TMI Blog2012 (6) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... -2008. 2. Ground Nos.2, 3 and 4 of the condensed grounds of appeal filed on 19-8-2010 has to be addressed first. The objection of the assessee is that when no notice u/s. 143(2) is issued, the assessment framed u/s. 143(3) r.w.s. 147 dated 28-12-2007 is not sustainable in law. However, the ld. CIT(Appeals) held that it is a procedural infirmity and the provisions of section 292B take care of the wrongful assumption of jurisdiction. 3. The relevant facts as narrated in the order of the ld. CIT(Appeals) are that the assessee filed its return of income for this assessment year declaring total income of Rs. 1,43,760/- and agricultural income of Rs. 5,000 on 31-10-2000. The return was processed u/s. 143(1) on 19-1-2001. Subsequently, notice u/s.148 dated 7-4-2006 was issued on the ground that the cash flow statement filed on 8-9-2005 for the assessment year 2001-02 shows an amount of Rs. 1,15,948/- as credit of profit from proprietary business and the same has been credited to his current account and has not been withdrawn therefrom. Hence, unexplained investment on this account comes to Rs. 1,15,948. Further during the assessment year 2000-01 the assessee had purchased a proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition, the ld. counsel relied on the decision of the Hon'ble Supreme Court in the case of R. Dalmia v. CIT [1999] 236 ITR 480/102 Taxman 702. Their Lordships of the Apex Court has observed in the last paragraph at page No. 488 of the said report reads as under: "As to the argument based upon sections 144A, 246,263, we do not doubt that assessments under section 143 and assessments and re-assessments under section 147 are different, but in making assessments and reassessments under section 147 the procedure laid down in sections subsequent to section 139, including that laid down by section 144B, has to be followed" Relying on the above decision, the ld. counsel submitted that while making assessment and reassessment u/s. 147 the procedure laid down in section subsequent to section 139 including that laid down by section 144B has to be followed. In other words the ld. counsel's objection is that without issue of notice u/s. 143(2), which is mandatory, it should have been held that the assessment under appeal completed u/s. 143(3) r.w.s. 147 is non est in law. The ld. counsel further submitted that when there is no notice as required under the statute, the assessment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proposed without the approval of the Jt. Commissioner of Income-tax as required u/s.151(2). Though the Assessing Officer issued notice u/s. 143(2) on the first occasion but after noticing the defect that re-assessment proceedings were started without the approval of the Jt. C.I.T., he dropped the re-assessment proceedings. Then he started a fresh notice after obtaining the necessary approval of the Jt. C.I.T. on 30-11-2006. After this 148 notice alone was issued and 143(2) notice has not been issued but 142(1) notice was issued. As held by the Hon'ble Supreme Court, 143(2) notice is the mandatory requirement for the purpose of completing the assessment u/s.143(3) r.w.s.147. The Hon'ble Supreme Court in the case of R. Dalmia it has been specifically laid down that all the provisions of the income-tax that is applicable to the regular assessments that is subsequent to section 139 including that laid down by 144 has to be followed. It has not been followed and this is clear violation of the mandatory requirement. Violation of mandatory requirement cannot be cured by taking the shelter u/s.292B and this has already been reiterated by the Hon'ble Supreme Court in the case of ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice u/s. 148 (dated 7.4.2006) had been issued without obtaining the necessary approval u/s. 151(2), the Assessing Officer (AO) dropped the assessment proceedings, initiated thus, on 28/11/2006. Sanction u/s. 151(2) was duly obtained from the Joint CIT on 30.11.2006 and, accordingly, a fresh notice u/s. 148 issued on 04.12.2006 (served on the assessee on 7/12/2006). No compliance with the said notice was made by the assessee, who after repeated adjournments; the AO also issuing notice u/s. 142(1) on 5/10/2007, filed a copy of the return as originally filed, i.e., on 31/10/2000, on 15/10/2007. The case was heard thereafter on different dates, and assessment completed on 28/12/2007, after issue of the pre-assessment notice on 14/12/2007 and considering the assessee's objections thereto, filed on, as it appears, 19/12/2007. These facts, stated in the assessment order (at different pages), stand further confirmed by the ld. CIT(A) (per paras 2.1 2.2 of the appellate order). Filing a copy of the return furnished earlier, which is again much after the time stipulated per the notice u/s. 148, cannot by any means be considered as the furnishing of a return of income, the disting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Maharaja Pratapsingh Bahadur Gidhaur [1961] 41 ITR 421 (SC)] and, in any case, dropped by the AO himself. As such, no cognizance of the return filed by the assessee in compliance with the earlier notice u/s. 148, or of the notice u/s. 143(2) issued in the course of proceedings initiated thereby, could be taken in law. If anything, it only goes to show that