Case Law Details

Case Name : ACIT Vs M/s. Sukhamani Cotton Industries (ITAT Indore)
Appeal Number : ITA No. 222/Ind/2017
Date of Judgement/Order : 21/12/2018
Related Assessment Year : 2011-12
Courts : All ITAT (6229) ITAT Indore (49)

ACIT Vs M/s. Sukhamani Cotton Industries (ITAT Indore)

Conclusion: Reassessment order passed u/s 147 r.w.s 143(3) by issuing notice under section 148 but without issuance of notice u/s 143(2)  was invalid and void ab initio and thus liable to be quashed.

Held: AO reopened assessment by issuance of notice u/s 148 on the basis of information received from DCIT investigation Mumbai for the alleged bogus purchases. Immediately, after issuance of notice u/s 148 and recording reasons the assessment proceedings u/s 143(3) r.w.s 148 were initiated and subsequently completed after making various additions. It was held even though notice u/s 148 had been issued but the notice u/s 143(2) had not been issued in the case of assessee thus, a fatal error had been committed by AO and thus the reassessment order passed u/s 147 r.w.s 143(3) was bad in law and void ab initio and thus liable to be quashed.

FULL TEXT OF THE ITAT JUDGEMENT

The above captioned appeals filed by the Revenue and cross objections by both the assessee pertaining to A.Y. 2011- 12 are directed against the order of Ld. Commissioner of Income Tax(Appeals)-II, Indore, (in short ‘CIT(A)’), vide order dated 23.12.2016 which is arising out of the order u/s 143(3) of the Income Tax Act 1961 (hereinafter called as the ‘Act’) framed on 30.10.2015 by ACIT-Khandwa.

2. As common issues have been raised in these appeals and Cross Objections these were heard together and are being disposed off by this common order for the sake of convenience and brevity.

In the case of Sukhmani Cotton Industries:

The Revenue has taken following grounds of appeal in ITA No. 222/Ind/20 17

“Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in restricting the addition made on account of bogus purchase to 6% of total bogus purchases of Rs. 67,75,050/-“

The assessee (namely Sukhmni Cotton Industries) has raised following grounds of appeal in Cross Objection No. 16/Ind/2018

1) That the learned Commissioner of Income tax (A) erred in law in not deciding the issue relating to validity of reopening the assessment u/s. 147 of the Act based on report of two suppliers of cotton received from sales tax department, Maharastra wherein neither the name of the appellant exist nor any statement was recorded of any of the suppliers so as to arrive at any adverse inference against the appellant. Such information from the Sales Tax Department, Maharastra cannot be made a basis to treat genuine purchases effected by the appellant as bogus hence notice so issued u/s 148 of the Act was ab-initio void.

2) That the learned Commissioner of Income tax (A) further erred in law in deciding the appeal on merits only without appreciating the fact that though notice u/s. 142(1) was issued but notice u/s 143(2) of the Act was not issued as stated in the assessment order. It being a mandatory requirement before passing any order u/s 143(3)/147 of the Act, assessment order passed without issue of such notice deserves to be quashed as failure to issue notice u/s. 1 43(2) renders the reassessment void.

In the case of Manjeet Cotton Pvt. Ltd.:

The Revenue has taken following grounds of appeal in ITA No. 223/Ind/2017

“Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in restricting the addition made on account of bogus purchase to 6% of total bogus purchases of Rs.11,08,07,574/-.”

The assessee (namely Manjeet Cotton Pvt. Ltd. ) has raised following grounds of appeal in Cross Objection No.04/Ind/20 18:

1) That the learned Commissioner of Income tax (A) erred in law in not deciding the issue relating to validity of reopening the assessment u/s. 147 of the Act based on report of two suppliers of cotton received from sales tax department, Maharastra wherein neither the name of the appellant exist nor any statement was recorded of any of the suppliers so as to arrive at any adverse inference against the appellant. Such information from the Sales Tax Department, Maharastra cannot be made a basis to treat genuine purchases effected by the appellant as bogus hence notice so issued u/s 148 of the Act was ab-initio void.

