Assessment is liable to be quashed in absence of issuance of notice u/s 143 (2)

Issue before Tribunal:

Whether assessing officer assigns jurisdiction to frame an assessment u/s 147 when no notice u/s 143 (2) was issued?

Brief facts:

• Proceedings u/s 147/148 of the Act were initiated by the AO after recording the reasons and the notice u/s 148 of the Act dated 06.03.2013 was issued and duly served in the office of CEO, Noida Authority on 12.03.2013. As per the said notice the assessee was required to file its return of income within 30 days from the date of the service of the notice.
• Notice u/s 142 (1) was issued but no notice u/s 143 (2) was issued.
• The return of income was filed on 13.12.2013 declaring Nil income. The AO noticed that the assessee had mentioned that it was not liable for audit u/s 44AB of the Act. However, alongwith return, balance sheet and income & expenditure account accompanied with schedules and notes on account was furnished.
• IT was observed by the AO that assessee lost exemption and claim of local authority with regard to section 10 (20) as a result of decision in favour of revenue in a writ petition filed by authority before Hon’ble Allahabad High Court.
• The AO added the amount of Rs. 4,51,57,86,991/- to the income of the assessee by observing that the assessee had not disclosed taxable income in its Income Tax Return.
• The AO further added Rs. 1,15,86,36,500/- out of the expenses by observing that the assessee had furnished no evidence of any nature.
• On appeal CIT (A) upheld the assessment order and held no objection of any procedural error was taken before AO.

Contention of the Revenue:

• Assessee cannot claim exemption u/s 10 (20) after the adverse decision by Allahabad high court. The income not shown in ITR is liable to be added.
• No evidence in support of claim of expenditure was produced by assessee.
• Notice u/s 143 (2) was issued to the assessee and sent via regd. Post.
• In case no notice u/s 143 (2) was issued to the assessee then same can be cured by the provision of section 292 BB. Revenue relied upon many judgments.
• The Income Tax Act does not prescribe that order sheet entry should have all the entries nor does the Act mention about the order sheet or that in the assessment order the issuance of notice u/s 143(2) be mentioned.
• It was submitted that assuming but not admitting that the notice u/s 143(2) of the Act was not issued, even then a notice is issued just to put the assessee on notice but there is no statutory form for the notice u/s 143(2) of the Act and if there is a detail show cause notice, that would suffice the purpose of issuance of notice u/s 143(2) of the Act. Reliance was placed on following judgements:
  • CIT Vs Madhay Bharat Energy Corporation Ltd. (2011) 337 ITR 389 (Del)
  • Modh Ayub Vs ITO 346 ITR 30 (All)
  • Kiran Nagji Nisar 114 ITD

Contention of the assessee:

• No notice u/s 143(2) of the Act had been issued after issuance of notice u/s 148 of the Act. Assessee took inspection of the file of the AO and did not find any notice u/s 143 (2) as claimed by the department and even no entry in the order sheet.
• It was further stated that the assessee took inspection of the file of the AO on 30.10.2014 and did not find any notice u/s 143(2) claimed to have been issued by the department on 16.01.2014.
• The claim of the department that notice u/s 143(2) of the Act was issued and entry was made in the dispatch register at serial no. 1326 but in the said entry it has been mentioned that ‘assessment proceedings for the assessment year 2009- 10 in the case of New Okhla Industrial Development Authority-regarding’ but nowhere issuance of notice u/s 143(2) has been mentioned.
• It was submitted that issuance of notice u/s 143(2) of the Act is mandatory and failure to issue the notice u/s 143(2) of the Act within the prescribed period cannot be cured by taking recourse to section 292BB of the Act.
• It was accordingly submitted that the assessment framed without issuing the notice u/s 143(2) of the Act was bad-in-law and deserves to be quashed. Reliance was placed on
  • ACIT Vs Hotel Blue Moon (2010) 321 ITR 362 (SC)
  • CIT Vs Adarsh Bus Travel (All) (2010) 204 Taxman 114
  • CIT Vs Rajeev Sharma (All) (2010) 336 ITR 678
  • CIT Vs Salarpur Cold Storage (P) Ltd. (2015) 228 Taxman 48 (ALL)

Conclusion:

Notice u/s 143 (2) is a right of assessee to be heard before any income tax authority. Statutory notices are the first step to initiate any proceeding under income-tax act. Therefore, failure in issuance of notice u/s 143 (2) is enough to hold assessment bad-in-law. Improper service can be cured by cured by any other provision of law i.e. section 292BB as section provides cure when there is no proper service. But when notice is not issued department cannot take advantage of section 292BB.