Case Law Details

Case Name : Yeshoda Electricals Vs ACIT (ITAT Bangalore)
Appeal Number : ITA No. 1175/Bang/2016
Date of Judgement/Order : 03/02/2021
Related Assessment Year : 2007-08

Yeshoda Electricals Vs ACIT (ITAT Bangalore)

This notice issued u/s. 148 is a manual notice and not a digital document. The digital document only does not require signature. A manual notice u/s. 148 is required to be dated and duly signed by the Officer who is issuing the same. A notice or an order without having signature of the person who issued such notice loses its relevance and importance and is to be treated as invalid. An order or notice without signature is not an order for execution or implementation. In all these cases, there was no signature of the AO who issued notice u/s. 148 of the Act. Therefore, it has to be construed that no notice was issued by the AO to the assessee and the assessee was continuously objecting for the same. It is also a fact that from the assessment order it is found that it is an ex parte order u/s. 144 r.w.s 147 of the Act without participation of the assessee and the provisions of section 292BB of the Act is of no help to the assessee, which suggests that if the assessee cooperated in the proceedings of assessment, the assessee cannot raise objections in further proceedings. Further, in our opinion, service of valid notice is a pre-condition to assume jurisdiction by the AO. Non-signing of a notice is not a clerical mistake and there cannot be any waiver by the assessee of an irregularity of an unsigned notice. In our view, section 282 of the Act provides that a notice under the Act may be served on the person name therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908. Sub-rule (3) of Rule 1 of Order 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints. In view of this provision, the notice issued u/s. 148 should have been signed by the AO and omission to do so invalidated the notice. Further, the provisions of section 292B of the Act intended to ensure that an inconsequential technicality does not defeat justice. But, the signing of a notice under section 148 of the Act is not merely an inconsequential technicality. It is a requirement of the provisions of Order 5, Rule 1(3) of CPC, which are applicable by virtue of Section 282 of the Act. Under the circumstances, the provisions of section 292B of the Act would not be attracted so as to make it as a valid notice in the eye of law. Therefore, the requirement of the signature of the AO is a legal requirement. The omission to sign the notice u/s. 148 cannot be cured by relying on the provisions of section 292B of the Act. The notice issued by the AO without affixing signature, in our view, cannot be said to be an omission, which was sought to be covered by the provisions of section 292B of the Act. If such a course is permitted to be followed, then that would amount to miscarriage of justice. An unsigned notice of reopening of assessment cannot be said to be in substance and effect in conformity with or according to the intent and purpose of the Act. Further, as rightly pointed out by the ld. AR, in the case of M/s. Taureg Properties & Security Services Ltd. (supra) in similar circumstances the assessment was framed on the basis of unsigned notice issued u/s. 148.

Further, as already observed, the provisions of section 282A of the Act is of no assistance to the department and it would be applicable only to a CPU which was nominated as designated authority by CBDT as required u/s. 282A of the Act. Therefore, we are of the opinion that the assessment framed on the basis of unsigned notice u/s. 148 is bad in law and cannot be sustained in the eyes of law. Accordingly, we quash all the assessment orders in these cases and allow the primary legal ground raised by the assesses in all these appeals.

FULL TEXT OF THE ITAT JUDGEMENT

These are cross appeals filed by three different assesses and the revenue against the separate orders of the CIT(Appeals)-4, Bangalore, all dated 29th March, 2016 relating to common assessment year 2007-08.

2. Since the grounds of appeal raised by all the assesses are common, with the only change in figures; for the sake of brevity, we reproduce the grounds of appeal raised in ITA No.1175/Bang/2016 as under:-

“1. The Appellate order dt: 29-03-2106 passed by the Ld. CIT(A) Bangalore-4 is opposed to law, facts and circumstances of the case in so far as it is against to the Appellant.

2. The Ld. CIT(A) has erred in holding that the un-signed notice u/s. 148 of the Act dt: 22-03-2012 as valid without appreciating the fact that the said notice did not bear the signature of the Authority (AO).

3. The Ld. CIT(A) has erred in holding that the un-signed notice u/s. 148 of the Act dt: 22-03-2012 as valid placing reliance on the provision of section 282A of the Act without appreciating the fact that the said provision was applicable only to the Central Processing Unit (CPU) which was nominated as a designated Authority.