3) That the learned Commissioner of Income tax (A) further erred in law in deciding the appeal on merits only without appreciating the fact that though notice u/s. 142(1) was issued but notice u/s 143(2) of the Act was not issued as stated in the assessment order. It being a mandatory requirement before passing any order u/s 143(3)/147 of the Act, assessment order passed without issue of such notice deserves to be quashed as failure to issue notice u/s. 1 43(2) renders the reassessment void.

3. We will first take up the cross objections for A.Y. 2011-12 raised by both assessees challenging the validity of the assessment proceedings completed u/s 143(3) r.w.s. 147 of the Act alleging that notice u/s 143(2) of the Act was not served upon the assessee during reassessment proceedings. As both the parties have accepted that the facts relating to this common issue raised in cross objections are similar we will take the facts of Sukhmani Cotton Industries for adjudication purpose.

4. The facts in brief are that e-return of income was filed on 24.09.2011 declaring income of Rs.46,83,090/-. Case was picked up for scrutiny through CASS and assessment u/s 143(3) of the Act was framed on 22.03.20 13 assessing income at Rs. 50,00,000/-. Subsequently, the case was reopened by issuance of notice u/s 148 of the Act dated 23.03.20 15 on the basis of information received from DCIT investigation Mumbai for the alleged bogus purchases. Immediately, after issuance of notice u/s 148 of the Act and recording reasons the assessment proceedings u/s 143(3) r.w.s 148 of the Act were initiated and subsequently completed after making various additions.

As the notice u/s 143(2) of the Act was not issued before commencing reassessment proceedings u/s 147 of the Act, the assessee has filed cross objection before us pleading that non-issuance of notice u/s 143(2) of the Act in the reassessment proceedings initiated u/s 148 of the Act is mandatory else the reassessment proceedings are void ab initio and not valid.

5. Ld. counsel for the assessee made following written submissions wherein reliance has been placed on various judgments in support of the ground raised in the cross objection:

“Non-issue of notice u/s 143(2) before assessment:

After reopening of the assessment, though notice u/s. 142(1) was issued by the AO but notice u/s 143(2) of the Act was not issued which is mandatory requirement before passing any order u/s 143(3)I147 of the Act. On perusal of assessment order also it is evident that notice u/s 142(1) was issued but notice u/s 143(2) was not issued. The appellant had applied for supply of certified copy of assessment proceeding as well copy of information received to initiate proceedings u/s 148 of the Act. Copy of assessment proceedings supplied by the Asstt. Commissioner of Income tax, Khandwa is annexed from which it is evident that notice u/s 143(2) of the Act was not issued. Copy of order sheet obtained is annexed for kind perusal in support. The order was passed without issue of such notice deserves to be quashed due to noncompliance of mandatory condition as failure to issue notice u/s. 143(2) renders the reassessment void. Reliance is placed on following judgments:-

  • ACIT vs. Hotel Blue Moon (2010) 321 ITR 362 (SC)
  • CIT vs. Rajeev Sharma (2012) 336 ITR 678 (All)
  • Pro CIT vs. Shri Jai Shiv Traders Pvt. Ltd. (2016)383 ITR 448 (Del)
  • Pro CIT vs. Silver Line (2016)383 ITR 455 (Del)
  • CIT vs Mundra Nanvati 227 CTR 387 (Born.)
  • Pro CIT vs Paramount Biotech Industries Ltd (Del.HC) [ITA No.887 & 888/2017 dated 24.10.2017. (Copy annexed).

6. Ld. counsel for the assessee also gave gist of judgments with a brief discussion about the facts wherein it has been consistently held that the issuance a notice u/s 143(2) of the Act is mandatory in the case where assessment was reopened u/s 147 of the Act by issuance of notice u/s 148 of the Act.

