TMI Blog2008 (9) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... ave retrospective (retroactive would be a more appropriate phrase) operation and therefore cure the procedural infirmities and irregularities in the matter of service of notice. This aspect of the matter is squarely covered by the judgment of the Hon'ble jurisdictional High Court in CWT vs. Kasturbhai Mayabhai [ 1985 (11) TMI 9 - GUJARAT HIGH COURT] [affirmed by the Hon'ble Supreme Court in CWT vs. Sharvan Kumar Swarup Sons [ 1994 (9) TMI 2 - SUPREME COURT] . Since the Hon'ble jurisdictional High Court and Hon'ble Supreme Court have comprehensively dealt with this aspect of the matter, it is not necessary for us to deal further with the issue that procedural provisions are always applicable to pending matters. We therefore hold that the provisions of s. 292BB are procedural in nature and hence they would cure all the notices of their deficiencies regardless of the fact that they were served before 1st April, 2008. It was contended that s. 292BB was not on the statute book as on the first day of the relevant assessment year under appeal and hence cannot be applied to that year. We are unable to agree with the aforesaid submissions also. where an assessment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restored to his file for a fresh decision. Now, the issue raised in the other appeal is also restored to his file for a fresh decision depending upon his order in the aforesaid appeal. Resultantly, the appeals filed by the Department are treated as allowed for statistical purposes. - D.K. SRIVASTAVA, A.M. AND MAHAVIR SINGH, J.M. ORDER D.K. SRIVASTAVA, A.M. 1. Both the appeals filed by the Department relate to the asst. yr. 2002-03. While the first appeal, namely, ITA No. l226/Ahd/2007 is directed against the order passed by the learned CIT(A) on 29th Dee., 2006 deleting the addition of Rs. 64,73,337 made by the AO under Section 143(3) on account of suppressed sales, the other appeal, namely, ITA No. 104/Ahd/2008 filed by the Department is directed against the order passed by the CIT(A) on 24th Oct., 2007 deleting the addition of Rs. 32,89,882 made by the AO under Section 154 of the IT Act. The issues involved in both the appeals are interlinked. We, therefore, find it convenient to dispose of both the appeals by a consolidated order. Grounds of appeal in ITA No. 1226/Ahd/2007 2. In ITA No. 1226/Ahd/2007, the Department has taken the following grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries and others. It was further explained that Shri Srikant Varia was a common partner in the assessee firm as well as in C.P. Udyog. It was also pointed out that there were disputes amongst the partners of C.P. Udyog and, therefore, the bank account of C.P. Udyog had become inoperative and accordingly the sale proceeds which were due to be received by C.P. Udyog were received by the assessee and later transferred to C.P. Udyog. 6. In order to examine the correctness of the submissions made by the assessee, the AO issued letters of inquiry under Section 133(6) of the Act to various parties for verification of the transactions. Copies of contra accounts received from the aforesaid parties to whom letters had been issued under Section 133(6) of the Act were supplied to the assessee by the AO. By the said letter, the AO required the assessee to explain the variations as observed from the copies of contra accounts obtained by the AO, with evidence. As noted at p. 7 of the assessment order, the assessee did not comply with the aforesaid show cause notice. Taking note of the materials available on record, the AO held that the impugned sum represented suppressed sales of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely on that account i.e., on account of low GP, on the sole ground that it stood telescoped against the larger addition. Appeal before the CIT(A) and his decision in ITA No. 1226/Ahd/2007 9. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT(A). In the grounds of appeal taken before the CIT(A), the assessee had, inter alia, challenged the addition of Rs. 64,73,337 on account of suppressed sales but had not challenged the other finding recorded by the AO in the assessment order regarding the rejection of the books of account and quantification of the addition on account of low GPs as also for telescoping the said amount against the larger addition. In other words, the assessee himself allowed the finding of the AO regarding rejection of books of account and the quantification of addition done by him in pursuance thereof in the assessment order on account of low rate of GP to attain finality by not challenging them before the CIT(A). 10. The learned CIT(A) considered all the issues raised by the assessee in its appeal and disposed them of by his appellate order dt. 29th Dec, 2006. As regards the addition of Rs. 64,73,337 made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. Therefore, in view of the abovementioned facts and circumstances, the assessment framed by the AO is not said to be illegal. Thus, this ground of appeal is dismissed. 12. Perusal of the appellate order passed by the learned CIT(A) shows that he has decided the issue relating to the addition of Rs. 64,73,337 made by the AO in favour of the assessee while he has decided the issue relating to the validity of notice issued by the AO under Section 143(2)(ii) of the Act against the assessee. It is therefore not a case where the assessee had fully succeeded before the learned CIT(A). However, the assessee has not filed any appeal or memorandum of cross-objections against the order of the learned CIT (A) upholding the validity of the notice issued by the AO under Section 143(2)(ii) on 19th Jan., 2005. The assessee has thus allowed the order of the CIT(A) upholding the validity of the notice issued under Section 143(2)(ii) by the AO to become final. The issue regarding validity of assessment order on account of non-timely or improper service of notice issued under Section 143(2)(ii) on 19th Jan., 2005 is not at all a subject-matter of appeal before this Tribunal. 13. Aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to proposed GP addition, and therefore no comment is seen to have been made by the CIT (A) with regard to AO's observation in case of GP. Therefore, when the appeal effect order is passed, the AO merely deleted the addition made towards suppressed sales. Hence, there is no apparent mistake from the appeal effect order given by the AO. 2.3.2 Further, it is to be mentioned that the provisions of Section 154 of the IT Act, 1961 can be applicable only when there is a mistake apparent on record. It is seen that in the instant case there is no mistake apparent from the appeal order. Therefore, I am inclined to accept the submissions of the Authorised Representative of the appellant. Accordingly, the addition made by the AO is deleted. 15. Aggrieved by the aforesaid order passed by the learned CIT(A) on 24th Oct., 2007 the Department has filed the other appeal bearing ITA No. 104/Ahd/2008 before this Tribunal. Submissions by the parties in both the appeals 16. In support of first appeal, the learned Departmental Representative invited our attention to the factual aspects of the case which have already been narrated earlier in this order. He took us through various findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of the aforesaid finding recorded in the assessment order and therefore the AO was justified in reviving his findings made in the assessment order and thereby in making the impugned addition by his order under Section 154 of the Act. According to him, there was no dispute in this behalf that the AO had quantified the addition of Rs. 32,89,882 but did not make any separate addition as he had telescoped the same against the larger amount of Rs. 64,73,337. He contended that since the CIT(A) had deleted the addition made on account of suppressed sales against which the impugned addition was telescoped, there was nothing available for telescoping the impugned sum of Rs. 32,89,882 and therefore the AO was justified in passing his order under Section 154 of the Act. 18. In reply, the learned Authorised Representative for the assessee supported both the orders passed by the CIT(A) deleting the additions of Rs. 64,73,337 and Rs. 32,89,882. He reiterated the submissions that were earlier made before the CIT(A) in both the matters. 19. The learned Authorised Representative, however, sought to challenge the order of the CIT(A) upholding the validity of the assessment order in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA. This notice is for a limited scrutiny of claim under Sections HHC and 80-IA. Please refer Memorandum Explaining the Provisions of Finance Bill, 2002 [(2002) 173 CTR (St) 171,210 : (2002) 254 ITR (St) 190, 233-234} explaining the scope of Section 143(2)(i) (Sr. No. 5) and Board Circular No. 8 of 2002 dt. 27th Aug., 2002 [(2002) 178 CTR (St) 9 : (2002) 258 ITR (St) 13, page No. 56, para 59] explaining the scope of Section 143(2)(i) (serial No. 6 of paper book II dt. 28th Sept., 2007). The notice under Section 143(2)(ii) may be issued to inquire into other areas. In the present case, the notice under Section 143(2)(ii) is not issued and therefore inquiry in other area is not permissible and therefore the addition of Rs. 64,73,337 on account of suppression of sales is bad in law even though the assessee participated in the assessment proceedings. 2. The Hon'ble Bench inquired whether Section 292BB has retrospective operation. 3. The Finance Act has inserted Section 292BB w.e.f. 1st April, 2008 and not from retrospective effect for the reasons stated below: (a) The Memorandum Explaining the Provisions of Section 292BB is enclosed [(2008) 215 CTR (St) 166, 192-193 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings for asst. yr. 2002-03, he would not have either complied with Section 142(1) dt. 19th Jan., 2005 or he would have objected. It therefore follows that the commissions and omissions cannot be brought to net with retrospective effect. (e) The receipt of notice under Section 143(2) within prescribed time-limit is statutory right of the assessee. The said right cannot be taken away with retrospective effect on the ground that he has participated in assessment proceedings. (f) When a statutory authority is required to do a thing in a particular manner, the same must be done in that manner alone [Bhavnagar University us. Palitana Sugar Mills (P) Ltd. (supra)]. Statute requires that the notice under Section 143(2)(ii) should be issued within the prescribed time-limit. Accordingly it has to be issued within prescribed time-limit. Failure to issue attracts consequences. Section 292BB as inserted by Finance Act, 2008 w.e.f. 1st April, 2008 cannot be applied with retrospective effect for the reasons stated hereinabove. 21. In support of his submissions, the learned Authorised Representative for the assessee relied upon the following decisions: (i) ITO vs. Smt Sukhini P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 2008 w.e.f. 1st April, 2008, reads as under: 292BB. Notice deemed to be valid in certain circumstances-Where an assessee appeared in any proceeding or co-operated in any inquiry related 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. 