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Facts
The assessee appealed against an order upholding the reopening of assessment under Section 147 and additions made. The assessee raised an additional ground challenging the reassessment proceedings for not issuing a mandatory notice under Section 143(2) of the Income-tax Act, 1961, after the notice under Section 148.
Held
The Tribunal held that the issuance of a notice under Section 143(2) of the Act is a jurisdictional requirement for completing reassessment proceedings. Relying on High Court and Supreme Court decisions, the Tribunal found that the absence of such a notice renders the reassessment proceedings invalid.
Key Issues
Whether the reassessment proceedings are invalid due to the non-issuance of a mandatory notice under Section 143(2) of the Income-tax Act, 1961, after the notice under Section 148 was issued.
Sections Cited
147, 148, 143(2), 151(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
This appeal by the assessee is directed against order dated 31.05.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
The Ld. AO was not justified in reopening of the case u/s u/s 147 by issuing notice u/s 148 of the IT Act, 1961 and also the Ld. CIT (Appeals) has erred in confirming the same.
Dhaval Exim Pvt. Ltd. 2 ITA No. 2532/M/2023
The Ld. AO ha 2. The Ld. AO has erred in making addition of Rs. 32,41,640/ s erred in making addition of Rs. 32,41,640/- (11.81% of Rs. (11.81% of Rs.2,74,48,260/-) and also the Ld. CIT (Appeals) has (Appeals) has erred in confirming the same. erred in confirming the same. 2. During the course of hearing, the assessee raising following the course of hearing, the assessee raising following the course of hearing, the assessee raising following additional ground:
Additional three more ground of appeal s: Additional three more ground of appeals:
1. The learned income
1. The learned income-tax officer has erred in making reassessment tax officer has erred in making reassessment without issuing statutory notice u/s 143(2) of the Act, resulting in without issuing statutory notice u/s 143(2) of the Act, resulting in without issuing statutory notice u/s 143(2) of the Act, resulting in reassessment is bad in law. The Ld. CIT (A) has further erred in essment is bad in law. The Ld. CIT (A) has further erred in essment is bad in law. The Ld. CIT (A) has further erred in confirming the same. confirming the same.
2. The Ld. AO has erred in reopening of the case u/s 147 of the Act
2. The Ld. AO has erred in reopening of the case u/s 147 of the Act
2. The Ld. AO has erred in reopening of the case u/s 147 of the Act by issuing notice u/s 148 of the Act after obtaining prior permission by issuing notice u/s 148 of the Act after obtaining prior permission by issuing notice u/s 148 of the Act after obtaining prior permission of Ld. CIT-5, Mumbai, whereas the per 5, Mumbai, whereas the permission as per section 151(2) mission as per section 151(2) of the Act (As substituted from 01.06.2015) is of Joint/Additional of the Act (As substituted from 01.06.2015) is of Joint/Additional of the Act (As substituted from 01.06.2015) is of Joint/Additional CIT. The Ld. CIT (A) has further erred in confirming the same. CIT. The Ld. CIT (A) has further erred in confirming the same. CIT. The Ld. CIT (A) has further erred in confirming the same.
