Entire reassessment proceeding illegal without issuance of notice u/s. 143(2)

ACIT Vs Suresh Productions (ITAT Hyderabad)

ITAT Hyderabad held that entire re-assessment proceeding is illegal and deserves to be quashed in absence of mandatory issue of notice under section 143(2) of the Income Tax Act.

Facts-

The assessee is a partnership firm engaged in film production. It filed its return on 27.11.2003. The original assessment was completed on 17.11.2005 with an addition of Rs.4,11,133/-. Subsequently, it was noticed that the assessee made a wrong claim to the tune of Rs.1,50,00,000/- emanating from the agreement dated 01.04.2002. Therefore, the assessment was reopened by issue of notice u/s. 148 dated 18.03.2010 which was served on Mr. B.S. Murthy, Manager of the assessee on 26.03.2010.

During the course of re-assessment proceedings, AO noted that the original assessment of the sister concern M/s Suresh Movies Film Distributors (SMFD) was completed u/s.143(3) on 17-11-2005 on a total income of Rs.10,84,870/-. M/s. Suresh productions produced a film called “Nee Premakai” which was released on 01-03-2002. As AO felt that the unpaid amount of Rs.1.50 Crores was not an allowable expenditure, therefore, he disallowed the same in the reassessment proceedings being excess liability claimed towards cost of acquisition of the rights of the exploitation of the film. AO made addition of Rs. 1,50,00,000/- being the difference between the amount offered at Rs.75,00,000/- and the consideration money in the agreement at Rs.2,25,00,000/-.

CIT(A) held that re-assessment proceedings u/s. 147 cannot be sustained. Being aggrieved, revenue has preferred the present appeal.

Conclusion-

The original assessment was completed under Section 143(3) on 17.11.2005 and notice u/s. 148 was issued after a period of 4 years from the end of the relevant A.Y and the reasons recorded nowhere shows any allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, therefore, held that the re-assessement proceedings initiated by the Assessing Officer are not in accordance with law.

The law is well settled that non-issuance of notice u/s. 143(2) of the Act is not a curable defect and since in the instant case, the Assessing Officer has failed to issue the notice u/s. 143(2) prior to finalising the re-assessment order, therefore, the impugned assessment order suffers from patent illegality and therefore, deserves to be quashed.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

ITA No.1429/Hyd/2014 filed by the Revenue is directed against the order dated 31.03.2014 relating to A.Y 2003- 4. The C.O filed by the assessee is directed against the appeal filed by the Revenue vide ITA 1429/Hyd/2014. ITA Nos. 2102 to 2105/Hyd/2018 filed by the assessee are directed against the separate orders dated 1.6.2018 of the CIT (A)-6 Hyderabad relating to the A.Ys 2010-11, 2012-13, 2013-14 & 2014-15 respectively. For the sake of convenience, the above appeals and the Cross objection were heard together and are being disposed of by this common order.

2. There is a delay of 32 days in filing of the cross objection by the assessee for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay which is due to the illness of the father of the assessee due to cancer. After considering the contents of the condonation application filed along with the affidavit and after hearing the learned DR, the delay in filing of the C.O by the assessee is condoned and the same is admitted for adjudication.

ITA No. 1429/Hyd/2014 – A.Y 2003-04 (Revenue)

3. Facts of the case, in brief, are that the assessee is a partnership firm engaged in film production. It filed its return of income on 27.11.2003 declaring total income of Rs. 1,24,22,829/-. The original assessment was completed on 17.11.2005 with an addition of Rs.4, 11,133/-. Subsequently, it was noticed that the assessee made a wrong claim to the tune of Rs. 1,50,00,000/- emanating from the agreement dated 01.04.2002. Therefore, the assessment was reopened by issue of notice u/s 148 dated 03.2010 which was served on Mr. B.S. Murthy, Manager of the assessee on 26.03.20 10. The assessee appeared before the Assessing Officer from time to time and filed the requisite details. Subsequently, in response to letter dated 22.11.2010 by the assessee, the Assessing Officer vide letter dated 23.11.2010, copy of which is filed by the Revenue at page 17 of the Paper Book, supplied the reasons for reopening which are as under:
4. The assessee vide letter dated 23.12.2010 filed its objection against the re-assessment proceedings the sum and substance of which has been reproduced by the Assessing Officer in the body of the assessment order and which reads as under:

