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M/s. Anadi Kunj Versus ITO Ward 3 (1) , Indore

2016 (9) TMI 1071 - ITAT INDORE

Validity of assessment - Notice served u/s. 143(2)(iii) - applicability of provisions of section 292BB - Held that:- In this case the assessee has filed the return of income, which was selected for scrutiny and assessment was completed u/s.143(3)(ii) of the Act. The undisputed fact in this case is that though the notice u/s.143(2) was issued on 26.09.2008 to the assessee, which is beyond the prescribed statutory time limit prescribed. Now the law is well settled that it is mandatory on the A.O. .....

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any objection till the completion of the said proceedings, yet the assessee can validly raised an objection for non service of the notice u/s.143(2) of the Act within the time limit prescribe vide proviso to said sub-section, as Sec. 292BB of the Act is applicable from the A.Y. 2008-09. In this case, admittedly, the A.O. has has served the notice u/s. 143(2) on 30.09.2008 i.e. after the expiry of twelve months from 24.07.2007 i.e. the date of filing of return of income. We find no merit in the p .....

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Javed, SR. DR ORDER PER O.P. MEENA ACCOUTANT MEMEBR. This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-I, Indore [hereinafter referred to as the CIT(A)] dated 24.09.2014 and pertains to Assessment Year 2007-08 as against appeal decided in assessment order dated 29.12.2009 passed u/s. 143(3) of Income Tax Act,1961( herein after referred to as "the Act) by the ITO Ward 3(1) Indore [hereinafter referred to as the AO]. 2. The grounds of appeal t .....

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onwards and thus, notices u/s. 143(2) was time barred and the assessment so framed is abinitio- void. Ground no.2 relates to maintaining the addition of ₹ 13,50,000/- by treating unsecured loans taken from farmers who have accepted granting such loans to the assessee. Ground no.3 relates to maintaining disallowance made u/s.40A(3) of ₹ 1,08,554/- Ground no.4 relates to agriculture income of ₹ 1,25,498/- included in total income, which does not form part of total income. 3. The .....

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it was claimed that the notice u/s.143(2) has been issued beyond twelve months from the end of the month in which return was furnished, which is in violation of clause and therefore the assessment made on the basis of said notice is invalid ab-initio. However, ld. CIT(A)held that the assessee has appeared in assessment proceeding and cooperated in assessment before the A.O. , therefore, as per provisions of section 292BB, the assessee has precluded to take any objection in any proceeding, hence .....

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of sec.292BB of the Act as the said section is applicable from the A.Y. 2008-09 and not prior to that. He submits that service of the notice u/s.143(2) is not procedural irregularity but being it is a mandatory, non service of the same is illegality which is non-curable. He pleaded for cancelling the assessment order on this ground. The ld. A.R. also placed his heavy reliance on the following decisions: Kuber Tobacco Products P Ltd. Vs. DCIT (120 TTJ557/117 ITD2 (SB-Del), CIT Vs. Bharat G Patel .....

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e Tea Company Ltd. 201 ITR 747(Cal) 5. Per contra, the Ld. D.R. supported the orders of the authorities below. He also drew the amendment made in section 292BB is curative in nature, hence, when the assessee has complied with assessment proceeding means that the notice u/s. 143(2) deemed to have been issued. The ld. D.R. harped upon the A.O. having issued notice after 01.04.2008 though belatedly and the assessee having participated in the assessment proceedings. The ld. A.R. has contended that i .....

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e u/s.143(2) was issued on 26.09.2008 to the assessee, which is beyond the prescribed statutory time limit prescribed. Now the law is well settled that it is mandatory on the A.O. to issue the notice u/s.143(2) and served the same on the assessee within 12 months from the end of the month in which the assessee has filed the return of income. The ld. A.R. for the assessee has placed reliance on catena of decisions as cited above. The reliance is placed in the case of Kuber Tobacco Products (P) Lt .....

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rpretation described above, s. 292BB cannot be construed retrospectively. 40. According to above-mentioned principles laid down by the Hon'ble Supreme Court, every litigant has a vested right in substantive law, but no litigant has such right in procedural law. No doubt, issue and service of notice though may relate to procedural law, but where procedural statute creates a new disability or obligation and imposes new duties in respect of transactions already accomplished, then the statute ca .....

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of the Act introduced w.e.f. 1st Oct., 1975. Thus, to challenge the validity of a particular action of the Department of making assessment or reassessment on the basis of invalidly issuance/service of notice had become right of litigant assessee during the course of appellate proceedings even though such contention was never raised during the course of assessment proceedings. Instances of striking down the validity of assessment and reassessment proceedings have already been discussed in the ea .....

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e the validity of the same on the ground of valid issuance/service of notice required to be given by the statute in a case where assessee has appeared in such proceedings or co- operated in the inquiry relating to assessment or reassessment. Therefore, applying the above principles of interpretation and keeping in view above discussion it has to be held that s. 292BB cannot be construed to have retrospective operation and it has to be applied prospectively. 42. Having arrived at the conclusion t .....

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rom taking such objection s. 292BB has been made applicable w.e.f. 1st April, 2008 by the Finance Act, 2008. As per well established law as explained by Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala (1966) 60 ITR 262 (SC) (which is a decision rendered by five Judges of Hon'ble Supreme Court) that the IT Act as it stands amended on the first day of any financial year must apply to the assessments of that year. The facts in that case were that for as .....

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yr. 1957-58. Such contention of the assessee was rejected by the AO as well as by the first appellate authority. However, the Tribunal held that surcharge could not be levied as Surcharge Act did not have retrospective operation unless there was a specific provision therein to that effect and the question of law was referred to Kerala High Court to state that whether surcharge could be levied for asst. yr. 1957- 58. The Hon'ble High Court decided the question in favour of the Revenue and, th .....

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e earlier decision of apex Court in the case of CIT vs. Scindia Steam Navigation Company Ltd. (supra) in which similar proposition of law was laid down while interpreting s. 10(2)(vii) and proviso (iv) and s. 66(1), (2) and (5) and in the said case it was held that the proviso though came into force on 5th May, 1946 could not be made operative from 1st April, 1946 and, therefore, no retrospective effect could be given to that provision by accepting the contention of the Revenue. In that case the .....

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day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force. In Scindia Steam Navigation Co. Ltd. vs. CIT, a Division Bench of the Bombay High Court consisting of Chagla, C.J. and Tendolkar J., has considered the question as to the effect of an amendment w .....

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e sum representing the difference between the original cost and the WDV was properly included in the assessee's total income computed for the asst. yr. 1946-47. It was argued that the fourth proviso to s. 10(2)(vii) of the IT Act (inserted by the Amendment Act of 1946 w.e.f. 4th May, 1946) under which the inclusion of the amount was justified by the Department, had no application to the case. The learned Judges held that as it was the Finance Act of 1946 that imposed the tax for the asst. yr .....

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ect of the asst. yr. 1946-47. 44. If the present issue is considered in the light of the above decision of Hon'ble Supreme Court, then, it has to be held that s. 292BB is applicable to asst. yr. 2008-09 and subsequent years. Therefore, answer to the second aspect of the question is that assessee is precluded from taking such objection for and from asst. yr. 2008-09. 45. Summarising our findings, we hold as follows : (i) Sec. 292BB even if it is procedural it is creating a new disability as i .....

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