PCIT vs. Shree Jai Shiv Shankar Traders Pvt. Ltd. IT Appeal No.1068 of 2013 dtd. 18.02.2015 A.Y. 2008-09 (Delhi High Court) (2016)383 ITR 448 Energy

In Review Petition No.441/2011 in ITANo. 950/2008 (CIT vs. Madhya Bharat Energy Corporation) this Court reviewed its main judgment in the matter rendered on 11th July 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement 0 issuance of notice under Section 143(2) of the Act. The upshot of the above discussion is that the decision 0 this Court in CIT vs. Madhya Bhara Energy Corporation(Supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned. (Para-9)

ACIT vs. Greater Noida Industrial Development Authority (2015) 93 CCH 185 (All HC) A.Y. 2011-12 & CIT vs. Rajiv Sharma (2011) 336 ITR 678 (All.)

Since the Assessing Officer failed to 52 to 57 issue notice within the specified period under Section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under Sector 143(2) of the Act and this defect cannot be cured by taking recourse to the deeming fiction provided under Sector 292BB of the Act. ( Para 22).

Indus Towers Limited vs. DCIT (2017) 99 CCH 0031 (Del HC) A.Y. 2009-10

No explanation for failure to issue notice 58 to 60 u/s 143(2) pursuant to notice u/s 148 before last date by which notice ought to have been issued. Delay in issuing notice u/s 143(2) would be fatal to reassessment proceedings.

Pankaj Dutta vs. ITO, Kolkata Bench and Tiny Girl Clothing (Company (P) Limited (Mum. Bench)

Kindly refer page no.11 to 17 & page no. 18 to 25 in copies of the judgments – I

7. Ld. DR vehemently argued the supporting the order of both lower authorities which also placed reliance on the Judgment of HonEble High Court of Jammu and Kashmir in the Pr. CIT vs. Broadway Shoe Co. (2018) 99 taxmann.com 83 (Jammu & Kashmir).

8. We have heard the rival contentions, perused the record placed before us and carefully gone through the judgments referred and relied by both the parties. Common issue raised by both the assessees in the cross objections is with regard to challenging the validity of the reassessment proceedings u/s 147 r.w.s 143(3) of the Act as the statutory notice u/s 143(2) of the Act has not been served upon the assessee.

9. During the course of hearing the question about the issuance of notice u/s 143(2) of the Act was raised to the Learned Departmental Representative. After enjoying sufficient opportunity Ld. DR submitted that the assessment records of both the assessees have been verified and it is found that though notice u/s 148 of the Act was issued for reopening the assessment proceedings but assessing officer has not issued any notice u/s 143(2) of the Act.

10. Now in the given facts wherein it is not disputed at the end of revenue authorities that notice u/s 143(2) of the Act has not been issued in the case of both assessees namely M/s.Sukhmani Cotton Industries Pvt. Ltd. & M/s. Manjeet Cotton Pvt. Ltd. before initiating reassessment proceedings u/s 147 of the Act, by way of issuance of notice u/s 148 of the Act whether the reassessment proceedings are valid, needs to be examined in the light of judicial pronouncement.

11. In the submissions given by Ld. counsel for the assessee various judgments have been referred and relied including that the Hon’ble High Court of Delhi in the case of PCIT vs. Shree Jai shiv Shankar Traders Pvt. Ltd. (supra) wherein Hon’ble’ High Court of Delhi has held dismissing the appeal of the revenue that “there was no legal infirmity in the order of the Tribunal as subsequent to the statement of the assessee on the returnable date to treat the original return filed as a return while pursuant to notice u/s 148 of the Act, the assessing officer’s failure to issue notice u/s 143(2) of the Act invalidated the order of reassessment”.

We find that in the recent decision given by Income Tax Appellate Tribunal, Delhi Bench on 02.01.2018 in the case of ACIT vs. Dimension Promoters Pvt. Ltd. in ITANo. 1 105/Del/20 11 similar issue came for adjudication and the Coordinate Bench has dismissed the revenue’s appeal placing reliance on various judgments including the judgment of HonEble High Court of Delhi in the case of PCIT Shree Jai shiv Shankar Traders Pvt. Ltd. (supra) and also discussed about the judgment of HonEble High Court of Delhi in the case of CIT vs. Madhya Bharat Energy Corporation (supra) which was relied by the Ld. DR and Coordinate Bench of I.T.A.T., Delhi has noted this fact that the judgment relied on by Ld. DR has already been considered by HonEble High Court of Delhi in the case of Jai Shiv Shankar Traders Pvt. Ltd. (supra).

