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Income Tax Appellate Tribunal, BANGALORE BENCH “ B ”
Before: SHRI A.K. GARODIA & SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.20.02.2015 of Commissioner of Income Tax (Appeals) for the Assessment Year 2010-11.
Though the assessee has raised various grounds in this appeal, however, at the time of hearing the learned Authorised Representative of the assessee has pressed only one ground of appeal regarding validity of reassessment under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short 'the Act') for want of notice under Section 143(2).
We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record.
The learned Authorised Representative of the assessee has pointed out that the CIT (Appeals) has accepted the fact that notice under Section 143(2) was not issued in this case. However, he was of the view that it is only a procedural irregularity and will not render reassessment proceedings null and void. The learned Authorised Representative has relied upon the decision of the co- ordinate bench of this Tribunal dt.10.10.2014 in the case of Sri G.N. Mohan Raju Vs. ITO in & 243/Bang/2013.
3. On the other hand, the learned Departmental Representative has submitted that the assessee has duly participated in reassessment proceedings and therefore in view of section 292BB of the Act, it is deemed to be valid notice if the assessee has appeared in the proceedings and co-operated in the enquiry by the Assessing Officer in the assessment or reassessment proceedings. Thus the learned Departmental Representative has submitted that the reassessment cannot be held null and void when the assessee has participated in the reassessment proceedings. He has relied upon the order of the CIT (Appeals).
We have heard the rival submissions and considered the relevant material on record. A heavy reliance is placed on by the learned Departmental Representative on section 292BB of the Act to support its contention that when the assessee has participated in the proceedings before the Assessing Officer then, it is deemed to be a valid notice. For ready reference, we quote section 292BB as under :
Section 292BB. Where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.
As it is clear from the provisions of section 292BB that it deals with the objections taken by the assessee regarding non-service of notice upon him or non-service of notice within time or service of notice in an improper manner.
Thus the provisions of section 292BB of the Act can be invoked only in a case where a notice as required under the provisions of the Act for completion of the assessment is duly issued but the service of the same has been disputed by the assessee and therefore in such a situation if the assessee has appeared in the proceedings relating to assessment or reassessment then after completion of the assessment the assessee is not permitted to take such objection of non- service of notice, non-service of notice within time or notice in improper manner. In the case on hand, the assessee has raised objection before the CIT (Appeals) regarding the non-issue of notice under Section 143(2) of the Act.
Therefore, it is not the case of non-service of notice issued by the Assessing Officer but it is a case of non-issuance of notice under Section 143(2) by the Assessing Officer. The CIT (Appeals) has recorded the objections of the assessee in paras 7 and its finding in para 7.1 as under :
7. The next grievance of the assessee relates to irregularity in the re- assessment proceedings. It is vehemently argued that after the issue of the notice under Section 148, a notice under Section 143(2) was not issued and hence the entire re-assessment proceedings i.e. to say under Section 147 r.w.s. 143(3) is null and void in the eyes of the law. …… 7.1 After considering this detailed order, it is clear that non-issuance of a notice under Section 143(2) is a mere procedural irregularity and nonce a notice under Section 148 has been issued in correct time, the re-assessment proceedings cannot be declared null and void and thereafter, quashed. The action of the Assessing Officer in concluding the assessment is upheld and no interference is called for.
