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2019 (9) TMI 499

..... (2) of the Act has been issued to assessee - alternate for completing the assessment under section 144 - HELD THAT:- Once no notice under section 143(2) of the Act has been issued, then no assessment can be completed under section 143(3) of the Act. Clause (a) to section 144(1) of the Act talks of failure to file any return of income under section 139(1) of the Act or under sub-sections (4) or (5) of the said section. Clause (b) talks of failure to comply with all terms of notice issued under sub-section 142(1) of the Act and clause (c) talks of failure to comply with the terms of notice issued under section 143(2) of the Act. In such scenario, the Assessing Officer is empowered to pass an order to the best of his judgment to determine the total income or loss of assessee for the relevant assessment year. In the facts of present case, where the assessee had failed to file any return of income under any of the provisions of section 139 and had failed even in terms of notice issued under section 142(1) of the Act, then the provisions of section 144 are attracted and the AO has the power to pass an order to the best of his judgment. The third condition of having filed return of income .....

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..... in law, the Learned Assessing Officer has erred in passing the order u/s 143(3) r.w.s 147 without disposing off objections raised by the appellant and without passing speaking order which is prerequisite as per the direction of Hon'ble Supreme Court in the case of GKN Driveshaft (India) Ltd. Vs. ITO [2003 (259) ITR 19 (SC)]. Therefore, such order passed is bad in law. 4. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer has erred in treating ₹ 33,42,078/- as undisclosed receipt by disregarding appellants contention in this regards. 5. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer has erred in making an addition of ₹ 33,42,078/- without realising the fact that corresponding Capital Gain on account of sale of jewellery to the tune of ₹ 26,80,205/- was already offered by your appellant for taxation and therefore further taxing the Gross consideration one more time has led to taxing the same amount twice. 6. Without prejudice to above grounds, on the facts and in the circumstances of the case and in law Learned CIT(Appeals), Nashik has erred in passing the Appellate order with .....

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..... s against the validity of assessment framed under section 143(3) r.w.s. 147 of the Act. The said issue decides the jurisdiction of Assessing Officer to complete assessment and does not require any investigation into facts, hence the same is admitted for adjudication. 6. Briefly, in the facts of the case, the Assessing Officer recorded reasons for reopening the assessment and issued notice under section 148 of the Act. Thereafter, the Assessing Officer issued notice under section 142(1) of the Act. However, no return of income was filed by assessee, though he participated in the assessment proceedings. Consequent thereto, order was passed under section 143(3) r.w.s. 147 of the Act on 14.02.2014. The question is whether where no notice under section 143(2) of the Act was issued, can order be framed under section 143(3) r.w.s. 147 of the Act? The proceedings before the Assessing Officer were thus, completed and the issue which has been adjudicated by the CIT(A) was on merits, with which we are not concerned at the moment. 7. The learned Authorized Representative for the assessee pointed out that the assessee had filed first return of income on 16.08.2010, which admittedly, was non-est .....

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..... essment be completed under section 143(3) of the Act? Further, whether in the circumstances where no return of income has been filed and no notice under section 143(2) of the Act could be issued, then what was course of action which was available for completing the assessment? 12. In order to adjudicate the issue, we need first to look at the facts of the case. The assessee had furnished one return of income on 16.08.2010 for assessment year 2006-07, which admittedly was non-est return and cannot stand in the eyes of law. The Assessing Officer recorded reasons for reopening the assessment and issued notice under section 148 of the Act on 28.03.2013. The assessee failed to furnish any return of income in response to the said notice issued under section 148 of the Act. Thereafter, no notice under section 143(2) of the Act was issued but the Assessing Officer issued notice under section 142(1) of the Act on 09.12.2013. The assessee participated in the assessment proceedings and the order was passed under section 143(3) r.w.s. 147 of the Act on 14.02.2014. The aforesaid order is questioned by the assessee and it is case of assessee that the basic requirement of completing assessment un .....

