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Suresh Exports P. Ltd. (Formerly Known as Devidoll Jewellery Ltd.) Versus Deputy Commissioner of Income-Tax

2015 (9) TMI 1443 - ITAT MUMBAI

Reopening of assessment - non issue of notice - Held that:- The mandatory notice under section 143(2) has neither been issued nor served upon the assessee and, therefore, the Assessing Officer cannot assume jurisdiction to frame assessment of the return filed by the assessee in response to the notice issued under section 148. Thus, the impugned assessment order is held to be illegal and the same is hereby quashed. - Decided in favour of assessee - I. T. A. No. 6307/Mum/2011 - Dated:- 23-9-2015 - .....

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red in upholding the assumption of jurisdiction by the Assessing Officer (AO) under section 147 of the Act. He failed to appreciate that the jurisdictional pre-conditions necessary for assuming the jurisdiction under the said section had not been fulfilled in the present one. 2. The Commissioner of Income-tax (Appeals) ought to have held that no reasons were recorded by the Assessing Officer before issuing the notice under section 148 of the Act, as, till now the reasons have not been provided t .....

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missible in law. 4. In the alternative and without prejudice to the above, the Commissioner of Income-tax (Appeals), ought to have held that there was no material before the Assessing Officer which could lead to the formative of belief that the appellant's income chargeable to tax has escaped assessment by way of grant of excess deduction under section 10A of the Act. The material, if any, has no nexus with the belief formed by the Assessing Officer. 5. The Commissioner of Income-tax (Appeal .....

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he position of section 80- IA(10) had not been fulfilled in the case. 8. The Commissioner of Income-tax (Appeals) failed to appreciate that the sale proceeds received on account of export is ₹ 7,02,10,134, i.e., the sale price agreed between the appellant and the purchaser of goods, such amount cannot be substituted by the estimate of alleged fair value of the goods of ₹ 5,83,97,338. 9. The Commissioner of Income-tax (Appeals) erred in upholding the denial of deduction under section .....

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to this ground. The learned Departmental representative refuted arguments of the learned counsel. After hearing the learned counsel and the learned Departmental representative, it was felt necessary by us that the perusal of the assessment records was required to examine the aspects of issuance and service of notice under section 143(2). In compliance with our direction, the learned Departmental representative produced the file containing assessment records before the Bench and the same was exa .....

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the assessee. It was submitted that the issue is covered with the judgment of the hon'ble Supreme Court in the case of Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC). It was submitted that there are many other judgments of various High Courts and various judgments of the Income-tax Appellate Tribunal on this issue. It was submitted that when this issue was raised before the learned Commissioner of Income-tax (Appeals), it has been accepted in the appellate order by the learned Commiss .....

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ncome-tax (Appeals) is contrary to law and is against the judgment of the hon'ble Supreme Court and the High Courts. It was also submitted that the provisions of section 292BB are not applicable on the facts of this case because the provisions of section 292BB cannot be applied, retrospectively, as the same came into effect from April 1, 2008, whereas the impugned proceedings were initiated before the said date. 5. On the other hand, the learned Departmental representative relied upon the or .....

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ed that as per the provisions of section 292BB, the assessee cannot raise any objection in respect of non-service of notice under section 143(2), at a later stage, if no objection was raised during the course of assessment proceedings. The learned Departmental representative requested to uphold the order of the learned Commissioner of Income-tax (Appeals) on this issue. 6. We have heard both the parties carefully and have gone through case records. We have also gone through various case law cite .....

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e on September 14, 2007. Subsequently, the Assessing Officer passed assessment order under section 143(3) read with section 147 of the Income-tax Act, 1961. Against the said assessment order, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals) and, inter alia, raised its grievance of non-service of the mandatory notice under section 143(2) of the Act. The assessee also filed an affidavit dated May 28, 2009, in support of its claim that no notice under section 143 .....

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sing Officer to the assessee. There was nothing to show that it was handed over by the Assessing Officer to the notice server. There was nothing to show that the notice has been issued out of the bounds of the Assessing Officer meant to be delivered to the assessee. It is further noted by us that the learned Commissioner of Income-tax (Appeals) has also confirmed this fact in his order at paragraph 3.5.1 that apparently there is no evidence on record with regard to service of notice under sectio .....

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s, we find that there is no evidence of issuance or service of the impugned notice under section 143(2) dated August 11, 2008. 8. Having held so, let us now examine the legal effect of non-issuance and non-service of mandatory notice under section 143(2), in the reassessment proceedings initiated under section 147 read with section 148 of the Income-tax Act, 1961. 9. In this regard, we first refer to the requirement of law for service of notice under section 143(2). First of all, we refer to the .....

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provided under section 148 of the Act, wherein it has been clarified by way of an Explanation to section 148(1) inserted by the Finance Act, 2006, with retrospective effect from October 1, 2005, that for making assessment of the returns filed after October 1, 2005 (in pursuance of notice under section 148), the Assessing Officer is obliged under the law to serve notice under section 143(2) upon the assessee as per law within 12 months from the end of the month in which return has been filed by .....

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notice under section 143(2) was mandatory. Thus, it is clearly established that the Legislature is very much conscious of the requirement of law that service of notice under section 143(2) is mandatory for the Assessing Officer to assume jurisdiction to make assessment of the return filed by the assessee. Thus, in simple words and as per the plain reading of law, service of notice upon the assessee under section143(2) within the 12 months from the end of the month in which return is filed by th .....

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the hon'ble jurisdictional High Court in the case of Asst. CIT v. Geno Pharmaceuticals Ltd. [2013] 84 CCH 117 (Bom) holding that service of notice under section 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot make an inquiry on the return filed in compliance with the notice issued under section 148. Thus, as per law, issuance and service of jurisdictional notice under section 143(2) is mandatory, and in the absence of the same, the assessment framed would .....

