Pankaj Dutta Vs ITO (ITAT Kolkata)
Issuance and service of notice under section 143(2) is mandatory and not procedural. If the notice is not served within the prescribed period, assessment framed would be invalid and such irregularity cannot be treated as curable under section 292BB.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is an appeal filed by the assessee directed against the order of Commissioner (Appeals) Durgapur dated 31-8-2016 for the assessment year 2009-10.
2. The assessee has filed an additional ground of appeal which reads as follows:
“Because that the learned Income Tax Officer was erred in law as well as in facts in passing of the order under section 147/143(3) dated 30-3-2015 without issue of the statutory notice under section 143(2) of the Income Tax Act, 1961 and as such his reassessment order is not good in law and void abinitio.
3. As this is a legal ground, challenging the jurisdiction of the assessing officer. As all the facts required to adjudicate this grounds are available on record, I admit this additional ground by following the judgment of the Hon’ble Supreme Court in the case of NTPC Ltd.
4. After hearing rival contentions perusing the papers on record and order of the authorities below, I hold as follows.
5. I have perused the assessment record produced by the learned Departmental Representative. On perusal of the order sheet entries made from 20-3-2014, it is clear that no notice under section 143(2) of the Income Tax Act, 1961 (Act) was issued to the assessee. The submission of the learned Departmental Representative that the assessee did not file a return of income and hence no notice is required to be issued under section 143(2) of the Income Tax Act, 1961 (Act) is factually incorrect. The assessee had filed its return of income. On these facts the proposition of law is brought out by the ‘SMC-2’, Bench, New Delhi, in the case of Ms. Meenakshi Aggarwal, ITA No. 4171/Del/2015 order dated 16-10-2015 wherein at para 4 and 5 it is held as follows:
4. On this factual matrix, I find that the issue is squarely covered in favour of the Assessee and against the Revenue. The ITAT, ‘C’ Bench, Bangalore in its order dated 10-10-2014 in the case of Shri G.N. Mohan Raju v. ITO passed in ITA No. 242 & 243(Bang) 2013 (A.Yrs 2006-07 & 2007-08), has been held as follows:
7. This brings as 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 reassessment 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., 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 section 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, Coordinate Bench in the cases of M/s. Amit Software Technologies Pvt. 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. Of course, in the case before us a notice under section 143(2) of the Act has been issued to the assessee, but on the date when such notice was issue viz., 23-9-2010 assessee had not filed any return pursuant to the reopening notice under section 148 of the Act. First instance when the assessee requested the assessing officer to treat the returns originally filed by it as returns filed pursuant to the notices under section 148 of the Act, was on 5-10-2010 which is clear from the narration in the order sheet which is reproduced here under:
Sri M. Srinivas Rao Mannan, CA appeared in response to notices issued under section 143(2) & 142(1) and requested that the return of income filed originally shall be treated as return of income filed in response to notice under section 148. He has been asked to explain as to why a sum of Rs. 1,00,00,000 (Rs. One Crore) received from Wifi Networks Pvt. Ltd. should not be treated as revenue receipt and taxed accordingly. The case is posted for final hearing on 20-10-2010 at 3.30 pm. No further adjournment will be granted. If no compliance is forthcoming on that day, assessment will be completed bringing to tax Rs. 1.00 (Rs. One Crore) as revenue receipt as per the provisions of section 28 (va) of the Act.
8. A look at section 143(2) is called for at this juncture. It is reproduced hereunder:
143(2) where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the assessing officer shall-
(i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: (Provided that no notice under this clause shall be served on the assessee on or after the 1-6-2003).
(ii) notwithstanding anything contained in clause (1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid his tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his officer or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return. (Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished).
Once the original return filed by the assessee was subject to processing under section 143(1) of the Act, procedure of assessment pursuant to such a return, in our opinion come to an end, since assessing officer did not issue any notice within the 6 months period mentioned in proviso to section 143(2)(ii). No doubt, if the income has been understated or the income has escaped assessment, on assessing officer is having the power to issue notice under section 148 of the Income Tax Act. 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 on 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 filed 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. Learned Commissioner (Appeals) had only adjudicated on a position where there was no service of notices under section 143(2) of the Income Tax Act. He had not dealt with the scenario, where notice was issued prior to the filing of return by the assessee. We, therefore, quash the assessment done for the impugned assessment years. Since the appeals of the assessee are allowed on its ground 3, other grounds are not adjudicated.