4. The Ld. CIT(A) has erred in holding that the un-signed notice u/s. 148 of the Act dt: 22-03-2012 as valid u/s. 282A of the Act without appreciating the fact that the AO was not nominated as a designated Authority by the CBDT as required under sub­section 3 of section 282A of the Act.

5. The Ld. CIT(A) has erred in up-holding the Re-Assessment proceedings without appreciating the fact that the Re-Assessment proceedings were based on the Audit Objection which, according to the several judicial decisions cannot be a basis for Re-Assessment proceedings.

6. The Ld. CIT(A) has erred in confirming the Marketing Expenditure of Rs. 9,97,920/- in the Re-Assessment proceedings without appreciating the fact that the same expenditure was allowed by the AO who has completed the Original Assessment dt: 24-12-2009 after considering the satisfactory submissions made by the Appellant in the original Assessment proceedings.

7. The Appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing.

For these and other grounds that may be urged at the time of hearing, the Appellant respectfully prays that your Hon’ble Authority be pleased to pass order that the Re-Assessment made u/s. 144 r.w.s 147 of the Act dt: 25-03-2013 as ab-intio-void and delete the additions made by the Ld. AO amounting to RS. 9,97,920/- being the disallowance of the Marketing Expenditure and further be pleased to pass such other orders granting such other relief that your Hon’ble Authority may deem fit in the interest of justice and equity.”

3. The grounds of appeal in revenue’s appeal for all the years under consideration are also common, except for change in figures. For the sake of brevity, the grounds of appeal in ITA No.1176/Bang/2016 by the revenue are reproduced are as follows:-

“1. The Order of the Ld.CIT (A) is opposed to the law and facts of the case.

2. On the facts and circumstances of the case, the CIT (A) erred in law in deleting the disallowance made by the AO u/s 40(a)(ia).

3. The CIT (A) erred in deleting the addition of Rs. 7,97,23,805/- without appreciating the fact that the issue of the expenses being paid or are payable is now settled by the jurisdictional High Court , as the decision of the Hon’ble Supreme Court in the case of M/s Vector Shipping has been distinguished in the case of Ryatar Sahakari Sakkare Karkhane in ITA No 100111¬100120/2015 dated 26.02.2016.

4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored

5. The appellant craves leave to add, alter, amend and/or delete any of the grounds that may be urged.”

4. The revenue has also raised common additional ground of appeal common for all the years, which is as follows:-

“The additional grounds of appeal to be filed in this case is,

1. The learned Hon’ble CIT(A) has erred in deleting the additions made u/s 40a(ia) of the Act, without appreciating the applicability of Sec.194C with respect to the expense made by the assessee.

1.1. In absence of definition in I.T Act, 1961, on what is contract, the definition in the General Clause Act/ dictionary meaning stands valid. Hence the contract could be an oral or a written contract. Further, the assessee’s claim on such payment being a direct manufacturing expenditure without furnishing any proof does not substantiate that such payments were not work contract or labour contracts. As per the Evidence Act if a fact has to be proved the person whose interest it is to prove it should adduce some evidence and here the burden of proof lies on the assessee.”

5. Since the facts of all the cases are similar, we consider the facts in ITA No.1175/Bang/2016 in assessees’ appeal.

6. The assessee is engaged in the business of Manufacture of Transformers primarily meant to be supplied to the Government Departments. It filed its original return of income for the relevant AY 2007­08 on 31-10-2007, declaring total income of Rs. 2,05,03,604/-.

7. The return of income so filed was processed u/s. 143(1) and thereafter, a Scrutiny Assessment was completed u/s. 143(3) of the Act on 24-12-2009, determining the total income at Rs. 2,05,03,604/-and the said original Assessment Order remained un-disturbed until issuance of notice u/s. 154 of the Act, dated 28-09-2011.

