Case Law Details

Case Name : Kamla Devi Sharma Vs Income Tax Officer (ITAT Jaipur)
Appeal Number : ITA No. 1026/JP/2016
Date of Judgement/Order : 06/02/2018
Related Assessment Year : 2009-10
Courts : All ITAT (7310) ITAT Jaipur (226)

Kamla Devi Sharma Vs ITO (ITAT Jaipur)

 Non-issuance of notice under section 143(2) was not a procedural error which could have been corrected in the wake of deeming provisions of section 292BB. Thus, assessment completed under section 143(3) read with section 147 was quashed.

FULL TEXT OF THE ITAT JUDGMENT

This is an appeal filed by the assessee emanates from the order of the learned Commissioner (Appeals)-3, Jaipur dated 20-9-2016 for the assessment year 2009-10.

2. The assessee is an individual. The assessee had purchased agricultural land on 30-4-2008 for a consideration of Rs. 1,01,20,000 and paid in cash. Notice under section 148 of the Income Tax Act, 1961 (in short the Act) was issued on 31-5-2013. Notice was served on 6-6-2013 through notice server. Return of income was filed on 22-4-2014. Notice under section 142(1) of the Act was issued alongwith questionnaire on 30-4-2014. The assessment was made on 5-3-2015 at Rs. 1,01,20,000, that is the amount paid for purchase of the agricultural land, treated as unexplained investment. The learned Commissioner (Appeals) has confirmed the action of the assessing officer.

3. Now the assessee is in appeal before the ITAT by taking following grounds of appeal :–

“1. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in upholding the action of learned assessing officer in completing the assessment under section 143(3) of the Income Tax Act, 1961 without issuing notice under section 143(2) of the Income Tax Act, 1961.

2. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in holding the mistake of non-issuance of notice under section 143(2) before completion of assessment under section 143(3) as curable under section 292BB of the Income Tax Act, 1961.

3. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in observing that it was for the assessee to have objected during the assessment proceedings itself that notice under section 143(2) had not been issued.

4. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in not holding the assessment order passed by the learned assessing officer as ab-initio void.

5. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in confirming the addition of Rs. 1,01,20,000.

6. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in relying and accepting the statement of Shri Shankar Lai Gurjar whereas opportunity of cross examination was not allowed to the assessee.

7. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in asking source of source of amount received from Shri Ranjeet Jat.

8. In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in sustaining addition of amount received from Shri Gopal Sharma and Ram Narayan Sharma on account of their default in not responding to summons issued under section 131 of the Income Tax Act, 1961 by the Learned assessing officer.

9. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”

4. In the grounds No. 1 to 4 of appeal, the assessee has challenged the assessment under section 143(3) of the Act without issuing notice under section 143(2) of the Act. The learned. AR of the assessee has submitted that non-issue of notice under section 143(2) of the Act prior to completion of assessment under section 143(3) of the Act cannot be cured by the provisions of section 292BB of the Act. The assessment framed without issue of notice is ab-initio void in view of various decisions of Hon’ble High Courts.

5. A written submission was also made by the learned. AR of the assessee on the issue of non-issue of notice under section 143(2) of the Act prior to finalization of the assessment under section 143(3) of the Act. The submissions of the learned. AR on this issue is reproduced hereunder :–

In these grounds of appeal, assessee has challenged the action of learned Commissioner (Appeals) in confirming the action of learned assessing officer in completing assessment without issuing notice under section 143(2), which is sine qua non once assessee furnished return of income. Since all these grounds of appeal are inter related, thus have been dealt with together for the sake of convenience.

Brief facts as stated above are that the case of assessee was reopened by issue of the notice under section 148 of the Act and thereafter the assessment was completed without issue of notice under section 143(2) though the assessee had filed the return of income in response to such notice under section 148. The chronology of the events are as under :–

– on 31-5-2013 notice under section 148 was issued and served upon assessee on 06.06.2013;

– on 3-4-2014, notice under section 142(1) was issued fixing date of hearing on 16.04.2014;

– on 22-4-2014, Return of Income was filed by assessee;

– on 30-4-2014, further Query letter under section 142(1) as well as show cause notice under section 271(1)(b) was issued;

– notices under section 142(1) were issued on 17-11-2014 and 6-2-2015 and the proceedings were attended by the A/R of the assessee from time to time

– Assessment order was passed under section 143(3)/ 147 of the Act by learned assessing officer vide order dated 5-3-2015.

