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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SMT. DIVA SINGH & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 12/08/2013 of learned Commissioner of Income-tax (Appeals)-XVII, New Delhi, for assessment year 2003-04, raising following grounds , which are revised on 22.02.2016:
1. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals)-XVII, New Delhi [briefly "the CIT(A)"] has erred in upholding the reopening of assessment under section 147 of the Income tax Act, 1961 (briefly "the Act").
2. That on the facts and circumstances of the case and in law, the CIT(A) has erred in not appreciating that the assessment was not validly reopened, for no valid notice 148 dated 25.3.2010 was issued and notice served through affixture was also invalid.
3. That on the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that before reopening the assessment , the Assessing Officer did not apply mind to the information received from Investigation Wing and that there was no tangible material to reopen the assessment.
4. Without prejudice, on the facts and circumstances of the case and in law, the reassessment dated 23.12.2010 was bad in law as no notice under section 143(2) of the Act was issued before completing the assessment under section 147 /143(3) of the Act.
5. That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding the addition of Rs. 17,52,000/- under section 68 of the Act, as bogus accommodation entry.
6. That the Appellant craves leave to add, alter, amend or vary any of the ground either at or before the hearing of the appeal.
The facts in brief of the case are that consequent to the receipt of information from the Director of Income tax (Investigation), New Delhi, that the assessee received an accommodation entry of Rs. 17.52 lakhs in previous year corresponding to the assessment year under consideration, the Assessing Officer after recording reasons to believe that income escaped taxation, issued notice under section 148 of the Income Tax Act, 1961 (for short ‘the Act’) on 25/03/2010. The objections filed by learned Authorised Representative of the assessee were settled by vide letter dated 04/10/2010 of the Assessing Officer. The assessee filed return of income in response to the notice under section 148 of the Act on 09/10/2010. The Assessing Officer noted in the assessment 148 of the Act. The Assessing Officer further noted that the assessee attended the case from time to time and filed the details as required. The Assessing Officer observed that the parties from whom the share application money received were not produced before him and, therefore, the assessee failed to discharge its onus in respect of identification, creditworthiness of the share applicant and genuineness of the transaction. In view of the observations, the Assessing Officer completed the assessment by making addition of Rs. 17.52 lakhs in terms of section 68 of the Act. Before the learned Commissioner of Income-tax (Appeals), the assessee challenged the jurisdiction assumed under section 147 of the Act on the ground that notice under section 148 of the Act was served beyond the period of limitation stipulated under the Act and also challenged the merit of the addition. The assessee also raised an additional ground that no notice under section 143(2) of the Act was issued before completion of the re-assessment under section 147 of the Act and, thus, re-assessment proceedings were not valid. However, the learned Commissioner of Income-tax (Appeals) observed that formation of the belief by the Assessing Officer is within the realm of subjective satisfaction and it was not necessary for the Assessing Officer to conclusively prove the escapement of income before initiating proceedings under section 147 of the Act and accordingly he held that the Assessing Officer was clearly in his competence to 147 of the Act to initiate reassessment proceedings in the case of the assessee. In respect of the additional ground challenging the reassessment proceedings in absence of issue of notice under section 143(2) of the Act, the learned Commissioner of Income-tax (Appeals) held that non-issue of notice under section 143(2) of the Act, did not render the reassessment as invalid. The Ld. Commissioner of Income Tax (Appeals) sustained the addition on merit as well. Aggrieved, the assessee is before the Tribunal raising the grounds of appeal
as reproduced above.
3. In ground No. 4, the assessee has challenged the reassessment proceedings on the ground that no notice under section 143(2) of the Act was issued before expiry of the time limit for making the reassessment. 3.1 Before us, the learned Authorized Representative of the assessee referring to para 7.5 of the impugned order, submitted that learned Commissioner of Income-tax (Appeals) has clearly admitted that no notice under section 143(2) was issued before completion of the reassessment proceedings. He drawn our attention towards judgment dated 22/03/2016 of Hon’ble Jurisdictional High Court in the case of CIT Vs. Delhi Kalyan Samiti in to 699/2015 wherein the reassessment proceedings in absence of issue of notice under section 143(2) are held as invalid. He, accordingly, submitted to quash the reassessment proceedings. 3.2 On the contrary, the learned Senior Departmental Representative relied on the authorities below.