Initiation of Rectification Proceedings u/s. 154 of the Act by issue of notice dated 28-09-2011

8. The AO in the Assessment Order has stated that during the Inspection of Assessment records it was noticed that the Assessee has failed to disallow payments made to the Contractors and Sub-Contractors without deducting taxes as per the Provisions of Section 40a(ia) of the Income-tax Act, 1961 [the Act]. The taxes were required to be deducted u/s. 194C of the Act. Therefore, the AO initiated Rectification Proceedings u/s. 154 of the Act by issue of a notice dated 28-09-2011 proposing to rectify an alleged mistake in the Assessment Order as regards the expenditure allowed amounting to Rs. 7,97,23,805/- being the Labour Charges paid without deduction of Tax at Source as required u/s. 194C of the Act. A notice dated 28-09-2011 is said to have been issued u/s. 154 of the Act.

9. The asse in response to the said notice u/s. 154 of the Act has filed a detailed objections dated 11-10-2011 along with a list of Labour Charge payments of Rs. 7,97,23,805/- (page 24 & 25 of PB) and a statement of Marketing Expenses incurred amounting to Rs. 9,97,920/-. The above details were filed by the Auditors of the assessee vide covering letter dated 06-10-2009 (page 23 of PB) in the AO’s Office on the same date i.e. 06-10­2009 as the hearing of the case was fixed on the said date. The AO on consideration of the objections so filed abandoned the proceedings initiated u/s. 154 of the Act.

10. Further, a notice u/s. 148 of the Act was issued on 22-03-2012 on the basis of the Explanation-(2)(c) to Section 147 of the Act and further stated that the said notice was received by the Assessee on 23-03-2012, but no Revised return or any reply to the notice was filed.

11. The assessee submitted that the AO is not entitled either to review or to cause Inspection of the Records in respect of the completed Assessments except with the directions of the higher Administrative Authorities or Appellate Authorities. The AO is also not entitled to sit on Judgment of the Assessment already completed by his predecessor in accordance with the law. The AO has not mentioned in the Assessment Order the actual cause for initiating the Rectification/Re-assessment Proceedings except vaguely stating that the remedial action was initiated after the Inspection of the Assessment Records. The AO did not have the cause of action for the alleged Inspection of the Assessment Records which is not the normal practice of the Department. Therefore, the assessee submitted that the reasons mentioned in the Assessment Order as to the Inspection of Assessment Records is far from the truth.

Remedial action u/s. 154

12. The assessee relied upon the decision of the Hon’ble Madras High Court in the case of CIT V/s. E.I.D Parry Limited (1995) 216 ITR 489, wherein it was held as under:-

“that the Income-tax Officer must have recourse to the appropriate provision having regard to the facts and circumstances in each case. In cases where the two appear to overlap, the Income-tax Officer must choose one in preference to the other and proceed. He should not take one as the appropriate proceeding and give it up at a later stage to have recourse to the other, since such proceedings are quasi-judicial and adjudication after notice is intended for the same purpose. In such a case of overlapping, constructive res judicata and not the statutory inhibition should make the Income-tax Officer desist from using one proceedings after the other instead of using one of the two with due care and caution”.

13. In this view of the matter, the assessee submitted that the AO was not justified to initiate the remedial action, one after the other u/s. 154 of the Act and also 147 of the Act. The Hon’ble High Court has held that the AO ought to have desisted from using one proceeding after the other instead of using one of the two with due care and caution. Therefore, the assessee submitted that Re-assessment completed exercising two the option was not justifiable in law and accordingly the Assessment is liable to be cancelled.

Issue of notice u/s. 148 of the Act

14. A notice u/s. 148 of the Act, dated 22-03-2012 (invoking Explanation 2(c) was issued by the AO forming belief that the income chargeable to tax escaped Assessment, in view of the fact that the expenditure of Labour Charges ought to have not been allowed since, the Assessee has failed to deduct the tax as required u/s. 194C of the Act. The AO also held that the expenditure of marketing expenses of Rs. 9,97,920/- should have been disallowed u/s. 40A(3) of the Act. It was submitted that the notice u/s. 148 was issued on same set of facts and circumstances which were already on record and the AO has not gathered any new material subsequent to the completion of original assessment, and therefore the notice so issued was not valid in the eyes of law and hence the reassessment made u/s. 144 r.w.s. 147 of the Act is not sustainable in law and is liable to be cancelled.

