TMI Blog2020 (4) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the f acts of the case as discussed after going through the remand report of the AO. So coming to clause (c), we note that if the assessee has filed the return, and thereafter assessee fails to comply with all the terms of a notice issued under sub-section (2) of section 143, then AO can resort to Best Judgment Assessment. Here in this case the assessee had filed return of income before the AO on 21.09.2017 and 20.11.2017, therefore, as per clause (c) the AO was duty bound to give the mandatory notice u/s. 143(2) and in case if the assessee failed to comply with all the terms of the notice issued u/s. 143(2) then only he could have resorted to Best Judgment Assessment u/s. 144 of the Act. When the assessee receives a notice u/s. 148, he is required to file a return of income within the time specified by the AO in that notice; and once the assessee files the return of income pursuant to notice u/s. 148, the return will be treated as a return u/s. 139 and the provision of section 139 so far as may be applicable would apply. In the present case though the assessee did not file the return of income within the specified time given by AO, the assessee had filed the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or re assessment, 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 provision 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 on time; or c) Served upon him in an improper manner ... 3. That the appellant craves for leave to add, delete, amend or modify, any ground before or at the time of appellate proceedings. 4. Briefly stated the facts as noted by the AO are that the assessee company is engaged in the business of commodity broking, trading in shares and securities and trading in derivatives. The AO notes that the case of assessee was reopened for reassessment as there was information that the assessee booked bogus loss of ₹ 334.36 lakhs in its books and as a result the consequent amount escaped assessment. According to AO, he issued Notice u/s. 148 of the Act on 31.03.2017 and served on 31.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act, 1961 (Act) was issued to the assessee. The submission of the learned DR that the assessee did not file a return of income and hence no notice is required to be issued under section 143(2) of the Income Tax Act, 1961 (Act) is factually incorrect. The assessee had filed its return of income. On these facts the proposition of law is brought out by the SMC 2 , Bench, New Delhi, in the case of Ms. Meenakshi Aggarwal, ITA No. 4171/Del/2015 order dated 16.10.2015 wherein at para 4 and 5 it is held as follows: 4. On this factual matrix, I find that the issue is squarely covered in favour of the Assessee and against the Revenue. The ITAT, C Bench, Bangalore in its order dated 10.10.2014 in the case of Shri G.N. Mohan Raju vs ITO passed in ITA No. 242 243(Bang) 2013 (A.Yrs 2006-07 2007-08), has been held as follows: 7. This brings as to the crux of the issue i.e. whether notices under section 143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified u/s 143(2) of the Act. That issue of a notice u/s 143(2) of the Act, is mandatory even in a reassessment proceeding initiated u/s 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: (Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003). (ii) notwithstanding anything contained in clause (1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid his tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his officer 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). Once the original re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere there was no service of notices u/s 143(2) of the IT Act. He had not dealt with the scenario, where notice was issued prior to the filing of return by the assessee. We, therefore, quash the assessment done for the impugned assessment years. Since the appeals of the assessee are allowed on its ground 3, other grounds are not adjudicated. 6. Respectfully following the propositions of law laid down in various case laws cited in this Tribunal order referred above, I hold that the assessment made in this case as bad in law. Hence the same is quashed. (Emphasis given by us) 6. Thereafter, the Ld. CIT, DR drew our attention to the order of the Hon ble J K High Court in PCIGT Vs. M/s. Broadway Shoe Co. (supra) wherein the Hon ble High Court held as at para 8 as under: 8. Admittedly in the instant case, the return was filed by the assessee after the time prescribed for filing return under Sections 139(1) and 139(4) had expired. Therefore, the return filed by the assessee has to be treated as non-est. The proceedings under Section 147 of the Act were initiated on the ground that the return for the assessment year 2005-06 was the first ever return filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily relied upon the decision of Hon ble Delhi High Court in Shrijai Shiv Shankar Traders (P.) Ltd. (supra) in which similar issue arose and also placed reliance on other case laws cited by the Ld. CIT(A) to quash the reassessment order. And he does not want us to interfere in the order of Ld. CIT(A). 