ITAT, ‘E’ Delhi Bench decision dated 8-4-2015 passed in the case of ITO v. Naseman Farms Pvt. Ltd. & Ors. In ITA No. 1175/Del/2011 (AY 2002-13) wherein the Tribunal has followed the decision of the Apex Court in the case of ACIT v. Hotel Blue Moon (2014) 321 ITR 362 (SC). The Tribunal has held as under:
15. In the light of the above, we are of the view that the assessing officer has not issued notice under section 143(2) which is mandatory. We are also of the view that in completing the assessment under section 148 of the Act, compliance of the procedure laid down under section 143 and 143(2) is mandatory. As per record, we find that there was no notice issued under section 143(2) of the Act which is very much essential for reassessment and it is a failure on the part of the assessing officer for not complying with the procedure laid down in section 143(2) of the Act. If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of the law and deserves to be cancelled. In view of above facts and circumstances of the present case, the issue in dispute raised in additional ground relating to non issue of the mandatory notice under section 143(2) of the Act is decided in favour of the assessee and we hold that the impugned assessment order dated 31-12-2009 passed under section 147/143(3) of the Act by the assessing officer as invalid. Our view is supported by the various judgments of the Hon’ble Supreme Court and Hon’ble Jurisdictional High Court. The relevant portion of the head notes of various judgments of the Hon’ble Courts are reproduced as under:
ACIT & Anr. v. Hotel Blue Moon: ((2010) 321 ITR 362 (SC))
HELD: It is mandatory for the assessing officer to issue notice under section 143(2). The issuance and service of notice under section 143(2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid Reassessment—–Notice—–Assessee intimating original return be treated as fresh return—-Reassessment proceedings completed despite assessee filing affidavit denying serviced of notice under section 143(2)—- assessing officer not representing before Commissioner (Appeals) that notice had been issued—–Reassessment order invalid due to want of notice under section 143(2)—-Income Tax Act, 1961, sections 143, 147, 148(1) prov—- ITO v. R.K. Gupta (2009) 308 ITR 49 (Del-Trib).
CIT v. Vishu & Co. Ltd. In ITA No. 470 of 2008 (2010) 230 CTR (Del) 62
Assessment-validity-Non Service of notice under section 143(2) within time-Notice served on the last date after office hours by affixture as no authorized person was present at assessee’s premises-is not a valid service of notice-Assessment framed in pursuance of such notice is not valid-It is immaterial that the assessee appeared in the proceedings.
CIT v. Cebon India Ltd. (2012) 347 ITR 583 (P&H)
6. We find that the concurrent finding has been recorded by the Commissioner (Appeals) as well the tribunal on the question of date of service of notice. Notice was not served within the stipulated time. Mere giving of dispatch number will not render the said finding to be perverse. In absence of notice being served, the assessing officer had no jurisdiction to make assessment. Absence of notice cannot be held to be curable under section 292BB of the Act.
CIT v. Mr. Salman Khan, ITA No. 508 of 2010
1. In the present case, reassessment order passed under section 143(3) row with 147 of the Income Tax Act, 1961 is held to be bad in law in view of the fact that the assessing officer has not issued notice under section 143(2) after issuing notice under section 148 of the Income Tax Act, 1961. This Court in the case of the CIT Viz. Mr. Salman Khan (Income Tax Appeal No. 2362 of 2009) decided on 1-12-2009 has considered similar question and has held that in the absence of notice under section 143(2) (prior to the insertion of section 292BB), the reassessment order cannot be sustained. In the present case, the reassessment year involved relates to the period prior to the insertion of section 292BB. In this view of the matter, the appeal is dismissed with no order as to costs.
DCIT v. M/s. Silver Line, ITA No. 1809, 1504, 1505 & 1506/Del/2013
vii. The Hon’ble ITAT of Agra Bench, in the case of ITO v. Aligarh Auto Centre reported in (2013) 152 TTJ (Agra) 767, on an identical issue that of the present issue, has recorded its findings as under:
5. We have considered the rival submissions and the material on record. It is not in dispute that the assessee filed original return of income and at the reassessment proceedings, the assessee contended before the assessing officer that the original return filed earlier may be treated to have been filed in response to the notice under section 147, which is also supported by order sheet entry dated 9-8-2006 (PB-20). It is also not in dispute that assessing officer never issued any notice under section 143(2) of the Act. The Revenue merely contended that the Commissioner (Appeals) should have appreciated the provisions of section 292BB of the Income Tax Act. Section 292BB of the Income Tax Act provides as under:
292BB. Where an assessee has appeared in any proceeding or cooperated 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.
