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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO
Per Asha Vijayaraghavan, Judicial Member
These are cross appeals by the revenue and the assessee against the order of CIT(Appeals)-I, Bangalore dated 26.8.2013 for the assessment year 2009-10.
We first take up the assessee’s appeal in ITA No.1400/Bang/2013. The assessee is a private limited company which filed its return of income for the AY 2009-10 on 26.9.2009 declaring a total income of Rs.3,27,67,090. The return was processed u/s. 143(1) of the Income-tax Act, 1961 [“the Act”] on 29.3.2011.
The AO subsequently reopened the assessment u/s. 147 by issue of notice u/s. 148 of the Act dated 23.3.2011. The assessee replied by stating that return of income filed originally on 26.9.2009 may be taken as one filed in response to the notice u/s. 148 of the Act. The AO issued a notice u/s. 142(1) of the act on 12.7.2012, however, there is no indication in the recital of the assessment order that a notice u/s. 143(2) of the Act was issued. In the reassessment completed u/s. 143(3) r.w.s. 147 of the Act by order dated 18.10.2012, the total income of the assessee has been determined at Rs.3,90,21,204.
Aggrieved, the assessee filed an appeal before the CIT(Appeals). In the grounds of appeal before the CIT(Appeals), the order of reopening of the assessment u/s. 147 was challenged as follows:-
“2. The impugned order of re-assessment is bad in law and void-ab-initio for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s. 148 of the Act did not exist and have not been complied with and consequently, assessment requires to be annulled under the facts and in the circumstances of the appellant’s case.
3. Without prejudice to the above, the order of assessment passed u/s. 143(3) rws 147 of the Act without serving the mandatory notice u/s. 143(2) of the Act on the appellant is opposed to law and void-ab-initio and consequently, the impugned order passed is anul1ity and liable to be cancelled.”
The CIT(Appeals) held that there is no merit in the assessee’s objection for non-issuance of notice u/s. 143(2) and rejected the ground raised by the assessee. The relevant observations of the CIT(Appeals) are as follows:-
“3.7 After due consideration of the appellant's objections, vide this office letter dated 06.08. 2013, the Assesing Officer was asked to submit report whether the notice u/s 143(2) has been issued and served on the appellant within permissible time and directed to submit report on or before 26.08.2013. In compliance, the AO sent his report dated 20.08.2013, received in this office on 23.08.2013 which is reproduced below:- "As directed by the CIT(A), the assessment records in the above case was verified and it appears that no notice u/s 143(2) of the I T Act was issued to the assessee during the re-assessment proceedings, though notices u/s 142 (1) were issued on several occasions. Now, it is informed that the assessee has raised the objection regarding the validity of the assessment. It is humbly submitted that during the course of re-assessment proceedings, the Authorised Representative of 'the assessee had appeared before the Assessing Officer and applying the provisions of Section 292BB of the I T Act, 1961, it shall be deemed that any notice under any provisions of the Act, which is required to be served upon the assessee, has been duly served upon the assessee in time in accordance with the provisions of the Act and such assessee shall be precluded from taking any objection in any proceedings or inquiry under this act that the notice was not served upon him. It is also submitted that in several judicial pronouncements (Decision of High Court of Punjab and Haryana in Aravali Engineers P. Ltd. Vs CIT, (2011) 11 TAxmann.com 291, decision of the ITAT, Ahmedabad Bench “C” in ITO Vs Varial Pratik Engineering (2009) 120 TTJ 1 (AHD), it has been held that once the assessee has appeared in any proceeding or co-operated in any inquiry related to the assessment, then the assessee cannot be permitted to raise any of the objections enumerated in the said section.” I -. ' . , ; ; ; .~ ~ .: - ~ ~' ''':. ' , ,. . f 3.8 In view of the AO’s report, there is no merit in the appellant’s objection for non issuance of the notice u/s. 143(2), hence appeal in this ground is rejected.”
Aggrieved, the assessee has preferred appeal before the Tribunal.
The ld. counsel for the assessee, Shri A. Shankar, relied on the following decisions:-
i) CIT v. Mukesh Kumar Agarwal [2012] 345 ITR 29 (All) ii) ACIT v. Greater Noida Industrial Development Authority [2015] 379 ITR 14 (All) iii) Principal CIT v. Silver Line (2016) 129 DTR 191 (Del) iv) CIT v. Gitsons Engineering Company [2015] 370 ITR 87
On the other hand, the ld. DR, Shri Sunil Kumar Agarwala relied on the decisions in the case of Aravali Engineers P. Ltd. Vs CIT, (2011) 11 TAxmann.com 291 and K.J. Thomas, 301 ITR 301.
We have heard both the parties. The Hon’ble Madras High Court in the case of CIT v. Gitsons Engineering Co., 370 ITR 87 (Mad) held as follows:-
“ The word “shall” employed in section 143(2) of the Income-tax Act, 1961 contemplates that the Assessing Officer should issue notice to the assessee so as to ensure that the assessee has not understated income or has not computed excessive loss or has not under paid the tax in any manner. It is, therefore, clear that when the Assessing Officer considers it necessary and expedient to ensure that tax is paid in accordance with law, he should call upon the assessee to produce evidence before him to ensure that the tax is paid in accordance with law. The section makes it clear that service of notice under section 143(2) of the Act within the time limit prescribed is mandatory and it is not a mere procedural requirement.”
The Hon’ble Madras High Court followed the decision of the Hon’ble Supreme Court in the case of ACIT v. Hotel Blue Moon [2010] 321 ITR 302 (SC). In the present case, it is clear from the remand report submitted by the AO before the CIT(Appeals) that no notice u/s. 143(2) has been served upon the assessee which is mandatory. Hence respectfully following the decision of the Hon’ble Madras High Court, since there has been no service of notice u/s. 143(2) of the Act on the assessee, the assessment order passed by the AO u/s. 143(3) r.w.s. 148 is quashed.
Since the assessee’s appeal is allowed on the legal issue of assumption of jurisdiction u/s. 148 of the Act, adjudication of the assessee’s appeal on merits of the case is not considered. So also, the departmental is dismissed as such.
In the result, the appeal by the assessee stands allowed, while the appeal by the department is dismissed.
Pronounced in the open court on this 30th day of June, 2016.