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..... essment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment. 15. The requirement of section is that after issuing notice under sub-section (2) and after hearing such evidences and after taking into account such particulars of income, the assessment needs to be completed determining the total income or loss in the hands of assessee. Once no notice under section 143(2) of the Act has been issued, then no assessment can be completed under section 143(3) of the Act. 16. The second stage which needs adjudication is what happens in such scenario? Then we must look at the other provisions of the Act, in the present case, which is section 144 of the Act. In order to understand the same, we may refer to the provisions of said section, which reads as under:- 144 (1) If any person- (a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under subsection (1) of section 142 or fails to comply with a direction issued un .....

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..... tion of having filed return of income and not complying with notice issued under section 143(2) of the Act do not apply to the present facts. In such scenario, we hold that the order passed under section 143(3) r.w.s. 147 of the Act suffers from infirmity and the Act itself provides an alternate for completing the assessment under section 144 of the Act. 19. The connected issue which arises is whether the defect in applying the said section is curable under section 292B of the Act or not? 20. The Mumbai Bench of Tribunal in S.Kumar Enterprises (Synfabs) Ltd. Vs. JCIT (supra) had considered the aspects of the case and had observed as under:- 8. We have given our thoughtful consideration to the rival contentions, perused the material on record, and duly considered the applicable legal position as also factual matrix of the case. The issue before us is by and large covered by the Special Bench decision in the case of Raj Kumar Chawla (supra) wherein it has been held that even in the case of a reopened assessment under s. 147, the procedure laid down in sections subsequent to s. 139 is to be followed. This Special Bench of the Tribunal has categorically concluded that "....We are .....

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..... se in which an assessment is reopened because an assessee has not offered a particular income which is clearly taxable in view of the current legal position. In the return filed in response to notice under s. 147, the assessee offers that income to tax and pays the due taxes thereon. In such a situation, the AO may as well conclude that scrutiny assessment is not necessary. There can be other situation in which the assessee offers an income to tax by way of belated return and the only way to regularize it is issuance of a reassessment notice under s. 147. What could not have been done under s. 143 because the time limit for framing the normal assessment having expired, can be done under s. 143 r/w s. 147 upon the successful reopening of the assessment. In that sense it sets the clock back but then there is no escape from the procedures laid down under ss. 142, 143 and 144. In some of the old amnesty schemes, the notices under s. 147 were routinely issued but the assessments were still completed under s. 143(1)(a) because the AO anyway could not have questioned the IT returns filed under the amnesty scheme. There is nothing like an assessment under s. 147 per se. A regular assessmen .....

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..... d as 'where such person has not made a return within the time allowed under sub-s. (1) of s. 148 . The assessment can thus follow under s. 144 after giving an opportunity of hearing as to why the assessment should not be completed on the basis of best of his judgment. Undoubtedly, where a notice under s. 142(1) is served upon the assessee, even this opportunity of hearing is not necessary. However, in the present case, neither any notice under s. 142(1) is issued, nor opportunity of hearing under s. 144 is issued. It is not, and it cannot be, treated as a best judgment assessment either. The next question then is whether an earlier notice under s. 143(2) can validate the proceedings subsequent to the original return being treated as return in response to notice. When the notice issued under s. 143(2) has been held to be invalid, it cannot have any consequences in law. We have noticed that revenue itself does not accept the validity of the letter filed by the assessee s tax consultant on 12th Nov., 1998. Therefore, this question itself becomes academic. It cannot be open to revenue to contend that the letter issued by the assessee s tax consultant is without any legal consequenc .....

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..... use there is no valid notice under s. 143(2) which is sine qua non for an assessment under s. 143(3). The notice under s. 143(2) has been held to be vitiated in law because there was no return in existence at the point of time when the notice was issued and since existence of a valid return is sine qua non for issuance of notice under s. 143(2). There is no dispute that there was no valid return in existence at the relevant point of time. On this set of facts, it is difficult to comprehend as to how the provisions of s. 292B can turn this fundamental illegality into 'a mistake, defect or omission which s. 292B seeks to cover. This argument could have been considered perhaps in a case where assessment under s. 143(3) was mandatory in every case of reopened assessment and the issuance of notice under s. 143(2) was only a mechanical formality but then that is not the legal position. The option for assessment under s. 143(3) is, as we have held earlier, is not an automatic consequence of the successful reopening under s. 148. By no stretch of logic, s. 292B can vest an AO with the jurisdiction to assess under s. 143(3) in all cases where the assessment is reopened. That is not the .....

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