ITO Vs P.N. Krishnamurthy (ITAT Bangalore)
According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. Being so, section 292BB of the Act cannot be applied in the present circumstances.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the Revenue and the cross objection by the assessee arise out of the order of the CIT(A), Bangalore-6, dated 08.01.2018, and they relate to the assessment year 2013-2014.
2. The Revenue has raised the following grounds: –
“1. The order of the CIT(Appeals) is opposed to law and the facts and circumstances of the case.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the disallowance of expenses of Rs.22,24,241 when it was established from discrete enquiry that assessee is showing fifty thousand rupees as net receipt in the P&L account and at the same time claiming expenditure against the net receipts.
3. On the facts and in the circumstances of the case, whether the learned CIT(A) is justified in deleting the addition of suppressed value of 54,00,000 and rejecting the estimation of the AO when it was gathered from the discrete enquiry that the assessee was collecting receipts from customers amounting to two lakhs fifty thousand rupees whereas receipt is issued of fifty thousand rupees only.
4. On the facts and circumstances of the case, whether the CIT(A) is justified in deleting the disallowance of Rs.8,75,000 towards unsecured loan and deciding the matter based on additional evidences submitted by the assessee in spite of the fact that the assessee could not produce any documents during the assessment proceedings which is contravened to the provision of Rule 46A(3).
5. On the facts and circumstances of the case, whether the CIT(A) is justified in deleting the addition of Rs.1,81,83,759 towards increase in capital and deciding the matter based on return of income for the AY 2012-13, when the AO has submitted that return of income for the AY 2012-13 is invalid as per system and the CIT(A) has allowed assessee’s appeal on this issue without verifying this aspect and without giving opportunity to the AO for verification.
6. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.”
3. The grounds raised by the assessee in the cross objection read as under: –
“1. The appeal of the Revenue is devoid of any merit and liable to be dismissed as not maintainable.
No Notice u/s 143(2).
2.1 The learned CIT(A) failed to appreciate that the Notice u/s 142(1) r.w.s. 129 dated 06.10.2015 was without jurisdiction as there was no valid notice u/s 143(2) issued and served on the Appellant-assessee.
2.2 The learned CIT(A) failed to appreciate that the impugned assessment order completed without issue of a valid notice u/s 143(2) is void ab initio.
No Estimation u/s 143(3)
3. The learned CIT(A) failed to appreciate that it is not permissible to estimate the income of an assessee without rejecting the books of account and framing the assessment u/s 144 of the Act.
On the appeal of the Revenue
4.1 The Ground No.4 taken by the appellant-revenue is not maintainable as no new evidence was adduced before the learned CIT(A) and there was no contravention of the provisions of Rule 46A(3).
4.2 The Appeal of the revenue is devoid of any merit since the finding of fact recorded by the learned CIT(A) on various issues is not shown to the perverse and therefore, liable to be dismissed.
4.3 The appeal of the Appellant-Revenue is liable to be dismissed as none of the grounds taken by the appellant is maintainable on facts and in law.
For these and other Grounds of Cross Objection that may be taken at the time of hearing, it is most respectfully prayed that the Hon’ble ITAT may be pleased to dismiss the Appeal of the Revenue and allow the Cross Objections of the Respondent.”
4. There was a delay of 134 days filing this Cross Objection by the assessee before the Tribunal. The assessee has filed a petition for condonation of delay and also an Affidavit of Sri.Girish J.S., Chartered Accountant of the assessee stating therein the reasons for belated filing of the C.O., which reads as follow: –
“I, Girish is., s/ o Late Srinivasa Murthy J, aged 48 years, resident of No.454, H A Block, 5th Main, Rajajinagar, Bangalore and Chartered Accountant (CA) by profession do hereby solemnly affirm on oath and state as under:
1. That I am a Chartered Accountant (CA) by profession and extended my professional services to P.N.Krishnamurthy, resident of No.32, Mathai Building, Officers Model Colony, Prashanth Nagara, T Dasarahalli, Bangalore, who is assessed to Income Tax under PAN ACOPN3645C.
2. That the professional services provided to the said Sri.P.N.Krishnamurthy included filing of Income-tax return, appearance before the assessing officer,
3. That the Notice of the Hon’ble Income Tax Appellate Tribunal (the Tribunal), Bengaluru, intimating the date of hearing on 26.12.2018 in respect of the appeal filed by the revenue in ITA No.1590/ Bang/ 2018 was handed over to me by the said, Sri.P.N.Krishnamurthy, for guidance and necessary action in the matter.
4. Since an appeal was not filed against the order of the learned Commissioner of Income Tax (Appeals) by the said Sri. P.N.Krishnamurthy, I was under the bona fide impression that the respondent is required to appear before the Hon’ble Tribunal in response to the said Notice of the Hon’ble Tribunal and defend the order of the learned Commissioner of Income Tax (Appeals), insofar it is in favour of the said P.N.Krishnamurthy, and was not aware of the concept of filing Cross Objection (CO) under section 253(4) of the Income Tax Act, 1961.