5. However, the Assessing Officer was not satisfied with the objection raised by the assessee and rejected the same.

6. During the course of re-assessement proceedings, the Assessing Officer noted that the original assessment of the sister concern M/s Suresh Movies Film Distributors (SMFD in short) was completed U/s. 143(3) on 17-11-2005 on a total income of 10,84,870/-. M/s. Suresh productions produced a film called “Nee Premakai” which was released on 01-03-2002. By agreement dt.01-04.2002, i.e. nearly one month after the release of the film, the rights of the film were acquired by Suresh Movies Film Distributors for a price of Rs.2.25 Crores from Suresh Productions. As per the terms of the agreement an amount of Rs.75 lakhs was to be paid as down payment and the balance of Rs.1.50 cores was to be paid in installments starting with the year ending 31-03-2006 fixing the annual installment at Rs. 15 lakhs. In the P & L account the entire amount of Rs.2.25 crores was claimed by Suresh Movies Film distributors as against payment of Rs.75 lakhs only. As the Assessing Officer felt that the unpaid amount of Rs. 1.50 Crores was not an allowable expenditure, therefore, he disallowed the same in the reassessment proceedings being excess liability claimed towards cost of acquisition of the rights of the exploitation of the film. Being aggrieved against the order M/s. Suresh Movies Film Distributors filed appeal on the effective ground that the learned Assessing Officer erred in rejecting the mercantile system of accounting consistently followed by the assessee and consequently erred in disallowing the expenditure of Rs. 1.50 Crore treating the same as contingent liability though it had accrued in the previous year relevant to the A.Y.2003-04. The appeal was fully allowed accepting the view of Suresh Movies Film Distributors. The Assessing Officer accordingly made addition of Rs. 1,50,00,000/- being the difference between the amount offered at Rs.75,00,000/- and the consideration money in the agreement at Rs.2,25,00,000/-.

7. Before the learned CIT (A), the assessee apart from challenging the addition on merit challenged the validity of the re-assessment proceedings. The learned CIT (A) decided both the issues in favour of the assessee.

7.1. So far as the validity of the re-assessement proceedings are concerned, the learned CIT (A) held that the re-assessement  proceedings u/s 147 cannot be sustained and bad in law by observing as under:

7.2 So far as the addition of Rs. 1.50 crore is concerned the learned CIT (A) also decided the issue in favour of the assessee by observing as under:8. Aggrieved with such order of the learned CIT (A) the Revenue is in appeal before the Tribunal by raising the following grounds:

i) The learned CIT (A) erred in holding the reopening of assessment made by the Assessing Officer is invalid though the assessment was made on receipt of fresh information from re-assessment proceedings of M/s. SMFD a sister concern of the company.

ii) The learned CIT (A) erred in considering the fact that both the companies followed mercantile system of accounting and M/s. SMFD has debited to P&L Account the total consideration as expenditure.

iii) Any other ground that may be argued at the time of hearing”.

9. The assessee has filed the cross objection by taking the following grounds:

“1) a) The learned CIT(Appeals), having allowed the grounds on mercantile system of accounting consistently followed by the assessee, should have also allowed the additional ground that revenue would have to redo/rectify a number of past and future assessments, if the method proposed by Assessing Officer were to be applied. The learned CIT(Appeals) ought to have allowed this ground also.

b) The learned CIT(Appeals) failed to appreciate that the doctrine of approbate and reprobate does not act against law, though employed as such by the Assessing Officer in the impugned reassessment, and consequently the learned CIT(Appeals) did not adjudicate on this additional ground raised before him.

2) For the above grounds and such other grounds that may be urged at the time of hearing, the Respondent prays that the cross objections be allowed.

3) The Respondent craves leave to add to, amend or modify the above grounds of cross objections either before or at the time of hearing of the appeal, if it is considered necessary.”