Change of opinion

15. Without prejudice to the above, it was submitted that the reassessment proceedings were initiated after dropping rectification proceedings without any change new material that came to the knowledge of AO and therefore it was merely on the basis of change of opinion and AO was not justified in the reassessment proceedings by invoking Explanation (2)(c) to section 147 of the Act.

16. Reliance was placed upon the Hon’ble Gujarat High Court in the case of VXL India Limited V/s. ACIT (1995) 215 ITR 295 and Birla VXL Limited V/s. ACIT (1996) 217 ITR 1 (Guj) wherein it was held that howsoever wide the scope for taking action u/s. 147 r.w.s 148 of the Act, it does not confer jurisdiction on change of opinion on the interpretation of a particular provision earlier adopted by the Assessing Officer. The scope of Section 147 is not for reviewing its earlier Order Suo-moto irrespective of there being any material to come to a different conclusion.

17. Further the assessee placed reliance on the Hon’ble Delhi High Court in the case of Jindal Photo Films Limited V/s. DCIT ( 1998) 234 ITR 171, which in turn placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT V/s. Rao Thakur Narayan Sigh (1965) 56 ITR 234 (SC) has held as follows:-

“that the power to re-open an Assessment has been conferred by the Legislature not with the intention to enable the Assessing Officer to re-open the final decision made against the Revenue in the earlier proceedings. If that were not the legal position, it would result in placing an unrestricted power of review in the hands of the Assessing Authorities depending on their changing moods and further held that mere fresh application of mind to the same set of facts or mere change of opinion does not confer jurisdiction u/s. 147 of the Act”.

18. Reference was also made to the Hon’ble Calcutta High Court in the case of Berger Paints India Limited V/s. ACIT (2010) 322 ITR 369 wherein it was held that the Re-assessment notice had been issued for virtually the same reason for which Rectification Proceedings had earlier been initiated, but dropped. The Assessing Officer had not disclosed any new materials for re-opening Assessment. The Notice for Re-assessment was not valid and was liable to be quashed.

19. The judgment of the Hon’ble High Court of Karnataka in the case of Naronha (H) and ITO (1982) 133 ITR 199 was also relied upon wherein it was unambiguously held that the AO was not entitled to initiate the Re­assessment Proceedings on the very same material which was already considered by the AO at the time of original Assessment. The notice issued for re-opening the Assessment is related non-disallowance labour charges for non-deduction of TDS and also marketing expenses u/s. 40A(3) of the Act. The relevant information was already made available to the AO at the time of original Assessment and thereafter, the AO has completed the Assessment after due satisfaction of the material evidence. Hence, the same material cannot be used as a ground to re-open the Assessment.

20. The assessee also relied upon the decision of the Hon’ble Supreme Court in the case of ACIT V/s. ICICI Securities Primary Dealership Limited (2012) 348 ITR 299, wherein it has been categorically held that the Re­assessment Proceeding was not sustainable on change of opinion. Further, Hon’ble Supreme Court in the case of CIT V/s. Kelvinator of India Ltd. clearly held that the change of opinion cannot be the ground for re­opening the case u/s. 147 of the Act (2010) 320 ITR 561 (SC). In CIT and Another V/s. Foramer France, it was held that the Re-Assessment Proceedings were not maintainable on the basis mere change of opinion. (2003) 264 ITR 566 (SC). The ITAT Bangalore Bench in its order in ITA No. 1006/Bang/2010 dt: 31-10-2011 in the case of M/s GMR Holdings Pvt Ltd., V/s. DCIT, Circle 11(3) has followed the decision of the Hon’ble Supreme Court in the case of CIT and Another V/s. Foramer France (supra). Similarly the Hon’ble High Court of Karnataka vide judgment dt: 16-2-2016 in the case of CIT V/s. M/s Chaitanya Properties Ltd. in ITA No. 205 of 2015 has held that initiation of RE-Assessment Proceedings merely on change of opinion were not proper.

