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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” , HYDERABAD
Before: SHRI LALIET KUMAR & SHRI MADHUSUDAN SAWDIA, ACCOUNANT MEMBER
O R D E R PER LALIET KUMAR, J.M. The appeal of the assessee for A.Y. 2012-13 arises from order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.27.12.2023 invoking proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, “the Act”).
The grounds raised by the assessee read as under :
“1. That the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in confirming the addition of Rs. 50,00,000/- towards unexplained investment u/s 69B of Income Tax Act, 1961 is wholly unsustainable in law and on facts.
2. That the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in holding that notice u/s 143(2) read with section 254 of the Act was issued in the appellant case merely relying on the impugned assessment order passed by the Learned Assessing Officer without calling for the case records. In doing so he failed to appreciate the fact that the statement of the assessing officer in paragraph 2 of the impugned assessment order is a copy paste mistake as issuing notice u/s 143(2) read with section 254 of the Act is totally unwarranted in the appellant case. Hence the order passed by the learned assessing officer is without assuming proper jurisdiction and hence the same is liable to be quashed.
That the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in holding that the Learned Assessing Officer did not made any violation of CBDT twin circular no’s 19/2019, dated 14.08.2019 and 27/2019, dated 26.09.2019 by not quoting the DIN on the impugned assessment order which is against the statutory requirements specified in the twin circulars and hence the said order is liable to be quashed.
That the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not passing the speaking order against the Ground No.2 of the appeal in which the appellant contented that invoking the provisions of section 69B of the Act has no relevance to the facts of the case and hence the said addition of Rs. 50,00,000/- wrongly made u/s 69B of the Act is liable to be deleted.
That the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not passing the speaking order against the Ground No.4 of the appeal in which the appellant contented that the learned assessing officer without supplying the copies of the reasons recorded for reopening the assessment, satisfaction note and material collected from the investigation wing, has passed the order u/s. 143(3) r.w.s 147 which is against the principle of natural justice and hence the impugned order is liable for quashed.
That the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in dismissing the ground no.5 of appeal without appreciating the fact that the Learned Assessing Officer has quoted the wrong assessment year in the demand notice issued u/s 156 of the Act which is attached to impugned asst. order and hence the disputed demand is liable for deletion.” 3. The brief facts of the case are that assessee is an individual and deriving income from house property and interest income. For the AY 2012-13 the assessee had filed return of income declaring total income of Rs. 2,04,480/-. The said return was processed by CPC. Later on, the case was reopened u/s. 147 based on the information received from ADIT(Inv) Tirupati that the assessee had lent money to one Sri A. Lakshmana Prasad, Hyderabad in cash of for Rs.50,00,000/- during the assessment for the year under consideration. Hence, notice u/s. 148 was issued to the assessee on 28.03.2019. Thereafter, a show cause notice and also notice u/s. 142(1) were issued along with questionnaires.
3.1. During the course of assessment, assessee submitted his reply wherein he stated that the sources of Rs.50 lakhs were from accumulations of his income and savings from the past several years and amount received from family members and further submitted that he had advanced money to the said Lakshmana Prasad with an intention to receive interest. Further, as the said Lakshmana Prasad died, he had filed suit to recover the advanced amount from the claimants of the estate of the deceased Alluri Lakshmana Prasad. Except the above information, the assessee failed to prove the sources of money with evidence and creditworthiness of lenders inspite of being called for time and again. Hence, the Assessing Officer treated the said amount as unexplained investment u/s 69B 3 of the Act and thereafter completed the assessment and passed assessment order u/s. 143(3) r.w.s. 147 of the IT Act, 1961 determining the total income at Rs.52,04,480/-.
4. Feeling aggrieved with the order of Assessing Officer, assessee filed an appeal before the ld.CIT(A), who dismissed the appeal of assessee.
5. Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
6. Before us, ld.AR has drawn our attention to the order passed by the ld.CIT(A) wherein in Paragraph 8, it was recorded as under :
“8. Grounds no. 01 to 02 being interlinked are taken up together for adjudication. The AO stated in para 2 of the assessment order, “Therefore in order to verify the sources of Rs. 50 lakhs in the background that the assessee had not fully and truly disclosed the income to the extent of Rs. 50 lakhs, prior approval was obtained from the Pr. CIT, Kurnool to reopen the assessment u/s 147 and accordingly issued notice u/s 148 dated 28.03.2019 which was duly seved to the assessee on 29.03.2019. This was followed by issue of notice u/s 143(2) read with section 254 of the income tax Act, 1961.” The appellant stated that notice u/s 143(2) of the Act in this case was not issued by the AO during assessment proceedings, is totally misleading and false.”
Further, the ld.AR has drawn our attention to the assessment order wherein the Assessing Officer has recorded in Para 2 that after the assessment was reopened u/s 147 of the Act, notice under Section 148 dt.28.03.2019 was duly served on the assessee on 29.03.2019. This was followed by the issuance of another notice under Section 143(2) r.w. 254 of the Act.
