P.SHANMUGAM,COIMBATORE vs. ITO, COIMBATORE

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:

In this appeal filed by the assessee, it assails jurisdiction of

the ld. Assessing Officer to pass the assessment order without issuing

notice u/s.143(2) of the Income Tax Act, 1961 (herein after referred

to as ‘the Act’).

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Sixty Eight days. In the condonation petition filed, it is stated that

assessee had approached one Shri. V. Ramnath, Chartered Accountant

on 25.03.2015 for advising on the course of action that was to be

taken on the order of the ld. Commissioner of Income Tax (Appeals)

received by him on 13.03.2015. It is also stated in the affidavit that

Shri. V. Ramnath, had instructed his employee one Shri. M. Karthik

Kumar to file the appeal which were signed by the assessee. The

affidavit says that Shri. M. Karthik Kumar had left the office of Shri. V.

Ramnath, without informing that the appeal was not filed. As per

assessee, it came to know that appeal was not filed only on receiving

notice for levy of penalty u/s.271(1) (c) of the Act. As per assessee

immediately when the matter came to his notice, he ensured that the

appeal was filed. As per assessee the delay of 268 days, in filing the

appeal was not due to any negligence.

Opposing the delay petition, ld. Departmental Representative 3.

submitted that there was nothing on record to show that delay was

due to a failure which happened in the office of Shri. V. Ramnath,

Chartered Accountant.

parties. We find that condonation petition of the assessee is

supported by an affidavit filed by Shri. V. Ramnath, who was a partner

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in the firm M/s. K.S. Palaniswamy & Co., Chartered Accountants,

Coimbatore. Shri. V. Ramnath in the said affidavit has given reasons

for the delay in filing the appeal. According to his affidavit, the appeal

was to be filed by one Shri. Karthik Kumar an articled clerk in his

office who had left abruptly, without informing that the appeal was not

filed. We find that no reason has been shown by the ld. Departmental

Representative for disbelieving the affidavit filed by Shri. V. Ramnath,

Chartered Accountant. We therefore, deem it fit to condone the delay.

Delay is condoned and appeal is admitted.

Ld. Counsel for the assessee submitted that there was no 5.

issuance of notice u/s.143(2) of the Act. As per ld. Authorised

Representative it was an assessment which was reopened pursuant to

a survey u/s.133A of the Act in the premises of the assessee. As per

ld. Authorised Representative assessee had filed return of income

pursuant to the notice u/s.148 of the Act. Ld. Authorised

Representative submitted that Assessing Officer never issued a notice

u/s.143(2) of the Act. As per ld. Authorised Representative Section

292BB of the Act would not cure a case where there was no issue of

notice u/s.143(2) of the Act. As per ld. Authorised Representative just

because assessee attended proceedings before ld. Assessing Officer

and answered queries raised by the ld. Assessing Officer would not

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validate an assessment done without issuing notice u/s.143(2) of the

Act. Ld. Authorised Representative submitted that ld. Commissioner of

Income Tax (Appeals) had rejected these arguments taken by the

assessee observing that judgment of Apex Court in the case of ACIT

vs. Blue Moon 321 ITR 362 would not apply to a re-assessment

proceedings u/s.147 of the Act. Ld. Authorised Representative

submitted that appearance of the assessee or his representative before

ld. Assessing Officer pursuant to a summons issued u/s.131 of the Act

could not substitute the requirement of issuing of notice u/s.143(2) of

the Act. As per assessee the view taken by the ld. Commissioner of

Income Tax (Appeals) was incorrect. Ld. Authorised Representative

also submitted that ld. Commissioner of Income Tax (Appeals) had

relied on a judgment of Delhi High Court in the case of CIT vs. Madhya

Bharat Energy Corporation Ltd 337 ITR 389 for holding the assessment

to have been validly done. As per ld. Authorised Representative the

said judgment was recalled by Delhi High Court in a review petition

filed by the concerned assessee. Reliance was placed on the judgment

of Hon’ble Madras High Court in the case of Sapthagiri Finance &

Investments vs. ITO (2013) 90 DTR 289 that of Hon’ble Delhi High

Court in the cases of Pr. Commissioner of Income Tax vs. Silver Line,

383 ITR 455 and Pr. Commissioner of Income Tax vs. Shri Jai Shiv

Shankar Traders Pvt. Ltd 383 ITR 448.