10. The learned DR strongly challenged the order of the learned CIT (A) in quashing the re-assessment proceedings as well as deleting the addition on merit. So far as the order of the learned CIT (A) quashing the re-assessement proceedings are concerned, the learned DR submitted that the reopening had been made on the basis of receipt of fresh information during the re­-assessement proceedings of M/s. SMFD, a sister concern of the assessee company. Therefore, the order of the learned CIT (A) quashing the re-assessement proceedings is not in accordance with law. He submitted that when both the companies are following mercantile system of accounting and SMFD has debited the entire expenditure in its P&L account therefore, M/s. Suresh Productions, i.e. the assessee should have also shown the entire amount during the impugned A.Y instead of spreading it over a number of years. He accordingly submitted that the order of the learned CIT (A) being contrary to fact and law should be reversed and that of the Assessing Officer be restored. He also relied on the decision of the Tribunal in the case of FRAICIS JOSEPH vs. Income Tax Officer (64 ITD 456) (Mad.)

11. The learned counsel for the assessee on the other hand while supporting the order of the learned CIT (A) submitted that the assessee is a partnership firm and entered into an agreement at Chennai on 1.4.2002 with M/s. Suresh Movies Film Distributors (SMFD). He submitted that a copy of this agreement was filed during the course of assessement proceedings for the A.Y 2003-04. This copy of the agreement was also given in the proceedings of the sister concern i.e. SMFD and the Assessing Officer assessing both the entities is the same. Referring to page No.359 of the Paper Book (Vol. III), he submitted that the assessment order u/s 143(3) in case of both the entities by the same Assessing Officer were passed on 17.11.2005. He submitted that in accordance with the agreement dated 1.4.2002 M/s. Suresh Productions was holding the exhibition and exploitation rights of the movie “NEE PREMAKAI”. He submitted that M/s. Suresh Productions assigned the rights of the movie for exhibition of the film in the entire state of A.P. for a period of 5 years from 1.4.2002 while the terms of the payment was extended to 15 years. He submitted that in consideration of the assignment by Suresh Productions, M/s. SMFD agreed to pay a sum of Rs.2,25,00,000/- as consideration in the following manner.

12. He submitted that in accordance with the aforesaid agreement, the assessee in its books of account reflected a sum of Rs.75.00 lakhs as its receipts on assignment and the balance instalment of Rs. 15.00 lakhs per annum was reflected in the subsequent A.Y from 2004-05 to 20 17-18. Thus, the entire receipts were assessed on deferral basis as on date. However, SMFD claimed the entire amount of Rs.2.25 crores being the amount paid by SMFD to SP as business expenditure under Rule 9-B/A of the I.T Rules, 1962 and u/s 37 of the I.T. Act, 1961 as per the method of accounting followed by it.

13. Referring to copy of the assessment order passed u/s 143(3) in the case of the assessee on 17.11.2005, he drew the attention of the Bench to para 2 of the assessment order where the Assessing Officer has mentioned as under:

“2. In response to the above notices, the assessee’s A.R Shri K. Srinivasa Rao, C.A appeared and furnished the books of account, vouchers for expenses, purchase agreement of the movies, confirmation of unsecured loans, copies of agreements with distributors, details of bad debts etc., and information called for. The above information has been examined and the case is heard”.

14. He submitted that the Assessing Officer on the basis of various details filed along with the P&L Account, balance sheet and annexures etc. completed the assessment on a total income of Rs. 1,28,33,970/-. Thus, there was full disclosure made by the assessee of the entire agreement and also trading account. Further, during the course of assessement proceedings, a detailed questionnaire was issued by the Assessing Officer to the assessee on 11.11.2005 prior to completion of the assessment on 17.11.2005 u/s 143(3) of the Act. Referring to the questionnaire, copy of which is placed at Page 1 & 2 of the Paper Book filed by the Revenue, he drew the attention of the Bench to the various information called for. Referring to the reply of the assessee, details of which are placed at page 3 to 43 of the Paper Book filed by the Revenue, he submitted that full details were given and the Assessing Officer after examination of the agreement and the various replies given in response to the questionnaire had completed the assessment in case of the assessee u/s 143(3) on 17.11.2005 accepting the disclosure of down payment of Rs.75.00 lakhs being the amount received from SMFD. Relying on various decisions, he submitted that when there was full disclosure of all material facts necessary for completion of assessment, the re­assessement proceedings were initiated beyond a period of 4 years from the end of relevant A.Y and there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, then such reassessment proceedings are not in accordance with law in view of the first proviso to section 147 of the I.T. Act