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Commissioner of Income-tax (Appeals) rightly rejected the objection of the assessee with regard to service of notice. 11. We have carefully examined the arguments made by the learned Departmental representative. First of all, it is noted by us that section292BB has been brought on the statute with effect from April 1, 2008. On this issue, the following three questions arise for our consideration before section 292BB could be applied upon this case to reject the grievance of the assessee : " .....

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notice can be deemed to have been done also within the stipulated time, as prescribed under the Act." 12. We have pondered over this issue and find that as far as the first question is concerned, it has already been answered in a few judgments. We note that the hon'ble Allahabad High Court in the case of CIT v. Mohammad Khaleeq, Commerical Taxes [2014] 44 taxmann.com 484 (All) held that the provisions of section 292BB of the Act has been inserted by the Finance Act, 2008, with effect fr .....

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] ; [2009] 117 ITD 273 (SB). It has been held by the hon'ble Kerala High Court in the case of Dr. K. M. Mehaboob v. Deputy CIT [2012] 76 DTR 90 (Ker) that section 292BB does not have retrospective effect. Further, the hon'ble Allahabad High Court in the case of Asst. CIT v. Greater Noida Industrial Development Authority [2015] 379 ITR 14 (All) (in Income-tax Appeal No. 142 of 2015 dated August 4, 2015) has held that section 292BB does not cure defect in issuance of notice, it does not ha .....

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old Storage (P) Ltd. [2014] 50 taxmann.com 105 (All), CIT v. Adarsh Travel Bus Service [2012] 17 taxmann.com 140 (All) as well as in CIT v. Mukesh Kumar Agrawal [2012] 345 ITR 29 (All) and CIT v. Rajeev Sharma [2011] 336 ITR 678 (All) ; [2010] 192 Taxman 197 (All). In the light of the aforesaid decisions, it is apparently clear that the jurisdiction of the Assessing Officer to make an assessment under section 143(3)(ii) of the Act is based on the issuance of a notice under section 143(2)(ii) of .....

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tion that once an assessee has appeared in any proceeding or participated in any query relating to assessment or reassessment, it shall be deemed that the notice under the provisions of the Act, which is required to be served has been duly served upon him in accordance with the provisions of the Act and, therefore, is precluded from contending that the notice was not served upon him or was not served upon him in time or was not served upon him in a proper manner, in our view, is not applicable f .....

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d, since the Assessing Officer failed to issue notice within the specified period under section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under section 143(2) of the Act and this defect cannot be cured by taking recourse to the deeming fiction provided under section 292BB of the Act. Consequently, the Tribunal was justified in setting aside the order of the Assessing Officer as well as the order of the appellate authority." Thus, from these judgment .....

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s a substantive right. Thus, when the assessee filed its return of income on September 14, 2007, a valuable substantive right accrued to the assessee, i.e., right to be served with the mandatory notice, as per law prevailing on the date of filing of return and statutory right of filing of appeal against any action in the form of framing of the assessment upon the assessee, without being served with the mandatory jurisdictional notice, the deeming provisions of section 292BB could not have been a .....

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fter service of notice, the Assessing Officer assumes jurisdiction to frame assessment under section 143(3). In our considered view any amendment in law affecting vested right is always prospective in nature, unless provided otherwise by the statute itself. On this issue following the observations of the hon'ble Punjab and Haryana High Court in the case of CIT v. Raman Industries [1980] 121 ITR 405 (P&H) are relevant here (page 413): "From the above observation it emerges that a sta .....

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it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in volume 36 of the Laws of England (third edition) and reiterated in seve .....

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anguage which is fairly capable of either interpretation, it ought to be construed as prospec tive only." We further derive support from the judgment of the hon'ble Supreme Court in the case of Gem Granites v. CIT [2004] 271 ITR 322 (SC) holding that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. We also refer to the following judgments on this issue : (i) R. Rajagopal Reddy v. Padmini Chandrasekharan [19 .....

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rds, that there is no evidence of issuance of the notice, as has been discussed by us in earlier part of this order also. Under these circumstances, a question arises that whether the Revenue can take recourse to the provisions of section 292BB to cure the defect in issuance of the jurisdictional notice. The answer to this question has already been given by the hon'ble Gujarat High Court in the case of CIT v. Panorama Builders (P.) Ltd. [2014] 45 taxmann.com 159 (Guj) in which it has been he .....

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Act. In absence of issuance of the notice under the proviso to section 143(2) of the Act within a period of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to block assessment period April 1, 1997, to July 25, 2002, on the basis of notice issued on July 6, 2006, under section 143(2), after about 20 months, was time barred and the entire proceedings in pursuance of such notice is null and void." .....

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held by the hon'ble Bench that section 292BB is prospective and does not have retrospective operation. Similar view has been expressed by the hon'ble Punjab and Haryana High Court in the case of CIT v. Cebon India Ltd. [2012] 347 ITR 583 (P&H) holding that mere giving of dispatch number, cannot be taken as an evidence of issuance of notice and the contention of the Revenue that where the notice has been duly dispatched to the assessee, the irregularity or defect in issuing notice wa .....

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earned counsel on the judgment of the co-ordinate Bench of Mumbai in the case of Sanjay Brothers v. Asst. CIT (I. T. A. No. 947/Mumbai/2013 dated January 9, 2015). It is seen by us that a similar view has been taken in the said judgment and we derive further support therefrom. 15. Third question that arises for our consideration is whether the Assessing Officer could take recourse to the provisions of section 292BB to extend the statutory period within which notice could have been served upon th .....

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