the sanction under section 151 of the Act has been granted in a mechanical manner.”
4. The assessee has raised additional grounds on 07.07.2022 stating that the notice u/s 143(2) of the Act was never issued before the completion of reassessment proceedings and accordingly, the entire reassessment should be declared as void ab initio. The assessee has also raised several other grounds in the additional ground which are legal in nature. The entire additional grounds raised by the assessee are hereby admitted as they go to the root of the matter and purely legal in nature. We deem it fit to first address the additional ground in respect of non issuance of notice u/s 143(2) of the Act as it goes to the root of the matter.
We have heard the rival submissions and perused the materials available on record. The notice u/s 148 of the Act issued on 31.03.2018. Despite several reminders, no return was filed by the assessee in response to the said notice. The ld AO finally gave opportunity to the assessee to file the return on or before 13.09.2018. The assessee vide letter dated 23.10.2018 stated that the return already filed by him on 30.03.2012 declaring income of Rs. 1,27,03,320/- may be treated as a return in response to notice u/s 148 of the Act. After this date, admittedly no notice u/s 143(2) of the Act was issued and served on the assessee by the ld AO. This fact is also confirmed by the ld AO in his reply submitted to the ld Sr. DR vide letter dated 04.03.2024. For the sake of convenience, the said letter is reproduced herein below:-
Dr. Arvind Taneja AACPT0269N AY 2011-12 COMMENTS ON ADDITIONAL GROUNDS OF APPEAL The above case was reopened on the following grounds - a) It is on record that during the period 01.4.2010 to 31.12.2010 that the assessee had mad payment of Rs. 1.09 crroes to Religare and all the transactions were routed through Bank Account No. 026501000011709 maintained with Indian Overseas Bank. The assessee is also maintained bank account no.26501000000016 (Indian Overseas Bank, A/c no. 910010014252069 (Axis Bank) and A/c No. 600710110002893 (Bank of India). b) On analysis of the bank account statement of M/s Arvind Taneja & Sons HUF, it was revealed that the assessee had advanced loan amounting to Rs. 80,00,000/- during the financial year 2010-11 to M/s M/s Arvind Taneja & Sons HUF. The said HUF was non-filer and hence veracity of loan advanced to HUF could not be established. Therefore, it can be adduced that the assessee has suppressed income of Rs.80,00,000/-.
In view of the above, parawise comment in respect of two additional grounds raised by the assessee is as under:-
Ground No.1 (i) On the basis of material available on record, the AO has reason to believe that income has escaped assessment within the meaning of the section 147 of the Act. (ii) The reason for reopening was based on the material available on record and there was no borrowed satisfaction. (iii) The case was reopened as the income of the assessee has escaped the assessment. (iv) On the basis of material on record and reasons recorded by the AO, the Pr. Commissioner of Income tax-12, Delhi has accorded sanction for issue of notice u/s 148 of the Act on 31/03/2018. Ground No.2 The assessment has been completed u/s 147/143(3) of the Act on 25/12/2018 determining total income at Rs. 1,50,07,490/- in which addition of Rs.23,04,167/- was made under the head capital gain.
The notice u/s 148 of the Act was issued on 31/03/20218 wherein the time limit for filing of return was 30 days. The assessee did not response to this notice. Notice u/s 142(1) of the Act dated 18/07/2018 was issued alongwith questionnaires to file the details on or before 24/07/2018 but the assessee did not comply to this notice also. Thereafter, penalty proceedings u/s 271(1)(b) of the Act was initiated on 07/08/2018 & 13/08/2018. Subsequently, notice u/s 142(1) of the Act was issued to the assessee on 31/08/2018 but no compliance. A letter was also issued to the assessee on 05.09.2018 vide which it was informed to the assessee that time limit for filing of ITR in response to notice u/s 148 has been expired and another opportunity to file return was allowed to the assessee to file return by 13/09/2018 but this time also the assessee did not reply. Finally, the assessee vide letter 23.10.2018 informed that original return filed on 30.3.2012 is to be treated as return filed u/s 148. The assessee did not file ITR in response to notice u/s 148 separately. When the notice for reassessment is issued, it is always desirable to file the return signed by the assessee who is authorised to sign the return u/s 140 of the Income-tax Act, 1961. As per record, no notice u/s 143(2) of the Act has been issued in the case. However, several opportunity of being heard allowed to the assessee at the assessment stage and assessee has not raised any issue regarding issuance of notice u/s 143(2) of the Act before the AO. Even at the appellate stage before the Ld.CIT(A), the asessee has raised the ground of disallowing the cost of building and land amounting to Rs.23,04,167/- only but not raised the ground of notice u/s 143(2) of the Act.. In the case of Madras High Court in Areva T and D India Ltd. 294 ITR 233 it is held that the non-issue of the notice under Section 143(2) was only a procedural irregularity and cannot nullify or invalidate the assessment. The assessee was given full opportunity to participate in the assessment proceedings, and therefore, the assessee cannot have any grievance in this behalf and should not be allowed to contend that the assessment itself is invalid. Technically, the assessee did not file a return in response to notice under Section 148 and, therefore, it is not possible to compute the period of limitation for issue of the notice under Section 143(2) and this itself indicates that in a case where no return is filed under Section 148, there was no requirement to issue a notice under Section 143(2). (Babul Prasad Verma) Asstt. Commissioner of Income Tax, Circle 61(1), New Delhi”
The ld DR vehemently argued that since the assessee had not filed any return in response to notice u/s 148 of the Act and had complied with the same beyond the time granted by the ld AO, the letter dated 23.10.2018 should not be considered as return filed by the assessee in response to notice u/s 148 of the Act. In other words, he argued that the assessee had not filed any return of income in the prescribed format but in response, only filed a letter to that effect in response to notice u/s 148 of the Act. We are unable to comprehend ourselves to accept to these arguments of the ld DR, as in our considered opinion, in response to notice u/s 148 of the Act the assessee has got two options viz. i) either to file a return in the prescribed format or ii) file a letter stating that the return already filed on 30.03.2012 may be treated as return in response to notice u/s 148 of the Act. In the instant case, the assessee has availed the second option. Further, the ld AO had apparently completed the reassessment proceedings by taking cognizance of the said return filed, wherein, income of Rs. 1,27,03,320/- was declared and this figure was starting point of computation of income by the ld AO in page 7 of his order. In any case, the issue in dispute is no longer res integra in view of the decision of the Hon‟ble Jurisdictional High Court in the case of PCIT Vs. Shri Jai Shiv Shanker Traders Pvt. Ltd reported in 64 taxmann.com 220 (Del). The relevant operative portion is reproduced below:-
“17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 341/210 Taxman 78 (Mad.) (Mag.). 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. 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(2) 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 u/s 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 u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO 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 u/s 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 u/s 143(2) of the Act."
As already noticed, the decision of this Court in Vision Inc. (supra) proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad 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.
The resultant position is that as far as the present case is 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, is fatal to the order of re-assessment. 20. Consequently, there is no legal infirmity in the impugned order of the ITAT. No substantial question of law arises. The appeal is dismissed.” 7. In view of the same, the additional ground No. 2 raised by the assessee is hereby allowed and the entire reassessment is hereby quashed for want of issuance of notice u/s 143(2) of the Act. Since, the entire reassessment is quashed, adjudication of other additional grounds and original grounds becomes academic in nature and they are left open.
In the result, the appeal of the assessee is allowed.