N.R. INSURANCE & FINANCIAL SERVICES,MUMBAI vs. ACIT 23(2), MUMBAI

The assessee is in the business of providing insurance services and loan syndication services. The assessee had paid a sum of Rs.6.94 lakhs as professional and technical fees to a concern named M/s Indravarun sales agency Private Limited. The above said concern was controlled by a chartered accountant named Mr. Sandeep Sitany. The revenue carried out search and seizure operations in the hands of Mr. Sandeep Sitany and it was found that he and his group concerns were issuing bogus bills towards provision of services.

The assessee filed a letter dated 8.10.2010 requesting the assessing officer to treat the return of income filed by him earlier as the return filed in response to the notice issued under section 148 of the Act. The assessee also objected to the reopening of assessment on various grounds. On merits the assessee placed reliance on the agreement entered by it with M/s Indiavarun sales agency Private Limited. The assessee also submitted that the payments have been made through banking channels by duly deducting tax at source. The assessing officer was not convinced with the contentions of the assessee and accordingly added a sum of Rs.6.94 lakhs to the total income of the assessee. The learned CIT(A) confirmed the reopening of assessment and also the addition made by the AO to the extent of Rs.6.51 lakhs. Aggrieved, the assessee has filed this appeal before the Tribunal.

With regard to the reopening of assessment, the learned AR submitted that the assessing officer has not issued notice under section 143 (2) of the Act after filing of return of income in response to notice under section 148 of the act. The notice issued by the assessing officer under section 143(2) of the Act is prior to filing of return and hence the same cannot be considered as a valid notice as per the provisions of the Act. The learned AR further submitted that the reopening has been made on the basis of general observations made by Mr Sandeep. The learned AR submitted that Mr Sandeep has not specifically implicated the assessee. He further submitted that the assessing officer has merely relied on the information given by DDI (Inv) without forming his own belief about

On the contrary, the learned DR submitted that the Department has conducted search in the hands of Mr Sandeep Sitani and he has confessed that the bills issued by him and his concerns were only accommodation bills. Accordingly the learned DR submitted that the addition made by the assessing officer is sustainable. He also submitted that the assessing officer has reopened assessment on proper reasoning. The contentions urged by learned AR on the issue of notice under section 143 (2) is too technical and hence the learned CIT(A) has rejected the same holding so.

I have heard the rival contentions and perused the record. Admittedly the assessee has filed the return of income on 8th October 2010 and notice under section 143(2) has been issued by the assessing officer on 15-09-2009, i.e., prior to filing of return of income. The provisions of Income tax Act mandates issuing of notice under that section after filing of return of income. Hence I find merit in the contentions of the assessee that the notice issued by the assessing officer under section 143(2) is not in accordance with the mandate of the provisions of the Act, meaning thereby it should be construed that the impugned assessment has been framed by the AO without issuing notice mandated u/s 143(2) of the Act. In my view, the information received from DDI(Inv.) with regard to the activities of group concerns of Mr. Sandeep Sitani and the payment received from the assessee would constitute sufficient reason to believe that there was escapement of income.

On merits, I noticed that the assessing officer has made the addition without making any enquiry with regard to the payments made by the assessee

In the result, the appeal filed by the assessee is treated as allowed.