LALJI & SONS,BANKURA vs. ACIT, CIRCLE - BANKURA, BANKURA

The only effective issue is to be decided as to whether the CIT- (A) was justified in confirming the order of the AO passed u/s. 143(3)/147 of the Act without there being notice issued u/s. 143(2) of the Act in the fact and circumstances of the case.

The brief facts of the case are that the assessee is a firm and derives its income from house property & capital gains. The assessee filed its return on 22-09-03 showing a total income of Rs.1,96,808/-. Accordingly, the said return was processed by raising a demand of Rs.206/-. Subsequently, on an information regarding declaration of less value of the property by issuing a notice u/s. 148 of the Act, the AO reopened the original assessment and determined the long term capital gain hereinafter for short ‘LTCG’ at Rs.7,59,300/- by an order dt. 18-12-09 passed u/s. 143(3)/147 of the Act.

Aggrieved, the assessee challenged the same before the CIT-A. Before him the main contention raised by the assessee was that the AO assumed his jurisdiction without issuing a notice u/s. 143(2) of the Act to the assessee and, therefore, the assessee challenged the validity of said assessment made u/s. 143(3)/147 of the Act is bad in law.

Considering the submissions of the assessee, the CIT-A, in turn, sought remand report from the AO regarding the issuance of notice u/s. 143(2) of the Act. The CIT (A) considering the remand report confirmed the impugned assessment and upheld the view of AO in taking recourse to section 292B of the Act by stating as under:- “7. I have gone through the submission of the appellant. The assessee has participated voluntarily and peacefully in the appellate proceedings. Participation is sufficient for the validity of the notice, as per the ratio laid down in the case of CIT vs. Uttam Chandra Nahar; 295 ITR 403 Raj. I also agree with the argument of the AO that ‘by issue of notice u/s. 143(2), the assessee is given an opportunity to substantiate that income disclosed by him is correct. In this context, I am enclosing a copy of letter No. 264, dt. 01/12/2009 issued to the assessee which clearly shows that the assessee was asked to explain that there was no concealment of Capital Gains on his part. Thus spirit of issue of notice u/s. 143(2) is served. In this regard it would not be out of place to reproduce the text of section 292B, which reads as under:- " Section 292B: No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with according to the intent and purpose of this Act." Thus by virtue of section 292B of the IT Act 1961, the assessment is not bad in law only because notice u/s 143(2) was not issued." In the case of K.G. Thomas vs. CIT; 303 ITR 303 Kerala; it was observed that not notice under section 143(2) was received but opportunity was availed, then reassessment is valid. Similar views were expressed in the case of CIT vs. T.C.P. Limited (2010) 235 CTR 414 Mad. Further, in any technical difficulty, the proceeding may be irregular but not invalid. The procedural irregularity can be rectified later as per the ratio laid down in the case of Areva T. & D. India vs. CIT; 294 ITR 233 Mad. Considering the above facts the appeal is dismissed. “

Before us the ld. AR of the assessee filed a copy of the said remand report at pages 1-2 of the paper book and submits that the AO did not issue statutory notice u/s. 143(2) of the Act and without there being the same the AO cannot assume his jurisdiction to frame re-assessment u/s.147. He referred to page-2 of the paper book and

The ld. DR argued that the jurisdiction of the AO can be cured by taking recourse to deeming fiction u/s.292B of the Act, which has already been discussed by the CIT-A in his order at page-4. Section 292B of the Act overcomes a procedural defect in regard to non service of notice u/s. 143(2) of the Act and the AO assumed his jurisdiction and made the assessment u/s. 143(3)/147 of the Act. He supported the orders of the AO and CIT-A. In view of above, prayed to dismiss the grounds of appeal of the assessee in the appeals for the A.Ys. under consideration.

Heard rival submissions and perused the material available on record including the case laws as relied on by the assessee and the paper book as filed by the assessee before us. We find that the AO in his remand report admitted about the non issuance of notice u/s. 143(2) of the Act. Relevant portion of said remand report is reproduced herein below:- “ Government of India Office of the Assistant Commissioner of Income-tax, Bankura Circle, Bankura Bilas Bhawan. Chandmari Dange, Bankura. No. ACIT/Circle-2/BNK/Remand Report/2010-11/137- Dated: 03/03/2011 To, The Commissioner of Income-tax (Appeals) Durgapur. Sir, Sub : Submission of remand Report in the case of M/s. Lalji & Sons for the A.Y 2004-05-Reg. Ref : Your letter No. CIT(A)/DGP/Remand Report/2010-11/330, dt. 28/01/2011 Kindly refer to the above. Desired report is as under:-

Supply of reason for reopening or assessment:

Reference to the Valuation Cell for determination of Fair Market Value:

Allowance of salary & interest to partners and Charging of interest u/s 243B:

Non-issue of Notice u/s. 143(2):

