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2016 (9) TMI 746 - ITAT BANGALORE

2016 (9) TMI 746 - ITAT BANGALORE - TMI - Validity of the assessment - notice u/s. 143(2) not served within the prescribed time - Held that:- The Tribunal has taken a view in a number of cases that if notice u/s. 143(2) is not served within the prescribed period, the assessment framed consequent thereto is bad in law and deserves to be quashed, following the various judgments of different High Courts. We therefore, following the judgment of the Hon’ble Allahabad High Court in ACIT v. Greater Noi .....

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MAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER For The Appellant : Shri S. Venkatesan, CA For TThe Respondent : Dr. Sibichen K. Mathew, CIT-III(DR) ORDER Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of CIT(Appeals)-11, Bangalore dated 29.12.2014 for the assessment year 2011-12 inter alia on the following grounds:- 1. The orders of the Learned Lower Authorities are bad in law and contrary to the evidences and fact on record .....

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erred in holding that there is no such loan amount outstanding in the balance sheet of Krishna Enterprises, ignoring all the evidences placed before the Learned CIT(A) in the letters / written submission cited in Ground No.3 above. 5. The Learned CIT(A) has also grossly erred in upholding the addition on the ground that the appellant has initially stated that the receipt was a fee for certain project, which later got converted into loan and that there are certain contradiction in the statement o .....

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eave to add any other ground or modify or revise the grounds taken at the time of hearing before the Hon'ble Income-tax Appellate Tribunal, Bangalore. For these and any other ground that may be urged during the hearing, it is prayed that this appeal may be allowed in the interest of equity and justice. 2. The assessee has raised a preliminary objection with regard to validity of the assessment on the ground that the notice u/s. 143(2) of the Income-tax Act, 1961 [ the Act ] was not served wi .....

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f, the AO himself has admitted that since no response from the assessee was received with respect to notice dated 13.09.2012, another notice u/s. 143(2) was issued on 14.12.2012. This narration of the AO is sufficient to establish that the first notice dated 13.09.2012 was not served upon the assessee and for that reason he has issued another notice dated 14.12.2012. Since notice u/s. 143(2) is not issued within the prescribed period, the assessment framed consequent to the invalid notice issued .....

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rically observed in his order that notice u/s. 143(2) was issued on 13.09.2012, therefore it was issued before the specified date i.e., 30.09.2012. Moreover, for the safer side, the AO has also issued a second notice. The ld. DR further contended that in any case, the assessee has joined the proceedings, therefore, he cannot raise a plea that notice u/s. 143(2) was not served. Moreover, the provisions of section 292BB covers this type of mistakes and as per these provisions, if the assessee appe .....

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has observed that notice u/s. 143(2) was issued on 13.09.2012 and since there was no response to this notice, another notice u/s. 143(2) was issued on 14.12.2012. This admission of the AO clearly speaks that notice u/s. 143(2) dated 13.09.2012 was not served upon the assessee and therefore he was forced to issue second notice u/s. 143(2) on 14.12.2012. Moreover, as per the provisions of section 143(2) of the Act, the requirement of law is to serve a notice within a specified period and not only .....

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d within a prescribed period, the AO could not assume jurisdiction to frame assessment over the assessee u/s. 143(3) of the Act. 6. The scope of provisions of section 292BB was also examined by the Hon ble Allahabad High Court in the case of ACIT v. Greater Noida Development Authority (supra) and Their Lordships have held that the defect of service of notice u/s. 143(2) could not be cured by recourse to deeming fiction provided by section 292BB of the Act. Their Lordships have also examined the .....

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;143 (2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, - (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced .....

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m, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished." 11. Under clause (ii) of sub-section (2) of Section 143, the Assessing Officer is required to serve, on the assessee, a notice requiring him to .....

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urn is furnished. Service on the assessee of a notice within the period prescribed by the proviso presupposes the issuance of a notice for, it is only when a notice is issued, that it can be served. Thereafter, the provisions of subsection (3) of Section 143 of the Act stipulate that on the date specified in the notice issued under clause (ii) of sub-section (2) of Section 143 of the Act, the Assessing Officer shall, after hearing the evidence as the assessee may produce and considering such oth .....

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than the expiry of six months from the end of the financial year in which the return has been furnished. If a notice is not even issued within the period of six months from the end of the financial year in which the return is furnished, there would be no occasion to serve it upon the assessee within the stipulated period. 13. The Supreme Court in Assistant Commissioner of Income Tax And Another Vs. Hotel Blue Moon, (2010) 321 ITR 362 (SC) = 2010-TIOL-08-SC-IT, while considering the provision of .....

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ice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with." 14. The Supreme Court clearly held that omission on the part of the Assessing Officer is not a procedural irregularity and is incurable and, therefore, the r .....

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(2010) 192 Taxman 197 (All.) = 2010-TIOL-381- HC-ALL-IT. 16. 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 the Act. The proviso to clause (ii) of sub Section (2) of Section 143 clearly stipulates that a notice must be served on the assessee. 17. In the light of the aforesaid, we have to see as to whether the .....

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at the accompanying notice is being issued under Section 142(1) of the Act. From the said notice, it is clear that the notice which the appellant is asserting to be a notice under Section 143(2) is patently erroneous and mischievous. It is nothing else but a notice under Section 142(1) of the Act. The record does not indicate any other notice being issued, which could purport to be one under Section 143(2) of the Act. We are, therefore, of the opinion that from a perusal of the original assessme .....

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r reassessment, it shall be deemed that any notice 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 ap .....

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quired to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (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 .....

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2) of the Act and in the absence of a notice under Section 143(2) of the Act, the assumption of jurisdiction itself would be invalid. 20. In view of the aforesaid, we are of the opinion that Section 292BB, which was inserted with effect from 01.04.3008 is not applicable to the proceedings for the assessment year 2006-07, 2007-08, 2008-09. We are also of the opinion that Section 292BB of the Act is not applicable also for the assessment years 2009- 10, 2010-11 and 2011-12. The deeming fiction tha .....

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ollowing reason. 21. There is a clear distinction between "issue of notice" and "service of notice". In R.K.Upadhyaya Vs. Shanabhai P. Patel, 166 ITR 163, the controversy was that a notice under Section 148 was issued on 31.03.1970 i.e. the last date of limitation, which notice was served on the assessee on 03.04.1970, after the expiry of limitation. The High Court held that since the notice was served after the expiry of the period, the assessment order was invalid and had a .....

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he period of limitation, the Income Tax Officer gets the jurisdiction to proceed to reassess and make the assessment order. The mandate of Section 148(1) of the Act is, that reassessment shall not be made until there has been a service of notice which is a condition precedent to making an order of assessment. The Supreme Court further held that the requirement of issue of notice is satisfied when a notice is actually issued and that service under the Act, 1961 is not a condition precedent to con .....

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o in C.I.T. v. Robert, 48 ITR 177. The High Court in our opinion went wrong in relying upon the ratio of 53 ITR 100 in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections, being sections 147, 148 and 149 in the 45 1961 Act. A clear distinction has been made out between 'issue of notice' and 'service of notice' und .....

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l there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction in the Income-tax Officer to deal with the matter but it is a condition precedent to making of the order of assessment. The High Court in our opinion lost sight of .....

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;issuance of notice" under Section 143(2) of the Act. The deeming fiction under Section 292BB of the Act is with regard to "service of notice". Since the initial requirement of issuance of notice was not made by the Assessing Officer, the deeming fiction of service of notice under Section 292BB of the Act, consequently, does not arise and is not applicable. 23. In the light of the aforesaid, since the Assessing Officer failed to issue notice within the specified period under Secti .....

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