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M/s New Okhla Industrial Development Authority Versus Assistant Commissioner of Income Tax Circle-1 Noida

Reopening of assessment - whether the assessment framed without issuing the notice u/s 143(2) of the Act is a valid assessment? - Held that:- Where notice u/s 143(2) of the Act is not issued to the assessee before framing the assessment u/s 143(3) of the Act, the AO does not have the jurisdiction to make the assessment. In the present case, the AO issued the notice u/s 148 of the Act and the assessee furnished the return of income in response to the said notice. Thereafter the AO asked the asses .....

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e, who has appeared in any proceeding and co-operated in any enquiry relating to assessment or reassessment shall be deemed to be served with any notice which was required to be served and would be precluded from objecting that the notice was not served upon him or was served upon him in an improper manner or was not served upon him in time. However, the proviso states that the principle of estoppels incorporated in the main section would not apply, if the assessee has raised objection in reply .....

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assessment can be framed u/s 143(3) r.w.s. 147 of the Act without issuance of notice u/s 143(2) of the Act. - Decided in favour of assessee. - ITA No. 5879/Del/2014 - Dated:- 26-6-2015 - Sh. N. K. Saini And Sh. I. C. Sudhir, JJ. For the Petitioner : Sh. Ajay Wadhwa, Adv., Ms. Raj Rani Lakra, CA , Sunil Kumar Gupta, CA & Dinesh Verma, CA For the Respondent : Sh. Gunjan Prashad, CIT DR ORDER PER N.K. SAINI, A.M. This is an appeal by the assessee against the order dated 26.09.2014 of the ld. CI .....

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rred in confirming the action of A.O. with respect to Ground no. 4 by not considering the submission of necessary supporting documents before A.O. by the Appellant. 4. That the order of the Ld. A.O. is void ab initio in as much as, no mandatory notice u/s 143(2) of the Income Tax Act, 1961 was issued at any stage of the assessment proceedings. 5. That the authorities below have erred in law and on facts in taking the entire surplus in the income & expenditure account as income. They have fai .....

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not taxable under any head of income. 7. That the authorities below have failed to appreciate the fact that surplus as per the income and expenditure account has further been allocated/provided for the activities of Appellant and, therefore, the amounts being in the nature of provision, there is no surplus available to taxation after reducing these allocations/provisions. 8. That the authorities below have failed to give credit for the tax collected by them from banks and institutions with whom .....

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duced below- (i) That having regard to the facts and circumstances of the case, The Ld. AO has acted against the principles of Natural justice in completing the assessment within a short period of 39 days; (ii) That the Ld. AO erred in treating the excess of receipts over expenditure as taxable income though the Appellant is performing Sovereign functions as mandated by the Section 3 of Uttar Pradesh Industrial Development Act, 1976 and is not mandated to carry out any business activity. (iii) T .....

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e Allahabad High Court Judgment without taking the cognizance of the fact that Appellant has filed a SLP with Honorable Supreme Court and Leave has been granted by the Honorable Supreme Court vide its order dated 17.01.2014 on the question of law; (v) That the Ld. AO has failed to appreciate the functions performed and discharged by the assessee and in treating the status of the assessee as Artificial Juridical Person instead of Local Authority; (vi) That having regard to the facts and circumsta .....

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hat Appellant is not mandated to carry out any business activity by Section 3 of Uttar Pradesh Industrial Development Act, 1976; (ix) That the Ld. AO has erred as a matter of fact in initiating the penalty under section 271(1)(c) of the Income Tax Act regarding concealment of particular of income of formulating inaccurate particular of income. (x) That "The Appellant craves leave to add, amend, alter, vary and/or withdraw or rescind all or any of the GROUND OF APPEAL on or before the final .....

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s to the non-issuance of mandatory notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) before completion of the assessment. 4. The facts related to this issue in brief are that in this case proceedings u/s 147/148 of the Act were initiated by the AO after recording the reasons and the notice u/s 148 of the Act dated 06.03.2013 was issued and duly served in the office of CEO, Noida Authority on 12.03.2013. As per the said notice the assessee was required to file its .....

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,51,57,86,991/- which had been allocated for appropriation under two heads viz., i) Appropriation for new infrastructure facility ii) Appropriation for maintenance & creation of public utility. 5. The AO noticed that prior to its claim of exemption u/s 10(20) of the Act, the assessee claimed exemption u/s 10(20A) of the Act, which was omitted by the Finance Act, 2002 w.e.f 01.04.2003. Subsequently, a writ was filed by the assessee in the Hon ble Allahabad High Court for its claim u/s 10(20) .....

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come. The AO also added ₹ 1,15,86,36,500/- out of the expenses by observing that the assessee had furnished no evidence of any nature even when it was asked to submit explanation along with relevant evidence as to whether expenses in the form of grant to ITTUP, GB University, USRTC had been incurred in accordance with the provision of section 36(1)(xii) of the Act. 6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the additions made by the AO and also stat .....