However, he opined that non issuance of notice can be cured by taking recourse to section 292BB of the Act. However, we find that the said issue was decided by the Hon’ble Supreme Court in the case of Hotel Blue Moon supra, which held non-issuance of notice U/Sec 143(2) of the Act is not a curable defect. Recently, the ITAT, Agra Bench decided the similar issue in the case of Laxman Das Khandelwal reported in (2017) 87 Taxmann. Com 346 (Agra Trib), wherein the Tribunal discussed the issue elaborately considering the various judgments of Hon’ble High Courts of Punjab & Haryana & Allahabad. We find that the Hon’ble High Courts of Punjab & Haryana & Allahabad followed the ratio laid down by the Hon’ble Supreme Court in the case of Hotel Blue Moon supra. Relevant portion of order of Agra Tribunal at paras 6.4 to 18 is reproduced herein below:- “6.4 He has also submitted that section 292BB applies only in the case of improper service wrong service and not to objection not taken by the assessee during assessment proceedings. Section 292BB does not save the defect of non-issue of notice u/s 143(2). He has relied on CIT v. Cebon India Ltd. [2012] 347 ITR 583/184 Taxman 290 (Punj. & Har), wherein, it is held that a concurrent finding had been recorded by the Commissioner (Appeals) and the Tribunal on the question of date of service of notice. The notice was not served within the stipulated time. Mere giving of dispatch no. would not render the finding perverse. In the absence of notice being served, the assessing officer had no jurisdiction to make assessment. Absence of notice was not curable u/s 292BB of the Act. 6.5 He further relied on the decision in the case of Asstt. CIT v. Greater Noida Industrial Development Authority [2015] 379 ITR 14 (All), where, it is held that since the assessing officer failed to issue notice within the specified period u/s 143(2) of the Act, the assessing officer had no jurisdiction to assume jurisdiction u/s 143(2) of the Act and this defect could not be cured by recourse to the deeming fiction provided u/s 292BB of the Act. 6.6 The Id Counsel for the assessee contended that the provisions of section 292BB are not applicable in this case because the said provisions take care of improper service of notice and do not pertain to non-issuance of notice, whereas in this case, the issue involved is non-issue of notice u/s 143(2). The fact of non-issue of notice is not in dispute, neither at the first appeal stage nor before the Tribunal. The Department is not in appeal on this issue before the Tribunal. Non-issue of notice u/s 143(2) is not a curable defect, as held in the case of Hotel Blue Moon (supra) (APB, page no. 1-5). Non- issue of notice u/s 143(2) cannot be saved by the provisions of section 292BB, as held in Cebon India Ltd. (supra) (APB, page no. 11-12) and Greater Noida Industrial Development Authority (supra) (APB, page no. 16-21). He submitted the case laws relied upon by Id. DR are distinguishable on facts. 6.7 He further explained that although the decision of the Hon'ble Supreme Court in the case of 'Hotel Blue Moon' (supra) is in relation to assessment completed u/s 158BC, holding that the non-issue of notice u/s 143(2) is not curable, the requirement of issue of notice u/s 143(2) of the Act is embodied in the provisions of section 143(3) of the Act also. Therefore, the issue involved in the appeal under consideration is covered by the decision in the case of 'Hotel Blue Moon' (supra) and ratio involved in this decision will apply to the present appeal also.He also relied on the decision of the Hon'ble Madras High Court in the case of CIT v. Gitsons Engg. Co. [2015] 370 ITR 87/53 taxmann.com 108 where the decision in the case of 'Hotel Blue Moon' (supra) is followed holding that: "Provision of section 143(2) makes it clear that service of notice u/s 143(2) within time limit prescribed is mandatory and it is not a mere procedural requirement. Therefore, the requirement of notice u/s 143(2) cannot be dispensed with (APB, age no. 22)."

Per contra, the Ld. DR, vehemently supported the impugned order, relaying on the decision of Hon'ble Delhi High Court in the case of 'Ashok Chaddha v. ITO' [2011] 337 ITR 399/[2012] 20 taxmann.com 387. The Id DR contended that the assessment being completed under section 153A, there is no requirement of issue of notice under section 143(2) of the Act. He submits that in any case, there is no prescribed proforma for issuing the notice. The notice is actually issued in the proforma marked as "ITNS-33" which is a non-statutory notice as the name suggest. It is a communication by the assessing officer to the assessee giving him the opportunity as required under section 143(2). Therefore, once the assessee has been put to notice and given opportunity to attend the office, the requirement of section 143(2) is complete, whether notice is issued in profoma "ITNS-33", or in any other format. In the present case, the assessing officer had communicated his intention to scrutinize the return by way of two letters and afforded opportunity to the assessee to produce necessary accounts, documents or evidence. Therefore, the requirement, if any, of section 143(2) has been satisfied.

We have considered the rival submissions on relevant facts brought on records and the Paper Book and Synopsis filed by the assessee. The fact of non-issue of notice is not in dispute neither at the first appeal stage, nor before the Tribunal. The Department is not in appeal on this issue before us.

It is noted that in this case, a search u/s 132 of the I. T. Act, 1961 was conducted from 11.03.2010 to 12.03.20 I 0 as is verifiable from the copy of Panchnama, which is placed at Page 33-35 of paper book (Relevant page 35), although, the AO has mentioned the date of search as 11.03.2011 at page 1 of the assessment order. Meaning thereby, that the search was conducted from 11.03.20 I 0 to 12.03.2010, i.e., during financial year 2009-10, relevant to assessment year 2010-11.