21. However, the AO rejected the contentions of the assessee.

Rectification u/s. 154 and Re-assessment Proceedings u/s. 147 of the Act based on Audit Objection

22. The AO in the Assessment Order has stated that on finding the mistakes of non-disallowance of expenditure of Labour Charges for failure to deduct the tax u/s. 194C of the Act, a notice u/s. 154 of the Act was issued giving an opportunity to the asse to file objections if any to modify the order made on 24-12-2009, in response to which the assessee has filed a letter on 11-10-2011 stating that “the mistake is not rectifiable u/s. 154 of the Act, 1961. It was pointed out that the deduction of tax at source on the job work and the Labour charges is a debatable point of law and therefore, the original Assessment Order is not liable to be rectified u/s. 154.

23. The assessee submitted that in view of the objections filed against the Proceedings u/s. 154, the AO has dropped the rectification proceedings. The AO after dropping the Rectification Proceedings has stated to have issued a notice u/s. 148 of the Act dated 22-03-2012 to bring to tax the alleged income escaping Assessment by invoking Explanation (2)(c) of section 147 of the Act and the notice u/s. 148 of the Act was received by the Assessee on 27-03-2012 and no Revised Return of Income or any reply to the notice was filed and therefore, the Assessment was stated to have been completed u/s. 147 r.w.s 144 of the Act.

24. In this connection, the assessee submitted that the notice u/s. 148 of the Act dated 22-03-2012 was not complied since it was found to be an illegal notice as it did not bear the signature of the AO. Further, the assessee has not complied with the hearing notice said to have been issued on 10-07-2012 for production of details on 27-07-2012 since the Re­assessment Proceedings were not initiated in accordance with the law. The AO in the Assessment Order has stated that the Assessee has filed a letter on 26-07-2012 requesting for an Adjournment which is incorrect. The Assessee has not filed any such adjournment letters.

25. With regard to the observations of the AO that assessee neither appeared nor filed any adjournment in response to notice u/s. 142(1) dated 13.11.2012 posting the case on 16.11.2012, the assessee submitted that the AO issued a notice u/s. 274 r.w.s. 271(1)(b) on 10.1.2013 for appearance on 20.1.2013 stated to have been served on assessee on 12.1.2013 and Sri Janakiram Reddy, ITP appeared only in response to penalty notice u/s. 274 r.w.s. 271(1)(b) and not in connection with assessment proceedings, which the AO has misconstrued as appearance for reassessment proceedings. Therefore, the AO was not justified in holding that assessee had participated in the assessment proceedings. It was submitted that the assessee had not participated in the reassessment proceedings and taking the non-appearance as a ground, the AO disallowed the labour charges and non-deduction of TDS by making an addition of Rs.9,97,920 u/s 40A(3) of the Act without appreciating the facts and circumstances of the case considered by the AO who completed the original assessment.

26. The assessee submitted that the entire gamut of exercise of initiation of remedial action by way of Rectification u/s. 154 and Re­assessment proceedings under Explanation-2(c) to Section 147 of the Act was based on an uncalled for Audit Objection. The matter was discussed and deliberated in the Rectification Proceedings and therefore, the Rectification Proceedings were dropped. During the course Rectification Proceedings it was brought to the notice of the assessee that the said Rectification Proceedings were initiated on the basis of an Audit Objection. In this regard, the assessee submitted that the Audit Objection does not confer jurisdiction u/s. 147 of the Act as has been held in the catena of Judgments both of the Hon’ble Supreme Court as well as other High Court decisions that the Audit Objection does not constitute information to form a reason belief as regards escapement of income within the ambit of Section 147 of the Act. The decisions relied upon by the assessee are as follows:-

a) Indian and Eastern Newspaper Society V/s. CIT (1979)119 ITR 0996, wherein it has been that the opinion of the Audit Party on a point of law could not be regarded as “information” enabling the ITO to initiate Re-assessment Proceedings u/s. 147(b) of the Act.