3. The Ld. AO. Has erred and Ld. CIT(A) has erred in confirming the 3. The Ld. AO. Has erred and Ld. CIT(A) has erred in confirming the 3. The Ld. AO. Has erred and Ld. CIT(A) has erred in confirming the same that the Ld. AO has err same that the Ld. AO has erred in completing the assessment ed in completing the assessment without disposing of the objections filed by the appellant. without disposing of the objections filed by the appellant. Since, the additional ground is on question of law and it is well Since, the additional ground is on question of law and it is well Since, the additional ground is on question of law and it is well settled law that it can be raised at any time during appeal. settled law that it can be raised at any time during appeal. 2.1 In view of the additional ground In view of the additional grounds raised being legal in nature raised being legal in nature and not requiring any i and not requiring any investigation of the fresh facts, same were nvestigation of the fresh facts, same were admitted for adjudication admitted for adjudication in view of law laid down by the Hon’ble in view of law laid down by the Hon’ble Supreme Court in the case of NTPC reported in 229 ITR 383. Supreme Court in the case of NTPC reported in 229 ITR 383 Supreme Court in the case of NTPC reported in 229 ITR 383
3. Regarding the additional ground the additional ground raised, the Ld. counsel for the , the Ld. counsel for the assessee submitted that subsequent to the issue of notice u/s 148 assessee submitted that subsequent to the issue of notice u/s 148 assessee submitted that subsequent to the issue of notice u/s 148 of the Act, the assessee filed a letter dated 05.04.2016 to treat the of the Act, the assessee filed a letter dated 05.04.2016 to treat the of the Act, the assessee filed a letter dated 05.04.2016 to treat the return of income file return of income filed originally on 26.09.2012 as return filed i inally on 26.09.2012 as return filed in response to the notic response to the notice u/s 148 of the Income-tax Act, 1961 (in short tax Act, 1961 (in short ‘the Act’). But subsequent to the return filed by the assessee, no ‘the Act’). But subsequent to the return filed by the ‘the Act’). But subsequent to the return filed by the Dhaval Exim Pvt. Ltd. 3 ITA No. 2532/M/2023 notice u/s 143(2) of the Act of the Act was issued by the Assessing Officer for issued by the Assessing Officer for taking case under scrutiny scrutiny, therefore reassessment scrutiny order , therefore reassessment scrutiny order passed by the assessing Officer is invalid in law by the assessing Officer is invalid in law. The Ld. counsel . The Ld. counsel relied on the decision of the Hon’ble Supreme Court in the case of relied on the decision of the Hon’ble Supreme Court in the case of relied on the decision of the Hon’ble Supreme Court in the case of Hotel Bluemoon (2010) 321 ITR 362 (SC), Rajiv Sharma 336 ITR Hotel Bluemoon (2010) 321 ITR 362 (SC), Rajiv Sharma 336 ITR Hotel Bluemoon (2010) 321 ITR 362 (SC), Rajiv Sharma 336 ITR 678 (Allahabad). He further relied on the decision of the Hon’ble further relied on the decision of the Hon’ble Delhi High Court in the case of Pr. CIT v. elhi High Court in the case of Pr. CIT v. Shri Jai Shiv Shankar Shri Jai Shiv Shankar Travels (P.) Ltd. [2015] 64 Taxmann.com 220 (Delhi). Travels (P.) Ltd. [2015] 64 Taxmann.com 220 (Delhi). Travels (P.) Ltd. [2015] 64 Taxmann.com 220 (Delhi).
3.1 In view of the question of no notice issued u/s 143(2) of the In view of the question of no notice issued u/s 143(2) of the In view of the question of no notice issued u/s 143(2) of the Act raised by the assessee, the Ld. Departmental Representative Act raised by the assessee, the Ld. Departmental Representative Act raised by the assessee, the Ld. Departmental Representative (DR) sought a report from the Assessing Officer. In response, the ght a report from the Assessing Officer. In response, the ght a report from the Assessing Officer. In response, the Assessing Officer filed a report Assessing Officer filed a report alongwith a copy of th a copy of the notice u/s 143(2) of the Act. The said notice 143(2) of the Act. The said notice is however found to be dated is however found to be dated 06.08.2013, which was issued in the original assessment 06.08.2013, which was issued in the original assessment 06.08.2013, which was issued in the original assessment proceedings u/s 143(3) of the Act s u/s 143(3) of the Act. No notice u/s 143(2) of the Act o notice u/s 143(2) of the Act issued after issue of notice u/s 148 of the Act in the reassessment issued after issue of notice u/s 148 of the Act in the reassessment issued after issue of notice u/s 148 of the Act in the reassessment proceedings, was brought to our attention by the Assessing Officer , was brought to our attention by the Assessing Officer . , was brought to our attention by the Assessing Officer This fact has not been disputed by the Ld. DR also. The Ld. DR This fact has not been disputed by the Ld. DR also. The Ld. D This fact has not been disputed by the Ld. DR also. The Ld. D however relied on the decision of the Hon’ble High Court of Madras however relied on the decision of the Hon’ble High Court of Madras however relied on the decision of the Hon’ble High Court of Madras in the case of Pradeep Dayanand Kothari v. CIT, Chennai [2020] Pradeep Dayanand Kothari v. CIT, Chennai [2020] Pradeep Dayanand Kothari v. CIT, Chennai [2020] 121 taxmann.com 166 (Madras). 121 taxmann.com 166 (Madras).
