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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI D.T.GARASIA (JM) & SHRI RAMIT KOCHAR (AM)
PER D.T.GARASIA, AM
This appeal is filed by the Assessee against the order of Ld. CIT(A)-22 Mumbai, dated 13/12/2011 for the Asst. year 2005-06 arising out of order of ACIT-10(3) Mumbai dated 16/11/2010 passed u/s 143(3) of the Income Tax Act, 1961(in short ‘the Act’).
The only grounds in this appeal read as under:- 1. “The Asst. Commissioner of Income tax-Officer-10(3) (the A.O) erred in initiating reassessment proceedings and framing assessment of the Appellant by invoking the provision of Section 147 r.w.s. 148 of the Income Tax Act, 1961 (the Act).” 2. “The A.O erred in disallowing the claim of deduction of income of Rs. 82,63,775 from the total income as it is a income under section 28(iv) and section 41 of the Income Tax Act, 1961 liable for tax.”
The short facts of the case are as under:-
The assessee company had filed its return of income on 30/10/2005 declaring NIL income after set off unabsorbed depreciation of Rs. 1,01,39,713/. The return was processed u/s 143(1) of the Act and thereafter the assessment has been finalized u/s 143(3)(ii) r.w.s. 147 of the Act on 16/11/2010 determining book profit u/s 115JB of the Act. In this case, the assessee has taken a legal ground that after reopening the assessment u/s 143(2) notice was not served to the assessee, therefore, the reassessment made is bad in law. In this case, the original assessment u/s 143(3) was made on 30/11/2007. The assessment was reopened u/s 147 after recording reasons mentioned in para 2 of the assessment order. Notice u/s 148 was issued on 29/03/2010 to the assessee and in response the assessee vide its letter dated. 19/10/2010 requested the A.O to treat the income tax return filed by the assessee on 30/10/2005 may be treated as return in response to notice u/s 148.
During the course of hearing, the Ld. AR submitted before us that the notice u/s 148 dated 29/03/2010 was never served on the assessee but the same was collected by the chartered accountant of the assessee only on 18/10/2010. That notice u/s 143(2) was never served. The reassessment proceeding was initiated solely based on the audit objection, where the A.O himself was of the opinion that the receipt was a capital receipt, therefore, it is not taxable. The Ld. AR further submitted that the Ld. CIT(A) has dismissed the objection of the assessee by simply invoking the section 292 BB of the Act and the ld. CIT(A) rejected contention of the assessee by simply relying upon the decision of Hon’ble Supreme Court in the case of CIT vs. P.V.S. Beedies (P) Ltd. 237 ITR 13(SC). The Ld. AR has drawn our attention on page 68 of the paper book and submitted that the notice u/s 148 was issued on 29/03/2010 which is on page 68 of paper book which was received by the chartered accountant of the assessee. The notice u/s 142(1) which is on page 69 of the paper book which was issued on 27/09/2010. In reply to show-cause notice, the assessee submitted that the return filed may be treated as be treated as return in response to notice u/s 148 of the Act. The assessee company has given the reply wherein he has specifically taken the contention that the section 143(2) notice was never served upon the assessee, therefore, the assessment is illegal and the reopening was done is bad in law. The Ld. AR further submitted that the present issue is covered by the following decisions:-
1) CIT vs. Chetan Gupta 382 ITR 613 (Delhi High Court) 2) ITO vs. Smt. Sukhini P. Modi 367 ITR 682 (Guj. High Court) 3) Abacus Distribution Systems (India) P. Ltd. vs. DCIT 29 ITR 1 (Mum. Tribunal) 4) Raj Kumar Chawla & Ors. Vs. ITO 94 ITD 1 (Del)(SB) 5) ACIT vs. Hotel Blue Moon 321 ITR 362(SC)
The Ld. DR relied upon the objections of the Ld. CIT(A). The Ld. DR submitted that the assessee was asked to provide the proof as to whether the objections raised by the assessee were against the reopening of assessment during assessment proceedings wherein he has complied his proceedings hence, section 292 BB of the Act is applicable.