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the assessment was completed based on the return filed by the

assessee pursuant to notice issued u/s. 148 of the Act, accepting the

income returned. According to ld. Departmental Representative

assessee having participated in the assessment proceedings, want of

notice u/s.143(2) of the Act stood cured by Sec. 292BB of the Act.

orders of the authorities below. There is no doubt that ld. Authorised

Representative of the assessee had appeared before ld. Assessing

Officer during the course of re-assessment proceedings. We have also

perused the assessment records. Nothing whatsoever is mentioned

regarding issue of any notice u/s.143(2) of the Act, either in the order

sheet or at any place in the concerned file. Ld. Departmental

Representative has also not strongly contested the claim of the

assessee that there was no issue of notice u/s.143(2) of the Act. The

question whether issue of notice u/s.143(2) of the Act is mandatory in

a re-assessment proceedings u/s.147 of the Act stands answered by

Hon’ble Jurisdictional High Court in the judgment in Sapthagiri Finance

& Investments (supra). Their lordship held as under at paras 12 & 13

of the judgment.

‘’12. As far as the contention of the Revenue that failure to issue notice under Section 143(2) of the Act is only curable defect is concerned, the decision relied on by the assessee reported in 321 ITR 362 � ASST. CIT v. HOTEL BLUE MOON, also covers the

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said issue. It is no doubt true that the said decision dealt with the assessment done under Chapter XIV relating to block assessment. The assessee therein raised a contention that the failure to issue notice under Section 143(2) within the prescribed time for the purpose of block assessment could be fatal to the validity of the assessment made under Chapter XIVB of the Income Tax Act, 1961. In other words, the assessee contended that the issuance of notice under Section 143(2) within the prescribed period of time for the purpose of block assessment is mandatory for assessing the assessee's undisclosed income found during the search. The Revenue took the stand that issue of notice under Section 143(2) of the Act was only procedural irregularity which was curable. The Apex Court pointed out to Section 158BC(b) provided for determination of the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of section 142, sub sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply. The Apex Court pointed out after return is filed, the Assessing Officer has to follow the procedure like the issue of notice under Section 143(2)/142 and complete the assessment under Section 143(3). In the event, the assessee is not filing the return or not complying with the notice under Section 143(2)/142, the Officer is authorised to complete the assessment ex parte under section 144. The Apex Court further pointed out that notice under Section 143(2) would become necessary only where the block return does not conform undisclosed income inferred by the authorities. Thus, if an assessment is to be completed under Section 143(3) read with Section 158BC, notice under Section 143(2) should be issued within one year from the date of filing of the block return. The Apex Court further held that omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable, and therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The legislation referring to the compliance of the provisions under Section 143, 144 and 145 of the Act is a legislation by incorporation. Thus, where the Assessing Officer repudiates the return filed by the assessee in response to notice under Section 158BC(a), the Assessing Officer must necessarily issue notice under Section 143(2) of the Act. Dealing with the contention that the issue of notice is not mandatory but optional and is to be applied to the extent practicable, in view of expression "so far as may be" in Section 153BC(b), the Apex Court pointed out that the expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. Rejecting the contention of the Revenue that it is not expedient to follow the provisions under Sections 142 and 143 (2) and (3) strictly for the purpose of block assessment, the

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Apex Court held that in completing the assessment, when the officer repudiates the return filed under Section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142 and 143 (2) and (3) of the Act.

Thus there can be no quarrel that issue of notice u/s.143(2) of the Act

is mandatory even in a re-assessment proceedings.