b) CIT V/s. Lucas T.V.S Ltd (2001) 249 ITR 0306

c) Lokendra Singji (Maharaja( (N.H.) V. CIT (1987) 166 ITR 407 (MP)

d) Commissioner of Wealth-tax V/s. Kaviraj Mahipat Singh ‘987) 165 ITR 0705 (Raj)

e) P. K. Mohammed P. Ltd. V. CIT (1986) 162 ITR 0587 KER) –

f) Punjab Produce and Trading Co. Ltd. V. CIT (1986) 158 TR 0524 (CAL)

g) Yeshwant Talkies V. CIT (1986) 157 ITR 0103 (MP)

h) Bhagwandas Jain V. CIT (1985) 156 ITR 0608 (MP)

i) Dinkarrai Anantrai Mankad V. Income-tax Officer (1985) 55 ITR 0406 (GUJ)

j) Habicht (H.) (Dr.) v. Makhija (1985) 154 ITR 0552 (BOM)

k) Rajan Silk v. Income-tax Officer (1985) 154 ITR 0474 1GUJ)

l) CIT v. Hackbridge-hewittic and Easun Ltd. (1985) 154 ITR 0378 (MAD)

m) CIT v. Aggarwal Textile Mills (1985) 154 ITR 0234 (P & H)

n) Ramesh Chandrasen Ashar v. Barshiwala (K.M.), 1st Asst CED (1984) 148 ITR 0001 (BOM)

o) Commissioner of Wealth-tax v. Savitri Devi (Smt.) (1983) ’44 ITR 0345 (P & H)

p) CIT v. Bhavnagar Chemical Works (1946) Ltd. (1983) 140 TR 0061 (GUJ)

q) Anil Starch Products Ltd. v. Income-tax Officer (1982) 134 !TR 0355 (GUJ)

r) Yamuna Syndicate Ltd. v. Surtax Officer (1982) 133 ITR 397 (P & H)

s) Surat District Co-operative Purchase and Sale Union Ltd. Income-tax Officer (1981) 129 ITR 0718 (GUJ)

t) Brig B. Lall v. Wealth-tax Officer (1981) 127 ITR 0308 RAJ)

u) Atul Products Ltd. v. Income-tax Officer (1980) 125 ITR 1452 (GUJ)

v) CIT v. Ratanlal Lallubhai (1978) 112 ITR 0985 (GUJ)

w) Kasturbhai Lalbhai v. Malhotra (R.K.), ITO (1971) 080 ITR :188 (GUJ)

Disallowance u/s. 40a(ia) r.w.s 194C of the Act

27. The AO on page 4 of the Assessment order has held that as per the P&L Account a sum of Rs. 7,97,23,805/- was claimed as Labour Charges against which no TDS was deducted as confirmed in Col.27 (a) of the 3CD Report and therefore, the Labour Charges were disallowed for alleged non-deduction of TDS. In this regard, the Appellant submitted that the Labour – charges were not paid to any Contractor in pursuance of any contract as required u/s. 194C of the Act and hence, there was no requirement of deduction of tax at source. The Hon’ble Supreme Court in the case of Associated Cement Company Limited V/s. CIT (1993) 201 ITR 435 has held that “Section 194C(1) had a wide import and covered any work which could be got carried through a Contractor under a Contract“. In this view of the matter, it was submitted that it is a settled position of law as laid by the Hon’ble Supreme Court that the deduction of TDS arises only in respect of payments made to a Contractor under a Contract. The essential requirement of Section 194C is that the payment ought to have been made to a contractor under a Contract. In this case, the assessee has not entered into any contract with any Contractor in respect of the Labour Charges paid as wages for the work carried out by the Labourers. There was no contractual obligation for the Appellant Firm to get the work done and therefore provisions of section 194C were not applicable.

28. Without prejudice to the above, the assessee submitted that the labour charges were direct expenses claimed and allowed u/s. 28. The provisions of section 40(a)(ia) are applicable only to the expenditure falling within the ambit of sections 30 to 36 and not u/s. 28 of the Act. In this regard reliance was placed on the decision of ITAT Hyderabad Bench in the case of Teja Constructions v. The assessee also pointed out that the AO had stated that the labour charges were shown as direct expenses in P&L Account and therefore the direct cost could not be disallowed u/s. 40(a)(ia) of the Act and hence the disallowance made by the AO was not justified and sustainable in law.

29. The assessee submits that the CBDT has issued a Circular No. 13/2006 dated 13-12-2006 to clarify para 7(vi) of the Circular No. 681, dated 08-03-1984 and clarified that Sec. 194C is not applicable on such transactions where the Assessee has outsourced certain work relating to fabrication or manufacturing of Article or thing in accordance with the specifications given by the Assessee and further clarified that where the property in Article or thing so fabricated passes from the Fabricator — Contractor to the Assessee only after such Article or thing is delivered to the Assessee, such Contract would be a contract for sale and so outside the purview of the Sec. 194C of the Act.

