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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Sri A.T.Varkey, JM & Shri M.Balaganesh, AM ]
This appeal of the assessee arises out of the order of the Learned CIT(A)-5, Kolkata in Appeal No. 31/CIT(A)-5/Wd-3(3)/-8-09/14-15 dated 22.03.2016 against the order of assessment framed for the Asst Year 2004-05 u/s 144 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
At the outset, we find that there is a delay in filing the appeal by the assessee before us by 8 days. We find that the reason stated by the assessee for the delay is convincing and accordingly we deem it fit to condone the delay and appeal of the assessee is admitted for adjudication. 3. The assesse has challenged the validity of assumption of jurisdiction u/s 147 of the Act. It has also challenged vide Ground No. 3 that notice us 143(2) of the Act was not issued and served on the assessee before the completion of reassessment proceedings. Firstly we would like to address this preliminary ground of non-issuance of notice u/s 143(2) of the Act.
Ricky Construction (P)Ltd. A.Yr.2004-05 4. The brief facts of this issue is that the assessee is a private limited company with the main object to work as civil contractors. The return of income u/s 139(1) of the Act was filed by the assessee on 19.10.2004 disclosing total income of Rs 84,510/- which was processed u/s 143(1) of the Act on 6.7.2005. Subsequently the ld AO assumed jurisdiction by issuance of notice u/s 148 of the Act. In response to the said notice u/s 148 of the Act, the assessee filed a reply on 4.10.2007 praying to treat the original return filed u/s 139(1) of the Act as return filed in compliance thereto. It is well settled that the assessee is entitled to state that a return already filed by him might be deemed to be a return filed in response to notice issued u/s 148 of the Act. Reliance in this regard was placed on the decision of Hon’ble Calcutta High Court in the case of Iqbal Singh Atwal vs CIT reported in (1984) 147 ITR 599 (Cal). The ld AO did not issue any notice u/s 143(2) of the Act thereafter, which was challenged by the assessee before the ld CITA. The ld CITA held as under :- Notice U/s.143(2)
The appellant has challenged the assessment order u/s.144/147 on the ground that the Notice u/s.143(2) was not issued before completion of assessment u/s.144 and after filing of letter by the appellant to the A. O. in response to notice u/s.148 requesting the earlier return to be treated as the return filed in response to the notice u/s.148. From the assessment folder, it is seen that the A.O. had issued a letter dated 03.09.08 (No.itowd-3(3)/KoI/08-09/309) asking the appellant to explain the allegation that against Rs.98 lacs of the gross receipts only Rs.80 lacs was disclosed whereas tax credit was claimed for the entire of Rs.2,00,900/-. The A.O.'s said letter has granted an opportunity to the A.O. to explain the above said difference. The content of the letter is reproduced as under :-
"Please refer to notice u/s.148 dated 09.08.2007 and your compliance letter submitted on 04.10.2007. It is apparent from TDS certificates present with your return of assessment year 2004-05 that you had gross receipts of Rs.98,00,000/- from which tax was deducted u/ s.194C for sum of Rs.2,00, 900/ - at the time of credit of gross amount to your account. Whereas in the P&L account you had shown a gross receipt of only Rs.80,00,000/-. You are given a opportunity to satisfactorily explain this under statement of income within 5 days, failing which the income & tax of assessment year 2004-05 shall be re-computed u/ s.144 of the 1. T. Act, 1961. 2
Ricky Construction (P)Ltd. A.Yr.2004-05 This letter may be treated as a notice u/ s.142(1) “
Though this letter does not mention section 143(2), its effect amounts to affording an opportunity to produce evidences at which the appellant could have relied in support of the return. It is thus not a case where no notice was issued to the A.O. This ground, therefore, is not allowed. “
The ld CITA after verifying the assessment records agreed to the fact that no notice u/s 143(2) of the Act was issued by the ld AO in the instant case, but opportunity of hearing was given to the assessee. Aggrieved, the assessee is in appeal before us on the following ground:- “
3. FOR THAT the ld. Commissioner of Income Tax (Appeals)-5, Kolkata was wholly in error in upholding the validity of the re-assessment order framed u/s 144 of the Act on account of failure of the Ld. Income Tax Officer, Ward
3. (3), Kolkata to issue notice u/s 143(2) of the Income Tax Act, 1961 prior to framing of such order and the specious order so passed on 26-09-2008 is therefore arbitrary, unreasonable and perverse.”
