M/S. CIVITECH HOUSING INDIA (P) LTD.,NEW DELHI vs. DCIT, NEW DELHI

The brief facts of the case are that the assessee a private limited company engaged in the business of construction activities. It sales constructed flats and open plots. For the year under consideration it filed its return of income u/s 139(1) of the Act which was subject to assessment u/s 143(3) vide order dated 26 December 2008. Subsequently on receipt of report from the office of Income Tax (Investigation) wing , New Delhi about accommodation entries given by entry operators pursuant to search u/s 132 of the Act at the office of one Chartered Accountant Shri Tarun Goel on 15th September 2008 the case of the assessee was reopened. During the course of enquiries, it was found that , from two companies operated by Shri Tarun Goel who is involved in providing accommodation entries assessee company has credited Rs 50 lakhs by issue of share capital. Therefore a notice u/s 148 of the act was issued on 11.05.2009 to the assessee which was replied vide letter dated 11.06.2009 requesting to consider the original return filed u/s 139(1) of the act as return in response to notice u/s 148 of the act. Assessee requested for the reasons recorded on 07.12.2010 which was provided to the assessee and objection to those reasons were also filed. Thereafter notice u/s 142(1) were issued on 16.09.2009 and 26.08.2010 were issued by t ld AO . further the order u/s 127(2) was passed and the case was transferred to the present Assessing Officer and therefore notice u/s 143(2) was issued on 22.11.2010. The assessee submitted vide letter dated 13.12.2010 and 20.12.2010 wherein it contested the proposed addition on merit as well as on Assessment Year: 2006-07 Civitech Housing India P Ltd Vs. DCIT, Page 3 of 6 jurisdiction. However, the ld AO made an addition u/s 68 of unexplained investment in the garb of share capital issued at a premium of Rs. 50 lakhs. Consequently, total income disclosed in the return of income of Rs. 5499860/- was assed u/s 143(3) read with section 147 vide order dated 20.12.2010 at Rs. 10499860/-.

The above assessment was challenged by the assessee before the first appellate authority on the merit as well as on the jurisdiction. The ld CIT(A) confirmed the action of the ld AO in assumption of jurisdiction u/s 147 of the Act. On the issue of not issuing valid notice u/s 143(2) of the Act, he held that appellant was put on notice which is evident from the letter dated 30 September 2009 of the AR of the appellant. On transfer of jurisdiction u/s 127 he held that firstly, it is not appealable and consequently no opportunity is required to be given when the case is transferred within same city from one officer to another. On the merits of the addition he confirmed the same holding that the assessee has never asked for the cross examination of Mr. Tarun Goel and further the assessee has failed to discharge its burden with respect to the investment made by two companies in the share capital of the assessee because mere filing of confirmation and other relevant details cannot be a stamp of genuineness of the transaction. Therefore, aggrieved by the order of the ld first appellate authority the assessee has preferred appeal before us.

On ground no .2 of the appeal, ld AR submitted extensive arguments. The first contention of the assessee was that notice u/s 143(2) of the act was not issued to the assessee within the stipulated period of time. He submitted that the ld AO issued notice u/s 143(2) of the Act on 22.11.2010 which is beyond prescribed time. He referred to page No. 215 of his paper book which is letter dated 20th December 2010 dealing with objections to the transfer of jurisdiction and issue of notice u/s 143(2) vide para NO. 7 of that letter he submitted that the notice u/s 143(2) was required to be issued and served upon the assessee up to 30th September 2010 and present notice was issued on 22.11.2010, therefore is barred by limitation. He further submitted that the issue is squarely covered in favour of the assessee by the order of Hon'ble Delhi High Court in the case of Alpine Electronics Asia PTE Ltd Vs. Director General of Income-tax and others 341 ITR 247 (Del) and further in the decision of Hon'ble Delhi High Court in case of Pr. CIT Vs. Shri Jay Shiv Shankar Traders Pvt. Ltd 383 ITR 448. He, therefore, submitted that failure to issue notice u/s 143(2) in accordance with the law invalidated the Assessment Year: 2006-07 Civitech Housing India P Ltd Vs. DCIT, Page 4 of 6 order of reassessment. On the issue of reopening, it was submitted that the reasons recorded are merely suspicion expressed and all the details were available with the ld AO at the time of passing original assessment.