30. In this connection, the assessee submitted that it has outsourced a part of the transformer manufacturing activity to the fabricators, who have delivered the fabricated Article to the Assessee and the Labour charges were paid to such fabricated components. The said activity amounts to contract of sale and Sec. 194C of the Act is not applicable as per the Board Circular (supra). These contentions of the assessee were also rejected by the AO.

31. On appeal, the Ld. CIT(A) has addressed the issue of validity of an unsigned Notice u/s. 148 and held it to be valid even though the said notice was not signed. He was of the view that the said notice bears the name and office of a designated Authority and is printed, stamped or otherwise written thereon as per section 282A of the Act.

32. In this regard the assessee submitted that the provision of section 282A is applicable to the designated officers as Authorised by the CBDT. But the AO was not designated by the CBDT and therefore section 282A of the Act is not applicable and hence the findings of the Ld. CIT(A) are not in accordance with the law and therefore such findings are to be set aside. However, the CIT(Appeals) confirmed the action of the AO.

33. Now the arguments of the assessee before us is primarily with regard to the issue of notice u/s. 148 of the Act. In these cases, the AO had not signed the notice u/s. 148 to the assesses. As such, the reassessment framed consequent to said notice u/s. 148 r.w.s. 147 is bad in law and assessment order has to be quashed as void-ab-initio. He drew our attention to the copies of notices u/s. 148 to the assesses as follows:-

(i) Yashoda Electricals : Notice u/s. 148 dated 22.3.2012.

(ii) Star Electricals :  Notice u/s. 148 dated 22.3.2012

(iii) Maruthi Electricals : Notice u/s. 148 dated 22.3.2012

34. The ld. AR submitted that the CIT(Appeals) placed reliance on section 282A of the Act without appreciating the fact that the said provision was applicable only to Central Processing Unit (CPU) which was nominated as a designated authority. Since the present AO not being a nominated or designated authority by the CBDT as required u/s. 282A(3) of the Act, as such the CIT(Appeals) ought to have annulled all the reassessment orders as void ab initio.

35. Further he relied on the decision of the Delhi Bench of ITAT in the case of M/s. Taureg Properties & Security Services Ltd. in ITA
No.733/Del/2016 dated 4.3.2020.

36. On the other hand, the ld. DR submitted that the office copy of the notice u/s. 148 was duly signed by the AO. Due to inadvertence, the AO omitted to sign the assesse’s copy and the same was despatched without signatures, which is a procedural lapse, which could be curable. However, it cannot be fatal as to invalidate the reassessment proceedings in its totality. Even if there is a lapse, the provisions of section 282A and 292BB of the Act take care of such mistakes.

37. We have heard both the parties and perused the material on record. We have carefully gone through the notices u/s. 148 issued to all the parties on 22.3.2012. For the sake of brevity, the notice in the case of M/s. Star Electricals is reproduced below:-

“PAN AAEFS1483K

Office of the
Deputy Commissioner of Income-tax, Circle-10(1), Ground Floor,
Unity Building Annexe, Mission Road,
Bangalore – 560 027.
Dated : 22/03/2012

To,
M/S Star Electricals,
25 Y, No. 8/2, Ambalipura Village,
Sarjapura Road,
Bangalore – 560 034
Email: [email protected]

Whereas I have reason to believe that your income chargeable to tax for the assessment year 2007-08 has escaped assessment within the meaning of section 147 of the Income tax act, 1961.

I therefore propose to assess the income for the said assessment year and hereby require you to deliver to me before the expiry of 11 days from the date of service of this notice, a return in the prescribed form of your income for the said assessment year.

(Sunil Kumar Agarwala)
Deputy Commissioner of Income-tax
Circle-10(1), Bangalore.”

