Shri Gaurav Kumar Vs ITO (ITAT Jaipur)
The issue under consideration is whether AO can issue notice under section 148 for re-assessment without issuing notice u/s 143(2)?
ITAT states that the assessee filed its return of income in response to the notice u/s 148 of the Act. The AO had concluded the assessment without issuing notice under section 143(2) of the Act after the return was filed by the assessee in response to notice under section 148 of the Act. The AO after receiving the return of the appellant filed in pursuance to notice u/s 148 of the Income Tax Act, 1961 did not issue notice u/s 143(2) of the Act which is sine qua non for assuming jurisdiction to assess the case. This is a grave error which is even not rectifiable u/s 292BB of the Act and hence order so passed lacks proper authority with the AO and hence the order so passed deserves to be declared void ab initio. In case of reassessment proceedings also once the assessee furnishes his return, same is considered as a return required to be furnished u/s 139 and for proceeding further in a case of return filed u/s 139 the AO is supposed to issue notice u/s 143(2) for assuming jurisdiction to assess the case. In case of non-issuance of such vital notice no assessment can be framed by the AO as the same lacks authority for the same. Further such vital defect cannot be cured even by resorting to the provisions of section 292BB as the provisions of section 292BB are applicable in those cases where notice was issued but not served. In the present case since no notice was ever issued and hence such defect cannot be cured. Hence, Without issue of notice U/s 143(2) completing the reassessment proceedings are liable to be quashed.
In the result, the appeal of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order dated 29.03.2019 of ld. CIT (Appeals), Alwar for the assessment year 2010-11. The assessee has raised the following grounds of appeal :-
“ 1. The ld. CIT (A) has erred on facts and in law in confirming addition of Rs. 14,64,000/-, out of addition of Rs. 17,64,000/-made by the AO u/s 69A, through a non speaking order, without appreciating the facts of the case and the submissions of the appellant.
2. the ld. CIT (A) has grossly erred on facts and n law in upholding the order of the AO u/s 143(3)/147 and in confirming the addition of Rs. 14,64,000/-, overlooking the ground of appeal of the appellant that the AO passed order u/s 143(3)/147 without issuing and serving any notice u/s 143(2) which is a mandatory requirement of law. The order passed u/s 143(3)/147 without issuance and service of notice u/s 143(2) is patently bad in law and deserves to be quashed.”
In Ground No. 2, the assessee has raised the question of validity of reassessment framed by the AO without issuing and service notice under section 143(2) of the IT Act.
2. The ld. A/R of the assessee has submitted that the assessee is engaged in the business of purchase and sale of building material during the year under consideration. However, upto the assessment year 2009-10 he was also having liquor contract business having a partnership concern and 50% partner in M/s. Gaurav Kumar Pohap Singh. During the year under consideration, the assessee made cash deposit of Rs. 17,84,500/- in the savings bank with Union Bank of India. The AO reopened the assessment on the basis of the AIR information regarding the deposit of cash by issuing a notice under section 148 of the IT Act on 29.03.2017. The assessee filed the return of income through e-filing on 08.12.2017 declaring total income at Rs. 1,38,240/-. The reassessment was completed by the AO by making an addition of Rs. 17,84,000/- on account of cash deposit in the bank account under section 69A of the IT Act. The ld. A/R has thus contended that the reassessment was completed by the AO without issuing notice under section 143(2) of the IT Act. In support of his contention he has relied upon the following decision :-
ITO vs. Shri Hans Raj Sharma
ITA No. 504/JP/2016 & C.O. No. 20/JP/2016 dated 09.04.2019.
3. On the other hand, the ld. D/R has relied upon the orders of the authorities below and submitted that the assessee did not file any return of income under section 139(1) of the IT Act. Even the return of income filed in response to notice under section 148 was belated one and the AO has issued a notice under section 143(2) on 11.02.2017, a copy of the same has been produced during the course of hearing. Thus the ld. D/R has submitted that when a notice was issued under section 143(2) and assessee has participated in the proceedings, then the assessee cannot raise this objection at this stage. He has referred to the provisions of section 292BB of the IT Act.
4. I have considered the rival submissions as well as the relevant material on record. The assessee has raised this objection even before the ld. CIT (A) as ground no. 4 reproduced at page 2 of the ld. CIT (A)’s order. However, the ld.CIT (A) has not adjudicated ground no. 4 separately but the entire matter was decided on the merits in para 5.3 and 5.4 as under :-
“ 5.3. I have perused the assessment order as well as submissions filed by the appellant. Following facts have emerged :-
1. That the appellant is engaged in the sale/purchase of building materials during the year under consideration.
2. That the appellant did not file regular return of income for the year under consideration.
3. That on the basis of NMS details, the A.O. has issued notice u/s 148 of the Act on 29.03.2017. However, still no return of income was filed within stipulated dates. Finally, the appellant filed return of income for the year under consideration on 08.12.2017 declaring income of Rs. 1,38,240/- declaring income u/s 44AD of the Act.
4. That the A.O. has found cash deposits of Rs. 17,84,000/- in his bank accounts.
5. That the appellant had submitted that it was out of payments received from previous creditors when during preceding years the appellant was running liquor business which has been closed and also some gift received during the year. However, no evidences were produced before the A.O. Accordingly, the A.O. has added the cash credit of Rs. 17,84,000/- in his hand.
5.4. I have considered the above mentioned facts of the case. The appellant has declared income of Rs. 1,38,240/- and considering the past business of distributorship in liquor trade and current business of the assessee and gifts received, in my considered view it would be reasonable to give credit of Rs. 3 lakhs for past year savings and receipts towards the cash credit. Accordingly, the addition to the extent of Rs. 14,64,000/- is sustained and the appellant’s ground of appeal on the issue is partly allowed.”
Thus it is clear that despite being specifically raised this ground and taken up for adjudication by the ld. CIT (A), it is not dealt with by the ld. CIT (A). Since this is a legal issue and goes to the root of the matter, therefore, the same is taken up for adjudication.
5. The AO in the reassessment order has accepted this fact that the assessee has filed the return of income on 08.12.2017 vide acknowledgement no. 328210000081217 as given in the assessment order. The fact of filing the return of income is not in dispute. The reassessment order is also framed on the return of income filed by the assessee. The AO has not treated the return of income as non est but the assessment was framed by taking the return of income and then making the addition. The final computation of total income of the assessee by the AO is as under :-
