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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-1’, NEW DELHI
ORDER This is an appeal by the assessee against the order dated 29.10.2013 of ld. CIT(A), Muzaffarnagar.
Following grounds have been raised in this appeal: “1. Because, the learned Commissioner of Income Tax (Appeals) grossly erred in dismissing the ground on non-issuance of notice u/s 143(2) of the IT Act, 1961, merely because the same is not issued during the assessment proceedings and such controversy is not permissible to raise at this stage or by general ground, while such legal ground can be taken at any stage.
2. Because, the learned Commissioner of Income Tax (Appeals) grossly erred in not appreciating the fact that in the absence of notice u/s 143(2) of the IT Act, 2 Satish Kumar 1961 after complying with notice u/s 148 specially when ‘reasons’ recorded are also supplied, than the entire assessment proceedings are void ab initio and consequent order is illegal.
3. Because, without prejudice to above, the learned Commissioner of Income Tax (Appeals) grossly erred in not appreciating the fact that the notice u/s 148 is issued without any application of mind in the absence of genuine “reason to believe” as such notice is illegal and proceedings are beyond jurisdiction.
4. Because, without prejudice to above but only as an alternative, the learned Commissioner of Income Tax (Appeals) totally failed to consider the merits of the case/material placed before and rejected the transaction without finding any evidence wrong or even without conducting direct enquiry despite assessee’s specific request to conduct same at his cost. As such notice u/s 148 and assessment proceedings, itself are illegal and in alternative and without prejudice to the same, additions are arbitrary and bad in the law on the merits, hence it is hereby prayed that the notice u/s 148/assessment framed my kindly be quashed and in alternative the addition may kindly be deleted.”
3. The grievance of the assessee vide Ground Nos. 1 & 2 relates to the non-issuance of notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act).
3 Satish Kumar 4. Facts of the case in brief are that the assessee filed the return of income declaring an income of Rs. 1,08,980/- on 31.03.2004. Later on, the AO reopened the case u/s 148 of the Act for the reason that the assessee had received an amount of Rs. 1,00,000/- through cheque no. 449508 on 10.07.2002 which had escaped assessment. The assessee did not file any return of income but relied on return already filed on 31.03.2004. The AO framed the assessment at an income of Rs. 2,08,980/- by making the addition of Rs. 1,00,000/- which was received from M/s Ayush Fincap Pvt. Ltd.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and raised the issue relating to the jurisdiction and submitted that no notice u/s 143(2) was issue. Therefore, all the reassessment proceedings were void ab initio. The reliance was placed on the following case laws: � Raj Kumar Chawala Vs ITO (2005) 94 ITD 1 (Del)(SB) � CIT Vs Cebon India Ltd. (2010) 229 CTR (P&H) 188 � CIT Vs Silver Streak Trading P. Ltd. (2010) 326 ITR 418 (Del) � CIT Vs Rajeev Sharma (2011) 336 ITR 678 (All) � ACIT Vs Hotel Blue Moon (2010) 321 ITR 362 (SC) � CIT Vs Adarsh Travel Bus Services (2012) 204 Taxman (All) 6. The ld. CIT(A) asked the remand report from the AO who furnished the same vide letter dated 02.09.2013 stated therein as under: “….3. But since no return of income was filed in compliance with notice u/s 148 within stipulated time of 30 days, nor any 4 Satish Kumar compliance to the notice issued u/s 142(1) on 16.07.2010 and 12.10.2010 was made, finally a notice under section 144 read with section 147/148 was issued on 6.12.2010 requiring the assessee’s explanation on the proposed additions in compliance thereto the assessee filed his reply vide letter dated 10.12.2010 which was taken into consideration by the then AO. Thereafter, the assessment under section 147 of the Act was completed on 20.12.2010 on total income of Rs. 2,08,980/- which included addition of Rs. 1,00,000/- as unexplained cash credit u/s 68 of the Act. 4.1 But as mentioned in the assessment order, and therein above the assessee did not file any return of income within stipulated time limit of 30 days in compliance with the notice u/s 148 on 26.03.2010 which was duly served on 27.03.2010. Therefore, the contention of the assessee that he submitted return on 19.11.2010 deserves to be rejected. In fact no return of income was submitted by him in response to the notice u/s 148 dated 26.03.2010. In view of these facts and circumstances of the case the proceedings initiated u/s 147 of the Act vide notice u/s 148 date 26.03.2010 were legally correct and justified. The proceedings concluded after giving opportunity by issue of notices u/s 142(1) on 16.07.2010 and 12.10.2010 and also show cause notice dated 6.12.2010 were also justified. Further since no return was filed, therefore, no notice u/s 143(2) was to be issued in this case in accordance with the provisions of the Act. 4.3 It may further submitted that since no return of income was filed in response to notice u/s 148 within specified period, the AO has rightly concluded the assessment proceedings under section 147 vide order dated 29.12.2010 and not u/s 147/143(3) of the I.T. Act, 1961 as mentioned by the assessee in his written submissions. It is also admitted fact that copy of reasons recorded before issuance of notice u/s 148 of the Act was also 5 Satish Kumar made available to the assessee during the course of assessment proceedings. In my opinion the various decisions of Hon’ble Courts relied upon by the assessee in the written submissions are, therefore, appear to be not applicable to the facts of the present case of the assessee….”
