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PR. Commissioner of Income Tax -18 Versus Silver Line

2015 (11) TMI 809 - DELHI HIGH COURT

Reopening of assessment - non issue of notice - Held that:- With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143(2) of the Act, the ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable. - Decided in favour of assessee. - ITA 578 to 581/2015, ITA 585/2015, ITA 586/2015, ITA 587/2015 .....

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late Tribunal ( ITAT ) in four appeals of the Revenue being ITA Nos. 1809, 1504, 1505 and 1506/Del/2013 and four cross objections of the Assessee being CO Nos. 122, 109, 107 and 108/Del/2013 for the Assessment Years ( AYs ) 2005-06, 2006-07, 2007-08 and 2008-09. 2. The central issue in the present case is whether the failure by the Assessing Officer ( AO ) to issue a notice to the Assessee under Section 143(2) of the Act is fatal to the reassessment proceedings under Sections 147/148 of the Act? .....

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n 143(2) of the Act was issued. Subsequently, the assessment was finalised by the AO by passing an order under Section 143 (3) of the Act. The return for AY 2008-09 was processed under Section 143(1) of the Act. 4. Information was received from the Director of Income Tax (Investigation), Jaipur by letter dated 10th May 2010 that the Assessee was making bogus purchases for which cheques were issued and bills were obtained without any physical delivery of goods. It was stated that the purchases sh .....

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sessee was called upon to file a return in the prescribed form for the said AY. 5. On 1st April 2011, the Assessee wrote a letter to the AO stating, inter alia, that the return for AY 2005-06 originally filed on 20th September 2005 should be treated as the return in response to the notice under Section 148 of the Act. The Assessee asked for a certified copy of the reasons recorded and noted that the return was being filed under protest . Thereafter the AO on 14th November 2011 issued a notice to .....

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uld be duly verified and signed in accordance with the provisions of section 140 of the said Act and delivered at my office on or before.............. (b)** produce or cause to be produced before me at my office at Room No.185-A 1st floor, C.R. Bldg., I.P. Estate, New Delhi on 18-11-2011, at 11:00 a.m. the accounts and/or documents specified and make compliance of the questionnaire annexed. (c)** furnish in writing and verified in the prescribed manner information called as per annexure and on t .....

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passed by the AO on 28th December 2011 making an addition of ₹ 7,05,600 on account of deduction wrongly made. The taxable income was computed at ₹ 2,02,19,273. Similar orders of reassessment were passed by the AO for AYs 2006-07, 2007-08 and 2008-09. 8. The Assessee appealed to the Commissioner of Income Tax (Appeals) [ CIT (A) ) questioning the initiation of the reassessment proceedings as well as the reassessment orders on merits. By the order dated 31st December 2012 for AY 2005-0 .....

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isation of the reassessment orders by the AO and therefore those orders were without jurisdiction. In the impugned common order, the ITAT considered the said ground and decided it in favour of the Assessee and against the Revenue. 10. Mr. N.P. Sahni, learned Senior Standing counsel for the Revenue, first submitted that the ITAT erred in permitting the Assessee to raise a ground regarding non-issuance of notice under Section 143(2) of the Act, when no such ground has been raised during the reasse .....

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return having been filed by the Assessee pursuant to the notice issued under Section 148 of the Act, to issue a notice under Section 143 (2) of the Act. It was for the above reason that the AO thought it appropriate to issue the notice under Section 142 (1) of the Act. Relying on the decision in Alpine Electronics Asia Pte. Ltd. v. Director General of Income Tax (2012) 341 ITR 247, Mr. Sahni submitted that in the facts and circumstances of the present case, the failure of the AO to issue a notic .....

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e Tax v. Parikalpana Estate Development (P.) Ltd. (2012) 79 DTR 246 (All.) and Manish Prakash Gupta v. Commissioner of Income Tax (2012) 259 CTR 57 (All.), he submitted that Section 292BB of the Act was only a rule of evidence for dealing with service of notice and has nothing to do with the mandatory requirement of issuance of notice under Section 143 (2) of the Act which is a notice giving jurisdiction to AO. Reference was also made to the decision of this Court in Pr. CIT v. Shri Jai Shiv Sha .....