9. After hearing both parties it is noted that assessee is a company engaged in the business of commodity broking trading in shares and securities and trading in derivatives. For the relevant assessment year, it filed its return of income u/s. 139(1) of the Act on 15.09.2010 declaring loss of ₹ 15,13,240/-. The said return of income was picked up for scrutiny assessment and an order of assessment u/s. 143(3) of the Act was framed on 22.03.2013 at an assessed loss of ₹ 9,14,048/-. Subsequently the case of assessee was reopened for the first time by issue of notice u/s. 148 of the Act to consider the disallowance of delayed payment of PF ESI amounting to ₹ 70,578/-. The said reassessment order was passed on 30.10.2014 u/s. 143(3) r.w.s. 147 of the Act wherein the assessed loss was computed at ₹ 8,43,470/-. Subsequently another notice dated 31.03.2017 u/s. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompliance of the procedure laid down u/s 143 and 143(2) is mandatory. As per record, I find that there was no notice issued u/s 143(2) of the Act which is very much essential for reassessment and it is a failure on the part of the AO for not complying with the procedure laid down in section 143(2) of the Act. If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of the law and deserves to be cancelled. In view of above facts and circumstances of the present case, the issue in dispute raised in additional ground relating to non-issue of the mandatory notice u/s. 143(2) of the Act is decided in favour of the assessee and I hold that the Impugned assessment order dated 22.12.2017 passed u/s.143(3)/154/147/144 of the Act by the AO is invalid. My view is supported by the various judgments of the Hon'ble Jurisdictional High Court. The relevant portion of the Head notes of various judgments of the Hon'ble Courts have already discussed in the body of the order. I find that the AO has not issued the notice u/s 143(2) of the Act in this case before completing the scrutiny assessment, therefore the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued under section 158BC(a) proceeds to make an inquiry. A reading of the provision would clearly indicate that if the Assessing Officer, for any reason repudiates the return filed by the assessee in response to notice under section 158BC (a), he must necessarily issue notice under section 143(2) within the time prescribed in the proviso to section 143(2). 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 a notice under section 143(2) cannot be dispensed with. The clarification given by the CBDT in its circular No. 717, dated 14-8-1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of section 143. Accordingly, even for the purpose of Chapter XlV-B, for the determination of undisclosed income for a block period under the provisions of section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment con be mode without issuing a notice under section 143(2). [Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143 of the Act come to an end and the matter becomes final. In view of the above, the first question now raised, therefore, stands concluded in favour of the assessee. [Emphasis given by us] iii) Similarly, Hon'ble Calcutta High Court in the case of Ma Kamakhyaya enterprises (supra) exactly on similar circumstances held that notice u/s. 143(2) of the Act within a period of 12 months is mandatory. Hon'ble Calcutta High Court discussed the facts as under: There is no dispute that the assessee filed return for the assessment year under consideration on 31st October,2006 and the said return was taken up for scrutiny and notice under section 143(2) of the Act was issued on 25th October, 2007, as it appears from the postal receipt placed on record by the Revenue. However, the said notice was received by the assessee on 3rd November, 2007 i.e. after the expiry of the period of 12 months from the end of the month in which the return was filed by the assessee. And finally, Hon'ble High Court has held as under: On ,a plain reading of the aforesaid provision, it is abundantly clear that 'service' on the assessee within 12 months from the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain circumstances. The newly inserted section 292BB provides that where an assessee has appeared in any proceedings or co-operated in any inquiry relating to an assessment or 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 the Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner. In the present case, the Tribunal has returned the findings that the notice under section 143(2) of the Act was admittedly not issued in this case. The assessing authority thus did not have jurisdiction to proceed further and make assessment We do not find that the non-consideration of section 292BB, which is rule of evidence, and a deeming provision to validate the notice in certain circumstances, will have any effect on the judgment in Hotel Blue Moon (supra). It was held in Hotel Blue Moon's case (supra) that the very foundation of the jurisdiction of the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mandatory requirement of notice being issued by the Assessing Officer to the assessee under section 143(2), the Tribunal was right in concluding that the re-assessment orders in question were legally unsustainable. viii) The Hon'ble High Court of Delhi in the case of Shri Jai Shiv Shankar Traders (P.) Ltd. [2015] 64 taxmann.com 220 (Delhi) on similar facts as in the present case has held as under.