15. Referring to the copy of the order passed u/s 143(3) r.w.s. 147 in case of SMFD for the A.Y 2003-04, he submitted that the Assessing Officer had reproduced clause 2 , 3 and 4 of the agreement dated 1.4.2002. While completing the re-assessement  proceedings in case of SMFD, the Assessing Officer has upheld the method of accounting followed by the assessee which is in conformity with clause 2, 3 and 4 of the agreement and has held that the argument of SMFD is neither supported by the agreement nor by the entries in the books of account of the seller. Referring to the reasons recorded by the Assessing Officer for reopening of the assessment u/s 147 both in the case of SP and SMFD, he submitted that the reasons clearly show that there has been flipflop by the Department. He submitted that the Revenue on one hand says that the claim of SMFD of the entire expenditure was wrong as stated in the re-assessement order passed in the case of SMFD, whereas the Assessing Officer, who happens to be the same for both the entities, has emphatically stated that the method of accounting followed by SP by reproducing relevant clauses is correct. In view of the above, he submitted that the entire recording of reasons for re-assessment proceedings are not in accordance with law.

16. The learned Counsel for the assessee further submitted that in the case of SMFD, the Assessing Officer made addition of Rs.1,50,00,000 in the order passed u/s 143(3) r.w.s. 147 of the Act on 31.12.2008 and the assessee preferred an appeal before the learned CIT (A) who vide order dated 20.03.2009 (pages 364 to 368 of the Paper Book) deleted the addition of Rs. 1,50,00,000/-. The Revenue preferred an appeal against the order of deletion of Rs. 1.50 cores and the Tribunal vide order dated 24.5.20 13 restored the issue back to the file of the learned CIT (A) to go through the assessment record and give a finding as to whether the Assessing Officer, while completing the original assessment, has inquired into the purchase of the rights of the film “NEE PREMAKAI” and whether he has examined the assessee’s letter dated 17.11.2005 and the agreement between the assessee and SP. However, till 16.8.2023 this direction has not been carried out by the learned CIT (A).

17. The learned Counsel for the assessee submitted that the learned CIT (A)-A.P- 1 Hyderabad in the proceedings u/s 263 dated 3.3.1998 (page 379 of Paper Book Vol. III) in the case of SMFD on similar issue held that the entire cost of royalty which was claimed as deduction at Rs. 1,30,00,000/- was not deductible and what was deductible was only annual royalty of 6,50,000/- in accordance with the agreement dated 2.4.1992 between SP and SMFD in respect of the film “Surigadu”. He submitted that this method of accounting was followed right from the year 1992. He submitted that the assessee filed its objection in the 263 proceedings vide letter dated 7.3.1998 (page Bos. 379- 380 of the Paper Book) and the proceedings u/s 263 were dropped. He submitted that proceedings u/s 154 were also initiated by the Dy. CIT (assessments), Special Range-3, Hyderabad vide notice dated 12.12.1996 in the case of SMFD to which the assessee filed detailed objections vide letter dated 18.12.1996 objecting to 154 proceedings. Referring to page 382 and 383 of the Paper Book, he submitted that the proceedings u/s 154 were also dropped.

18. The learned Counsel for the assessee referring to Paper Book page 15 filed by the Revenue, submitted that the assessee vide letter dated 5.4.20 10 had requested the Assessing Officer to treat the return already filed originally as return in response to notice u/s 148. He submitted that the learned CIT (A) at page 44 of his order at Para 7 held that the notice of reopening was not served properly, the assessement proceedings were conducted without issuing the mandatory notice as required u/s 143(2) and without passing a speaking order against the objections filed for reopening. However, these were not challenged by the Revenue and his findings were accepted. He accordingly submitted that the reopening of the assessment was rightly quashed by the learned CIT (A).

19. So far as the decision relied on by the learned DR in the case of FRAICIS JOSEPH vs. Income Tax Officer (64 ITD 456) (Mad.) is concerned, he submitted that the said decision is distinguishable and not applicable to the facts of the present case. He submitted that in that case the entire interest income was assessed on accrual basis in the firm’s assessment u/s 143(3) and it was not a case of re-opening of assessment. Therefore, consequence of change of opinion did not arise.