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(CIT v. Kuber Tobacco Producers P. Ltd.) he pointed out that Section 292BB of the Act has been held to be prospective, i.e., applicable only from AY 2008-09. Finally Dr. Gupta submitted that in any event the question as to the legal effect of the failure of the AO to issue a notice under Section 143(2) of the Act was a pure question of law and on the strength of the decision of the Supreme Court in National Thermal Power Co. Ltd. v. Commissioner of Income Tax (1998) 229 ITR 383 (SC) and Gedore .....

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precluded, at the stage of the proceedings before the ITAT, from raising a contention regarding failure of the AO to issue a notice under Section 143(2) of the Act. The legal position appears to be fairly well settled that Section 292BB of the Act talks of the drawing of a presumption of service of notice on an Assessee and is basically a rule of evidence. In Commissioner of Income Tax v. Parikalpana Estate Development (P.) Ltd. (supra) in answering a similar question, the Court referred to its .....

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him in accordance with the provisions of the Act and the Assessee in those circumstances would be precluded from objecting that a notice that was required to be served upon him under the Act was not served upon him or not served in time or was served in an improper manner. It was held that Section 292BB of the Act is a rule of evidence and it has nothing to do with the mandatory requirement of giving a notice and especially a notice under Section 143(2) of the Act which is a notice giving juris .....

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arma (2011) 336 ITR 678 and Commissioner of Income-tax-II, Lucknow v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All.) and the decision of the Madras High Court in Sapthagiri Finance & Investments v. Income Tax Officer (2013) 90 DTR (Mad) 289), that Section 292 BB of the Act would apply insofar as failure of 'service' of notice was concerned and not with regard to the failure to 'issue' notice. In other words, the failure of the AO, in re-assessment proceeding .....

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that in any event as far as AYs 2005-06 to 2007-08 is concerned, Section 292BB of the Act would not apply since it is prospective in its application, i.e., applicable from AY 2008-09 onwards. The legal position in this regard appears to be well settled as explained in CIT v. Kuber Tobacco Producers P. Ltd. (supra) and Commissioner of Income Tax v. Mohammad Khaleeq (supra). 16. As regards the objection of the Revenue to the ITAT permitting the Assessee to raise the point concerning non-issuance .....

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sation of the reassessment orders, notice under Section 143(2) of the Act was not issued by the AO to the Assessee. With there being no fresh evidence or disputed facts sought to be brought on record, and the issue being purely one of law, the ITAT was not in error in permitting the Assessee to raise such a point before it. This finds support in the decision of the Supreme Court in National Thermal Power Co. Ltd. v. Commissioner of Income Tax (supra) and the decision of this Court in Gedore Tool .....

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itted that the original return was filed in the 'Saral Form' which had since been replaced with a different form for filing of returns. Consequently, the said return could not have been treated as a return filed pursuant to the notice issued to the Assessee under Section 148 of the Act. He further submitted that with no discrepancy having been found by the AO in the returns for AYs 2005-06 till 2007-08, which were processed under Section 143 (1) of the Act, there was no occasion for the .....

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ner . The AO has the discretion to issue a notice under Section 143 (2) if he considers it necessary or expedient to do so. This exercise by the AO under Section 143 (2) of the Act is qualitatively different from the issuance of a notice under Section 142(1) of the Act, which as noted hereinbefore, is in a standard proforma. 19. The Court is unable to accept the submission of the Revenue that in the present case, no return was filed by the Assessee pursuant to the notice issued to it under Secti .....

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e been issued to him under Section 143 (2) of the Act, the AO would have been obliged to let the Assessee know why he was being asked to file a return notwithstanding his letter dated 1st April 2011. In the circumstances, the Assessee was justified in proceeding on the basis that it had not committed any default in communicating to the AO that the return already filed should be treated as the return filed pursuant to the notice under Section 148 of the Act. 20. The proposal to reopen an assessme .....

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the Madras High Court in Sapthagiri Finance & Investments v. Income Tax Officer (supra) where again the Assessee did not file a return pursuant to Section 148 of the Act. The AO then issued a notice to it under Section 142(1) of the Act. The Assessee thereafter appeared before the AO and stated that the original return filed should be treated as the return filed in response to the notice under Section 148 of the Act. In those circumstances, the High Court observed that if there was some expl .....

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