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. relevant material on record. In the additional ground, the assessee In the additional ground, the assessee has raised issue challenging the jurisdiction of the Assessing Officer has raised issue challenging the jurisdiction of the Assessing Officer has raised issue challenging the jurisdiction of the Assessing Officer
Dhaval Exim Pvt. Ltd. 4 ITA No. 2532/M/2023 in completing the reassessment proceedings. We find that the in completing the reassessment proceedings. We find that the in completing the reassessment proceedings. We find that the Hon’ble Delhi High Court in the case of Pr. CIT v. M/s Paramount Pr. CIT v. M/s Paramount Hon’ble Delhi High Court in the case of Biotech Industries L Biotech Industries Ltd. in & 888 of 2017 td. in ITA No. 887 & 888 of 2017 held that even in the reassessment proceedings issue of notice u/s 143(2) of even in the reassessment proceedings issue of notice u/s 143(2) of even in the reassessment proceedings issue of notice u/s 143(2) of the Act is mandatory. The relevant finding of the Hon’ble High the Act is mandatory. The relevant finding of the Hon’ble High the Act is mandatory. The relevant finding of the Hon’ble High Court in M/s Paramount Biotech Industries Ltd. (supra) is Court in M/s Paramount Biotech Industries Ltd. (supra) is Court in M/s Paramount Biotech Industries Ltd. (supra) is reproduced as under: reproduced as under:
“6. The Court here held that: The Court here held that: "16. As regards the objection of the Revenue to the ITAT "16. As regards the objection of the Revenue to the ITAT "16. As regards the objection of the Revenue to the ITAT permitting the Assessee to raise the point concerning non permitting the Assessee to raise the point concerning non permitting the Assessee to raise the point concerning non- issuance of notice under Section 143(2) of the Act for the first issuance of notice under Section 143(2) of the Act for the first issuance of notice under Section 143(2) of the Act for the first time in the appeal before the ITAT, time in the appeal before the ITAT, the Court is the Court is of the considered view that in view of the settled legal considered view that in view of the settled legal considered view that in view of the settled legal position that the requirement of issuance of such position that the requirement of issuance of such position that the requirement of issuance of such notice is a jurisdictional one, it does go to the root of notice is a jurisdictional one, it does go to the root of notice is a jurisdictional one, it does go to the root of the matter as far as the validity of the reassessment the matter as far as the validity of the reassessment the matter as far as the validity of the reassessment proceedings under Section 147/148 of proceedings under Section 147/148 of the Act is the Act is concerned. concerned. It raises a question of law as far as the present It raises a question of law as far as the present cases are concerned since it is not in dispute that prior to cases are concerned since it is not in dispute that prior to cases are concerned since it is not in dispute that prior to finalisation of the reassessment orders, notice under Section finalisation of the reassessment orders, notice under Section finalisation of the reassessment orders, notice under Section 143(2) of the Act was not issued by the AO to the 143(2) of the Act was not issued by the AO to the Assessee. Assessee. With there being no fresh evidence or disputed facts sought to ith there being no fresh evidence or disputed facts sought to ith there being no fresh evidence or disputed facts sought to be brought on record, and the issue being purely one of law, be brought on record, and the issue being purely one of law, be brought on record, and the issue being purely one of law, the ITAT was not in error in permitting the Assessee to raise the ITAT was not in error in permitting the Assessee to raise the ITAT was not in error in permitting the Assessee to raise such a point before it. This finds support in the decision of the such a point before it. This finds support in the decision of the such a point before it. This finds support in the decision of the Supreme Court in me Court in National Thermal Power Co. Ltd. v. National Thermal Power Co. Ltd. v. Commissioner of Income Tax Commissioner of Income Tax (supra) and the decision of this (supra) and the decision of this Court in Court in Gedore Tools (P) Ltd. v. Commissioner of Income r of Income Tax (supra). (supra).
