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The Assistant Commissioner of Income Tax Versus M/s. Ashed Properties and Investments Pvt. Ltd.

2015 (8) TMI 226 - ITAT BANGALORE

Validity of reopening of assessment - non service of notice u/s. 143(2) before completion of the assessment u/s. 147 - DR relied on the provisions of section 292BB of the Act and submitted that non-issue of notice u/s. 143(2) within the time specified under the proviso to sec. 143(2)(ii) will not render the order of reassessment null and void - Held that:- The two provisos in sub-section (1) to section 148 has been inserted with retrospective effect from 1st October, 1991. The gist of the two pr .....

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ed in section 153(2), such (otherwise time-barred) notice shall be deemed to be a valid notice. Further, the new Explanation inserted with effect from 1st October, 2005, specifically clarifies that the aforestated (newly inserted) provisos shall not apply to any return which has been furnished on or after 1st October, 2005, in response to a notice served under section 148(1) of the Act. The purpose of the amendment is to ensure that notices which were issued and barred by limitation and those wh .....

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ill not apply to any return which has been furnished on or after 1st October, 2005, in response to a notice served under section 148(1) of the Act. Thus the legislature has accepted the position that issue and service of notice u/s.143(2) of the Act within the time limit laid down in those provisions is mandatory.

We therefore, of the view that issue and service of notice u/s. 143(2) of the Act within the period of limitation contemplated under the proviso to sec. 143(2)(ii) is mandat .....

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bed under the said proviso, the Revenue cannot take advantage of the provisions of section 292BB. In other words, “issue of notice” and “service of notice” are two different aspects and what is covered by section 292BB is only “service of notice”. Non-issue of notice u/s. 143(2) within the period of limitation would not be covered under the ambit of section 292BB of the Act. The decision of the Tribunal in the case of Amithi Software Technologies Pvt. Ltd. (2014 (2) TMI 989 - ITAT BANGALORE) cle .....

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venue against the order dated 30.7.2012 of CIT(Appeals)-VI, Bangalore relating to assessment year 209-10. The assessee has filed a Cross Objection against the very same order of the CIT(Appeals). 2. The assessee is a company. It is engaged in the business of property development and real estate. For AY 2008-09, assessee filed a return of income on 30.9.2008 declaring a total income of ₹ 4,75,22,320. An intimation u/s. 143(1) of the Income-tax Act, 1961 [ the Act ] dated 29.9.09 was issued .....

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material impounded during the survey, assessment was reopened for AY 2008-09 by issue of notice dated 11.8.2010 u/s. 148 of the Act. The assessee vide letter dated 22.8.2010 requested the AO to treat the original return filed on 30.9.2008 as a return filed in response to notice u/s. 148. The Assessing Officer completed the assessment by making an addition of ₹ 9,75,24,011 to the total income of the assessee for the following reasons:- During the scrutiny proceedings it was seen that Page .....

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ut, there is variation in figures for F.Y. 2007-08 under certain heads like closing stock & WIP, Provisions, Profit before tax, Provision for current tax, Reserves & Surplus, etc. During the course of survey, a copy of signed audit report for F.Y. 2007-08 was obtained. When compared the figures in the said signed audit report and the figures appearing in the balance sheets under the head Option-I and Option-II , substantial variation have been noticed. Some of the important variations ar .....

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14,48,33,912 4,73,09,901 9,75,24,011 5 Provision for current tax 4,26,10,126 Nil 1,65,58,465 (-) 1,65,58,465 A plain reading of the chart suggest that the assessee company has suppressed net profit to the tune of ₹ 9,75,24,011/- and the same is added to the total taxable income of the assessee. 4. Aggrieved by the order of the AO, assessee filed appeal before the CIT(Appeals). Amongst other grounds, assessee also challenged the validity of the proceedings completed u/s. 147 of the Act on .....

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AO. The AO in the remand report submitted as follows:- Comments on Ground No.2: The order u/s 147 r. w.s. 143(3) of I.T. Act is a valid one in terms of provisions u/s 292BB. Failure to issue notice u/s 143(2) does not render the assessment unsustainable when the assessment is in response to a notice u/s 148. The A.O. has the basic jurisdiction to assess income in terms of sec 147 and sec 148. The scheme of provisions of sec 147 and sec 148 do not provide issue of notice u/s 143(2). In (2000) 3 S .....

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urther informed vide this office letter dated 07.03.2011 that the objections filed are rejected and the proceedings u/s 148 cannot be dropped. Sri K Seshadri, C.A. & Authorised Representative of the assessee appeared on 14.09.2011; 13.10.2011; 02.12.2011; 14.12.2011 and on 21.12.2011 (notings in the order sheet enclosed) and was asked to explain the details in respect of the work-in-progress as per impounded materials and on payments of money. These issues were not substantiated with any val .....

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the assessment. The assessee had objected to the re-opening of the assessment. However, the A.O. had further informed him vide his letter dated 07.03.2011 that the objections filed were rejected. The A.R. of the assessee appeared on several dates before the A.O. which is clear from the Order Sheet notings and they had been asked to explain the various discrepancies which the A.O. wanted to verify. In the light of the above, the assessee s contention that the assessment u/s 147 r.w.s. 143(3) is .....

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. From a perusal of the said records, the facts that emerge are that; the date of filing of return of income in response to notice u/s. 148 of the Act was 23.8.2010. In terms of proviso to section 143(2)(ii), notice u/s.143(2) of the Act ought to be issued and served on the assessee within a period of six months from the end of the financial year in which the return is furnished. The end of financial year in which return of income is furnished in this case is 31.3.2011. In terms of proviso to se .....