The ld DR relied upon the order of the lower authorities and submitted that the ld first appellate authority has considered the objection of the assessee and has correctly upheld the action of the ld AO on legal grounds as well as on the merits.

We have carefully considered the rival contentions and perused the orders of the lower authorities dealing with the various issues on merits of the case and legal aspects. Now we come to the only argument raised before us that no notice under section 143 (2 ) was issued within the limitation period, therefore, any variation made to the returned income is without jurisdiction. In the present case admittedly, the first notice was issued under section 143 (2) of the act on 22/11/2010. This fact has been objected to by assessee before the Ld. assessing officer by filing an objection vide letter dated 20/12/2010. However, the ld .assessing officer has passed order without disposing off this objection of the assessee. On appeal before the Ld. 1st appellate authority, the argument of the assessee was dismissed holding that there is no violation of the principle of natural Justice, as assessee was put to notice of pending assessment proceedings under section 148 of the income tax act. Therefore it is undisputed fact that the assessee has filed letter to treat the return of income filed by it under section 139 ( 1 ) of the income tax act, as return filed in response to the notice under section 148 of the income tax act. Therefore according to the provisions of section 143 (2) of the act mandatory notice should have been issued to the assessee by 30/09/2010 that is within 6 months from the end of the financial year in which the return of income was filed. In the impugned case the notice under section 143 (2) was issued only on 22/11/2010. However, the Ld. 1st appellate authority has brushed aside this issue holding that assessee was aware that reassessment proceedings are going on in the case of the assessee. Section 143(2) of the Income-tax Act, 1961, is also applicable to proceedings under section 147 / 148 of the Act. The provisions of section 148 of the Act grants liberty to the Revenue to serve notice under section 143(2) of the Act before passing the assessment order for returns furnished. In respect of returns filed pursuant to notice under section 148 of the Act, it is mandatory to serve notice under section 143(2) of the Act, within the stipulated time limit. Section 292BB incorporates the principle of estoppel. It stipulates that an assessee, who has Assessment Year: 2006-07 Civitech Housing India P Ltd Vs. DCIT, Page 5 of 6 appeared in any proceeding and cooperated in any enquiry relating to assessment or reassessment shall be deemed to be served with any notice which was required to be served and would be precluded from objecting that the notice was not served upon him or was served upon him in an improper manner or was not served upon him in time. However, the proviso states that the principle of estoppel incorporated in the main section would not apply, if the assessee has raised objection in reply to the notice before completion of assessment or reassessment. In the present case the assessee has objected to the fact that no notice under section 143 (2) was not served on the assessee in time. Therefore, the principle of estoppel laid down under section 292BB does not apply to the facts of the present case. Furthermore, the Ld. 1st appellate authority has brushed aside this argument of the assessee stating that there is no violation of principle of natural Justice. We are of the view that it is not the question of the violation of the principles of natural Justice, but non-issue of a valid notice shakes the foundation of the assessment proceedings itself. The decision of the Hon’ble Delhi High Court in case of Alpine Electricals Asia PTE Ltd versus Director General of Income Tax and others (341 ITR 247) also covers the case of the assessee. Therefore, we are of the opinion that the Ld. 1st appellate authority has not decided this issue in right perspective. Though in this paper book the assessee has placed notice issued under section 143 (2) of the act dated 22 – 11 – 2010 issued by the Deputy Commissioner of Income Tax, Central circle 3 Delhi. On this notice, the assessee has submitted that it is issued beyond the prescribed time limit. However, the facts of the case are that that the original notice under section 142(1) was issued by the Deputy Commissioner of Income Tax, circle 3 (1), New Delhi on 16/09/2009 and also on 26th of August 2010. Therefore it is not available from the information available before us that whether any notice under section 143(2) of the income tax act was issued by the Deputy Commissioner of Income tax, circle – 3 (1), New Delhi. Therefore, for the twin reasons that (i) the Ld. 1st appellate authority has not dealt with this issue in right perspective and (ii) no information is available before us whether any notice under section 143 (2) was issued by the Deputy Commissioner of Income Tax, circle 3 (1), New Delhi, we set aside the ground No. 2 of the appeal of the assessee to the file of the Ld. 1st appellate authority with the direction to decide the issue of validity of assessment proceedings vis -a –vis issue of valid notice under section 143 Assessment Year: 2006-07 Civitech Housing India P Ltd Vs. DCIT,