The above provision has been inserted by the Finance Act, 2008 with effect from 1-4-2008. ITAT, Delhi Special Bench in the case of Kuber Tobacco Product Pvt. Ltd. v. DCIT (2009) 117 ITD 273 held that section 292BB has been inserted by Finance Act, 2008, has no retrospective effect and is to be construed prospectively. The assessment order under appeal is 2001-02. Therefore, the provision of section 292BB of the Income Tax Act would not apply in the case of the assessee. Further, no notice under section 143(2) has been issued or served upon the assessee. Therefore, the decision of Hon’ble Punjab & Haryana High Court in the case of Cebon India Ltd. (supra) squarely applies against the revenue. It was held in this case that absence of notice is not curable defect under section 292BB of the Income Tax Act. Considering the above discussion and the case laws cited above, the sole objection of the Revenue is not maintainable. Therefore, the learned Commissioner (Appeals) was justified in setting aside the entire assessment order. We, therefore, do not find any infirmity in the order of the learned Commissioner (Appeals) for interference.
(v) The Hon’ble Mumbai Bench of the ITAT has, in the case of Sanjeev R Arora v. ACIT (IT (SS) No. 103/Mum/2004 dated 25-7-2012) recorded its findings as under.
Even the irregularity in proper service of notice which can be treated as curable under section 292BB of the Income Tax Act is only in the cause where the notice under section 143(2) was issued properly and within the period of limitation and the assessee did not raise any objection regarding the service of the notice during the assessment proceedings and also participated in the assessment proceedings then at a later stage the assessee is precluded from raising such objection. Therefore, the provisions of section 292B are not applicable in the case where the assessing officer has not at all issued notice under section 143(2) within the period as prescribed.
7.9. Taking into account the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in view of the judicial pronouncements (supra), we are of the view that the reassessment’s made for the assessment years under consideration have become invalid for not having served the mandatory notice under section 143(2) of the Act on the assessee. It is ordered accordingly.
7.10. We have since decided that the reassessment proceedings concluded under section 147 row with 143(3) of the Act were invalid for the assessment years under dispute, the issues raised by the revenue in its appeals and also the Cross-objections of the assessee firm based on the invalid assessment orders have not been addressed to.
16. In the backdrop of the aforesaid discussions and precedents relied upon, we find that the assessing officer has not issued the notice under section 143(2) of the Act in this case before completing the scrutiny assessment, therefore the impugned assessment order before us is invalid, void abnitio and so the impugned order is not sustainable in the eyes of law and hence, we cancel the same by allowing the additional ground raised in the cross objection filed by the assessee on this issue.
17. In the result, the cross objection filed by the assessee is allowed. Since the assessment order is held to be void abnitio, the other grounds raised by the assessee in the cross objection have become academic in nature, hence, the same are not being adjudicated upon.
5. Respectfully following the decision of the Coordinate Bench, I hold that the non-issue of notice under section 143(2) after filing of the return of the assessee, by way of letter, makes the assessment order passed under section 143(3) row with section 147 bad in law. Hence, I quash the same and allow the ground of appeal in favour of the assessee. Since I have already quashed the assessment proceedings on this jurisdictional ground. I do not deem it necessary to adjudicate the other grounds raised by the assessee on the non-service of the Notice under section 148 etc. as it would be an academic exercise.
6. The facts in all the appeals listed above, admittedly, are the same. Hence, I told that the assessment under passed in all the cases are bad in law and without jurisdiction and no notice under section 143(2) of the Act was served on the assessee after the filing of the ROI by way of letter by the assessee.
7. In the result all the appeals filed by the assessee are allowed.”
6. Respectfully following the propositions of law laid down in various case laws cited in this Tribunal order referred above, I hold that the assessment made in this case as bad in law. Hence the same is quashed.
7. In the result, the appeal of the assessee is allowed.
Order Pronounced in the Open Court on 17th November, 2017.