The ld. CIT(A) again asked the assessee to furnish the rejoinder on the remand report of the AO. The assessee furnished the rejoinder stating therein as under: “…..Firstly, on the page 3 para 4.1/4.3, Ld. AO has justified the action of non-issuance of notice u/s 143(2) on the basis that as assessee had not filed any return within 30 days of notice u/s 148, hence compliance made vide letter dated 19.11.2010 by relying on original return hence such compliance deserves to rejected and case law relied does not apply on the assessee. But said make shift justification is wrong on the record as under: a) ‘Reason’ are to be supplied only and only after acceptance of compliance of notice u/s 148 as per the law of land as pronounced in GKN driveshaft case-259 ITR 19 (SC) and admittedly Ld. AO has supplied ‘reasons’ which automatically proves that compliance is accepted now the same stand is changed to cover up the non-issuance of notice u/s 143(2) b) Assessee made compliance vide letter dt. 19.11.10 and sought ‘reasons’ but AO asked to file computation of income before supplying seeking ‘reasons’ the same are supplied of course after accepting the compliance. As such when during the re-assessment proceedings, compliance is accepted than now it can be said that no compliance is made. In fact in no. of cases, similar plea is 6 Satish Kumar taken in appeals but not accepted by the courts/tribunal. For example in the case of Aligarh Auto, which is no reported as (2013) 34 taxmann.com 211 (Agra-Trib.), the same stand is taken which is dealt in para 7.1/page 3 of order already filed and ultimately order is quashed. While facts of present case is even better where AO himself supplied the ‘reasons’ in response to letter seeking the same on the basis of compliance of notice. As such when admittedly, notice u/s 143(2) is not issued even after accepting the compliance than proceedings are void ab initio as per the settled law in terms of earlier submissions and hence it is prayed that the order may kindly be held as null & void….”
The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO dismissed the ground raised by the assessee by stating that this issue was never raised before the AO and was not a ground of appeal also. He further observed that the assessee was trying to raise the fresh ground and a fresh controversy which was not permissible at this stage. Therefore, the ld. CIT(A) did not adjudicate this issue and considered the submission of the assessee that the order being bad in law, as general in nature.
9. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee can raise the legal ground at any stage. Therefore, the ld. CIT(A) ought to have disposed off the ground raised
by the assessee for non-issuance of notice u/s 143(2) of the Act. It was 7. Satish Kumar further stated that issuance of notice u/s 143(2) of the Act is mandatory and not even curable u/s 292B of the Act. Therefore, the reassessment framed by the AO without issuing the notice u/s 143(2) was void ab initio.
In his rival submission the ld. DR supported the orders of the authorities below.
I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the AO did not issue any notice u/s 143(2) of the Act. A similar issue has been decided by the Hon’ble Jurisdictional High Court of Allahabad in the case of CIT Vs Rajeev Sharma reported at (2011) 336 ITR 678 wherein by following judgment of the Hon’ble Supreme Court in the case of ACIT Vs Hotel Blue Moon (2010) 321 ITR 362, it has been held that the assessment could not be sustained for lack of service of statutory notice u/s 143(2) of the Act. The head note of the said case read as under: “If the Assessing Officer, for any reason, repudiates the return filed by an assessee in response to notice under section 158BC(a) of the Income-tax Act, 1961 relating to a block assessment, the Assessing Officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to section 143(2).
8 Satish Kumar By making the issue of notice mandatory, section 158BC, dealing with block assessments, makes such notice the very foundation for jurisdiction. Such notice is required to be served on the person who is found to have undisclosed income. Section 158BC provides for enquiry and assessment. After the return is filed, clause (b) of section 158BC provides that the Assessing Officer shall proceed to determine 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”. This indicates that this clause enables the Assessing Officer, after the return is filed, to complete the assessment under section 143(2) by following the procedure like issue of notice under section 143(2)/142. This does not provide accepting the return as provided under section 143(1)(a): the officer has to complete the assessment under section 143(3) only. 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. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable. Therefore, the requirement of notice under section 143(2) cannot be dispensed with.”
I, therefore, by keeping in view the ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to case of CIT Vs Rajeev Sharma 336 ITR 678, set aside the impurnged order and the reassessment framed by the AO without serving the statutory notice u/s 143(2) of the Act on the assessee is held to be bad in law and void ab initio.
9 Satish Kumar 13. In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 30/09/2015)