was cured by Sec. 292BB of the Act, observation of Hon’ble Delhi High

Court in the case of Shri Jai Shiv Shankar Traders Pvt. Ltd (supra)

appearing at paras 15 to 18 of that judgment is very relevant. This is

reproduced hereunder:-

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"10. Sec. 292BB of the Act was inserted by the Finance Act, 2008 w.e.f. 1st April, 2008. Sec. 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 cooperated 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. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time; or(iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to s. 292BB of the Act, however, carves out an exception to the effect that the section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Sec. 292BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the AO to make an order of assessment under s. 143(3) of the Act, it is necessary to issue a notice under s. 143(2) of the Act and in the absence of a notice under s. 143(2) of the Act, the assumption of jurisdiction itself would be invalid." 16. In the same decision in CIT vs. Salarpur Cold Storage (P) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Asstt. CIT vs. Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under s. 143(2) was mandatory. It was not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under s. 143(2) cannot be dispensed with." 17. The Madras High Court held likewise in Sapthagiri Finance & Investments vs. ITO (2013) 90 DTR (Mad) 289. The facts of that case were that a notice under s. 148 of the Act was issued to the assessee seeking to reopen the assessment for asst. yr. 2000-01. However, the assessee did not file a return and therefore a notice was issued to it under s. 142(1) of the Act. Pursuant thereto, the assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under s. 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required explanation by the assessee

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then the AO ought to have followed up with a notice under s. 143(2) of the Act. It was observed that : "Merely because the matter was discussed with the assessee and the signature is affixed it does not mean the rest of the procedure of notice under s. 143(2) of the Act was complied with or that on placing the objection the assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued under s. 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued under s. 148 of the Act and the officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under s. 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued under s. 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued under s. 143(2) of the Act." 18. As already noticed, the decision of this Court in CIT vs. Vision Inc. (supra) proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the-assessee under s. 143(2) ofthe Act. As already further noticed, the legal position regarding s. 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of "service" of notice was concerned and not with regard to failure to "issue" notice. In other words, the failure of the AO, in reassessment proceedings, to issue notice under s. 143(2) of the Act, prior to finalising the reassessment order, cannot be condoned by referring to s. 292BB of the Act’’. Thus, it is clear that Sec. 292BB of the Act can cure a case of non

service of notice and not a non-issue of notice. In the case before us,

as already mentioned by us, there was no issue of notice u/s.143(2) of

the Act.

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deal with the argument of the ld. Departmental Representative that

such notice was held not mandatory by Hon’ble Delhi High Court in the

case of Madhya Bharat Energy Corporation Ltd (supra). Relevance of

the above judgment was also discussed by Delhi High Court in the

case of Shri Jai Shiv Shankar Traders Pvt Ltd (supra) at paras 8 & 9 of

its judgment.

‘’8. When this appeal was first listed before this Court on 29th July, 2015 reliance was placed by Ms. Suruchi Aggarwal, learned senior standing counsel for the Revenue on the decision of this Court in CIT vs. Madhya Bharat Energy Corpn. Ltd. (2011) 245 CTR (Del) 35: (2011) 62 DTR (Del) 37: (2011) 337 ITR 389 (Del) which purported to hold that non-issue of notice under s. 143(2) of the Act on an assessee prior to completion of the reassessment would not be fatal to the reassessment. She also sought to distinguish the decision in Asstt. CIT vs. Hotel Blue Moon (supra) on the ground that it pertained to a block assessment. 9. Dr. Rakesh Gupta, learned counsel appearing for the assessee, at the outset drew the attention of this Court to an order passed by this Court on 17th Aug., 2011 in Review Petn. No. 441 of 2011 in IT Appeal No. 950 of 2008 (CIT vs. Madhya Bharat Energy Corporation) whereby this Court reviewed its main judgment in the matter rendered on 11th July, 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under s. 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17th Feb., 2011 after noticing that in the said case that no notice under s. 143(2) had ever been issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT vs. Madhya Bharat Energy Corpn. (supra) is not of any

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assistance to the Revenue as far as the issue in the present case is concerned’’.

In the circumstances, we are of the opinion that the judgment of Delhi

High Court in the case of Madhya Bharat Energy Corporation Ltd (supra) cannot be considered as laying down the correct law. Thus,

we are of the opinion that non issue of notice u/s.143(2) of the Act

invalidates the jurisdiction to make the assessment. We therefore quash the assessment done on the assessee for the impugned

assessment year.

Order pronounced on Wednesday, the 11th day of January, 2017, at Chennai.

Sd/- Sd/- (जी. पवन कुमार) (अ�ाहम पी. जॉज�) (G. PAVAN KUMAR) (ABRAHAM P. GEORGE) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated:11th January, 2017. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF