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Income Tax Appellate Tribunal, DELHI BENCH “SMC-3”, NEW DELHI
Before: SHRI H.S. SIDHU
ORDER ORDER ORDER ORDER The Assessee has filed the present appeal against the impugned order dated 31/8/2016 passed by the Ld. Commissioner of Income Tax (Appeals), Ghaziabad on the following grounds:-
“1 That the learned Commissioner of Income Tax (Appeals) Ghaziabad has grossly erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 1471144 of the Act.
2 That since no notice under section 143(2) of the Act was issued and served on the appellant subsequent to the filing of the return accepted by the learned Assessing Officer, the assessment so made under section 1471144 of the Act is otherwise bad in law and wholly unsustainable.
2.1 That the finding that "return filed in response to 1481142(1) was beyond prescribed time limit in the notice thus was treated nonest and there was no need to issue u/s 143(2)" is factually incorrect, legally misconceived and untenable.
2.2 That the judgment relied upon by the learned Commissioner of Income Tax (Appeals) in the case of CIT v Areva T&D India Ltd. v. ACIT reported 294 ITR 233 (Mad) wherein it has been held if appellant has been participating in assessment proceedings failure to issue 143(2) does not make re-assessment proceedings void is wholly inapplicable on the fact of the appellant and hence untenable.
3 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining an addition of Rs. 9,00,000/- to cover all possible leakages in the account of the assessee on estimated basis.
4 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in recording various adverse inferences which are contrary to the facts on record, material placed on record and, are otherwise unsustainable in law and therefore, addition so sustained is absolutely unwarranted.
That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest of Rs. 2,85,335/- uls 234A of the Act and of Rs. 2,94,540/- u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant.
It is therefore, prayed that, it be held that assessment made by the learned Assessing Officer and sustained by the learned Commissioner of Income Tax (Appeals) be quashed and, further addition made of Rs. 9,00,000/- by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”
The facts in brief are that the assessee lady is an individual deriving income from proprietorship concern M/s Hare Krishna Chemicals. In this case an information had been received from DCIT, Central Circle-20, ARA Centre, Jhandewalan Extension, New Delhi that the assessee has maintained bank account no. 21-42928 with PNB, Ashok Vihar, New Delhi and large amount of cash amounting to Rs. 1,41,80,900/- has been deposited but no return of income has been filed for the assessment year 2007-08. Accordingly, provisions of section 147 were invoked after recording of reasons, notice under section 148 of the I.T. Act was issued to the Assessee on 18.3.2014. Further, notices under section 142(1) of the I.T. Act were issued to the assessee on various dates and lastly on 23.1.2015 and in response to the notice dated 23.1.2015, assessee’s AR attended the proceedings and filed the power of attorney and on 3.3.2015 the assessee furnished the return of income for AY 2007-08 dated 12.3.2015 alongwith computation of income, copy of audit report, balance sheet, trading account. etc. Thereafter, the AO vide his order dated 4.3.2015 passed u/s. 147 read with Section 144 of the I.T. Act, 1961 the I.T. Act, 1961 has computed the income of the assessee at Rs. 10,46,400 + Rs. 50,000/- towards agricultural income for rate purposes and made the additions.
Aggrieved with the aforesaid order dated 4.3.2015, assessee filed the Appeal before the Ld. CIT(A), who impugned order dated 31.8.2016 has dismissed the appeal of the assessee.
Against the aforesaid order dated 31.8.2016 passed by the Ld. CIT(A), assessee is in appeal before the Tribunal.