From the facts recorded by the CIT (Appeals) it is manifest that the assessee raised a ground that after issuing notice under Section 148 of the Act, a notice under Section 143(2) was not issued and hence the entire reassessment proceedings under Section 147 r.w.s. 143(3) was sought to be held as null and void. The CIT (Appeals) in its finding in para 7.1 (supra) has accepted the non- issuance of notice under Section 143(2) of the Act. Therefore, there is no dispute that the Assessing Officer has completed the reassessment under Section 143(3) rws 147 of the Act without issuing notice under Section 143(2) of the Act. It is pertinent to note that the requirement of issue of notice under Section 143(2) is mandatory and it gives jurisdiction to the Assessing Officer to proceed with the scrutiny assessment. An identical issue has been considered by the co-ordinate bench of this Tribunal in the case of Sri G.N. Mohan Raju (supra) in paras 7 & 8 as under :
“ 7. This brings us to the crux of the issue i.e. whether notices under section 143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified u/s 143(2) of the Act. That issue of a notice u/s 143(2) of the Act, is mandatory even in a re-assessment proceeding initiated u/s 148 of the Act has been clearly laid down by the Hon’ble Delhi High Court in the case of M/s Alpine Electronics Asia PTE Ltd., (supra). Hon’ble Delhi High Court had reached this conclusion after considering the decision of the Hon’ble Apex Court in the case of Hotel Blue Moon (supra). At para-24 of the judgment their Lordship has held that Section 143(2) was applicable to a proceedings u/s 147/148 also, since proviso to section 148 of the Act, granted certain specific liberties to the revenue, with regard to extension of time for serving such notices. No doubt, Hon’ble Madras High Court in the case of Areva T and D India Ltd.,(supra) had held that issue of notice u/s 143(2) was procedural in nature. However, Co-ordinate Bench in the case of M/s Amit Software Technologies Pvt. Ltd.,(supra) after considering the decision of the Hon’ble
Madras High Court as well as Delhi High Court had held that Section 143(2) of the Act, was a mandatory requirement and not a procedural one. Of course, in the case before us, a notice u/s 143(2) of the Act has been issued to the assessee, but on the date when such notice was issued viz., 23-09-2010 assessee had not filed any return pursuant to the reopening notice under section 148 of the Act. First instance when the assessee requested the AO to treat the returns originally filed by it as returns filed pursuant to the notices u/s 148 of the Act, was on 05-10-2010 which is clear from the narration in the order sheet which is reproduced here under; “ Sri M.Srinivas Rao Mannan, CA appeared in response to notices issued u/s 143(2) & 142(1) and requested that the return of income filed originally shall be treated as return of income filed in response to notice u/s 148. He has been asked to explain as to why a sum of Rs.1,00,00,000/- (Rs. One Crore) received from Wifi Networks Pvt.Ltd., should not be treated as revenue receipt and taxed accordingly. The case is posted for final hearing on 20-10-2010 at 3.30 pm. No further adjournment will be granted. If no compliance is forthcoming on that day, assessment will be completed bringing to tax Rs.1.00 (Rs. One Crore) as revenue receipt as per the provisions of sec.28(va) of the Act.”
A look at Section 143(2) is called for at this juncture. It is reproduced hereunder; “143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section(1) of section 142, the AO shall- i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim; (Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003) ii) notwithstanding anything contained in clause(1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid he tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his officer or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return. (Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished).
Once the original return filed by the assessee was subject to processing u/s 143(1) of the Act, the procedure of assessment pursuant to such a return, in our opinion came to an end, since AO did not issue any notice within the 6 months period mentioned in proviso to section 143(2)(ii). No doubt, if the income has been understated or the income has escaped assessment, an AO is having the power to issue notice u/s 148 of the IT Act. Notice u/s 148 of the Act, issued to the assessee required it to file a return within 30 days from the date of service of such notice. There is no provision in the Act, which would allow an AO to treat the return which was already subject to a processing u/s 143(1) of the IT Act, as a return filed pursuant to a notice subsequently issued u/s 148 of the Act. However, once an assessee itself declare before the AO that his earlier return could be treated as filed pursuant to notice u/s 148 of the IT Act, three results can follow. Assessing Officer can either say no, this will not be accepted, you have to file a fresh return or he can say that 30 days time period being over I will not take cognizance of your request or he has to accept the request of the assessee and treat the earlier returns as one filed pursuant to the notice u/s 148 of the IT Act. In the former two scenarios, AO has to follow the procedure set out for a best of judgment assessment and cannot make an assessment under section 143(3). On the other hand, if the AO chose to accept assessee’s request, he can indeed make an assessment under section 143(3). In the case before us, assessments were completed under section 143(3) read with section 147. Or in other words AO accepted the request of the assessee. This in turn makes it obligatory to issue notice u/s 143(2) after the request by the assessee to treat his earlier return as filed in pursuance to notices u/s 148 of the IT Act was received. This request, in the given case, has been made only on 05-10-2010. Any issue of notice prior to that date cannot be treated as a notice on a return filed by the assessee pursuant to a notice u/s 148 of the Act. Or in other words, there was no valid issue of notice u/s 143(2) of the IT Act, and the assessments were done without following the mandatory requirement u/s 143(2) of the IT Act. This in our opinion, render the subsequent proceedings all invalid. Learned CIT(A) had only adjudicated on a position where there was no service of notices u/s 143(2) of the IT Act. He had not dealt with the scenario, where notice was issued prior to the filing of return by the assessee. We therefore, quash the assessment done for the impugned assessment years. Since the appeals of the assessee are allowed on its ground 3, other grounds are not adjudicated.”
In view of the findings of the co-ordinate bench of this Tribunal, a notice under Section 143(2) is a mandatory requirement for completing the scrutiny assessment even under Section 147 of the Act and therefore for want of mandatory notice under Section 143(2), the reassessment completed under Section 143(3) rws 147 of the Act is invalid and not sustainable under law.
Accordingly, we quash the reassessment order in question being invalid.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 6th day of May, 2016.