the AO was conscious of the statutory requirement of service of notice u/s. 143(2) within time, i.e., where he chose to subject the return of income filed to the verification procedure under law, and frame the assessment on that basis. Under the given facts and circumstances, which are not in dispute, and the law as it stands and, further, elucidated, I am, therefore, of the view that the non-issue and, consequently, the non-service of the notice u/s. 143(2) in the absence of the furnishing a return of income would not be fatal to the assessment; rather, could not have possibly been issued and served on the assessee, i.e., both factually and legally. Reliance for the purpose, i.e., apart from the clear language of the provision and the entire procedure for assessment, is placed on the decision by the apex court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istake. The assessment under reference is, on facts, which are undisputed, and in law, only one u/s. 144 r/w s.147 of the Act, on account of non-furnishing any return of income by the assessee in response to the only legally valid notice u/s. 148 served on him, as well as of the assessment as framed being in pursuance to the said notice u/s. 148, followed by another u/s. 142(1). The writing or the mention of the said section on the assessment order would not make it or convert its character to an assessment u/s. 143(3), which could only be in pursuance to a return of income filed by the assessee. The said mistake is of no moment, and saved by s. 292B of the Act. Even otherwise, it is trite law that the exercise of power is referable to the jurisdiction that confers validity (to the exercise), rather than one which renders it nugatory [ref: L. Hazari Mal Kuthiala v. ITO [1961] 41 TR 12 (SC)]. There has been due observance of the procedure for assessment by the AO in the present case. Conclusion For the detailed reasons aforestated, the assessment of income in the instant case has been validly made pursuant to the issue of notice u/s. 148 dated 4/12/2006, and in view of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, legally valid, or suffers from the vice of the non-issue of notice u/s. 143(2)? Reference under section 255(4) of the Income-tax Act, 1961 As there is a difference of opinion between the Members who heard the appeal, the following question is referred to the Hon'ble President, Income-tax Appellate Tribunal:- "Whether the Assessing Officer has the jurisdiction to frame the assessment u/s.143(3) r.w.s. 147 of the I.T.Act,1961 without the service of notice u/s.143(2) of the I.T. Act, 1961?" THIRD MEMBER ORDER N. Bharathvaja Sankar, Vice-President (As a Third Member) - On account of difference of opinion between the Hon ! ble Judicial Member and Hon'ble Accountant Member of the Cochin Bench, this matter has been referred to me by the Hon'ble President for consideration and disposal u/s.255(4) of the IT Act, 1961. 2. The questions referred to me are the following : ( i ) Question framed by the Hon'ble Judicial Member : "Whether the Assessing Officer has the jurisdiction to frame the assessment u/s. 143(3) r.w.s.147 of the IT Act, 1961 without the service of notice u/s. 143(2) of the IT Act, 1961 ?" ( ii ) Questions framed by the Horible Accountant Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 142(1) was issued on 05.10.2007. In response to the notice, the assessee filed copy of the statement of account and original return of income on 15.10.2007. The case was heard, reassessment notice was issued, assessee's letter of objection to the reassessment notice was filed and thereafter the assessment was concluded on 28.12.2007 u/s. 143(3) r.w.s.147 as appearing on the face of the assessment order. The total income was determined by the Assessing Officer at Rs. 38,64,000/- by making certain additions to the returned income of Rs. 1,43,760/-. This matter was carried to the Commissioner of Income-tax(A) who held that there were procedural infirmities in the order and however, in sum and substance the order is in conformity with the intended purpose of the Act and hence cannot be considered invalid. He also held that order to be a valid order as per the provisions of Section 292B. Aggrieved by this order of the Commissioner of Income-tax(A), the assessee moved an appeal before the Tribunal with various grounds of appeal- on jurisdiction and on merits. 5. The Hon'ble Judicial Member has dealt with the grounds relating to jurisdiction (ground nos.2, 3 and 4 of the condensed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,000/-which was processed u/s. 143(1) on 19.1.2001. Subsequently a notice u/s. 148 dated.7.4.2006 was issued, in response to which the assessee filed a return of income on 22.5.2006. Subsequently a notice u/s. 143(2) was issued on 14.07.2006, as the notice under section 148 issued on 07.04.2006 was without the approval needed u/s. 151(2), Assessing Officer dropped the proceedings on 28.11.2006. Subsequently the approval u/s. 151 (2) was obtained and another notice u/s. 148 was issued on 04/12/2006. Notice u/s. 143(2) was never issued thereafter. Notice under section 142(1) was issued on 05/10/2007. The appellant filed copy of the statement of accounts and original return of income on 15.10.2007. The assessment was concluded on 28/12/2007 u/s. 143(3) r.w.s. 147 on a total income of Rs. 30,84,020/-, by making various additions to the returned income of Rs. 1, 43,760/-. 