12. The relevant abstract of the decision given by Coordinate Bench of I.T.A.T., Delhi in the case of ACIT vs. Dimension Promoters Pvt. Ltd. (supra) along with brief facts and the judgment relied on both the parties are mentioned below:

2. At the outset, the ld. AR took up ground No. 3 of cross objections, which relates to non-issue of notice u/s. 143(2) of the IT Act. The ld. AR invited our attention to the order of assessment and submitted that nowhere in the assessment order, the Assessing Officer mentioned about the issuance of notice u/s. 143(2) of the Act. Further inviting our attention to the ld. CIT(A)’s order, the ld. AR submitted that when this ground was raised before the ld. CIT(A), the ld. CIT(A) has held that non-issue of notice u/s. 143(2) by itself cannot be said to vitiate the assessment proceedings. It was submitted that from the findings of the ld. Assessing Officer and the ld. CIT(A), it becomes amply clear that no notice u/s. 143(2) was issued to the assessee and therefore, the assessment order is liable to be quashed. Reliance in this respect was placed on a number of case laws mentioned in paper book pages A to M, which are as under:

(i) ACIT & Anr. Vs. Hotel Blue Moon, 321 ITR 3 62 (SC)

(ii) Directorate of Income Tax vs. VR Educational Trust, 2013(12) TMI 745 (Delhi High Court)

(iii) Alpine Electronics Asia Pvt. Ltd. Vs. DGIT, 341 ITR 247 (Del.)

(iv) Dalmia (R) vs. CIT, 236 ITR 480 (SC)

(v) CIT vs. Pawan Gupta, 318 ITR 322 (Del.)

(vi) DCIT vs. M/s. Silver Line 2014(10) TMI 141 ITATDelhi

(vii) CIT vs. Rajeev Sharma, 336 ITR 247 (Del.)

(viii) ITO vs. Smt Sukhini P. Modi, 295 ITR (AT) 169 (Ahmedabad Bench)

(ix) UKT Software Technologies Pvt Ltd vs. ITO, 2013 (1) TM 1678-ITAT Delhi.

(x) CIT vs. Mukesh Kumar Aggarwal, 345 ITR 29

(xi) CIT vs. M/s. Parikalpana Estate Development (P) Ltd., 2012 (1 0) TMI 617

(xii) CIT vs. M/s. Ceban India Ltd., 347 ITR 583 (P&H)

3. The ld. DR, on the other hand, submitted that due notice u/s. 142(1) was issued to the assessee and therefore, there was no need to issue notice u/s. 143(2) of the Act. Reliance was placed on the order of Delhi High Court in the case of Madhya Bharat Energy Corporation, 337 ITR 389 (Del).

4. The ld. AR, in his rejoinder, submitted that after considering the judgment of Madhya Bharat Energy Corpn. (supra), the Hon’ble Delhi High Court in the case of Alpine Electronics Asia Pvt. Ltd. Vs. DCIT (supra) and in V.R. Education Trust in appeal No. 510 of 2011 has again held that service of notice u/s. 143(2) is a mandatory requirement even in the proceedings u/s. 148 of the Act.

5. We have heard the rival parties and have gone through the material placed on record. From the findings of the Assessing Officer and ld. CIT(A), one thing is apparent that no notice u/s. 143(2) was issued to the assessee as the ld. CIT(A) himself has held that mere non-issuance of notice u/s. 143(2) by itself cannot be said to vitiate the assessment proceedings. In a number of judgments delivered by various Courts and Tribunals, it has been held that service of notice u/s. 143(2) is mandatory requirement. The Hon’ble Delhi High court in recent case of Indus Tower Limited vs. CIT vide its judgment dated 29.05.2017 has also considered similar issue by following the judgment of Hotel Blue Moon, 321 ITR 366 (SC) and CIT vs. Jai Shree Shiv Shankar and has again decided the issue in favour of the assessee by holding as under:

“13. In response to the above submissions, Mr. Dileep Shivpuri, learned Senior Standing Counsel for the Department, submitted that as far as second submission is concerned, the facts speak for themselves. He had nothing further to add because there was no explanation for the failure to issue notice under Section 143(2) of the Act pursuant to the notice under Section 148 of the Act before 30 September 2013, the last date by which the notice ought to have been issued.