From the perusal of the summary of chronological events it is clearly evident that notice under section 143(2) was never issued by learned assessing officer before completion of the assessment and this fact has categorically been admitted by learned assessing officer in remand report submitted before the learned Commissioner (Appeals) (APB 15-18).

With this background of chronological events, kind attention of Hon’ble bench is invited to the provisions of section 148 of the Act, which reads as under:

148. [(1)] Before making the assessment, reassessment or recomputation under section 147. the assessing officer shall serve on the assessee a notice requiring him to furnish within such period, [* * *] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :]

Provided further that in a case —

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and

(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or re-computation as specified in subsection (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.]

On perusal of above, it is evident that section 148 specifically provides that all the provisions of Act shall be applicable in respect of return of income under section 148 as if the same was return furnished under section 139. Going further, first and second provisos to section 148, provides the time limit for issuance of notice under section 143(2) on the basis of date of filing return of income. Thus, it is not discretionary rather mandatory for an assessing officer to issue notice under section 143(2) once the return of income is filed by assessee. The only relaxation in the case of re assessment is that notice under section 143(2) can be issued at any time before the expiry of time limit for completing assessment/ re assessment and the same would be deemed as valid notice. However, as stated above, no notice under section 143(2) was ever issued in the case of the assessee even though the return of income was filed by the assessee. Thus the completion of the re-assessment proceedings and completion of the assessment is without any valid jurisdiction and therefore the order passed is void ab initio. This contention was also raised before learned. Commissioner (Appeals) who sought remand report from learned assessing officer in this regard. The learned assessing officer in remand report dated 12-2-2016 at page 2 in last para observed that: (APB -17)

“During the assessment proceedings in this case for the assessment year under consideration, the assessee or her authorized representative did not oppose that the notice under section 143(2) of the income Tax Act, 1961 was not issued after filing return of income in response to the notice under section 148 of the Income Tax Act, 1961. Therefore, under the provisions of Income Tax Act, 1961, the notice under section 148 can’t be issued……… ”

Ld.CIT(A). confirmed the validity of assessment order so passed without issue of notice under section 143(2) by observing that assessee had attended the hearing on several occasions and no objection was raised during the proceedings before the learned assessing officer, thus non issuance of notice under section 143(2) of the Act would not make assessment order invalid. Learned Commissioner (Appeals) further held that such mistake of learned assessing officer of non issue of notice under section 143(2) is curable under section 292BB of the Act.

At this juncture, provisions of section 292BB of the Act are reproduced herewith for the sake of convenience :–

292BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was–

(a) not served upon him; or

(b) not served upon him in time; or

(c) served upon him in an improper manner:

Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.]

In this regard, it is submitted that section 292BB provides that a notice shall be deemed to be served in a situation that assessee has cooperated/ attended / participated in assessment/ re assessment proceedings and no objection regarding non receipt of notice was filed during assessment stage. It is worth noticing here that section nowhere provides that “a notice required to be issued, shall be deemed to be issued”. Thus, it is evident that deeming provisions of section 292BB are with respect to notices issued but not served/ not served in time / not served in proper manner. It does not cure the defect so far as notice has not been issued at all.

In this regard, it is further submitted that there are catena of judicial pronouncements, which hold that Omission to issue notice under section 143(2), is not a procedural irregularity and the same is not curable. Further, learned assessing officer in the remand report dated 12-2-2016 (APB 15-18) has stated that return of income has been filed belatedly thus he not required to issue such notice mandatory. Your honours would appreciate that it has nowhere been provided in the Act that assessing officer shall be absolved with the requirement of issuing notice under section 143(2) in the event of late filing of return. In fact, proviso to section 148 provides that notice under section 143(2) can be issued at any time before completion of assessment. Thus, so far as return of income has been filed, assessing officer ought to have issued notice under section 143(2), which has not been done in the instant case.