2. The learned JM as per his reference order, has rightly concluded that the reassessment made without issuing notice under section 143(2) is invalid, based on decisions of the Hon'ble Supreme Court in the cases reported at 236 ITR 480 and 321 ITR 362. In pursuance of the order, he has rightly framed the question a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. The second question framed by him for reference totally lacks any legal or factual support. 4. Under the circumstances the findings of the Hon'ble JM may be upheld, as against that of the AM." 8. The learned DR submitted as under : "( i ) Fresh notice u/s.148 was issued on 4.12.2006, after obtaining proper sanction of 30.11.2006. The said notice u/s. 148 was served on assessee on 7.12.2006. The assessee did not file any return in response to said notice u/s. 148 within 30 days of receipt of said notice ending on 7.1.2007. As per record, the Assessing Officer had not extended any time for filing the return in response to said notice u/s.148 beyond 30 days. ( ii ) However, the assessee filed same copy of return as returned originally u/s. 139 with copy of statement of accounts on 15.10.2007, which cannot be treated as return filed in response to notice u/s. 148 served on 7.12.2006 being a copy only and no return was filed within time allowed u/s. 148 of I. T. Act, 1961.. ( iii ) By following the ratio in the case of GKN Driveshafts (India) Ltd., reported in 259 ITR 19, the proper course of action for the assessee when notice u/s.148 is received, is to file a return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact and on law proper and valid. While making assessment of 'income escaped assessment', the Assessing Officer had considered the returned income of Rs. 1,43,760/- as per the original return filed u/s. 139 for the assessment year 2000-01. Considering the above facts and position of law and the decisions cited above and by the Hon'ble Accountant Member, the assessment order made by the Assessing Officer in the said case for assessment year 2000-01 dated.28.12.2007 is proper, legal and valid on jurisdiction." 9. To resolve the difference between the Hon'ble Members on the point at issue, in my opinion it is the foremost thing to find out whether any return of income was there before the Assessing Officer in response to the notice issued u/s. 148, after obtaining the necessary sanction (148 notice issued on 4.12.2006). I find from the assessment order that in response to this fresh notice u/s. 148, dated.30.11.2006, the assessee has filed the same copy of the return as filed originally along with copies of statement of accounts on 15.10.2007. Now, I have to consider whether this is sufficient compliance as envisaged under the IT Act. It is not uncommon that an assessee in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order: "In response to the notice u/s.148 dated 30-11-2006 issued, after obtaining approval from the appropriate authority, the assessee has filed the same copy of return as returned originally along with copy of statements of accounts on 15-10-2007." Further extract from page No. 9 of asst order which is reproduced below is also relevant: "After examining the details and other evidences filed, the following adjustments are also made to the income returned." "Income as returned by the assessee Rs. 1,43,760/- Add:------------" 11. Thus, I find force in the contention of the assessee's counsel that the Assessing Officer was conscious that he is acting on the copy of the original return filed in response to notice u/s.148. In view of this fact, it is obvious that there was a return before the Assessing Officer in response to notice u/s.148 and he has proceeded from the figures of such return only to complete the assessment. If the assessee has intimated that the original return may be treated as one filed in response to notice u/s.148 and if the Assessing Officer is duty-bound to issue notice u/s. 143(2) in such cases, definitely in this case on hand, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. 15. In view of the above analysis, I am of the view that since the Assessing Officer acted on the copy of the return filed by the assessee, (as a starting point), it is the conscious view of the Assessing Officer that there was a return filed in response to notice u/s.148 and hence he acted upon the same. The other observations of the learned Accountant Member have no relevance when I have come to the conclusion that there was a return in response to notice u/s.148. In this view of the matter, I have to concur with the Hon'ble Judicial Member in concluding that the Assessing Officer has no jurisdiction to frame the assessment u /s. 143(3) r.w.s.147 of the IT Act without service of notice u/s. 143(2) of the Act. 16. Now the matter will go back to the regular bench for disposal in accordance with the majority opinion. ORDER Sanjay Arora, Accountant Member - This is an Appeal by the Assessee challenging the Order by the Commissioner of Income-tax Appeals)-V, Kochi ('CIT(A)' for short) dated 24.11.2008, partly allowing his appeal against its assessment u/s. 143(3) r.w.s. 147 of Income-tax Act, 1961 ('the Act', hereinafter) dated 28/12/2007 for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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