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ssue was not raised during the assessment proceedings before the AO. He further observed that the AO initiated the assessment proceedings for the assessment year 2005-06 subsequent to the amendment in section 10(20) of the Act and the assessee filed a writ petition before the Hon ble Allahabad High Court challenging the action of the AO wherein vide order dated 28.02.2011, it has been held that after amendment u/s 10(20) of the Act w.e.f. 01.04.2003, the assessee is not a Local Authority within .....

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ary evidence to explain the view on the nature of impugned grant which had been claimed to be an expenditure. He also observed that the submissions of the assessee was silent regarding nature as well as treatment of grant to organization and it was not clear as to whether these grants were in the nature of expenses/investment or loan/advances etc. He, therefore, for want of necessary details found no infirmity in the order of the AO in rejecting the claim of the assessee. 8. Being aggrieved the .....

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assessment file maintained by the AO for the captioned assessment year which always records factum of issuance of all the notice u/s 142(1) etc. did not contain a whisper of the notices u/s 143(2) of the Act and there was no such entry in the order sheet. It was contended that in the assessment order passed for the year under consideration all the notices issued u/s 142(1)/148 etc. are mentioned but nothing is mentioned about the issuance of notice u/s 143(2) of the Act. It was contended that no .....

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claimed that notice u/s 143(2) of the Act was issued on 16.01.2014 and entry was made in the dispatch register at serial no. 1326 but in the said entry it has been mentioned that assessment proceedings for the assessment year 2009- 10 in the case of New Okhla Industrial Development Authority-regarding but nowhere issuance of notice u/s 143(2) has been mentioned. It was contended that at serial no. 1326 different letter was issued and not the notice u/s 143(2) of the Act. It was emphasized that .....

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and the stamp of C.E.O office was placed on the said letter (a reference was made to page no. 139 of the assessee s paper book). The said letter from the C.E.O office moved to A.C.O s office vide receipt no. 712 dated 21.01.2014 (copy of which is placed at page no. 169 of the assessee s paper book). The said letter is having the stamp of the A.C.O s office. It was further stated that from the A.C.O s office the letter moved to F.C s office vide receipt no. 4492 dated 28.01.2014 (copy of which is .....

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he claim of the department was merely an afterthought. It was submitted that when the assessee stated that no notice had been received, the burden was on the department to prove the service of the same but no such service of the notice u/s 143(2) of the Act on the assessee was proved by the department. It was submitted that issuance of notice u/s 143(2) of the Act is mandatory and failure to issue the notice u/s 143(2) of the Act within the prescribed period cannot be cured by taking recourse to .....

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Vs Mukesh Kumar Agrawal (2012) 345 ITR 29 (All. HC) Ø CIT Vs M/s Bora Polyclinic Pvt. Ltd. (All. HC) (ITA No. 134 of 2005 & 135 of 2005) order dated 05.07.2010 Ø Alpine Electronics Asia Pte. Ltd. Vs DGIT (Del HC) (2012) 341 ITR 247 Ø Raj Kumar Chawla Vs ITO (Del ITAT) (SB) (2005) 1 SOT 934 Ø DCIT Vs M/s Silver Line (ITA No. 1809, 1504, 1505 & 1506/Del/2013) order dated 26.09.2014 Ø Adarsh Education Society Vs ITO (2006) 8 SOT 847 (Del) Ø CIT Vs P .....

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ncome on 13.12.2013. It was further submitted that the Income Tax Act does not prescribe that order sheet entry should have all the entries nor does the Act mention about the order sheet or that in the assessment order the issuance of notice u/s 143(2) be mentioned. It was further submitted that assuming but not admitting that the notice u/s 143(2) of the Act was not issued, even then a notice is issued just to put the assessee on notice but there is no statutory form for the notice u/s 143(2) o .....

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slash; Intracraft India Vs CIT 154 ITR 662 (Del) Ø Sant Baba Mohan Singh 90 ITR 197 (All) Ø Areva T&D India Ltd. Vs ACIT 207 CTR (Mad) 497 Ø Travancore Cements Ltd. Vs ACIT (2008) 305 ITR 170 (Ker) Ø UOI Vs R. C. Jain & Ors. 1981 AIR 951 Ø Vidarbha Irrigation Development Corp. Vs JCIT (2006) 114 TTJ 524 (Mum) 11. It was further submitted that section 148(1) of the Act clearly states that the assessee is to be served a notice clearly specifying that the .....

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ng the return of income, there is no need to issue the notice u/s 143(2) of the Act and as the assessment was framed by taking into consideration the return filed by the assessee. Therefore, the assessment framed by the AO was valid particularly when no objection was raised before the AO relating to the issuance of notice u/s 143(2) of the Act. The reliance was placed on the following case laws: Ø Mohd. Ayub Vs ITO (346 ITR 30 (All): 2012) Ø CIT Vs Madhya Bharat Energy Corporation .....

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a Vs ITO (2011) (Del) 245 CTR 416 12. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the proceedings u/s 147 r.w.s. 148 of the Act were initiated by the AO after recording the reasons, the notice u/s 148 of the Act dated 06.03.2013 was issued and duly served in the office of the assessee on 12.03.2013 requiring the assessee to file the return within 30 days from the service o .....