At the time of hearing ld. Counsel of the assessee has only argued the ground no. 2 i.e. legal ground and stated that since no notice under section 143(2) of the I.T. Act was issued and served on the assessee subsequent to the filing of the return accepted by the AO, the assessment so made u/s. 147/144 of the I.T. Act, is otherwise bad in law and wholly unsustainable. He further stated that the finding that "return filed in response to 148/142(1) was beyond prescribed time limit in the notice thus was treated nonest and there was no need to issue u/s 143(2)" is factually incorrect, legally misconceived and untenable. It was further stated that the judgment relied upon by the learned Commissioner of Income Tax (Appeals) in the case of CIT v Areva T&D India Ltd. v. ACIT reported 294 ITR 233 (Mad) wherein it has been held if appellant has been participating in assessment proceedings failure to issue 143(2) does not make re-assessment proceedings void is wholly inapplicable on the fact of the appellant and hence untenable. Ld. Counsel of the assessee filed the synopsis and stated that the issue in dispute is squarely covered by the various decisions of the various Hon’ble High Courts as well as Tribunal. In this behalf, he filed the a Paper Book containing pages 1 to 74 containing the copies of various judgments and decisions of the Hon’ble High Courts and Tribunal especially the order of the 4 Hon’ble Delhi High Court in the case of CIT vs. Delhi Kalyan Samiti in 697 and 699 of 2015 wherein the decision of the Hon’ble Supreme Court of India i.e. ACIT vs. Hotel Blue Moon and Hon’ble High Court as been followed. In support of this contention he relied upon the following cases:-
- Decision of Hon’ble Punjab & Haryana High Court decision in the case of CIT vs. Panorma Builders P Ltd. reported in 224 Taxmann 203 (Guj.).
- Decision of Hon’ble Allahabad High Court in the case of CIT vs. Bihari Lal Agarwal reported in 346 ITR 67 (All.)
- Decision of Hon’ble High Court of Allahabad in the case of Manish Prakash Gupta vs. CIT reported in 68 DTR 112 (All.)
- Decision of the Hon’ble High Court of Bombay in the case of ACIT vs. Geno Pharmaceuticals Ltd. reported in 214 Taxmann 83 (Bom.)
- Decision of the ITAT, Delhi in the case of DCIT vs. Silver Line in 1504, 1505 and 1506/Del/2013.
- Decision of Hon’ble High Court in the case of CIT vs. Rajeev Sharma reported in 336 ITR 678.
- Decision of the Hon’ble High Court in the case of CIT vs. Delhi Kalyan Samiti in 697 and 699/2015.
- Decision of the Hon’ble High Court in the case of CIT vs. Silver Lilne in to 588/2015.
- Decision of Hon’ble High Court in the case of Areva T & D India Ltd. reported in 294 ITR 233 (Madras) 5 - Copy of judgment of Tribunal in the case of DCIT vs. Ms. Mayawati in & 3158/Del/2010.
On the other hand, Ld. DR relied upon the order passed by the revenue authorities and stated that the return has been filed on 3.3.2015 which is beyond the prescribed limit; and therefore there is no requirement to issue notice u/s. 143(2) of the I.T. Act, 1961.
I have heard both the parties and perused the relevant records especially the order passed by the Revenue Authorities. I find considerable cogency in the assessee’s counsel submissions that no notice under section 143(2) of the Act was issued and served on the assessee subsequent to the filing of the return accepted by the AO, hence, the assessment so made under section 147/144 of the I.T. Act is otherwise bad in law and not sustainable in the eyes of law. Hence, the assessment so framed by the AO is totally illegal and needs to be quashed. My view is fully supported by the following judgment of the Hon’ble Supreme Court of India, Hon’ble High Courts, Coordinate Benches of the ITAT decisions:-
ACIT & Anr. vs. Hotel Blue Moon: [(2010) 321 ITR 362 (SC)] ACIT & Anr. vs. Hotel Blue Moon: [(2010) 321 ITR 362 (SC)] ACIT & Anr. vs. Hotel Blue Moon: [(2010) 321 ITR 362 (SC)] ACIT & Anr. vs. Hotel Blue Moon: [(2010) 321 ITR 362 (SC)] HELD: “It is mandatory for the AO to issue notice u/s 143 (2). The issuance and service of notice u/s 143 (2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid Reassessment-----Notice----- Assessee intimating original return be treated as fresh return--- Reassessment proceedings completed despite assessee filing affidavit denying serviced of notice under section 143(2)---- Assessing Officer not representing before Commissioner (Appeals) that notice had been issued---- Reassessment order invalid due to want of notice under section 143(2)--- Income-tax Act, 1961, ss.