On the question of whether the notice under Section 17. On the question of whether the notice under Section 17. On the question of whether the notice under Section 143(2) of the Act was in the facts and circumstances 143(2) of the Act was in the facts and circumstances 143(2) of the Act was in the facts and circumstances mandatory, Mr. Sahni sought to distinguish the long line of mandatory, Mr. Sahni sought to distinguish the long line of mandatory, Mr. Sahni sought to distinguish the long line of decisions including the recent decision of this Court in decisions including the recent decision of this Court in decisions including the recent decision of this Court in Pr. CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra) on the (supra) on the ground that there was no occasion for the AO to issue any ground that there was no occasion for the AO to issue any ground that there was no occasion for the AO to issue any notice under Section 143 (2) of the Act since the Assessee notice under Section 143 (2) of the Act since the Assessee notice under Section 143 (2) of the Act since the Assessee had, in fact, not filed a had, in fact, not filed a return. He submitted that the original return. He submitted that the original return was filed in the 'Saral Form' which had since been return was filed in the 'Saral Form' which had since been return was filed in the 'Saral Form' which had since been replaced with a different form for filing of returns. replaced with a different form for filing of returns. replaced with a different form for filing of returns. Consequently, the said return could not have been treated as Consequently, the said return could not have been treated as Consequently, the said return could not have been treated as a return filed pursuant to the notice issued a return filed pursuant to the notice issued to the Assessee to the Assessee
Dhaval Exim Pvt. Ltd. 5 ITA No. 2532/M/2023 under Section 148 of the Act. He further submitted that with under Section 148 of the Act. He further submitted that with under Section 148 of the Act. He further submitted that with no discrepancy having been found by the AO in the returns no discrepancy having been found by the AO in the returns no discrepancy having been found by the AO in the returns for AYs 2005 for AYs 2005-06 till 2007-08, which were processed under 08, which were processed under Section 143 (1) of the Act, there was no occasion for the AO to Section 143 (1) of the Act, there was no occasion for the AO to Section 143 (1) of the Act, there was no occasion for the AO to issue a notice under Section 143 (2) of the Act. Mr. Sahni issue a notice under Section 143 (2) of the Act. Mr. Sahni issue a notice under Section 143 (2) of the Act. Mr. Sahni submitted that in the circumstances, the action of the AO in submitted that in the circumstances, the action of the AO in submitted that in the circumstances, the action of the AO in finalising the reassessment orders without notice under finalising the reassessment orders without notice under finalising the reassessment orders without notice under Section 143 (2) of the Act was justified. Section 143 (2) of the Act was justified.
