KHANNA INDUSTRIAL PIPES P. LTD,MUMBAI vs. ITO 9(2)2, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 02/01/2013,of the CIT (A)-20,Mumbai the assessee has filed the present appeal.Assessee-company,engaged in trading of industrial goods, filed its return of income on 28/11/2003,declaring total income at Rs. 24. 35 lakhs.

2.First ground of appeal is about reopening of the assessment,as per the provisions of section 147 of the Act.In this matter initially the return,filed by the assessee,was processed u/s. 143 (1) of the Act. Subsequently,the case was reopened u/s. 147 of the Act on the basis of information that the assessee had wrongly claimed deduction u/s. 80. HHC under the heads interest income, Sundry balances write-offs.A notice u/s. 148 was issued on 31/03/2010.In response to the said notice, the assessee vide its letter dated 05/04/2010 stated that return filed on 28/11/2003 should be taken as the return filed in response to the reassessment notice.Vide his letter dated 29/06/2010 the assessee was informed about the reasons of reopening. The AO completed the assessment u/s. 147 r.w.s. 143 (3) of the Act on 28/12/2010, determining its income at Rs. 48.64 lakhs. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that reopening was not valid as no new facts were not unearthed by the AO, that the notice was issued without a copy of reasons recorded, that the reasons were communicated after the expiry of six years from the end of relevant AY. i.e. on 26/06/2010, that that no notice u/s.143 (2) was issued by the AO before completing the assessment u/s. 147 r.w.s. 143(3),that the issuance of notice u/s.143 (2) was prerequisite for completing the assessment proceedings, that the provisions of section 292BB

1845/M/13- Khanna Indl. Pipes Pvt.Ltd. could not be pressed into service to cure that effect of non-issuance of the notice, that in the remand report, dated 7/12/2012, the AO himself had admitted the notice was not received. After considering the submission of the assessee and the reassessment order, the FAA held that the AO had noticed that the assessee had claimed wrong deduction u/s.80 HHC,that the reopening was done after obtaining approval from the Additional CIT,that after receipt of notice u/s. 148 the assessee had acknowledged the same,that the reasons recorded for reopening were comunicated to the assessee,that in compliance of the 148 notice it had submitted various details, that the assessee had participated in the proceedings, that there was no merit in the argument that notice u/s. 148 was not validly issued and that argument was not pressed by the assessee,that the argument about non-service of notice u/s. 143 (2) of the Act was baseless, that it had been provided proper and full opportunity to represent its case,that it had not raised any such objection before the completion of re-assessment proceedings, that by virtue of law u/s. 292 BB of the Act re-opening could not be challenged, that the assessee did not deserve any relief. 4.During the course of hearing before us, the Authorised Representative (AR) argued that it was a case of change of opinion, that the AO had not issued notice u/s. 143 (2),that the assessment was not valid. He referred to the case of Silver Line (383 ITR 455) and Haryana Acrylic Manufacturing Company (308 ITR 38), Balwant Rai Wadhwa (ITA/4806/Del/2010). The Departmental Representative (DR) supported the order of the FAA. 5.We have heard the rival submissions and perused the material before us. We find that initially the return was processed u/s. 143 (1), that later on a notice for reopening the completed assessment was issued, that there is no evidence of service of notice u/s. 143 (2) of the Act on the assessee, that the FAA had held that provisions of section 292 BB were applicable to the facts of the case. We are of the opinion that assessment order passed u/s. 147 r.w.s.143 (3) has to be preceded by issue of notice u/s. 143(2), that without the said notice the assessment proceedings would be invalid. We would like to refer to the judgment of Hon’ble Delhi High Court,delivered in the case of Silver Line (supra) and it reads as under: “The proposal to reopen an assessment u/s. 147 of the Income-tax Act, 1961, is to be based on reasons to be recorded by the Assessing Officer. Such reasons have to be communicated to the assessee. Merely because the assessee participates in the proceedings pursuant to such notice u/s. 148 of the Act, it does not obviate the mandatory requirement of the Assessing Officer having to issue to the assessee a notice u/s. 143(2) of the Act before finalising the order of reassessment. A reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the Assessing Officer to the assessee u/s. 143(2) . The 1845/M/13- Khanna Indl. Pipes Pvt.Ltd. requirement of issuance of such notice is a jurisdictional one. It does go to the root of the matter as far as the validity of the reassessment proceedings u/s. 147 / 148 of the Act is concerned. Section 292BB was inserted in the Income-tax Act, with effect from April 1, 2008. It talks of the drawing of a presumption of service of notice on an assessee and is basically a rule of evidence. It introduces a fiction that once the assessee appears in any proceeding or has co- operated in any enquiry relating to assessment or reassessment it shall be deemed that any notice under any provision of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and the assessee in those circumstances would be precluded from objecting that a notice that was required to be served upon him under the Act was not served upon him or not served in time or was served in an improper manner. The failure of the Assessing Officer, in reassessment proceedings, to issue notice u/s. 143(2) of the Act, prior to finalising the reassessment order, cannot be condoned by referring to section 292BB of the Act.” The Hon’’ble Court has the deliberated upon the applicability of section 292 BB of the Act also,while deciding the appeal.Respectfully, following the above judgment,we reverse the order of the FAA and hold that reassessment proceedings were invalid.First ground of appeal is decided in favour of the assessee.As we have held that reassessment was not valid, so, we are not adjudicating the other grounds raised by the assessee.