In this regard, reliance is placed on :–

Assistant Commissioner of Income Tax v. Hotel Blue Moon (2010) 321 ITR 362 (SC) (Case laws Paper book pages 93-99)

Search and Seizure – Undisclosed Income Detected – Block Assessment – Issue of Notice under section 143(2) within prescribed time – Mandatory – Income Tax Act, 1961, sections 132, 143(2), 158BA, 158BC, 158BH – CBDT Circular No. 717 Dated 14-8-1995.

Though in the above case, assessment was completed by learned assessing officer under section 153A, without issuing notice under section 143(2), the same is applicable to assessments completed under Act, irrespective of the fact under which section assessment is to be completed as legislature has provided for issuance of such notice before completion of assessment under whatever section it may be.

CIT v. Salarpur Cold Storage (P) Ltd. [Income Tax Appeal No. 24 of 2014, dt. 19-8-2014]

“10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from 1-4-2008. Section 292BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time ; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to section 292BB of the Act, however, carves out an exception to the effect that the section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the assessing officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdiction itself would be invalid.

In the same decision in CIT v. Salarpur Cold Storage (P) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Asst. CIT v. Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under section 143(2) was mandatory. It was not “a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with”.

(2017) 390 ITR 167 (Ker) Travancore Diagnostics (P) Ltd. v. ACIT (Case laws Paper book pages 58-61)

Reassessment- Notice- Validity- Reassessment can be made within time for regular assessment- Reassessment under section 147 read with section 143(3)- Condition precedent- Notice under section 143(2) Omission to issue notice under section 143(2)- Deject not curable – section 292BB not applicable- Reassessment not valid- Income Tax Act, 1961, sections 143,147,292BB

336 ITR 678 (All) CIT v. Rajeev Sharma (Allahabad) (Case laws Paper book pages 62-68)

Reassessment – Procedure – Return in response to Notice under section 148 – assessing officer must apply his mind and issue Notice under section 143(2) – Procedure must be followed strictly – Income Tax Act, 1961, sections 143, 148.

It is further submitted that even if the return of income was filed after the issue of notice under section 142(1), the Hon’ble Delhi court in the case of PCIT-08 v. Shri Jai Shiv Shankar traders (P) Ltd. (2016) 383 ITR 448 (Delhi) (Case laws Paper book pages 29-31) has held that the 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, notice under section 148 was issued on 30-3-2010, in response to which no return of income was filed. On 1-10-2010, learned assessing officer issued notice under section 143(2), which was duly served. Subsequently notices under section 142(1) were also issued on certain occasions. Authorized representative of assessee, on 16-12-2010 presented and stated that return of income filed under section 139 may be treated as furnished in response to notice under section 148. Assessment was completed vide order dated 31-12-2010, in that situation also, the Hon’ble Court held that assessing officer ought to have issued notice after 16-12-2010, in absence of which assessment was held invalid. In our case also, the return was filed after the issue of notice under section 142(1), thus is squarely covered by the decision of Hon’ble Delhi high court, as stated above.

Further reliance is placed on the following :–

323 ITR 249 (Delhi)- DIT v. Society for Worldwide Inter Bank Financial Telecommunications (Delhi) (Case laws Paper book pages 49-50)

Assessment – Enquiry – Notice – Only upon Examination of Return – Notice under section 143(2) served upon assessee before filing of Return – Not valid – Assessment completed on basis of Notice invalid – Income Tax Act, 1961, section 143(2)

90 DTR 289 – Saptha Giri Finance & Investments v. ITO (Madras)

Reassessment – Validity – Absence of notice under section 143(2) – In completing the assessment under section 148, compliance of the procedure laid down under ss. 142 and 143(2) is mandatory – Once the admitted fact that beyond notice under section 142(1), there was no notice issued under section 143(2) and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to s. 148, there was total failure on the part of the Revenue from complying with the procedure laid down under section 143(2) which is mandatory – In the absence of notice under section 143(2), reassessment could not be held to be validly made.