143, 147, 148(1), prov.----ITO v. R.K. GUPTA [308 ITR 49 (Delhi)Tribu.,” CIT vs. M/s Panorama Builders Pvt. Ltd. in Tax Appeal no. 435 of CIT vs. M/s Panorama Builders Pvt. Ltd. in Tax Appeal no. 4 CIT vs. M/s Panorama Builders Pvt. Ltd. in Tax Appeal no. 4 CIT vs. M/s Panorama Builders Pvt. Ltd. in Tax Appeal no. 4 35 of 35 of 35 of 2011 of Hon'ble Gujarat High Court 2011 of Hon'ble Gujarat High Court 2011 of Hon'ble Gujarat High Court 2011 of Hon'ble Gujarat High Court Issue Involved: "Whether non-issuance of the notice u/s 143(2) within the prescribed time, made the whole block assessment order null and void and bad in law, despite the assessee not having raised any objection before the passing of the assessment order and despite the provisions of section 292BB of the Act? " Held: “In this case, Hon'ble High Court has held that section 292BB cures the defects in service of notice but section 292BB is 'confined to only service of notice under this Act and this section does not apply to 'Issuance of notice' under the provisions of Act. It does not lay down that if a mandatory notice is required to be issued by the assessing officer and it has not been issued within the period of limitation fixed under the law, then such notice shall be deemed to have been issued within time. It has been further held that resort cannot be taken by the Revenue to section 292BH to give a go-bye to mandatory requirement of issuance of notice within the statutory fixed by the proviso to section I43(2) of the Act.” CIT vs Rajeev Sharma 336 ITR 678, High court of Allahabad. CIT vs Rajeev Sharma 336 ITR 678, High court of Allahabad. CIT vs Rajeev Sharma 336 ITR 678, High court of Allahabad. CIT vs Rajeev Sharma 336 ITR 678, High court of Allahabad. “In view of above submissions and case laws, it has been established that no notice u/s 143(2) was issued in the present case and therefore the impugned assessment is liable to be annulled.”
M/s Sapthagiri Finance and Investments vs. ITO: TC(A). No. 159 of M/s Sapthagiri Finance and Investments vs. ITO: TC(A). No. 159 of M/s Sapthagiri Finance and Investments vs. ITO: TC(A). No. 159 of M/s Sapthagiri Finance and Investments vs. ITO: TC(A). No. 159 of 2006 dated 17.07.2012 (Mad HC) [(2013) 90 DTR (Mad) 289] 2006 dated 17.07.2012 (Mad HC) [(2013) 90 DTR (Mad) 289] 2006 dated 17.07.2012 (Mad HC) [(2013) 90 DTR (Mad) 289] 2006 dated 17.07.2012 (Mad HC) [(2013) 90 DTR (Mad) 289] Relevant para reproduced here under: "13. As far as the present case is concerned, the provisions of Section 148 also uses the expression "so far as may be apply accordingly as if such return were a return required to be furnished under Section 139". Thus, understanding this provisions in the background of the decision of the Apex Court, on the facts available, we are of the view that in completing the assessment under Section 148 of the Act, compliance of the procedure laid down under Sections 142 and 143 (2) is mandatory. On the admitted fact that beyond notice under Section 142(1), there was no notice issued under Section 143(2), and in the light of the fact that the very basis of the reassessment was the failure on the part of the assessee in not disclosing the capital gains arising on the transfer of property for assessment and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to Section 148 of the Act, we hold that there was total failure on the part of the Revenue from complying with the procedure laid down under Section 143(2) of the Act, which is mandatory one as held by the Apex Court.” Alpine Electronics Asia Pte Ltd. vs. DGIT & Ors: [(2012) 341 ITR 247 Alpine Electronics Asia Pte Ltd. vs. DGIT & Ors: [(2012) 341 ITR 247 Alpine Electronics Asia Pte Ltd. vs. DGIT & Ors: [(2012) 341 ITR 247 Alpine Electronics Asia Pte Ltd. vs. DGIT & Ors: [(2012) 341 ITR 247 (Del) (Del) (Del) (Del) Held: “The service of notice u/s 143(2) within the statutory time limit is mandatory and is not an inconsequential procedural requirement. Omission to issue notice u/s 143 (2) is not curable and the requirement cannot be dispensed with. S. 143(2) is applicable to proceedings u/s 147 & 148.” JYOTI PAT RAM VS. ITO [(2005) 92 ITD 423 (Lucknow) JYOTI PAT RAM VS. ITO [(2005) 92 ITD 423 (Lucknow) - ShreeJai JYOTI PAT RAM VS. ITO [(2005) 92 ITD 423 (Lucknow) JYOTI PAT RAM VS. ITO [(2005) 92 ITD 423 (Lucknow) ShreeJai ShreeJai ShreeJai Shiv Shonhor Traders (P) Ltd. Shiv Shonhor Traders (P) Ltd. - A.Y. Shiv Shonhor Traders (P) Ltd. Shiv Shonhor Traders (P) Ltd. A.Y. A.Y. - 2008 A.Y. 2008 2008-09 2008 09 09 09 “Reassessment order passed under section 143(3)/148 without issue of a valid notice under section 143(2) was illegal.”