The ld.AR further submitted that no notice u/s 143(2) was issued to the assessee despite the Assessing Officer recording that the assessee had filed the return of income in response to notice u/s 148 of the Act.
8.1. The Tribunal had issued directions to the Revenue to submit the report as to the issuance and service of notice u/s 143(2) on the assessee.
8.2. The ld. DR for the Revenue had obtained report from the Assessing Officer and in the said report it was mentioned as under :
“(1) How is section 254 relevant in this case ? On perusal of the notice u/s 143(2), it is submitted that the section was mistakenly quoted as r.w.s. 254 for the A.Y. 2012- 13 which is typographical error. (i) Whether notice u/s 143(2) was issued in this case, if so, what is the date of issue and DIN ? It is found from the record that though a notice u/s 143(2) dated 24.06.2019 is available on record, there is no proof of service Of this notice. Also there is no DIN on this notice. You are requested to clarify if the notice was issued and if so, what is the date of issue of notice & DIN? The Notice u/s 143(2) was issued manually on 24.06.2019. However the proof of service of the notice is not readily available with this office. As verified in ITBA, No notice u/s 143(2) was issued electronically.
(ii) Whether the assessee filed any return of income in response to notice u/s 148 issued in this case. If so, what is the date of filing of such return?
The assessee has not filed any Return of Income for the A.Y 2012-13 in response to notice u/s 148. On perusal of records from ITBA, the assessee has filed Return of income for the AN 2012-13 on 02.02.2013 u/s 139(4). However, the assessee replied vide letter dated 21.06.2019 stating that the Return of income was filed on 02.02.2013 declaring the' income from all the sources and requested to accept the Return of income filed.
(iii) If no return in response to 148 is filed, the question of issuance of notice u/s 143(2) does not arise. In such a scenario the assessment was to be completed u/s 144 rws 147 However, the impugned order is seemed to have been passed u/s 143(3), rws 147 of the Act. Please, clarify. The assessee has not filed Return of income u/s 148. So notice u/s 143(2) does not arise in this case. However the assessee was responsive during the scrutiny proceedings Further, assessee's statement was recorded on oath in response to summons u/s 131 issued. Hence, the AO has passed order u/s 143(3) rws 147. (2) It is verified from the Asst Record that no DIN is mentioned on the order. The assessee has taken a specific ground on this issue. You are requested to furnish proof of DIN generated & communicated to the assessee in respect of the Asst Order. As per functionality available in ITBA the assessment order was passed on 23/12/20191 with Document NO. (DIN) ITBA/AST/M1147/2019-20/1022972079(1) which information was sent through intimation letter generated by the system having DIN ITBA/AST/S91/2019-20/1022975020(1) on 24.12.2019. Copy of intimation letter containing DIN in question, is enclosed for ready reference. 3) It is verified from the notice of demand u/s 156 attached to the asst order that the A.Y is mentioned as 2017-18 whereas the assessment is related to A.Y 2012-13. Please clarify. On perusal of the demand notice u/s 156, the A.Y was mistakenly quoted as 2017-18 instead of A.Y 2012-13 which is typographical error. The notice is valid as per sec.292B of the IT Act.”
The ld.DR after filing the return submitted that assessee was a non-filer. Therefore, there was no requirement of issuing notice under section 143(2) of the Act and in the said assessment order, the Assessing Officer had wrongly recorded issuance of notice u/s 143(2) of the Act.
The ld.AR in rebuttal has drawn our attention to the instruction No.8/2017 issued by the CBDT dt.29.09.2017 and also instruction No.1/2018 dt.12.02.2018. In the Instruction No.1/2018, it was mentioned as under :
“2. In accordance with the procedure outlines in revised 143(2) notice(s) for conduct of assessment proceedings electronically, it is hereby directed that except for search related assessments, proceedings in other pending scrutiny where the concerned assessee objects to conduct of assessment proceedings electronically through the E-Proceeding’ facility, such cases, for the time-being, may be kept on hold.
The ld.AR has also drawn our attention to the written submissions filed by the assessee and in the written submissions, the ld.AR relied upon the following judgments.