The facts of that case were that a notice under section 148 of the Act was issued to the assessee seeking to reopen the assessment for the assessment year 2000-01. However, the assessee did not file a return and therefore a notice was issued to it under section 142(1) of the Act. Pursuant thereto, the assessee appeared before the assessing officer and stated that the original return filed should be treated as a return filed in response to the notice under section 148 of the Act. The High Court observed that if thereafter, the assessing officer found that there were problems with the return which required explanation by the assessee then the assessing officer ought to have followed up with a notice under section 143(2) of the Act. It was observed that :–

“Merely because the matter was discussed with the assessee and the signature is affixed, it does not mean the rest of the procedure of notice under section 143(3) of the Act was complied with or that on placing the objection the assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued under section 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued under section 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the assessing officer has the duty of issuing the notice under section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued under section 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued under section 143(2) of the Act.”

Recently Jaipur bench of ITAT in the case of Cameron (Singapore) (P) Ltd v. ADIT [ITA No. 2/JP/14, dt. 27-7-2017] held that where notice under section 143(2) is not served upon the assessee within the stipulated time period, the consequent order passed cannot be sustained. In that case though the notice under section 143(2) was issued but the same was not served upon the assessee within the stipulated time period however, in our case the notice under section 143(2) was never served upon the assessee.

The Hon’ble ITAT Delhi bench in the case of Dr. S.B. Kalidhar v. ITO [ITA No. 1082/Del/2016, dt. 27-11-2017] has given a finding in favour of the assessee, by placing reliance on the decision of the Hon’ble ITAT, SMC-2, Delhi Bench dated 16-10-2015 passed in ITA Nos. 4171- 4175/Del/2015 ((assessment year 2003-04) in the case of M/s. Meenakshi Aggarwal v. ITO & Ors. (Case laws paper book pages 7-9) in which reliance was placed on the decision of the Hon’ble ITAT, ‘C’ Bench, Bangalore dated 10-10-2014 in the case of Shri GN Mohan Raju v. ITO passed in ITA No. 242 & 243(Bang)2013, wherein it was held as under :–

“7. This brings us to the crux of the issue i.e. whether notices under section 143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified under section 143(2) of the Act. That issue of a notice under section 143(2) of the Act, is mandatory even in a re-assessment proceeding initiated under section 148 of the Act has been clearly laid down by the Hon’ble Delhi High Court in the case of M/s Alpine Electronics Asia PTE Ltd. (supra). Hon’ble Delhi High Court had reached this conclusion after considering the decision of the Hon’ble Apex Court in the case of Hotel Blue Moon (supra). At para-24 of the judgment their Lordship has held that section 143(2) was applicable to a proceedings under sections 147/148 also, since proviso to section 148 of the Act, granted certain specific liberties to the revenue, with regard to extension of time for serving such notices. No doubt, Hon’ble Madras High Court in the case of Areva T and D India Ltd. (supra) had held that issue of notice under section 143(2) was procedural in nature. However, Co-ordinate Bench in the case of M/s Amit Software Technologies (P) Ltd. (supra) after considering the decision of the Hon’ble Madras High Court as well as Delhi High Court had held that section 143(2) of the Act, was a mandatory requirement and not a procedural one.