25. In the Memorandum to the Finance Bill, 2008 [(2008) 215 CTR (St) 192 : (2008) 298 ITR (St) 216], the Government has given the following reasons for inserting Section 292BB in the IT Act: Service of notice and the time limit for issuance of notice under Section 143(2) of the IT Act Sub-s. (2) of Section 143 of the IT Act provides that the notice under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis of Section 292BB 26. The newly inserted Section 292BB has four limbs. First limb contains the conditions precedent for the applicability of the legal fiction created by the said section. The section comes into play after 31st March, 2008 in a case where an assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment. The legal fiction created by the section is not available unless it is shown that the assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment. The aforesaid requirements constitute the conditions precedent for the applicability of the section. Second limb contains the legal fiction itself created by the section or, in other words, the legal effect produced upon the existence of the facts constituting the conditions precedent. Once it is shown that an assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment, the legal fiction created by the second limb of the section 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 accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be decided after 31st March, 2008 in accordance with the provisions of Section 292BB irrespective of the fact whether the assessment year involved is 2008-09 or any subsequent year or any preceding assessment year. In other words, each and every case involving the validity of the service of notices to be decided after 31st March, 2008 must be governed by the provisions of Section 292BB and not by the provisions as they stood before 1st April, 2008 or till 31st March, 2008. Similar view is clearly discernible from the decision in Rakesh Aggarwal v. Asstt. CIT (1997) 142 CTR (Del) 272 : (1997) 225 ITR 496, 501 (Del) though it was expressed in the context of the provisions of Section 147. Since both the sections, namely, 143(2) and 147 appear under the same chapter, i.e., Chapter XIV-Procedure for assessment , the principle discernible in the said judgment would have material bearing on the understanding of other procedural provisions appearing under the same chapter which are made effective from a given date and not from a given assessment year. In this view of the matter, there is no warrant for taking a view that the provisions of Section 292BB are effective from asst. yr. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the legal fiction created by the section depends on the existence of only one fact, i.e., where an assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment. If it is found that an assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment that is past as on 1st April, 2008, the legal fiction automatically comes into operation after 31st March, 2008. This view is well supported by the use of the word related in the first limb of Section 292BB. It is quite obvious that the words related to an assessment or reassessment signify past and thus refer to the assessments that are past as on 1st April, 2008. Section 292BB is effective from 1st April, 2008 and hence the appearance of an assessee in any proceeding or cooperation in any inquiry related to an assessment or reassessment would have to be necessarily from time antecedent to the date from which the section is effective otherwise the legislative prescription of making the section effective from 1st April, 2008 would be completely frustrated. The use of the words related to an 'assessment or reassessment in the sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or time stipulation for coming to the conclusion that the section would apply only when the notices have been issued/served on or after 1st April, 2008 or the assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment on or after 1st April, 2008, there is another reason that dissuades us from taking such a view as taking such a view would require us to supply and add words and time stipulation in the section to artificially narrow down the applicability of the section to the notices served after 31st March, 2008 or to the cases where an assessee has appeared in any proceeding or co-operated in any inquiry related to an assessment for asst. yr. 2008-09 onwards. Any interpretation which has the effect of adding certain words to a provision and thereby frustrating the legislative intent unambiguously expressed needs to be avoided. As stated earlier, the section is intended to cure irregular/invalid notices issued/served at any time in the past. The meaning conveyed by the section is loud and clear in that it has been enacted to cure after 31st March, 2008 what was invalid or irregular at any time in the past and therefore any past ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Section 292BB has been put under the heading Rationalisation and simplification of administrative and compliance procedures in the Memorandum to the Finance Bill, 2008 presented before Parliament. It is obvious that the provisions of Section 292BB removing the irregularities in service of notice are in the nature of procedural provisions. It is well established that the rule against retrospectivity has no application to enactments which affect only the procedure. No person has a vested right in any course of procedure, but only the right of prosecution or defence in the manner prescribed for the time being, and if an Act alters that mode of procedure, he can only proceed according to the altered mode. Alterations in the form of procedure are always retrospective. Section 292BB deals with service of notices which are matters of procedure and hence would always have retrospective (retroactive would be a more appropriate phrase) operation and therefore cure the procedural infirmities and irregularities in the matter of service of notice. This aspect of the matter is squarely covered by the judgment of the Hon'ble jurisdictional High Court in CWT v. Kasturbhai Mayabhai (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative nature. 