14.. The law on this point is fairly well settled in the decisions in ACIT v. Hotel Blue Moon 12010] 321 ITR 362 (SC) reiterated in CIT v. Madhya Bharat Energy Corporation [2011] 337 ITR 389 (Del) and Principal Commissioner of Income tax v. Jai Shiv Shankar Traders (P.) Ltd. [2016]383 ITR 448 (Del). In the last mentioned judgment, this Court held that the delay in issuing a notice under Section 143(2) of the Act would be fatal to the re-assessment proceedings.

15. For the aforementioned reasons, it is held that as far as the second ground is concerned, the Petitioner should succeed. In that view of the matter, the Court does not consider it necessary to examine the first ground of challenge. The impugned notice dated 22 February, 2013 issued to the Petitioner under Section 148 of the Act as well as the consequential order dated 20th January, 2014 disposing of its objections as well as the reassessment proceedings pursuant thereto are hereby quashed.”

Similar finding has been made by various courts in the decisions relied on by the ld. AR.

6. The case law relied on by the ld. DR in Madhya Bharat Energy Corporation (supra) is not applicable, as this decision has been reviewed by Hon’ble Delhi High Court in Revenue petition No. 441/2011 vide order dated 17th August, 2011. This fact has been noted by the Hon’ble High Court in the case of Pr. CIT Vs. Sri Jai Shiv Shankar Trader Pvt. Ltd. at para -9 which reads as under.

“9. Dr Rakesh Gupta, learned counsel appearing for the Assessee, at the outset drew the attention of this Court to an order passed by this Court on 17th August, 2011 in Review Petition No.441/2011 in ITA No.950/2008 (CUT v. Madhya Bharat Energy Corporation) whereby this Court reviewed its main judgment in the matter rendered on 11th July 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under Section 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17th February, 2011 after noticing that in the said case that no notice under Section 143(2) had ever been issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned.”

Therefore, this judgment is also not relevant and in view of the facts discussed on the judgment relied on by the Ld. DR, this is distinguishable on the facts.

7. Hon’ble Delhi High court in the case of CIT vs. Shri Jai Shiv Shankar Pvt. Ltd. (supra) has also considered the judgment of Delhi High court in the case of Mandhya Bharat Energy Corporation (supra) and has also considered the decision in the case of CIT vs. Vision Inc. (supra) and after considering these judgments, Hon’ble High Court decided the issue in favour of the assessee wherein it has been decided that even in the cases covered u/s. 148, the issuance of notice u/s. 143(2) is a mandatory requirement. The relevant part of the order of Delhi High Court is reproduced below:

“9 Dr Rakesh Gupta, learned counsel appearing for the Assessee, at the outset drew the attention of this Court to an order passed by this Court on 17th August, 2011 in Review Petition No.441/2011 in ITA No.950/2008 (CIT v. Madhya Bharat Energy Corporation) whereby this Court reviewed its main judgment in the matter rendered on 11th July 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under Section 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17th February, 2011 after noticing that in the said case that no notice under Section 143(2) had ever been issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned.

10. Ms Aggarwal nevertheless urged that notwithstanding the above position, the decision of this Court in CIT v. Vision Inc. (2012) 73 DTR 201 (Del) would apply. The said judgment held that since on the facts of that case the Assessee had been properly served with the notice under Section 143(2) of the Act within the statutory time limit prescribed under the proviso thereto, the ITAT should not have set aside the re-assessment in toto. Ms Aggarwal placed reliance on Section 292BB of the Act and urged that the Assessee having not raised any objection about non service of the notice under Section 143(2) of the Act either at any time before the AO or prior to, or during the reassessment proceedings, the Assessee was precluded from raising such an objection in the subsequent of the proceedings.