20. So far as the merit of the case is concerned, he submitted that the assessee is following the method of deferral accounting since last so many years and there is no change in the The same facts are permeating through all the A.Ys without any change and therefore, on the principle of consistency the balance of Rs. 1,50,00,000/-, which is receivable at the rate of Rs. 15.00 lakhs per year, has been fully taxed in the A.Ys from 2006-07 to 2017-18 on deferral basis. Thus, the gross amount of Rs.2,25,00,000/- has been fully taxed. Further, the same method of accounting was followed by the assessee for other A.Ys also in respect of other films on the same model of agreement. Thus, the learned CIT (A) was also fully justified in deleting the addition.

20.1. He submitted that since the rate of tax is same, whether it is assessed in the relevant year or previous year or subsequent year, no prejudice is caused to the Department as the entire sum of Rs. 1,50,00,000/- has been taxed on deferral basis over a period of time. For the above proposition, the learned Counsel for the assessee relied upon the following decisions:

i) CIT vs. Nagari Mills Co. Ltd (33 ITR 681) (Bombay)

ii) Berger Paints India Ltd (266 ITR 99) (pages 103-104) (S.C)

iii) PCIT v. Rajesh Prakash Timblo (2019 (415 ITR 334) (Bombay)

iv) CIT vs. Excel Producer Ltd (358 ITR 295).(S.C)

21. The learned DR in his rejoinder submitted that the question of issue of notice u/s 143(2) does not arise since the assessee failed to submit the return of income in response to notice u/s 148 of the I.T. Act. Further, the re-assessment proceedings initiated by the Assessing Officer are in accordance with law and therefore, the observation of the learned CIT (A) that there was no service of notice u/s 143(2) for which the re­assessement proceedings can be held as bad in law is not He accordingly submitted that the order of the learned CIT (A) be reversed and that of the Assessing Officer be reversed.

22. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the Assessing Officer while doing the re-assessement proceedings in the case of SMFD noted that SMFD had acquired the rights of the film called “NEE PREKAMAI” for a price of Rs.2.25 crores from SP i.e. the assessee. As per the terms of the agreement, an amount of Rs.75.00 lakhs was to be paid as down payment and the balance of Rs. 1.25 crores was to be paid in instalments starting with the year ending 31.3.2006 fixing the annual instalment at Rs. 15.00 lakhs. While the entire amount of Rs.2.25 crores was claimed as expenditure by SMFD in their P&L account being the cost of the film, however, the assessee has shown only an amount of Rs.75.00 lakhs which was received during the year. He, therefore, after recording the reasons, which are already reproduced in the preceding paragraph, reopened the case of the assessee u/s 147 of the Act and issued notice u/s 148 on 18.03.2010. We find the learned CIT (A) quashed the re­assessement proceedings and deleted the addition on merit, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned DR that when the assessment was reopened on the basis of receipt of fresh information while doing the re-assessement proceedings of SMFD, a sister concern of the assessee, the learned CIT (A) is not justified in holding that the reopening of the assessment made by the Assessing Officer is invalid. It is also his submission that when both the companies are following the mercantile system of accounting and SMFD debited an amount of Rs.2.25 crores as its expenditure in the P&L Account, it is but natural that the assessee also should have shown the entire amount of Rs.2.25 crores as its income. However, the assessee has shown only Rs.75.00 lakhs and therefore, the order of the learned CIT (A) deleting the addition of Rs. 1.50 crores is not correct. It is the submission of the learned Counsel for the assessee that when the original assessment was completed u/s 143(3) and all material facts necessary for completion of the assessment were filed during the course of original assessement proceedings and there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, therefore, in view of the first proviso to section 147 of the I.T. Act, 1961, the re-assessement proceedings initiated by the Assessing Officer are not in accordance with law and therefore, the learned CIT (A) was fully justified in quashing the re-assessement proceedings. It is also his argument that in absence of mandatory issue of notice u/s 143(2), the entire re-assessement proceedings have to be quashed. Even on merit also, it is the submission of the learned Counsel for the assessee that the assessee is following the system of accounting in conformity with the terms of agreement for sale of the film production/distribution rights/royalty which were accepted by the Revenue and the entire amount of Rs.2.25 crores have been offered to tax on deferral basis and therefore, there is no loss to the Revenue. Therefore, it is his argument that in view of the rule of consistency, the learned CIT (A) was justified in deleting the addition of Rs. 1.5 crores made by the Assessing Officer.