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f the assessment order dated 29.01.2014, the AO stated section 147 of the Act under which the assessment was framed. He did not mention that the assessment was framed either u/s 143(3) or 144 r.w.s. 147 of the Act. It is also noticed that in the body of the order at page no. 2 the AO mentioned that the assessee was required to furnish replies to questionnaire u/s 142(1) of the Act on 24.12.2013 at 11:30 AM. The AO specifically mentioned at page no. 2 of the assessment order dated 29.01.2014 that .....

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, it was given final opportunity to represent and explain on 23.01.2014 failing which this office had no alternative except the complete the assessment on merit and on the basis of the material facts available on record . Copy of the said letter dated 16.01.2014 is placed at page no. 110 of the assessee s paper book-II. The said letter is reproduced as under: To, The Chief Executive Officer, New Okhla Industrial Development Authority, Main Administrative Building, Sector-6, Noida. Kind Attn: Mr. .....

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y few queries were addressed and the case was scheduled for hearing on 15.01.2014 as per request of your AR. It is noticed that there was no compliance on above mentioned date nor any details were filed in this office. It is further noticed that ITR for AY 2009-10 which was filed in this office u/s 148 had no entries or details other than nil figures. In view of this you are provided final opportunity to plead your case by filing complete replies to questionnaire and attend as per date mentioned .....

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faithfully, Sd/- (Abhishek Gautam, IRS) Asstt. Commissioner of Income Tax, Circle-1, Noida 13. From the contents of the aforesaid letter, it is crystal clear that nothing was mentioned in this letter about the issuance of notice u/s 143(2) of the Act. The claim of the department was that the notice u/s 143(2) was issued on 16.01.2014, however, nothing was brought on record that apart from the aforesaid letter dated 16.01.2014 any other notice or letter or document was issued by the department to .....

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, New Okhla Industrial Development Authority, Main Administrative Building, Sector-6, Noida Sub:- Assessment Proceedings for the AY 2009-10 in the case of New Okhla Industrial Development Authority- Regarding 14. From the above notings, it is clear that nothing was mentioned about the issuance of notice u/s 143(2) of the Act at serial no 1326. It is also clear that the department was unable to produce any evidence to substantiate that notice u/s 143(2) of the act was issued to the assessee. 15. .....

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ction 143(2) of the Act within the time prescribed in the proviso to section 143(2). By making the issue of notice mandatory, section 158BC, dealing with block assessments, makes such notice the very foundation for jurisdiction. Such notice is required to be served on the person who is found to have undisclosed income. Section 158BC provides for enquiry and assessment. After the return is filed, clause (b) of section 158BC provides that the Assessing Officer shall proceed to determine the undisc .....

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): the officer has to complete the assessment under section 143(3) only. If an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable. Therefore, the requirement of notice under section 143(2) cannot be dispensed with. 16. Similarly, .....

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ue a notice under section 143(2) of the Act. While computing escaped assessment, the return filed in response to a notice under section 148 shall be deemed to be furnished under section 139 of the Act. Meaning thereby, that the procedure of section 139 of the Act shall be followed while dealing with the case of escaped assessment under section 148 of the Act. The plain reading of section 148 of the Act further reveals that within the statutory period specified therein, it shall be incumbent to s .....

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e Act has held as under (Head Note): The Supreme Court held in Hotel Blue Moon s case (2010) 321 ITR 362 (SC) that if the Assessing Officer, for any reason, repudiates the return filed by an assessee in response to the notice under section 158BC(a) of the Act relating to a block assessment, the Assessing Officer must necessarily issue notice under section 143(2). It was further held that by making the issue of notice mandatory, section 158BC, dealing with block assessments, makes such notice the .....

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r 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 the Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner. In the present case, the Tribunal has returned the findings that the notice under section 143(2) of the Act was admittedly not .....

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ssuance of the notice under section 143(2). 18. From the ratio laid down in the aforesaid referred to judicial pronouncements, it is crystal clear that where notice u/s 143(2) of the Act is not issued to the assessee before framing the assessment u/s 143(3) of the Act, the AO does not have the jurisdiction to make the assessment. In the present case, the AO issued the notice u/s 148 of the Act and the assessee furnished the return of income in response to the said notice. Thereafter the AO asked .....

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T-II, Lucknow Vs Salarpur Cold Storage (P.) Ld. (2014) 50 Taxmann.com 105 (supra) has held as under: Where the Assessing Officer fails to issue a notice within the period of six months as spelt out in the proviso to clause (ii) of section 143(2), the assumption of jurisdiction under section 143(3) would be invalid. This defect in regard to the assumption of jurisdiction cannot be cured by taking recourse to the deeming fiction under section 292BB. The fiction in section 292BB overcomes a procedu .....

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t was served correctly or otherwise, would be of no relevance whatsoever. Failure to issue a notice within the prescribed period would result in the Assessing Officer assuming jurisdiction contrary to law. 20. Similarly, the Hon ble Delhi High Court in the case of Alpine Electronics Asia Pte. Ltd. Vs DGIT (2012) 341 ITR 247 held as under: Section 143(2) of the Income-tax Act, 1961, is applicable to proceedings under section 147/148 of the Act. The proviso to section 148 of the Act grants liberty .....

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