We have heard the rival submissions. The ld DR confirmed that notice u/s 143(2) of the Act was not issued in the instant case as rightly pointed out by the ld CITA. We find that issuance of notice u/s 143(2) of the Act is a sine qua non for commencement of the assessment proceedings and only thereafter the ld AO is entitled to call for further details from the assessee. The law does not differentiate this primary requirement for assumption of jurisdiction between an assessment or a reassessment. We find that the Hon’ble Apex Court in the case of CIT vs Hotel Blue Moon reported in (2010) 321 ITR 362(SC) had held that if notice u/s 143(2) of the Act was not issued to the assessee before the completion of reassessment within the stipulated time , then such reassessment was not sustainable in law. We also find that the Hon’ble Allahabad High Court in the case of ACIT vs Greater Noida Industrial Development Authority reported in (2015) 379 ITR 14 (All) had held as under :- “The jurisdiction of the Assessing Officer to make an assessment under section 143(3)(ii) of the Income-tax Act, 1961, is based on the issuance of a notice under section 143(2)( ii) of the Act. The proviso to clause (ii) of sub-section (2) of section 3
Ricky Construction (P)Ltd. A.Yr.2004-05 143 clearly stipulates that a notice must be served on the assessee. Section 292BB of the Act was inserted by the Finance Act, 2008, with effect from April 1, 2008. Section 292BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or co-operated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. There is a difference between issue and service of notice. The essential requirement is "issuance of notice" under section 143(2) of the .Act. The deeming fiction under section 292BB of the Act is with regard to "service of notice". Section 292BB cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of juris-diction itself would be invalid. Held, dismissing the appeal, that since the Assessing Officer failed to issue notice within the specified period under section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under section 143(2) of the Act and this defect could not be cured by recourse to the deeming fiction provided under section 292BB of the Act. Consequently, the Tribunal was justified in setting aside the order of the Assessing Officer as well as the order of the appellate authority for the assessment years 2007-08, 2008-09, 2009-10,2010-11 and 2011- 12.”
We also find that the Hon’ble Delhi High Court in the case of Principal CIT vs Shri Jai Shiv Shankar Traders Pvt Ltd reported in (2016) 383 ITR 448 (Del) had also endorsed the same view. The Head Notes of the said judgment is reproduced hereunder:- “REASSESSMENT – CONDITION PRECEDENT – ISSUANCE OF NOTICE – ASSESSEE’S STATEMENT BEFORE ASSESSING OFFICER TO TREAT ORIGINAL RETURN FILED AS RETURN PURSUANT TO NOTICE UNDER SECTION 148 – FAILURE TO ISSUE NOTICE THEREAFRTER UNDER SECTION 143(2)- REASSESSMENT ORDER UNSUSTAINABLE – INCOME-TAX ACT, 1961, SS.143(2), 148.”
Hence respectfully following the aforesaid decisions and in view of the fact that notice u/s 143(2) of the Act was not issued to the assessee in the instant case within the stipulated time before the completion of reassessment proceedings, we hold that the 4
Ricky Construction (P)Ltd. A.Yr.2004-05 reassessment framed on the assessee deserves to be quashed and declared void abinitio. Accordingly the Ground No. 3 raised by the assessee is allowed.
Since the entire reassessment is quashed, the other grounds raised by the assessee on challenging the reassessment and on merits, are left open, which in our opinion does not require any adjudication.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 07.07.2017