23. We find force in the argument of the learned Counsel for the assessee on the issue of validity of the re-assessement proceedings. The reasons recorded by the Assessing Officer for reopening of the assessment, which has been provided to the assessee by the Assessing Officer and a copy of which was filed by the Revenue does not speak of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the original assessment made on 17.11.2005. A perusal of the original assessment order dated 17.11.2005 shows that the Assessing Officer at para 2 of the order has categorically mentioned that the A.R of the assessee Shri K. Srinivasa Rao, CA appeared and furnished the books of account, vouchers for expenses, purchase agreement of the movies, confirmation of unsecured loans, copies of agreements with distributors, details of bad debts etc., and information called for. The copy of the agreement between the assessee and M/s. SMFD was also produced at the time of original assessment proceedings. The Assessing Officer after due application of mind has completed the assessment u/s 143(3) on 17.11.2005. It is also an admitted fact that the Assessing Officer of SMFD and the assessee are one and the same and the order u/s 143(3) in case of SMFD was also passed on 17.11.2005, copy of which is available at page 359 of the Paper Book (Vol. III). It is also an admitted fact that M/s. SMFD vide its letter dated 17.11.2005 filed a copy of the agreement of film “NEE PREMAKAI” which is available at page 359 of the paper book (Vol. III). Thus, the assessee, in our opinion, has made full disclosure of the entire agreement and the trading account filed was also accepted by the Assessing Officer. Further, the questionnaire issued by the Assessing Officer was also replied by the assessee and after going through the copy of the agreement and other details, the Assessing Officer passed the order u/s 143(3) on 17.11.2005 accepting the down payment of Rs.75.00 lakhs being the amount received from SMFD. Under these circumstances when the original assessment order was passed u/s 143(3) on 17.11.2005 and the case was reopened on 26.3.20 10 which is beyond a period of 4 years from the end of the relevant A.Y, the first proviso to section 147 of the I.T. Act would be applicable especially when there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment.

24. We find the Hon’ble Supreme Court in the case of Commissioner of Income-Tax vs. Foramer France reported in 264 ITR 566 has held that where there is no failure on the part of the assessee to disclose all material facts, the re-assessement proceedings after the expiry of 4 years is not possible in view of section 147 of the I.T. Act.

25. We find the Hon’ble Bombay High Court in the case of Jet Air (P) Ltd vs. DCIT vide W.P No.3446 of 2022 order dated 3.2023 has held the initiation of re-assessement proceedings as invalid since there was no failure on the part of the assessee to disclose any material facts. We find the Hon’ble Delhi High Court in the case of PCIT vs. DSC Ltd vide ITA No.546/2019 order dated 18.7.2023 has held that the reopening of assessments u/s 147 requires a specific allegation of non-disclosure of material facts by the taxpayer. Without such an allegation, the re-assessement proceedings are not valid.

26. In view of the above discussion and considering the fact that the original assessment was completed u/s 143(3) on 17.11.2005 and notice u/s 148 was issued after a period of 4 years from the end of the relevant A.Y and the reasons recorded nowhere shows any allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, therefore, relying on the decisions cited (Supra) we hold that the re-assessement proceedings initiated by the Assessing Officer are not in accordance with law. We therefore, uphold the order of the learned CIT (A) in quashing the re-assessement proceedings.

