SHRI MAHESH K. DHIRMALANI,MUMBAI vs. THE ADDL CIT CEN RG, THANE, THANE

The assessee has raised the following grounds:-

The brief facts of the case are that the assessee Shri Mahesh K. Dhirmalan was deriving income from house property and from business. Original return of income for A.Y.2002-03 was filed by the assessee on 31.10.2002 by declaring income to the tune of Rs.3,73,894/-. The return was accepted. The assessee’s residential premises were searched u/s.132 of the Income Tax Act, 1961 ( in short “the Act”) on 31.10.2003 along with other group cases. The assessee was assessed to income tax by ITO, Ward 3(2), Thane. The case was assessed to income tax by ITO, Ward 3(2), Thane. The case was assigned to ACIT, Central Circle 3, Thane vide CIT-III, Thane’s order No.THN/CIT-II/Assign/2003-04/2263 dated 30.01.2004. 2 A.Y. 2002-03 Further, the case was transferred to the Addl. CIT, Central Range, Thane, vide CIT(C), Pune’s order No. Pn/CIT(C)/Assign Juris/ 2005- 06/ 1454 dated 08.12.2005. Notice u/s.153A(a) of the Act was issued by ACIT, Central Circle – 3, Thane on 12.04.2004 which was served on 27.04.2004 .It was requested that the assessee should prepare a true and correct return of his total income including undisclosed income for the A.Y. within 30 days of the receipt. In response to this notice, the assessee has filed return of income of Rs.3,73,890/- in Form No.2D on 23.07.2004. Thereafter, notices u/s.143(2) and 142(1) along with questionnaire were issued and served upon the assessee. Thereafter the income of the assessee was assessed to the tune of Rs.18,79,519/-. The assessee was not satisfied with the addition, therefore filed the appeal before the CIT(A) who dismissed the appeal of the assessee, therefore the present appeal has been filed by the assessee before us.

Under this issue the learned representative of the assessee has raised the contention that notice u/s.143(2) of the Act was served upon the assessee beyond the time limit prescribed under the proviso to section 143(2)(ii) of the Act, therefore the notice u/s.143(3) r.w.s. 153A of the Act is wrong against law and facts. In support of this contention the learned representative of the assessee has placed reliance upon the law settled by Hon’ble High Court of Gauhati in 3 A.Y. 2002-03 Smt. Bandana Gogoi Vs. Commissioner of Income Tax & Anr. (2007) 289 ITR 28 (Gau).

However, on the other hand the learned representative of the department has refuted the said contention and argued that the notice u/s.143(2) of the Act is directory in nature and is not mandatory, therefore the assessment is not bad in law in view of the law settled in Income Tax Appellate Tribunal, Third Member in case of Smt. Sumanlata Bansal in to 530/Mum/2008 for the A.Y.1999-2000 to 2005-06. By giving the careful thoughts to the contention raised by the Ld representative of the parties and perusing the record carefully it came into notice that matter of controversy has duly been settled by the Income Tax Appellate Tribunal, Mumbai Third Member case of Smt. Sumanlata Bansal (Supra) which speaks that the assessment proceeding u/s.153A cannot be held as null and void for non-issuance of notice u/s.143(2) of the Act as not attracted to proceedings u/s.153A of the Act.

Since in this issue the assessee has challenged the order in question on account of non-issuance of notice u/s.143(2) of the Act within the limitation period, therefore, in the said circumstances and by relying upon the above said law, we are of the view that the assessment is not bad on account of non-issuance of notice u/s.143(2) of the Act. Hence this issue is decided in favour of the revenue against the assessee.

Under this issue the assessee has challenged the addition of Rs.15,00,000/- made on account of the appellant receiving the said amount on surrender of right to carry on the profession of income tax/sales tax consultancy as well as from non-compete convenant, by holding that the same was a transaction of “Slump Sale” liable to tax under the provision of section 50B of the Act. But the learned representative of the assessee has argued that this issue is squarely covered in case decided by the Income Tax Appellate Tribunal, Delhi Special Bench case of Shri Saurabh Srivastava Vs. Dy. Commissioner of Income Tax Circle 46(1) where it is held that the non-compete fees received by the assessee from F.I.Pl. UK being in the nature of a capital receipt is not liable to tax. Therefore, in view of the said circumstances and specifically in view of the above mentioned law, we set aside the finding of the CIT(A) on this issue and therefore direct the Assessing Officer to re-assess the tax on this issue. In view of the finding in case decided by the Income Tax Appellate Tribunal in case of Shri Saurabh Srivastava (Supra). Accordingly, this issue is decided in favour of the assessee against the revenue.

In the result, the appeal filed by the assessee is hereby partly allowed.