“5. The condition precedent for assuming the jurisdiction over a case is that the statutory notice u/s 143(2) should be issued and served upon the appellant. But in the present appellant case the Learned Assessing Officer has not issued and served the notice u/s 143(2) before completion of assessment proceedings for the AY 2012-13. The said non issuance of notice u/s 143(2) is a grave error and the assessment order passed u/s 143(3) r.w.s 147 of the I.T. Act dt. 24- 12-2019 is without assuming the jurisdiction as conferred by section 143(2) and hence the said Assessment order passed is bad-in-law and is liable to be quashed. In this regard the appellant is placing reliance on the following case laws;
(i) The decision of the Hon'ble Apex Court in the case of ACIT v. Hotel Blue Moon, (2010) 321 ITR 362 (SC) wherein it was held by the Hon'ble Court that issuance of notice under section 143(2) is mandatory even in block assessments. (ii) CIT v. Salarpur Cold Storage, (2019) 50 taxmann.com 105 (All-HC). For framing order under section 143(3) it is necessary to issue a notice under section 143(2) of the Act, and in absence of notice under section 143(2) the assumption of jurisdiction itself would be invalid. (iii) Pr. CIT v. Jignesh Bhagwandas Patel (Guj-HC) of 2019. The reassessment order passed without complying with the mandatory provisions of the Act cannot held as valid and sustainable and hence, the learned Commissioner (Appeals) was right in holding the same as not valid and unsustainable. (iv) Travancore Diagnostics (P) Ltd. v. ACIT, (2016) 390 ITR 167 (Ker-HC). Omission to issue notice under section 143(2) is incurable defect even under section 292BB of the Income Tax Act, 1961. (v) PCIT v. Jai Shiv Shankar Traders (P) Ltd., (2015) 383 ITR 448 (Delhi-HC). Issue of notice under section 143(2) is not a procedural requirement and is mandatory and completion of assessment without issue of notice under section 143(2) is fatal to the assessment. In this case return was filed after issuance of notice under section 142(1) and since no notice was issued under section 143(2) the assessment was held to be invalid. (vi) B.M.Land Developers & Builders v. ITO ward, 11(4), (hAT Hyderabad Bench SMC) ITA No. 1146/HYD/2017. Since the requirement of 'service' of notice u/s. 143(2) and not its 'issue', is a jurisdictional condition, which is unfortunately lacking in the instant case, the sequitur is that the AO lacked jurisdiction to make the assessment. Ex consequential, the assessment order passed in absence of a valid jurisdiction has to be and is hereby quashed. (vii) ITO v. Neeraj Goel, (ITAT Delhi Bench SMC). Assumption of jurisdiction to frame an assessment or non-assumption of jurisdiction to frame an assessment goes to the root of the judicial act of framing an assessment order and in event of non-assumption of jurisdiction under section 143(2) of the Act to frame an assessment the act of the assessing officer in framing an assessment order without issuing notice under section 143(2) cannot be saved under the provisions of section 292B of the Income Tax Act, 1961 or under section 292BB of the Income Tax Act, 1961 and therefore the assessment order so framed will be void ab initio.
(viii) Gaurav Kumar v. ITO, (hAT Jaipur Bench) ITA No. 804/JP/2019. Wherein the Tribunal held that we do not find any merit in the assessment so framed under section 143(3) without issue of notice under section 143(2) of the Act.”
12 We have heard the rival submissions and perused the material on record. Admittedly, in the present case, the Assessing Officer has recorded that notice u/s 143(2) r.w.s. 254 was issued to the assessee. Further, in the assessment order, it was mentioned that the assessee has filed the return of income along with the letter dt.21.06.2019 for the consideration of the Assessing Officer. However, quite contrary to the above said decision, the ld.CIT(A) has not decided the grounds as mentioned hereinabove, while passing the order and has passed order in a cryptic manner mentioning that “the submissions made by the assessee are misleading and false” and we do not subscribe the finding recorded by the ld.CIT(A) as there was no basis for recording that the submissions of the assessee were misleading and false. Quite contrary to the findings of the ld.CIT(A), when we called report from the Assessing Officer, the Assessing Officer categorically mentioned that the notice was issued manually on 24.06.2019, however, the proof of service of the notice was not available in the office. Thereafter, it was mentioned that on verification of ITBA Portal, no notice u/s 143(2) of the Act was issued electronically. As mentioned hereinabove, as per the Instruction No.1 of 2018 issued by the CBDT, the notice u/s 143(2) of the Act is required to be issued electronically and there is no provision of issuing notice manually.
Based on the report given by the Assessing Officer and the submissions made before us, it is abundantly clear that the Assessing Officer before making additions have not issued notice u/s 143(2) of the Act though it was required to be issued electronically. The above said fact was confirmed by the ld. DR when he tried to persuade us that there was no requirement of notice u/s 143(2) of the Act. In our understanding, the law provides that notice u/s 143(2) of the Act is required to be served on the assessee before making the addition in the hands of the assessee. Since the needful was not done by the Assessing Officer before making addition in the hands of the assessee as contemplated u/s 143(2) of the Act, thus, there was jurisdictional error committed by Revenue before making addition in the hands of the assessee which goes to the root of the matter. Hence, any addition based on such fatal error, is not sustainable, in the eye of law. For the above said purpose, we may fruitfully rely upon the judgment referred by the assessee in the case of ACIT Vs. Hotel Blue Moon reported in (2010) 321 ITR 362 (SC) wherein the Hon'ble Apex Court decided the issue in favour of the assessee and accordingly, respectfully following the decision cited supra , we allow the legal ground raised by the assessee. As we have allowed the legal ground with respect to non-issuance of notice u/s 143(2) of the Act, therefore, we deem it appropriate to abstain from adjudication of the remaining grounds. Thus, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 9th May, 2024.