We have heard the rival contentions of both the parties during the course of hearing and also perused the material available on record including the case laws and we have called for the case records. During the course of hearing, the Ld. Departmental representative was asked whether the notice u/s 143(2) was issued after reopening of the assessment u/s 148 of the Act or not. The representative person before us was unable to point out from the assessment order that notice u/s 143(2) was served to the assessee and hence we fairly admit that no notice was issued. In the case of ITO vs. Sukhini P. Modi 367 ITR 682 (Gujarat High Court) wherein the Hon’ble Gujarat High Court has relied upon the decision of Hon’ble Apex Court in the case of CIT vs. Hotel Blue Moon, 321 ITR 362 (SC) whereby the Hon’ble Court held that the A.O has to necessarily follow the provisions of section 142, sub-section (2) and (3) of section 143. The Hon’ble High Court has held that the notice u/s 143(2) is mandatory. This view also supported by the decision of Hon’ble Delhi High Court in the case of CIT vs. Chetan Gupta 382 ITR 613(Delhi) wherein the Hon’ble High Court has held that the notice u/s 148(1) is mandatory. We also find that similar decision was followed in the case of Abacus Distribution Systems India P. Ltd. vs. DCIT 29 ITR (Tribunal) 1 Mumbai wherein the Tribunal has dealt with the issue regarding notice u/s 143(2) and held that the service of notice u/s 143 (2) is mandatory and no mere procedural formalities. This view also find that the present assessment year is Asst. year 2005-06 and section 292BB was inserted w.e.f. 01/04/2008, therefore, there is no application of section 292BB in this case. Therefore, the objections raised by the Ld. CIT(A) has also not found tenable. Therefore, considering the above decision of the Hon’ble Supreme Court in the case of Asst. CIT vs. Hotel Blue Moon, [2010] 321 ITR 362 (SC) held as under :-
The apex court in the case of Asst. CIT vs. Hotel Blue Moon reported in [2010] 321 ITR 362 (SC) has considered the very issue. The apex court held that the Assessing Officer has to necessarily follow the provisions of section 142 and sub-sections (2) and (3) of section 143. It did not accept the submission of the revenue that the requirement of the notice under section 143 can be dispensed with and the same is mere procedural irregularity. In the words of the apex court, it is held as under: “The case of the Revenue is that the expression ‘so far as may be apply indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression’ so far as may be apply’. In our view, where the Assessing Officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section143.”
In the instant case, we find that the notice u/s 143(2) after re-opening the assessment u/s 148 was not served to the assessee therefore, procedure prescribed of issuance of notice under section 143(2) has not followed at all. This fact is not disputed by the revenue in view of the decision of apex court, the assumption of the jurisdiction of issuance of notice of reopening itself is not sustainable. In the absence of fulfillment of mandatory requirements of issuance of notice under section 143(2) is not favour of the assessee. Moreover, the Special Bench in ITAT in the case of Raj Kumar vs. ITO 94 ITD 1 (Delhi) (SB) wherein has held as under:-
Section 143(2), read with section 148, of the Income-tax Act, 1961- Assessment-Notice of-Assessment year 1995-96-Whether return filed pursuant to notice under section 148 must be assumed and treated to be return filed under section 139 and assessment must thereafter be made under section 143 or 144 after complying with mandatory provisions-Held, yes- Whether, therefore, proviso to section 143(2) which mandates service of notice within 12 months from end of month in which return is filed, also applies to returns filed pursuant to notice under section 148 and it is incumbent upon assessing authority to issue notice under section 143(2) within period as stipulated in proviso to section 143(2) in respect of return filed pursuant to notice under section 148-Held, yes- Whether no assessment can be made if notice under section 143(2) is not served within period prescribed by proviso under section 143(2) and, thus, return filed will be deemed as accepted.
Respectfully following the above ratio, we allow the appeal of the assessee on the ground of non-issuance of notice u/s 143(2) of the Act. Therefore, the return filed by the assessee is deemed to be accepted and the appeal of the assessee is hereby allowed. As we have allowed ground No. 1, therefore, ground No. 2 has become academic, hence, no need to discuss ground no. 2.
In the result, appeal of the assessee for Asst. year 2005-06 is allowed.
Judgment pronounced in open court on 31st March, 2017.