3.3 We have heard the rival submissions and perused the material on record. In the case, the Assessing Officer issued notice under section 148 of the Act on 25/03/2010, directing the assessee to file the return of income. In response thereof, the assessee filed return of income on 09/10/2010. Thereafter, the assessee attended the office of the Assessing Officer and the assessment was completed, however, from the assessment order, it is seen that no notice under section 143(2) of the Act was issued. The fact that no notice under section 143(2) of the Act was issued before completion of the reassessment proceedings under section 147 of the Act, has been duly accepted by the learned Commissioner of Income-tax (Appeals), however, he held that non-issue of notice under section 143(2) of the Act did not render the reassessment as invalid. Thus, in our view, the fact that no notice under section 143(2) of the Act was issued before completion of the reassessment proceedings is not in dispute between the parties. Now, the only issue is whether the reassessment proceedings in absence of notice under section 143(2) of the Act are invalid. In the judgment of CIT Vs. Delhi Kalyan Samiti (supra), the Revenue challenged the findings of the Tribunal that the assessment order in question having been passed without issuing notice under section 143(2) of the Act was invalid. In that case notice under section 148 of the Act was issued on 29/03/2007, however, the assessee objected to the reopening of the assessment. Thereafter, the Assessing Officer issued notice under section 142(1) of the Act to file the return of income as well as to furnish details as per questionnaire. Subsequently, the assessee filed return of income on 19/12/2007, however, the same was not taken note by the Assessing Officer and he proceeded to pass assessment order under section 144 read with section 147 of the Act, without issuing any notice under section 143(2) of the Act. The Hon’ble Jurisdictional High Court after considering earlier judgments on the issue in dispute observed that whenever the return filed by the assessee is not accepted at its face, it is mandatory for the Assessing Officer to issue notice under section 143(2) of the Act for proceeding further. The Hon’ble Court did not find any infirmity in the order passed by the Tribunal and the appeal of the Revenue was dismissed. The relevant observations of the Hon’ble High Court are as under: “9. It is now well established that if the AO does not accept the return filed by the Assessee on its face and he is required to issue a notice under Section 143(2) of the Act and provide an opportunity to the Assessee to produce the necessary material in support of his return. Mr Shivpuri had argued that a notice under Section 143(2) was required to be issued only in cases where the AO considers it necessary or expedient to do so and in cases where the Assessee had not filed its response to the notice under Section 142(1) it was not necessary for the AO to issue such notice under Section 143(2). In our view, this contention is bereft of any merits and completely ignores the scheme of the machinery provisions for assessment under the Act. It is now well settled by a number of decisions (See: Pr. CIT Silver Line and 283 CTR 148 (Del), ACIT v. Hotel Blue Moon: 321ITR 362 (SC) and CIT v. PawanGupta: 318 ITR 322 (Del)) that whenever the return filed by an Assessee is not accepted at its face, it is mandatory for the AO has to issue a notice under Section 143(2) of the Act for proceeding further. It is thus not open for the AO to not issue a notice under Section 143(2) of the Act and proceed directly under Section 144 of the Act by rejecting the return filed by the Assessee.
The decision of this Court in Ashok Chaddha (supra) was rendered in the context of Section 153A of the Act and in our view, the same is not applicable in the present case. This Court in several cases pertaining to proceedings under Section 147 has held that a notice under Section 143(2) is mandatory. [See: Alpine Electronics Asia (P.) Ltd. v. DGIT: 341 ITR 247 (Del), DIT v. Society for Worldwide Interbank Financial Telecommunication: 323 ITR 249 (Del), Pr. CIT v Shri Jai Shiv Shankar Traders Pvt. Ltd.: 282 CTR 435 (Del) and CIT v. Rajeev 336 ITR (All)}. It is also relevant to note that clause (b) of the proviso to Section 148(1) of the Act also specifically extends the period for issuance of notice under Section 143(2) of the Act.”
3.4 Thus, the Hon’ble High Court in the above case has clearly held that in reassessment proceedings under section 147 of the Act, issuing notice under section 143(2) of the Act is mandatory and, therefore, in absence of which, the reassessment proceedings are invalid. Therefore, respectfully following the findings of the Hon’ble High Court in the case of CIT Vs. Delhi Kalyan Samiti (supra), we hold that in absence of issue of notice under section 143(2) of the Act before completion of the reassessment proceedings in the case of the assessee, the reassessment proceedings are held as invalid and not in accordance with law. Accordingly, the ground of the appeal is allowed.
Since the reassessment proceedings itself have been held as invalid by us, other grounds of the appeal challenging the jurisdiction assumed under section 147 of the Act as well as challenging the additions on merit are rendered academic only and, therefore, same are not adjudicated. 4. In the result, the appeal of the assessee is allowed. The decision is pronounced in the open court on 27th July, 2016.