27. Even otherwise also, we find no notice u/s 143(2) has been issued to the assessee, a finding given by the learned CIT (A) and not controverted by the Revenue. A perusal of page 15 of the Paper Book filed by the Revenue shows that the assessee vide letter dated 5.4.2010 had stated before the Assessing Officer to treat the return already filed originally may be treated as return filed in compliance to notice u/s 148. The assessee while asking for the reasons for initiation of proceedings u/s 148 vide letter dated 22.11.2010 had written to the Assessing Officer as under:

27.1 Thus, the contention of the learned DR that the assessee has not filed any return in response to notice u/s 148 and therefore, there is no requirement of issuance of notice u/s 143(2) is not correct. It has been held in various decisions that without issuance of mandatory notice u/s 143(2) of the Act, the Assessing Officer cannot assume jurisdiction to complete the re­assessement proceedings u/s 143(3) r.w.s. 147 of the Act. For the above proposition, we rely on the decision of the Hon’ble Bombay High Court in the case of ACIT vs. Geno Pharmaceuticals Ltd reported in 32 Taxmann.com 162 and the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Sri Jai Shiv Shankar Travels (P) Ltd reported in (2015) 64 Taxmann.com 220. Since the law is well settled that non-issuance of notice u/s 143(2) of the Act is not a curable defect and since in the instant case, the Assessing Officer has failed to issue the notice u/s 143(2) prior to finalising the re-assessment order, therefore, the impugned assessment order suffers from patent illegality and therefore, deserves to be quashed. It is pertinent to mention here that although the learned CIT (A) while passing the re-assessments proceedings has also mentioned that the assessment order is bad in law in absence of issuance of mandatory notice u/s 143(2), we find the Revenue, for whatever reasons, has not challenged this findings of the CIT (A) in the grounds of appeal raised by them. In view of the above discussion, we uphold the order of the learned CIT (A) in quashing the re-assessement proceedings. Since the re­assessement proceedings are quashed, the ground raised by the Revenue challenging the order of the learned CIT (A) in deleting the addition on merit become academic in nature and therefore, the same is not being adjudicated. The grounds raised by the Revenue are accordingly dismissed.

C.O No 78/Hyd/2014 (Assessee)

28. After hearing both the sides and in view of our discussions in ITA No. 1429/Hyd/2014, wherein we have dismissed the appeal filed by the Revenue, the grounds raised by the assessee in the C.O become infructuous and accordingly the same are dismissed.

ITA No.2102/Hyd/2018 – A.Y 20 10-11

29. The grounds raised by the assessee are as under:

30. Facts of the case, in brief, are that the assessee filed its return of income on 14.10.2010 admitting total income of Rs. 1,74,32,653/-. The assessee during the course of assessement proceedings submitted the following in respect of Royalty as under:31. However, the Assessing Officer rejected the submissions of the assessee on the ground that the assessee has filed an appeal against the additions made in the earlier years and the issue has not yet been crystallized.

32. In appeal, the learned CIT (A) dismissed the appeal filed by the assessee by observing as under:

33. Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.

34. We have heard the rival arguments and perused the We find the learned CIT (A) has given a categorical finding that on the basis of the CIT (A)’s order favouring the stand of the assessee, the Assessing Officer has revised the assessment orders by deleting the additions made by the Assessing Officer in the respective A.Ys and the assessee has also reiterated the same in the written submissions during appeal proceedings. He has also given a finding that by claiming reduction from its returned income, the assessee is claiming double benefits. The learned Counsel for the assessee could not controvert the above findings of the learned CIT (A). Accordingly, the grounds raised by the assessee are dismissed.

35. In the result, appeal filed by the assessee is dismissed.

ITA No 2103/Hyd/2018 – A.Y 2012-13

36. Grounds of appeal 1 & 2 raised by the assessee read as under:37. After hearing both sides, we find the assessee filed its return of income on 30.09.2012 for the A.Y 2012-13 declaring total income of Rs.34,05,512/-. During the course of assessement proceedings, the Assessing Officer noted that the assessee has received dividend of Rs. 10,44,086/- and claimed the same as The Assessing Officer asked the assessee to explain as to why disallowance in accordance with provisions of section 14A r.w. rule 8D should not be made being expenditure incurred for earning tax free income. The assessee submitted that no expenses are incurred in realizing exempt income and therefore, no expenditure is liable to be disallowed under the second limb of Rule 8D.

37.1 However, the Assessing Officer rejected the contention of the assessee and made disallowance of Rs.2,47,2 12/- u/s 14A of the Act. While doing so, he noted that the assessee has shown investment to the tune of Rs.6,07,69,338/- in shares in the balance sheet and has shown dividend income of Rs. 10,44,086/- in the P&L Account. Further, the volume of transaction in respect of investment is considerably large. According to the Assessing Officer, some expenditure is necessarily required to be incurred in order to maintain and manage such investment.