11. Dr Rakesh Gupta for the Assessee on the other hand placed reliance on a large number of decisions of the High Courts apart from the decision of the Supreme Court in ACIT v. Hotel Blue Moon (supra). He submitted that the failure to issue a notice under Section 143(2) of the Act subsequent to the Assessee having informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act, was fatal to the order of re-assessment.

12. The narration of facts as noted above by the Court makes it clear that no notice under Section 143(2) of the Act was issued to the Assessee after 16th December 2010, the date on which the Assessee informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act.

13. In DIT v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del), this Court invalidated an reassessment proceedings after noting that the notice under Section 143(2) of the Act was not issued to the Assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under Section 143(2) of the Act only after the return filed by the Assessee is actually scrutinized by the AO.

14. The interplay of Sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court. In CIT v. Rajeev Sit anna (2011) 336ITR 678 (All.) it was held that a plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under Section 143(2) of the Act. It was observed:

“the provisions contained in sub-Section (2) of Section 143 is mandatory and the legislature in their wisdom by using the word ‘reason to believe’ had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the AO to serve a notice under sub-Section 2 of Section 143 assigning reason therein. In absence of any notice issued under sub-Section 2 of Section 143 after receipt of fresh return submitted by the Assessee in response to notice under Section, the entire procedure adopted for escaped assessment, shall not be valid.”

15. In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. (2014) 50 Taxmann.com105 (All) it was held as under: “10. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB 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 292 BB 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 292 BB 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.” A) In the same decision in v. Salarpur Cold Storage (P.) Ltd. { supra), the Allaha bad High Court noticed that the decision of the Supreme Court in ACIT 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.”

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 AY 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 AO 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 AO found that there were problems with the return which required explanation by the Assessee then the AO 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(2) 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 u/s 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 u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO 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 u/s 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 u/s 143(2) of the Act.”

18. As already noticed, the decision of this Court in CIT v. Vision Inc. proceeded on a different set offacts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allaha bad 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 AO, in reassessment 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.

19. The resultant position is that as far as the present case is concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of reassessment.”

8. In view of the above facts and circumstances, we decide the ground No. 3 of cross objections in favour of the assessee and we hold that the reassessment order passed in this case is bad, void ab initio. In view of our decision on ground No. 3, the rest of the grounds taken in the cross objections do not require any adjudication. Accordingly, the cross objections filed by the assessee are partly allowed. The appeal filed by the Revenue has become infructuous and, therefore, same is dismissed.

9. In nutshell, the cross objections filed by the assessee are partly allowed and the appeal filed by the Revenue is dismissed.

13. We, therefore, respectfully following the judgment of HonEble Delhi High Court in the case of Shree Jai Shiv Shankar Traders Pvt. Ltd. (supra) as well as decision of Coordinate Bench of Delhi in the case of Dimension Promoters Pvt. Ltd. (supra) and in the given facts and circumstances of the case, are of the considered opinion that even though notice u/s 148 of the Act has been issued but the notice u/s 143(2) of the Act has not been issued in the case of both the assessees namely M/s. Sukhmani Cotton Industries Pvt. Ltd. & M/s. Manjeet Cotton Pvt. Ltd. a fatal error has been committed by Ld. Assessing Officer and thus the reassessment order passed u/s 147 r.w.s 143(3) of the Act is invalid bad in law and void ab initio and thus liable to be quashed. We accordingly, allow the common ground no.2 raised by both the assessee in the Cross Objections challenging the validity of reopening of assessment u/s 147 of the Act for non-issuance of notice u/s 143(2) of the Act.

14. As we have already quashed reassessment proceedings framed in the case of both the assessees vide order dated 30.10.2015 for non-issuance of statutory notice u/s 143(2) of the Act by allowing common grounds no.2 raised in the cross objections, the addition made in both the impugned order stands deleted and therefore, the remaining grounds raised by the assessee in the cross objections as well as raised by the Revenue becomes infructuous and therefore, are liable to be dismissed.

15. In the result, Cross objection filed by the assessee C.O. Nos. 16 & 04/Ind/20 18 are partly allowed and appeals filed by the Revenue ITANos.222 & 223/Ind/2017 are dismissed.

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