- This appeal by the Revenue is against an order dated 18th February, 2015 passed by the Income Tax Appellate Tribuna (ITAT) in ITA No.l068/Del/2013 for the Assessment Year ('AY') 2008-09. The Assessee filed its return of income for the AY in question on 16th September, 2008. The said return was accepted by the Department and an acknowledgement was issued under Section 143(1) of the Act It appears that subsequently the return was picked up for scrutiny: After recording reasons, notice apparently was issued by the Assessing Officer (AO) to the Assessee on 30th March, 2010 under Section 148 of the Act It is not in dispute that this notice was never served on the Assessee. Subsequently, on 1st October, 2010, a notice was issued under Section 143(2) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a return pursuant to a notice under section 148 of the Act, is fatal in the order of reassessment. ix) The Madras High Court held in Sapthagiri Finance Investments v. ITO [2012] 25 taxman.com 341/210 Taxman 78 (Mad.) (Mag.). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. However, the Assessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 Not attended Refixation letter dated 06.09.2017 22.09.2017 Not attended Show cause letter dated 03.11.2017 08.11.2017 Not attended even not filed any written compliance. This is for your kind information that the assessee not filed any letter of filing return with the copy of the return. (With the enclosures of your remand letter, it is found that the assessee filed the return on 20.11.2017. As no compliance was made even several opportunities were given to the assessee and no documentary evidence was found in record for filing of return, which assessee was required to submit within 30 days of service of the notice u/s 148, omitting to file before the AO at the time of assessment, the notice u/s 143(2) was not issued. Accordingly, on the basis of documents available on record the assessment was completed at the end of December 2017. After receiving the order u/s 143(3)/154/147/144 on 22.12.2017 the copy of return filed before you which shows the malafied intention of the assessee raising such question. It is perti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Remand Report, states in his own words It is pertinent to mention that acknowledgement of-return filed before original assessment u/s 143(3) was submitted at the time of assessment u/s 147 on 21.09.2017 which the acknowledgement for the year 2010-11 on 03.09.2011 . Thereafter, we note from the Remand Report that AO had issued show cause notice dated 03.11.2017, wherein we note that he has not rejected the return of income as reiterated by assessee in the letter dated 21.09.2017. Thereafter before the AO, the assessee filed a copy of the return originally filed dated 15.09.2010 on 21.11.2017 [see Remand Report of AO, supra.] We note that the AO has not bothered to reject the letter dated 21.09.2017 of assessee in which the assessee reiterated the Return of Income pursuant to notice u/s. 148 of the Act or even the copy of return of income filed on 20.11.2017. Thereafter, the AO had framed the re-assessment order u/s. 143(3)/154/147/144 on 22.12.2017 without rejecting the Return of Income filed pursuant to the notice u/s. 148 of the Act, and without issuing notice u/s. 143(2) of the Act, which action of AO according to assessee and Ld. CIT(A). vitiates the very usurpation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 1988 , or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.] 14. From a reading of the aforesaid provision it is under stood that clause (a) and (b) of sub-section (1) of section 144 is not applicable to the f acts of the case as discussed after going through the remand report of the AO. So coming to clause (c), we note that if the assessee has filed the return, and thereafter assessee fails to comply with all the terms of a notice issued under sub-section (2) of section 143, then AO can resort to Best Judgment Assessment. Here in this case the assessee had filed return of income before the AO on 21.09.2017 and 20.11.2017, therefore, as per clause (c) the AO was duty bound to give the mandatory notice u/s. 143(2) and in case if the assessee failed to comply with all the terms of the notice issued u/s. 143(2) then only he could have resorted to Best Judgment Assessment u/s. 144 of the Act. 15. Coming to the main reason given by the AO for non-issue of notice u/s. 143(2) is that the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified by AO in the notice u/s. 148) then the assessee is allowed to file the return before the completion of the assessment. That means in the present case though the assessee did not file the return of income within the specified time given by AO, the assessee had filed the return of income on 21.09.2017 and on 20.11.2017 before the reassessment was framed on 22.12.2017. So, on a con-joint reading of section 148(1) with sec. 139(4) and section 144 makes it abundantly clear that pursuant to a notice u/s. 148 of the Act, if an assessee files belatedly a return or a letter reiterating his earlier return then the AO is bound to issue notice u/s. 143(2) of the Act, if he has to frame re-assessment order u/s 143(3)/144 of the Act. Therefore, the contention raised by the Ld. CIT, DR and reasoning given by AO cannot be countenanced. Since, it is not the case of the AO/Ld. CIT, DR, that assessee has not filed return of income pursuant to notice u/s. 148 of the Act, and when the fact was that assessee had filed return of income, the AO in order to successfully usurp the jurisdiction to frame assessment had to issue notice u/s. 143(2) which was a jurisdictional notice and mandatory for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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