The wording of Section 143(2)(ii) 18. The wording of Section 143(2)(ii) of the Act, which is of the Act, which is applicable in the present case, requires the AO to be satisfied applicable in the present case, requires the AO to be satisfied applicable in the present case, requires the AO to be satisfied on examining the return filed that prima facie the Assessee on examining the return filed that prima facie the Assessee on examining the return filed that prima facie the Assessee has „understated the income has „understated the income‟ or has „computed excessive ‟ or has „computed excessive loss‟ or has „underpaid the tax in any manner‟. The AO ‟ or has „underpaid the tax in any manner‟. The AO ‟ or has „underpaid the tax in any manner‟. The AO has the discretion to issue a notice under Section 143 (2) if he the discretion to issue a notice under Section 143 (2) if he the discretion to issue a notice under Section 143 (2) if he considers it „necessary or expedient considers it „necessary or expedient‟ to do so. This exercise ‟ to do so. This exercise by the AO under Section 143 (2) of the Act is qualitatively by the AO under Section 143 (2) of the Act is qualitatively by the AO under Section 143 (2) of the Act is qualitatively different from the issuance of a notice under Section 142(1) different from the issuance of a notice under Section 142(1) different from the issuance of a notice under Section 142(1) of the the Act, which as noted hereinbefore, is in a standard Act, which as noted hereinbefore, is in a standard proforma. proforma. ****************** ****************** 20. The proposal to reopen an assessment under Section 147 20. The proposal to reopen an assessment under Section 147 20. The proposal to reopen an assessment under Section 147 of the Act is to be based on reasons to be recorded by the AO. of the Act is to be based on reasons to be recorded by the AO. of the Act is to be based on reasons to be recorded by the AO. Such reasons have to be communicated to the Assessee. Such reasons have to be communicated to the Assessee. Such reasons have to be communicated to the Assessee. However, merely because the Assessee participates in the However, merely because the Assessee participates in the However, merely because the Assessee participates in the proceedings pursuant to such notice under Section 148 of the proceedings pursuant to such notice under Section 148 of the proceedings pursuant to such notice under Section 148 of the Act, it does not obviate the mandatory requirement of the AO Act, it does not obviate the mandatory requirement of the AO Act, it does not obviate the mandatory requirement of the AO having to issue to the Assessee a notice under Section 143(2) having to issue to the Assessee a notice under Section 143(2) having to issue to the Assessee a notice under Section 143(2) of the Act befo of the Act before finalising the order of the reassessment." re finalising the order of the reassessment."
In the light of In the light of the above decision, this Court is of the opinion that , this Court is of the opinion that the reasoning and conclusion of the Tribunal cannot be faulted. No the reasoning and conclusion of the Tribunal cannot be faulted. No the reasoning and conclusion of the Tribunal cannot be faulted. No substantial questi substantial question of law arises. The appeals have to fail and are on of law arises. The appeals have to fail and are dismissed.” 4.1 In the above decision, the Hon’ble High Court has also In the above decision, the Hon’ble High Court has also In the above decision, the Hon’ble High Court has also considered the decision of the Hon’ble Supreme Court in the case of considered the decision of the Hon’ble Supreme Court in the case of considered the decision of the Hon’ble Supreme Court in the case of Hotel Bluemoon (supra). In view of the above there being a Hotel Bluemoon (supra). In view of the above there being a Hotel Bluemoon (supra). In view of the above there being a jurisdictional defect in ctional defect in completing, the reassessment proceedings the reassessment proceedings hence same are held to be invalid. The reassessment proceedings ame are held to be invalid. The reassessment proceedings ame are held to be invalid. The reassessment proceedings u/s 147 of the Act dated 20.12.2016 are accordingly hereby u/s 147 of the Act dated 20.12.2016 are accordingly hereby u/s 147 of the Act dated 20.12.2016 are accordingly hereby
Dhaval Exim Pvt. Ltd. 6 ITA No. 2532/M/2023 quashed. The orders of the lower authorities are orders of the lower authorities are accordingly set aside.
4.2 Since, the first first additional ground is allowed in favour of the additional ground is allowed in favour of the assessee and the reassessment proceedings have been quashed assessee and the reassessment proceedings have been quashed assessee and the reassessment proceedings have been quashed therefore, the other additional grounds as well as regular grounds therefore, the other additional grounds as well as regular grounds therefore, the other additional grounds as well as regular grounds are rendered academic and therefore, same are not decided at this are rendered academic and therefore, same are not decided at t are rendered academic and therefore, same are not decided at t stage.
In the result, the appeal of the assessee stands allowed. In the result, the appeal of the assessee stands allowed. In the result, the appeal of the assessee stands allowed.