38. In appeal, the learned CIT (A) upheld the action of the Assessing Officer.

39. Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.

40. At the time of hearing, the learned Counsel for the assessee could not point out any mistake in the order of the learned CIT (A) while confirming the disallowance of Rs.2,47,212/- made by the Assessing Officer u/s 14A r.w. rule 8D(iii) of the I.T. Act. In absence of any distinguishable feature brought to our notice against the order of the learned CIT(A), we do not find any merit in the grounds raised by the assessee on this issue. Accofrdingly, these grounds are dismissed.

41. Grounds 3 to 5 raised by the assessee read as under:42. After hearing both sides, we find the above grounds are identical to ground of appeal in ITA No.2 102/Hyd/2018 for the A.Y 2010-11. We have already decided the issue and the grounds raised by the assessee have been dismissed. Following similar reasonings, these grounds raised by the assessee are dismissed.

43. In the result, appeal filed by the assessee is dismissed.

ITA No.2104/Hyd/2018 – A.Y 2013-14

44. Revised grounds of appeal Nos. 1 to 3 raised by the assessee reads as under:45. The learned Counsel for the assessee did not press the above grounds because of the smallness of the amount. Accordingly, these grounds are dismissed.

46. Grounds 4 to 6 raised by the assessee reads as under:47. After hearing both sides, we find the above grounds are identical to the grounds of appeal 1 to 3 in ITA No.2 102/Hyd/ 2018 for the A.Y 2010-11. We have already decided the issue and the grounds raised by the assessee have been dismissed. Following similar reasonings, these grounds raised by the assessee are dismissed.

48. In the result, the appeal filed by the assessee is dismissed.

ITANo.2105/Hyd/2018 – A.Y 20 14-15

49. Revised grounds of appeal No.1 & 2 read as under:50. The learned Counsel for the assessee did not press the above grounds because of the smallness of the amount. Accordingly, the above grounds are dismissed.

51. Grounds of appeal No.3 to 5 by the assessee are as under:52. After hearing both sides, we find the above grounds are identical to the grounds of appeal 1 to 3 in ITA No.2 102/Hyd/ 2018 for the A.Y 2010-11. We have already decided the issue and the grounds raised by the assessee have been dismissed. Following similar reasonings, these grounds raised by the assessee are dismissed.

51. Ground of appeal No.6 raised by the assessee reads as under:

“9. The learned CIT (A) ought to have clearly held that the appellant was entitled to the full credit of the TDS amounts while the income on Fixed Deposits was taxed in the hands of the Appellant”.

54. After hearing both sides, we find the Assessing Officer did not allow credit for full amount of TDS and more specifically with regard to TDS on interest on FDs held by the assessee firm with Bank of Baroda. Before the learned CIT (A) it was submitted that the FDs were made in the name of one of the partner Shri D. Suresh Babu, therefore, the TDS deducted by the bank is not reflected in Form 26AS of the assessee but reflected in the name of Shri D. Suresh Babu. However, the interest income has been declared for the impugned A.Y. It was submitted that Shri D Suresh Babu admitted the interest income in his return of income filed. It was accordingly argued that the same should be an allowable credit. We find the learned CIT (A) after thoroughly analysing the issue held that although prima facie the assessee is entitled to claim credit for TDS to the extent of Rs.5,00, 188/- but is required to obtain relevant TDS certificate from the deduct or i.e. Bank of Baroda to enable it to avail such credit from the I.T. Department. Accordingly, he directed the Assessing Officer to allow the credit only after fulfilment of the statutory requirement as envisaged u/s 199 r.w. proviso below sub-rule (2) of Rule 37BA of the Rules. We do not find any infirmity in the order of the learned CIT (A) in absence of any distinguishable features brought to our notice by the learned Counsel for the assessee. Accordingly, this ground raised by the assessee is dismissed.

55. In the result, the appeal filed by the Revenue as well as all the appeals and C.O filed by the assessee are dismissed. Order pronounced in the Open Court on 11^th October, 2023.