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r proviso to sec. 143(2)(ii). It is, however, clear from the record that assessee was represented by a CA and he had participated in the proceedings throughout. 11. On the factual details as narrated above, the ld. DR relied on the provisions of section 292BB of the Act and submitted that non-issue of notice u/s. 143(2) within the time specified under the proviso to sec. 143(2)(ii) will not render the order of reassessment null and void. On the other hand, the ld. counsel for the assessee placed .....

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ated as non est by the AO and a notice u/s. 143(2) was issued on 19.8.2010 with reference to original return of income filed by the assessee on 1.10.2008. The question before the Tribunal was as to, whether assessment proceedings are bad in law for want of issue of notice u/s. 143(2) within the period mentioned under the proviso to sec. 143(2)(ii) of the Act. The Tribunal dealt with the validity of notice issued beyond the period of limitation specified under proviso to sec. 143(2)(ii) and the e .....

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AO. The order of assessment is very clear on this aspect. The law is by now well settled that issuance of a notice u/s. 143(2) of the Act within the statutory time limit is mandatory and it is not a procedural requirement which is inconsequential. Reference may be made to the decision of the Hon ble Delhi High Court in the case of Alpine Electronics Asia Pvt. Ltd. v. DGIT, 341 ITR 247 (Del), CIT v. Vardhana Estates Pvt. Ltd., 287 ITR 368 and ACIT v. Hotel Blumoon, 321 ITR 362 (SC). The contrary .....

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ulled. 15. The ld. DR has, however, placed reliance on the provisions of sections 292B & 292BB of the Act. The aforesaid provisions read as follows:- 292B Return of income, etc., not to be invalid on certain grounds No return of income, assessment, notice, summons or other proceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by .....

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e 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 .....

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92B of the Act. As far as provisions of section 292BB is concerned, as laid down in the decisions of the Allahabad High Court in the case of Manish Prakash Gupta (supra) & Parikalpana Estate Development (P) Ltd. (supra) and Hon ble Punjab & Haryana High Court in the case of Cebong India Ltd. (supra), provisions of section 292BB cannot be applied in a case where admittedly no notice u/s. 143(2) had been issued within the time limit prescribed in law. We may also clarify that the dispute i .....

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ttable. The provisions of section 292BB cannot extend to a case where the question of limitation is raised on admitted factual position in a given case. We therefore hold that the provisions of section 292BB of the Act will not be applicable to the present case. 17. In light of the discussion as aforesaid, we hold that the assessment proceedings are invalid for the reason that the notice u/s. 143(2) of the Act had not been issued and served within the time limit prescribed by those provisions. T .....

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he rival submissions. From the narration of the factual details as given above, it is clear that the only notice issued u/s. 143(2) was dated 13.10.2011 and the same was beyond the period contemplated under proviso to sec. 143(2)(ii) of the Act. Two questions arise for our consideration; (i) Whether notice u/s. 143(2) of the Act is mandatory before completion of proceedings u/s. 147 of the Act? (ii) Whether provisions of section 292BB of the Act will come to the rescue of the Revenue so as not t .....

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. ITO (2005) 94 ITD 1 (Del)(SB) was confronted with similar/ identical facts. The questions required to be answered by the Special Bench were as under:- "1. Whether the proviso to s. 143(2) of the I.T. Act.1961, which mandates the service of notice within 12 months from the end of the month in which return is filed, also applies to the returns filed pursuant to notice under s. 148 of the I.T. Act, 1961? 2. If the answer to the aforesaid question is in the affirmative then what is the effect .....

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rescribed by the proviso u/s. 143(2). In the operative part. the Hon'ble Special Bench, held as under :- "39. It may be noted that no doubt, the foundation to assess or reassess is laid by issue of a valid notice under s. 148 but such jurisdiction is subject to further compliance was has been stipulated in the statute itself. If compliance of the proviso is not made, the very purpose of creating the proviso is defeated, i.e. uncertainty of assessee with respect to assessment shall conti .....

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n such as the present one regulating period of limitation must received strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigants for an indefinite period on future unforeseen events." If limitations are not followed strictly, chaotic situation would follow. 40. In the light of the analysis of the relevant provisions of law and judicial precedents, we are of the considered view that the .....

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in affirmative. 15. Sec.148 of the Act was amended by the Finance Act, 2006 by insertion of two proviso below Sub-section (1) and an Explanation. The amended provisions read as follows: Sec.148: Issue of notice where income has escaped assessment. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the .....

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period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reasse .....

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f twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in subsection (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation : For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on .....

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section 143(2) [or 143(2)(ii), as the case may be] after the expiry of twelve months as specified in the relevant proviso but before the expiry of the time-limit for making the assessment, reassessment or re-computation as specified in section 153(2), such (otherwise time-barred) notice shall be deemed to be a valid notice. Further, the new Explanation inserted with effect from 1st October, 2005, specifically clarifies that the aforestated (newly inserted) provisos shall not apply to any return .....

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it. The invalidity of notice as well as the absence of any notice became fatal to the proceedings and are sought to be validated and justified by the retrospective amendments. The explanation clarifies that the amended provisions will not apply to any return which has been furnished on or after 1st October, 2005, in response to a notice served under section 148(1) of the Act. Thus the legislature has accepted the position that issue and service of notice u/s.143(2) of the Act within the time lim .....

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