Once notice under section 148 of the Act, issued to the assessee required it to file a return within 30 days from the date of service of such notice. There is no provision in the Act, which would allow an assessing officer to treat the return which was already subject to a processing under section 143(1) of the Income Tax Act, as a return filed pursuant to a notice subsequently issued under section 148 of the Act. However, once an assessee itself declare before the assessing officer that his earlier return could be treated as filed pursuant to notice under section 148 of the Income Tax Act, three results can follow. Assessing officer can either say no, this will not be accepted, you have to file a fresh return or he can say that 30 days time period being over I will not take cognizance of your request or he has to accept the request of the assessee and treat the earlier returns as one filed pursuant to the notice under section 148 of the Income Tax Act. In the former two scenarios, assessing officer has to follow the procedure set out for a best of judgment assessment and cannot make an assessment under section 143(3). On the other hand, if the assessing officer chose to accept assessee’s request, he can indeed make an assessment under section 143(3). In the case before us, assessments were completed under section 143(3) read with section 147. Or in other words assessing officer accepted the request of the assessee. This in turn makes it obligatory to issue notice under section 143(2) after the request by the assessee to treat his earlier return as filed in pursuance to notices under section 148 of the Income Tax Act was received. This request, in the given case, has been made only on 5-10-2010. Any issue of notice prior to that date cannot be treated as a notice on a return jiled by the assessee pursuant to a notice under section 148 of the Act. Or in other words, there was no valid issue of notice under section 143(2) of the Income Tax Act, and the assessments were done without following the mandatory requirement under section 143(2) of the Income Tax Act. This in our opinion, render the subsequent proceedings all invalid”

In view of above judicial pronouncements, it is submitted that so far as assessee furnished return of income under section 148, learned assessing officer was duty bound to issue notice under section 143(2) of the Act. And the non-issuance of notice under section 143(2) was not a procedural error which could have been corrected in the wake of deeming provisions of sec 292BB of the Act. Thus, in the case of assessee, since no notice was issued under section 143(2), it is prayed that assessment completed under section 143(3)/ 147 deserves to be Quashed

6. On the other hand, the learned. DR has relied on the orders of the authorities below and pleaded that the order of the learned Commissioner (Appeals) may be sustained.

7. The Bench have heard both the sides on this issue and perused the material available on the record. The Hon’ble Delhi High Court in the case ofPr. CIT v. Jai Shiv Shankar Traders (P) Ltd. (2016) 383 ITR 448 (Delhi), in the similar circumstances, has held as under:

“No notice under section 143(2) of the Act was issued to the assessee after 16-12-2010, the date on which the assessee informed the assessing officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Act.

(Para 12)

The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2013) 90 DTR 289 (Mad). The facts of that case were that a notice under section 148 of the Act was issued to the assessee seeking to reopen the assessment for assessment year 2000-01. However, the assessee did not file a return and therefore a notice was issued to it under section 142 (1) of the Act. Pursuant thereto, the assessee appeared before the assessing officer and stated that the original return filed should be treated as a return filed in response to the notice under section 148 of the Act. The High Court observed that if thereafter, the assessing officer found that there were problems with the return which required explanation by the assessee then the assessing officer ought to have followed up with a notice under section 143(2) of the Act.

(Para 17)

As already further noticed, the legal position regarding section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of “service” of notice was concerned and not with regard to failure to “issue” notice. In other words, the failure of the assessing officer, in re-assessment proceedings, to issue notice under section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to section 292BB of the Act.

(Para 18)

The resultant position was that as far as the present case was concerned the failure by the assessing officer to issue a notice to the assessee under section 143(2) of the Act subsequent to 16-12-2010 when the assessee made a statement before the assessing officer to the effect that the original return filed should be treated as a return pursuant to a notice under section 148 of the Act, was fatal to the order of re-assessment.

(Para 19)

Consequently, there was no legal infirmity in the impugned order of the ITAT. No substantial question of law arises. The appeal was dismissed.”

(Para 20)

Thus, the facts of the assessee’s case are similar to the facts of the case involved in the decision of the Hon’ble Delhi High Court wherein it has been categorically held that the issue of notice under section 143(2) in reassessment proceedings, prior to finalizing re-assessment order, cannot be condoned by referring to section 292BB and is fatal to the order of re-assessment. Respectfully following the same, we hereby set aside the order of the authorities below and allow the grounds No. 1 to 4 of the assessee’s appeal.

8. Since we have quashed the reassessment proceedings, therefore, there is no need to adjudicate the issues raised in grounds No. 5 to 9 of the appeal.

9. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 06/02/2018.

Download Judgment/Order

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