34. The question that now arises is whether the legal fiction created by Section 292BB is declaratory in nature and therefore applies to all the pending matters touching upon the validity of the notices on or after 1st April, 2008. The language in Section 292BB is that 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 that an assessee shall be precluded from taking any of the objections mentioned in the section in a case where he has appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment. Section 292BB seeks to achieve four major objects : one, to clarify the legal effect arising from non-service of notices upon the assessee, non-service of the notices upon the assessee as per time provisions, and improper service of the notices; two, to declare that such notices would be deemed to have been validly served upon the assessee in accordance with the provisions of the Act on the fulfilment of the stipulated condition; three, to cure the notices of their deficiencies in their serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and sufficient to cure past actions which were not in conformity with law as amending the law with retrospective effect. Diverse methods are available to the legislature for curing the past actions of their infirmity and any of them is as efficient and sufficient to achieve the same object as any other. It was open to the legislature to employ an appropriate curative clause in the IT Act, without retrospectively amending each of the provisions dealing with the notices, in order to cure the notices suffering from certain infirmities or invalidity. It was equally open to the legislature to retrospectively amend each of the sections dealing with the notices to achieve the same purpose but this course of action would not only have been more cumbersome but also added bulk to the IT Act. As stated earlier, Section 292BB is a curative provision and therefore quite efficient and sufficient by itself to cure the deficiencies in the matter of service of notices issued in the past, which would otherwise have been invalid. (vii) Whether Section 292BB can draw a part of its requisites for its operation from time antecedent to the date from which it is effective. 37. The crux of the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r case, no one would class statutes of limitation or prescription as retrospective merely because the space of time which is essential for their operation may consist in part of time passed before the Act. 38. It is thus quite clear that a statute is not required to be given retrospective effect in express terms only for the reason that it seeks to draw a part of its requisites for its operation from time antecedent to its being made effective. Repealing, declaratory, curative, validating, retroactive (as distinguished from retrospective) or procedural laws generally draw a part of their requisites for their operation from time antecedent to the date from which they are made effective. A statute may be prospective and yet draw a part of its requisites for its operation from time antecedent to its being made effective. And this is what Section 292BB seeks to do. It creates a legal fiction effective from 1st April, 2008 but the legal fiction so created is made specifically applicable to the things that are past as on 1st April, 2008 and hence absence of service of notice in time or in accordance with law at any time in the past would stand cured after 31st March, 2008, i.e., the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slative intent behind enacting Section 292BB, the irresistible conclusion is that it cures the notices of their deficiencies after 31st March, 2008 and therefore an assessee cannot be permitted to raise any of the objections enumerated in the said section after 31st March, 2008 once it is shown that an assessee has appeared in any proceeding or cooperated in any inquiry related to an assessment. 41. The assessee has fairly conceded before the CIT(A) as also before us that he has fully participated in the enquiry and the proceedings related to the assessment for the year under appeal. No material has been placed before us to show that any objection was raised before the AO in terms of the proviso to Section 292BB. In this view of the matter, it shall now be deemed in terms of Section 292BB that the notice which was required to be served as per the time provision of Section 143(2) has been duly served upon the assessee in time in accordance with the relevant provisions of the Act and therefore the assessee stands statutorily precluded from taking any objection at this stage that the notice was not served upon him, or was not served upon him in time, or was served upon him in an im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the aforesaid pieces of evidence were placed by the assessee before the AO. In the absence of relevant evidence supporting the claim of the assessee that the sales were actually made by C.P. Udyog, it was not open to the learned CIT(A) to come to the conclusion that the sales were made by C.P. Udyog and payment in respect thereof were received by the assessee. It is the assessee, who has recorded the impugned sum in his books of account, and therefore the presumption is that the sum credited in the books of the assessee represents income of assessable nature in his hands. It was for the assessee to rebut the same by leading cogent evidence to establish that the sales were actually made by C.P. Udyog and by none else and the proceeds thereof were received by the assessee and not by C.P. Udyog. These facts were within the special knowledge of the assessee and therefore it was the assessee alone who ought to have filed necessary evidence to support his case. The learned CIT(A) seems to have missed this aspect of the case while deleting the impugned addition. (ii) The AO had supplied copies of contra-accounts obtained by him from certain parties together with a show-cause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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