I do affirm that whatever stated above is true to the best of my knowledge and belief.”
5. We have perused the reasons stated in the affidavit for the belated filing of the Cross Objection. We find that there is sufficient cause for the delayed filing of the C.O. and no latches can be attributed to the assessee. Hence, we condone the delay and proceed to dispose of the C.O. on merits.
6. First of all, we will take up the Cross Objection filed by the assessee, which goes to the root of the matter.
C.O. No.4/Bang/2019 – by Assessee
7. The facts of the case are that the assessee has filed the return of income on 29.11.2014 for the assessment year 20132014. The return was processed u/s 143(1) of the I.T.Act. Subsequently, notice u/s 143(2) of the Act was issued and served on the assessee on 28.08.2015 by the Assessing Officer, i.e. ITO Ward 6(2)(2), Bangalore. In view of the change of jurisdiction, notice u/s 142(1) r.w.s. 129 of the Act dated 06.10.2015 was issued and the same was served on the assessee on 09.10.2015 by the Assessing Officer, i.e., ITO Ward 6(2)(3) Bangalore, requiring the assessee to produce the details of profit and loss account, balance sheet, business activities, books of account, ledger extract and details of bills / vouchers, additions made to fixed deposits for the financial year 2012-2013 relevant to the assessment year 2013-2014. Thereafter, the assessment was completed u/s 143(3) of the Act on 10.03.2016. The assessee went in appeal before the CIT(A) challenging that there was no proper notice issued u/s 143(2) of the Act. The CIT(A) observed that, perusal of records shows notice u/s 143(2) was issued by ITO Ward 6(2)(2) on 28.8.2015. It is noted that although assessment order was passed by ITO Ward 6(2)(3) due to transfer of cash u/s 129, original notice u/s 143(2) was to be treated as valid notice and the assessment was valid. Against this appeal, the assessee is in appeal before us.
8. Before us, the learned AR relied on the order of the Tribunal in ITA No.1163/Chd/2018 in the case of M/s.H.P.Singh 86 Ors. v. ITO – order dated 01st August, 2019, wherein it was held as follows: –
“12. I have considered the submissions of both the parties and perused the material available on the record. In the present case it is an admitted fact that the assessee efiled the return of income on 14/09/2015 mentioning the address at Mohali, in the earlier years also, the returns of income were filed at the same address. Therefore the A.O. Ward-6(4) Mohali was having the jurisdiction upon the case of the assessee. In the present case the ALIT, Circle-1, Amritsar who was not having the jurisdiction over the assessee’s case issued the notice under section 143(2) dt. 12/08/2016 therefore the said notice was beyond the jurisdiction. To resolve the present controversy it is necessary to discuss the provisions contained in Section 143(2) of the Act which reads as under:
(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.
From the proviso to sub section 2 of Section 143 of the Act, it is clear that no notice under section 143(2) of the Act shall be served on the assessee after the expiry of six months from the end of the Financial Year in which the return was furnished. In the present case the assessee filed the return on 14/09/2015 and the Financial Year ended on 31/03/2016. Therefore the time available to issue the notice under section 143(2) was upto 30/09/2016 but the A.O. who was having the jurisdiction i.e; the ITO, Ward 6(4) Mohali issued the notice under section 143(2) alongwith the questionnaire under section 142(1) of the Act to the assessee on 22/05/2017.
13. On a similar issue, the Hon’ble Supreme Court in the case of ALIT And Another Vs. Hotel Blue Moon (2010) 321 ITR 362 (supra) held 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).”
It has further been held as under:
“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.”
14. As regards to curing the defect under section 292B of the Act the Hon’ble Jurisdictional High Court in the case of CIT Vs. Norton Motors (supra) held as under:
“A reading of section 292B of the Income-tax Act, 1961, makes it clear that mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding in substance and effect is in conformity with or according to the provisions of the Act. To put it differently, section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other 5 words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his / its jurisdiction, the same cannot be cured by having resort to section 292B.”
15. In the present case as I have already pointed out in the former part of this order that the notice under section 143(2) of the Act was not issued in prescribed time limit as per the proviso to section 143(2) of the Act by the A.O. having the jurisdiction upon the case of the assessee and the notice issued by the ALIT, Amritsar suffered from an inherent lacuna affecting his jurisdiction so the same could not be cured by having resort to the provisions of section 292B of the Act. Therefore, the assessment framed under section 143(3) of the Act, by the A.O. without issuing the notice u/s 143(2) of the Act within the time limit prescribed in the proviso to section 143(2) of the Act was invalid and accordingly quashed.”
9. On the other hand, the learned Departmental Representative, relied on the order of the CIT(A) and also the provisions of section 292BB of the Act.
