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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCHES, MUMBAI
Before: Shri Joginder Singh
आदेश / O R D E R The Revenue is aggrieved by the impugned order dated 27/03/2017 of the ld. First Appellate Authority, Mumbai. Broadly, the Revenue is aggrieved a note providing opportunity to the ld. Assessing Officer of the Income Tax Rules, 1962 and (Allauddin Yakub Shaikh) consequent, deleting the addition of cash deposit in the savings bank account of the assessee. 2. During hearing, the ld. DR – Ms. N. Hemalatha relied on the assessment order by defending addition made by the ld. Assessing Officer.
On the other hand, Satyendra Lahoti, ld. counsel for the assessee supported the impugned order by contending the addition was rightly deleted.
3.1 I have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee in an individual declared income of Rs. 1,58,000/- (gross receipt at 7,75,000/- and expenses of Rs. 6,20,000/-). There was an AIR /CIB information that the assessee had deposited Rs. 35,71,800/- in the savings bank account maintaining with the IDBI Bank and Rs. 4,00,000/- in HDFC bank. The ld. Assessing Officer was of the view that income chargeable to tax has escaped assessment. Therefore, he issued notice under section 148 of the Income Tax Act, 1961 (hereinafter the Act) on 25/09/2013 and thereafter, notice under section 142(1) was served upon the (Allauddin Yakub Shaikh) assessee. The assessee vide letter dated 28/02/2013 submitted before the ld. Assessing Officer that the return filed on 28/02/2013 may be treated as return to have been filed in response to notice issued under section 148 of the Act. The ld. Assessing Officer framed assessment under section 144 of the Act by passing an ex-parte order on the basis of information available with him. The ld. Assessing Officer held that the source of cash deposits in the bank accounts and its genuineness was not proved. Therefore, he added Rs. 39,71,800/- as “unexplained income” of the assessee.
On appeal, it was found by the Ld. Commissioner of Income Tax (Appeals) that no notice under section 143(2) was issued to the assessee and rather the assessee appeared before the ld. Assessing Officer in response to notice under section 142(1) of the Act. The ld. Assessing Officer was expected to issue notice under section 143(2) of the Act as we held by the Hon'ble Jurisdictional High Court in the case of CIT v. Ms. Mudra G. Nanawati [2009] 30 DTER (Bom.) 108. As per Hon'ble High Court issuance of notice under section 143(2) is a mandatory requirement even in reassessment (Allauddin Yakub Shaikh) proceedings. Identical ratio was laid down by Kerala High Court in Travancore Diagnostics (P) Ltd. v. ACIT (2017) 390 ITR 167 (Kerala). The relevant observations made by the Hon'ble Kerala High Court are reproduced hereunder for ready reference and analysis:-
The issue that, however, engages out attention more than the other issues is the contention of the learned counsel for the appellant that before making an assessment under section 143(3) read with section 147 of the Act, they ought to have been given a statutory notice under section 143(2) of the Act. We must say that this contention, in our mind, assumes great significance. The question as to whether a notice has to be issued under section 143(2) before making an assessment or reassessment under the provisions of sections 143 and 147 respectively is no longer res integra and is not untouched by dicta. The hon'ble Supreme Court has answered this with precision in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC) stating as under (page 369) : ". . . But section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143(2). However, it an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omis sion on the part of the assessing authority to issue notice under sec tion 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with." 3.2 Identical ratio was laid down by Hon'ble Jurisidictional High Court in the case of CIT v. Ms. Mudra G. Nanawati (2009) 30 DTR (Bom.) 108 holding that where the (Allauddin Yakub Shaikh) return has been filed by the assessee or where the assessee has intimated that the original return may be treated as filed in response to notice under section 148 of the Act, it is the duty of the Assessing Officer to issue notice of the Assessing Officer to issue notice under section 143(2) before proceedings further in any matter. Identical ratio was laid down in ITO v. R.K. Gupta (2009) 122 TTJ (Delhi) 256 and Rajkumar Chawala and others v. ITO (92 TTJ (Delhi) (SB) 1245; (2005) 277 ITR 255 (Delhi) (SB) (AT). Hon'ble Apex Court in Hotel Blue Moon (321 ITR 362) held as under:-
If the Assessing Officer, for any reason, repudiates the return filed by an assessee in response to notice under section 158BC(a) of the Income-tax Act, 1961relating to a block assessment, the Assessing Officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to section 143(2) . By making the issue of notice mandatory, section 158BC , dealing with block assessments, makes such notice the very foundation for jurisdiction. Such notice is required to be served on the person who is found to have undisclosed income. Section 158BC provides for enquiry and assessment. After the return is filed, clause (b) of section 158BC provides that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and “the provisions of section 142 , sub-sections (2) and (3) of section 143 , section 144 and section 145 shall, so far as may be, apply . This indicates that this clause enables the Assessing Officer, after the return is filed, to complete the assessment under section 143(2) by following the procedure like issue of notice under section 143(2) /142. This does not provide accepting the return as provided under section 143(1)(a) : the officer has to complete the assessment under section 143(3)
(Allauddin Yakub Shaikh) only. If an assessment is to be completed under section 143(3) read with section 158BC , notice under section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable. Therefore, the requirement of notice under section 143(2) cannot be dispensed with. The Hon'ble Apex Court while coming to the aforesaid conclusion affirmed the decision of Hon'ble Gauhati High Court and also the Hon'ble Delhi High Court in the case CIT V. Pawan Gupta (2009) 318 ITR 322 and also considered the decision in Maganlal v. Jaiswal Industries [1989] 4 SCC 344 (para 15) Partap Singh (Dr.) v. Director of Enforcement [1985] 155 ITR 166 (SC) (paras 5, 15). The ratio laid down by Hon'ble Allahabad High Court in CIT v. Rajeev Sharma (2011) 336 ITR 678 (Allahabad) further supports the case of the assessee. The Hon'ble Delhi High Court in Pr. CIT v. Shri Jai Shiv Shankar Traders (P) Ltd. (2016) 383 ITR 448 (Delhi) where the Assessing Officer picked up the return of income for the assessment year 2008-09 and issued notice under section 148. The assessee appeared ld. Assessing Officer and contended that the original return filed by the assessee should be treated should be filed pursuant to notice under section 148. The ld. Assessing Officer made certain additions. It was held that issuance of notice under section (Allauddin Yakub Shaikh) 143(2) of the Act was a mandatory requirement. Hon'ble Delhi High Court even considered the provision of section 292BB of the Act by holding that this section does not come to the rescue of the department were no notice under section 143(2) has not been issued. Considering the totality of facts and since no notice under section 143(2) of the Act was issued to the assessee and following the ratio laid down in the aforesaid judicial pronouncements, I find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeals) as issuance of notice is a mandatory requirement. Thus, the appeal of the Revenue is dismissed.
Finally, the appeal of the Revenue dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 13/02/2017.