38. A perusal of the above notice in all the cases show that the said notice issued u/s. 148 of the Act was typed on a plain paper, it was not signed by the Assessing Officer who issued the same and remained unsigned which is not in dispute before us. The contention of the ld. DR is that the office copy of the said notice was duly signed by the AO. This notice issued u/s. 148 is a manual notice and not a digital document. The digital document only does not require signature. A manual notice u/s. 148 is required to be dated and duly signed by the Officer who is issuing the same. A notice or an order without having signature of the person who issued such notice loses its relevance and importance and is to be treated as invalid. An order or notice without signature is not an order for execution or implementation. In all these cases, there was no signature of the AO who issued notice u/s. 148 of the Act. Therefore, it has to be construed that no notice was issued by the AO to the assessee and the assessee was continuously objecting for the same. It is also a fact that from the assessment order it is found that it is an ex parte order u/s. 144 r.w.s 147 of the Act without participation of the assessee and the provisions of section 292BB of the Act is of no help to the assessee, which suggests that if the assessee cooperated in the proceedings of assessment, the assessee cannot raise objections in further proceedings. Further, in our opinion, service of valid notice is a pre-condition to assume jurisdiction by the AO. Non-signing of a notice is not a clerical mistake and there cannot be any waiver by the assessee of an irregularity of an unsigned notice. In our view, section 282 of the Act provides that a notice under the Act may be served on the person name therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908. Sub-rule (3) of Rule 1 of Order 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints. In view of this provision, the notice issued u/s. 148 should have been signed by the AO and omission to do so invalidated the notice. Further, the provisions of section 292B of the Act intended to ensure that an inconsequential technicality does not defeat justice. But, the signing of a notice under section 148 of the Act is not merely an inconsequential technicality. It is a requirement of the provisions of Order 5, Rule 1(3) of CPC, which are applicable by virtue of Section 282 of the Act. Under the circumstances, the provisions of section 292B of the Act would not be attracted so as to make it as a valid notice in the eye of law. Therefore, the requirement of the signature of the AO is a legal requirement. The omission to sign the notice u/s. 148 cannot be cured by relying on the provisions of section 292B of the Act. The notice issued by the AO without affixing signature, in our view, cannot be said to be an omission, which was sought to be covered by the provisions of section 292B of the Act. If such a course is permitted to be followed, then that would amount to miscarriage of justice. An unsigned notice of reopening of assessment cannot be said to be in substance and effect in conformity with or according to the intent and purpose of the Act. Further, as rightly pointed out by the ld. AR, in the case of M/s. Taureg Properties & Security Services Ltd. (supra) in similar circumstances the assessment was framed on the basis of unsigned notice issued u/s. 148. In that case, the Tribunal quashed the assessment order by observing as follows:-

“6. After considering the rival submissions, we do not find any merit in the Departmental Appeal. Copy of the notice under section 148 Dated 26.03.2007 is available at page-1 of the paper book. It is unsigned as well as did not mention any assessment year. Since unsigned notice have been sent to the assessee, therefore, it vitiate the entire re-assessment proceedings because it was the jurisdictional notice to initiate proceedings under section 147 of the I.T. Act, 1961. Since the notice itself was illegal and bad in Law, therefore, entire re-assessment proceedings have been vitiated and as such A.O. could not have assume the jurisdiction under section 148 of the I.T. Act, 1961 to frame the assessment against the assessee. The Ld. CIT(A) was justified in holding the assessment order to be null and void. The Departmental Appeal has no merit and the same is accordingly dismissed.”

39. Further, as already observed, the provisions of section 282A of the Act is of no assistance to the department and it would be applicable only to a CPU which was nominated as designated authority by CBDT as required u/s. 282A of the Act. Therefore, we are of the opinion that the assessment framed on the basis of unsigned notice u/s. 148 is bad in law and cannot be sustained in the eyes of law. Accordingly, we quash all the assessment orders in these cases and allow the primary legal ground raised by the assesses in all these appeals.

40. Since we have allowed the legal ground with regard to validity of unsigned notice u/s. 148, we refrain from going into other grounds of appeal raised by the assesses. Consequently, the appeals filed by the revenue have become infructuous and dismissed accordingly.

41. In the result, the appeals by the assesses are allowed, while the appeals by the revenue are dismissed.

Pronounced in the open court on this 3rd day of February, 2021.

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