10. We have heard the rival submissions and perused the material on record.In the present case, the original jurisdiction of the Assessing Officer is ITO Wad 6(2)(2), Bangalore, who issued notice u/s 143(2) of the Act dated 28.08.2015 fixing the case for hearing on 15th September, 2015. However, the assessment records were transferred vide order u/s 129 of the Act, to the ITO Ward 6(2)(3), Bangalore, and thereafter notice u/s 142(1) r.w.s. 129 of the Act dated 06.10.2015 was issued and served on the assessee. Thus, it is an admitted fact that the ITOWard 6(2)(3) Bangalore has never issued any notice u/s 143(2) of the Act to the assessee. Since there was no notice u/s 143(2) of the Act issued by the Assessing Officer, Ward 6(2)(3), the assessment framed consequently is bad in law. In our opinion, the assessment framed by the ITO Ward 6(2)(3), Bangalore is not in order on the simple reason that this was framed without giving notice u/s 143(2) of the Act. Before framing any assessment, there should be valid notice u/s 143(2) of the Act, as has been held by the Hon’ble Supreme Court in the case of ALIT And Another Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC). The reliance placed by the learned DR on section 292BB of the Act is totally misconceived, as it is stated in the assessment order that the assessee has not cooperated with the A.O. and the A.O. sent hearing notices dated 02.01.2015, 16.01.2015 requesting the assessee to appear for hearing on 13.11.2015 and 26.11.2015. Since no response from the assessee, again one more notice dated 27.11.2015 was issued by the Assessing Officer by posting the case on 04.12.2015, but none appeared on behalf of the assessee. It is also intimated to the assessee that the order will be passed ex parte u/s 144 of the Act. Again, there was no response from the assessee. However, one Chartered Accountant, namely, Sri.J.S.Girish appeared before the Assessing Officer on 07.12.2015 and submitted a Power of Attorney and copy of Profit and Loss Account and Balance Sheet and sought time for hearing. Further during the course of hearing, the AR was requested to submit the details vide notice dated 06.10.2015 for which the AR has agreed to submit the same on 14.12.2015. Accordingly, the case was adjourned to 14.12.2015. However, on that date none appeared on behalf of the assessee nor filed any adjournment application. Further, the A.O. Ward 6(2)(3) sent one more letter on 14.12.2015 posting the case for hearing on 23.12.2015 requesting to appear before him with all details as has been called for earlier, stating therein that failure to comply with the same, the assessment will be completed u/s 144 of the Act. However, on this occasion also the assessee has neither appeared nor filed any submission. Reading of the above shows that there was no cooperation by the assessee before the Assessing Officer, however, the assessee is challenging invalid notice u/s 143(2) of the Act, before the CIT(A). According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. Being so, section 292BB of the Act cannot be applied in the present circumstances. We also rely on the decision of the ITAT Kolkata Benches in the case of M/s.Rungta Irrigation Limited v. ACIT in ITA No.1224/Kol/ 2019. The Tribunal vide its order dated 06.09.2019, held as under: –
“11. We have heard both the sides and perused the records. Before us the Ld. AR of the assessee has raised the jurisdiction of the AO at Kolkata who passed the assessment order without issue of notice u/s. 143(2) of the Act, which according to Ld. AR, is mandatory to assume jurisdiction to frame assessment u/s. 143(3)/144 of the Act. According to ld. AR, non-issue of legally valid notice u/s 143(2) is not a curable defect, as held by the Hon’ble Supreme Court in Hotel Blue Moon (supra). However, the main contention of the Ld. CIT, DR opposing this legal issue raised by the assessee is that, the assessee’s principal office continues to be situated at 26 Rajendra Place, New Delhi,which falls under the territorial jurisdiction of the ACIT, Circle-21, New Delhi, and thushe had concurrent jurisdiction over the assessee’s case, as envisaged for the purposes of Section 120 and 124 of the Act. According to the Ld. CIT, DR, even as per section 127 of the Act, which deals with the transfer of jurisdiction of a case, sub-section (4) of section 127 stipulates that there is no necessity to re-issue of any statutory notices already issued by the AO or AO from whom the case is transferred. According to ld. CIT, DR therefore, since the admitted position is that AM Circle-21, New Delhi was having territorial jurisdiction over the assessee’s principal office situated at Rajendra Place, New Delhi, by virtue of jurisdiction bestowed u/s. 120 and 124 of the Act, he had rightly issued notice u/s. 143(2) of the Act within the stipulated time for assessment of AY 2015-16. In the circumstances therefore when the case was transferred to the ACIT, Central Circle-3(1), Kolkata, the AO at Kolkata was not required to re-issue notice u/s. 143(2) of the Act which had been already been issued by AO at Delhi. According to Ld. CIT, DR therefore, there is no merit in the contention of the assessee. For objectively adjudicating this issue, it is therefore necessary to look at the facts, for which a bird’s eye view of the undisputed facts which are noted from the documents placed on record, aretabulated in the following chart. These facts are important to decide the legal issue before us.