In pursuance of the search, notices 153A(l )(a), were to be issued to furnish the return of income in respect of each assessment year falling within the six assessment years as referred to in clause (b), meaning thereby, the six assessment years immediately preceding the assessment years relevant to the previous year in which the search was conducted. As the search in this case, was conducted from 11.03.2010 to 12.03.2010, i.e., during the previous year 2009-10 relevant to assessment year 2010- 11, the six preceding years were 2003-04, 2004-05,2005-06,2006-07,2007-08 and 2008-09 relevant to assessment year 2004-05, 2005-06,2006-07,2007-08,2008-09 and 2009-10, for the purpose of issue of notice u/s 153A(l)(a) of the Act.

We find that the year under consideration being the search year, notice u/s 153A was neither required to be issued, nor was issued in the case of the assessee. The return of income was furnished on 24.08.20 11, as per the provisions of section 139 of the Act. The assessment for the previous year (Financial year) 2009-10 relevant to assessment year 2010-11 was completed u/s 143(3) of the Act, vide assessment order dated 23.12.2011 under the regular assessment procedure, as the AO noted the section 143(3) under which the assessment order is completed, at page 1 of his order. Non- issue of notice u/s 143(2) prior to completion of assessment is not a curable defect as held by the Apex court in the case of 'Hotel Blue Moon' (supra).

The Ld. CIT (A) has dismissed the legal ground observing that the assessee did not object to the fact of non issue of notice u/s 143(2) during the assessment proceedings and that therefore, in view of the provisions of section 292BB of the Act, the assessee is precluded from taking the ground regarding non issue of notice u/s 143(2) at the appeal stage. The CIT (A) has, thus, accepted the fact of non issue of notice u/s 143(2) and its impact on the assessment proceedings, considering it as a mandatory requirement.

The AO had issued notices u/s 142(1) on 18.11.2011 and 12.12.2011, as mentioned in the first para at page 2 of the assessment order and as such no notice u/s 143(2) was issued. The Ld. OR argued that once the assessee has been put to notice and has been given opportunity of being heard, the requirement of section 143(2) is complete, whether the notices are issued in Performa ITNS 33, or in any other format. In counter argument, the ld. Counsel for the assessee submitted that the purpose of issue of notice u/s 142(1) (format ITNS 32) and notice u/s 143(2) (format ITNS 33) are different, as provided in the section itself. When both the notices are meant for different purposes,

The statutory provisions for issue of notice u/s 143(2) are given in sub-section (3) of section 143 of the Act, which is being reproduced hereunder:

The decision of the Hon'ble Supreme Court in the case of 'Hotel Blue Moon' (supra) is in relation to assessment completed u/s 158BC, holding that the non-issue of notice u/s 143(2) is not curable. The requirement of issue of notice u/s 143(2) of the Act is embodied in the provisions of section 143(3) of the Act itself. Therefore, the issue involved in the impugned appeal under consideration is covered by the decision in the case of 'Hotel Blue Moon' (supra) and ratio involved in this decision will apply to the present appeal also. In the case of 'Hotel Blue Moon' (supra) it was held that if the Assessing Officer, for any reason, repudiates the return filed by an assessee in response to the notice under section 158BC(a) of the Act relating to a block assessment, the Assessing Officer must necessarily issue a notice under section 143(2) of the Act, within the time prescribed in the proviso to section 143(2). It was further held that by making the issue of notice mandatory, section 158BC, dealing with block assessments, makes such notice the very foundation for assumption of jurisdiction; that Such notice is required to be served on the person who is found to have undisclosed income and that the requirement of notice under section 143(2) cannot be dispensed with.

The Hon'ble Madras High Court in the case of Gitsons Engineering Co. (supra) following the decision in the case of 'Hotel Blue Moon' (supra) has held as under: -

In conclusion, we find that there was no notice issued u/s 143(2) prior to the completion of assessment under section 143(3) of the Act by the AO; that the year under consideration was beyond the scope of the provisions of section 153A of the Act, it being the search year and not covered in the six year to the year of search as per the assessment scheme/procedure defined U/S 153A; that the AO has passed regular assessment U/S 143(3) of the Act; although the ld CIT has mentioned the section as 143 r.w.s 153A and that the department had not controverted these facts at the stage of hearing. It is noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non-issuance thereof is not a curable defect. Even in case of block assessment u/s 158BC, it has been so held by the Apex court in the case of 'Hole! Blue Moon' (supra).

Considering the facts, as discussed above, we note that the assessment order is passes without issue of notice u/s 143(3) of the Act and this defect cannot be cured by taking recourse to the provisions of section 292BB of the Act.”

Respectfully following the above, we are of the view that the impugned assessment passed u/s. 143(3)/147 of the Act dt. 18-12- 09 is bad in law and the order of CIT-A is not justified in confirming the same. Grounds raised by the assessee in appeals ITA No. 220/Kol/2016, ITA No. 221/Kol/2016 and ITA No. 222/Kol/2016 filed

In the result, all the appeals of assessee are allowed. Order pronounced in the open court on 25-01-2018