RAJ KUMAR CHA WLA AND ORS. VS. ITO RAJ KUMAR CHA WLA AND ORS. VS. ITO - (2005) 94 ITD 1 (2005) 94 ITD 1 RAJ KUMAR CHA WLA AND ORS. RAJ KUMAR CHA WLA AND ORS. VS. ITO VS. ITO (2005) 94 ITD 1 (2005) 94 ITD 1 (Del)(SB) (Del)(SB) (Del)(SB) (Del)(SB) Limitation for re-assessment- Service of notice u/s143(2) in time - A.Y.1995-96. “It was presumed by legal fiction that a return filed uls 148 of the Income Tax Act 1961 would be treated as a return filed u/s 139 of the Act. The assessee had filed its return in response to a notice issued u/s 148 of the Income Tax Act 1961. The service of notice u/s143(2) of the Act within 12 months of filing the return u/s 148 of the Act was mandatory, but the notice had been served beyond 12 months. Therefore, as the re-assessment was barred by limitation, no re- assessment could be made u/s 143(3) r/w S.147 of the Act.- ITAT Delhi ‘F’ Special Bench.” CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) reported CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) reported CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) reported CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) reported in 346 ITR 67 in 346 ITR 67 in 346 ITR 67 in 346 ITR 67
We also may mention here that the question of section 292BB of the Act pressed into service by the Revenue herein came up for consideration before this court in Income Tax Appeal No.286 of 20 11, decided on November 23, 2011 (ClT v. Mukesh Kumar Agrawal since reported in [2012l 345 ITR 29 (All)) and this court has held that the proviso to section 292BB is not applicable in a case where the authority did not have jurisdiction to proceed further and male assessment. Hon’ble Delhi High Court in the case CIT vs. Hon’ble Delhi High Court in the case CIT vs. Delhi Kalyan Samiti Hon’ble Delhi High Court in the case CIT vs. Hon’ble Delhi High Court in the case CIT vs. Delhi Kalyan Samiti Delhi Kalyan Samiti Delhi Kalyan Samiti vide dated 22.3.2016 held as under: vide ITA No. 696/2015 dated 22.3.2016 held as under:- vide ITA No. 696/2015 dated 22.3.2016 held as under: vide ITA No. 696/2015 dated 22.3.2016 held as under:
Mr. Jain’s contention that a belated return filed by the assessee prior to the assessee cannot be ignored as an invalid return, prima facie, appears to be merited. However, in the facts of the present case, the said question does not arise as the AO had issued a notice under section 142(1) of the Act on 30th November, 2011, inter alia, calling upon the 9 assessee to file its return. Further, on 10th December, 2007, the AO was informed that the Assessee was in the process of filing its reutnr and an adjournment was requested. The AO had acceded to his request, which would be wholly unnecessary if the AO was of the view that a belated return would be invalid. Thus, in the facts of the present case, the returns filed by the assessee could not be ignored by the AO.”
In the background of the aforesaid discussions and precedents relied upon, I am of the considered view that the AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law. Therefore, the assessment order as well as the appellate order stand cancelled and appeal of the assessee stands allowed.
In the result, the appeal of the Assessee is allowed.
Order pronounced in the Open Court on 15/02/2017.