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2016 (7) TMI 3 - ITAT DELHI

2016 (7) TMI 3 - ITAT DELHI - TMI - Reopening of assessment - Held that:- We quash the entire reassessment proceedings by holding that the non-issuance of the statutory notice u/s 143(2) in the instant case is an incurable defect and therefore the entire reassessment proceedings were bad in law and void ab initio. - Decided in favour of assessee - ITA No. 3403/Del/2013 - Dated:- 29-4-2016 - SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Shri .....

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ocedural irregularity and the same is not curable. 2. The assessee filed its return of income on 30.04.2004. Notice u/s 148 of the Act was issued on 28.03.2011 and thereafter, the income was assessed at ₹ 11,34,435/-. It is the assessee s contention that no notice u/s 143(2) of the Act was issued to the assessee subsequent to the issue of notice u/s 148. It has been the assessee s stand that non-issuance of notice to an assessee, as prescribed in the Act, is not only a procedural irregular .....

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invalid. On merits also, the Ld. CIT (A) dismissed the grounds of appeal of the assessee. Now, the assessee is in appeal before us and has raised as many as 12 grounds of appeal but ground no. 5 being germane to the entire issue at hand is being taken up first. The ground reads as under:- 5. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in confirming the reopening despite the fact that the same is bad and liable to be quashed having been made with .....

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kar Traders (P) Ltd. 282 CTR 435 (Del). He submitted that in view of the binding precedent of the Hon'ble Delhi High Court s judgment, the entire proceedings ought to be quashed. 4. The learned Departmental Representative submitted that a mere technical default, if at all, cannot vitiate the entire reassessment proceedings and submitted that on merits, the Department has a very strong case. He relied on the orders of the authorities below and submitted that the additions have been legally ma .....

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n 147 of the Act. In the re-assessment order, the Assessing Officer has not made any reference to issue of notice under section 143(2), however, it is apparent from the assessment order that enough opportunities have been provided to the appellant by issue of statutory notices and vide order sheet entries to which the assessee has complied with by filing reply dated 27.10.2011 and 31.10.2011. No objection has been raised by the Authorized Representative during assessment proceedings in complianc .....

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his claim of the assessee. The Hon'ble Delhi High Court in the case of Pr. CIT-08 vs Shri Jai Shiv Shankar Traders (In I.T.A. No. 519/ 2015 in order dated 14.10.2015) has dealt with the issue at length. The relevant paragraphs are reproduced as under:- 6. The AO then proceeded to pass an assessment order on 31st December, 2010 whereby, inter alia, an addition of ₹ 1 crore was made to the income of the Assessee under Section 68 of the Act as unexplained credits. In the appeal before the .....

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evidence. Secondly, it was held that non issue of notice under Section 143(2) did not render the reassessment invalid. 7. The Assessee's further appeal has been allowed by the ITAT by the impugned order. Relying, inter alia, on the decision of the Supreme Court in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 and a plethora of judgments of the High Courts, the ITAT concluded that for completing the assessment under Section 148 of the Act compliance with the procedure under Section 143 (2) was .....

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otice under Section 143(2) of the Act on an Assessee prior to completion of the reassessment would not be fatal to the reassessment. She also sought to distinguish the decision in ACIT v. Hotel Blue Moon (supra) on the ground that it pertained to a block assessment. 9. Dr Rakesh Gupta, learned counsel appearing for the Assessee, at the outset drew the attention of this Court to an order passed by this Court on 17th August, 2011 in Review Petition No.441/2011 in ITA No.950/2008 (CIT v. Madhya Bha .....

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Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned. xxxxxxxxxxxx 12. The narration of facts as noted above by the Court makes it clear that no notice under Section 143(2) of the Act was issued to the Assessee after 16th December 2010, the date on which the Assessee informed the .....

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return filed by the Assessee is actually scrutinised by the AO. 14. The interplay of Sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court. In CIT v. Rajeev Sharma (2011) 336 ITR 678 (All.) it was held that a plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under Section 143(2) of the Act. It was observed: the provisions contained in sub-Section .....

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on therein. In absence of any notice issued under sub-Section 2 of Section 143 after receipt of fresh return submitted by the Assessee in response to notice under Section, the entire procedure adopted for escaped assessment, shall not be valid." 15. In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. (2014) 50 Taxmann.com 105 (All) it was held as under: "10. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB of t .....

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i) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act, however, carves out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of th .....

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bad High Court noticed that the decision of the Supreme Court in ACIT v. Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with." 17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2013) 90 DTR 2 .....

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after, the AO found that there were problems with the return which required explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. It was observed that: "Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of .....

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