TMI Blog2019 (7) TMI 1952X X X X Extracts X X X X X X X X Extracts X X X X ..... [hereinafter in short Ld.CIT(A) ] dated 01.01.2018 for the A.Ys. 2009-10 and 2010-11 in sustaining the validity of assessment order and also the additions/disallowance made in the assessment towards bogus purchases. 2. In so far as the validity of assessment is concerned, briefly stated the facts are that the assessee filed returns of income for the A.Ys. 2009-10 and 2010-11 and the returns were processed u/s. 143(1) of the Act. Subsequently by way of issue of notice dated 12.03.2014 and 30.03.2014 the assessments for the A.Ys. 2009-10 and 2010-11 respectively were reopened. The reopened assessments were completed on 15.09.2014 and 16.09.2014 for the A.Y. 2009-10 and 2010-11 respectively u/s. 143(3) r.w.s. 147 of the Act by bringing to tax the non-genuine purchases from various parties referred in the Assessment Order. Before the Ld.CIT(A) the assessee challenged the validity of the reassessment order made u/s. 143(3) r.w.s. 147 of the Act contending that in the absence of issue of notice u/s. 143(2) of the Act the reassessment order made u/s. 147 of the Act is bad in law. 3. Ld.CIT(A) rejected the contentions of the assessee that the assessment is a nullity in the absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the entire proceedings in pursuance of such notice is null and void. 6. Ld. DR vehemently supported the orders of the authorities below. 7. Heard rival submissions, perused the orders of the authorities below and the case laws relied on. The assessee s contention that no notice was issued u/s. 143(2) of the Act and therefore the assessment made u/s.143(3) r.w.s. 147 of the Act is invalid is not accepted by the Ld.CIT(A) since the assessee has not filed any return in response to notice u/s. 148 of the Act and assessee has filed only a letter stating that return filed originally on 30.09.2009 and 30.09.2010 for the A.Ys. 2009-10 2010-11 may be taken as if the return filed in response to notice u/s.148 of the Act. The assessee filed no returns and the returns filed are non-est in the eyes of law and therefore he sustained the validity of assessment relying on the decision of the Pune Bench of the Tribunal in the case of Chawara Educational Trust v. ITO [66 taxmann.com 127]. 8. In the case before me the Ld. DR could not produce any evidence to show that notice u/s. 143(2) was in fact issued and served on the assessee before completion of reassessment. 9. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT has held that notice under Section 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot proceed to make an inquiry on the return filed in compliance with the notice issued under Section 148. 11. The Hon'ble Delhi High Court in the case of Pr.CIT v. Silver Line [383 ITR 455] held that the failure of the Assessing Officer in reassessment proceedings to issue notice u/s. 143(2) of the Act prior to finalization of the re-assessment order cannot be condoned by referring to section 292BB of the Act and consequently there is no merit in the objection of the Revenue that the assessee was precluded from rising the point concerning the non-issuance of notice u/s. 143(2) of the Act in view of the proviso to section 292BB of the Act. The Hon'ble High Court observed that in the case of CIT v. Parikalpana Estate Development Pvt. Ltd., 40 taxmann.com 248] held that section 292BB is a rule of evidence and it has nothing to do with the mandatory requirement of giving a notice and especially a notice u/s.143(2) which is a notice giving jurisdiction to the Assessing Officer to frame an assessment. The Hon'ble High Court held that the reassessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Commissioner of Income Tax v. Rajeev Sharma (2011) 336 ITR 678 and Commissioner of Income-tax-II, Lucknow v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All.) and the decision of the Madras High Court in Sapthagiri Finance Investments v. Income Tax Officer (2013) 90 DTR (Mad) 289), that Section 292 BB of the Act would apply insofar as failure of 'service' of notice was concerned and not with regard to the failure to 'issue' notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act. 14. Consequently, the Court does not find merit in the objection of the Revenue that the Assessee was precluded from raising the point concerning the non-issuance of notice under Section 143 (2) of the Act in the present case in view of the proviso to Section 292BB of the Act. 15. The Court also finds merit in the contention of the Assessee that in any event as far as AYs 2005-06 to 2007-08 is concerned, Section 292BB of the Act would not apply since it is prospective in its application, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Mr. Sahni submitted that in the circumstances, the action of the AO in finalising the reassessment orders without notice under Section 143 (2) of the Act was justified. 18. The wording of Section 143(2)(ii) of the Act, which is applicable in the present case, requires the AO to be satisfied on examining the return filed that prima facie the Assessee has understated the income‟ or has computed excessive loss‟ or has underpaid the tax in any manner‟. The AO has the discretion to issue a notice under Section 143 (2) if he considers it necessary or expedient‟ to do so. This exercise by the AO under Section 143 (2) of the Act is qualitatively different from the issuance of a notice under Section 142(1) of the Act, which as noted hereinbefore, is in a standard proforma. 19. The Court is unable to accept the submission of the Revenue that in the present case, no return was filed by the Assessee pursuant to the notice issued to it under Section 148 of the Act. If after receiving the letter dated 1st April 2011 of the Assessee the AO was of the view that the return originally filed in the Saral Form could not be treated as the return pursuant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act. 22. The decisions of the Allahabad High Court in Commissioner of Income Tax v. Rajeev Sharma(supra) and Commissioner of Income-tax-II, Lucknow v. Salarpur Cold Storage (P.) Ltd. (supra) also reiterate the above legal position. As far as this Court is concerned, the decision in Director of Income Tax v. Society For Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del) and the recent decision in Pr. CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra) hold likewise. 23. With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction thereof by the assessee. It is evident that the assessee carried the objection before the Commissioner (Appeals) and the Commissioner brushed aside the objection on the ground that it was a technicality without addressing the issue or applying his mind to such aspect of the matter. Further, it is evident from the order impugned passed by the Appellate Tribunal that no notice under Section 143(2)of the Act had, in fact, been issued in this case. In such a situation, where a notice that is mandatorily required to be issued is found not to have been issued, Section 292BB of the Act has no manner of operation. The two substantial questions of law are answered accordingly as follows: (1) If the time for issuance of the notice under Section 143(2) of the Act has expired or the time for completing the reassessment proceedings under Section 153(2) of the Act has run out, the failure to issue such notice under Section 143(2) of the Act would result in the entire proceedings, including any order of assessment, to be quashed. (2) Section 292BB of the Act does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct has been issued or served on the assessee before completion of assessment under section 147/148 of the Act. Once this inference is drawn, the contention of the ld. A.R. of the assessee was that non-issuance and service of notice under section 143(2) of the Act before completion of the assessment under section 147/148 of the Act makes the assessment invalid and void ab-initio and in this regard he has placed reliance on the following decisions:- 1. Kuber Tobacco Products vs. DCIT, 117 ITD 273 (SB) 2. CIT vs. Jai Shiv Shankar Traders, 383 ITR 448 (Del) 3. Alpine Electronics vs. Director General Income Tax, 341 ITR 247. 10. The ld. D.R., on the other hand, has contended before us that non-issuance of notice under section 143(2) of the Act before completion of the assessment under section 147/148 of the Act will not make the assessment to be illegal and void ab-initio and in this regard he relied on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Madhya Bharat Energy Corporation Ltd., 337 ITR 389. 11. After hearing the rival submission and going through the orders of the authorities below as well as the case laws relied on by both the parties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion concerning the mandatory compliance with the requirement of issuance of notice under Section 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17th February, 2011 after noticing that in the said case that no notice under Section 143(2) had ever been issued, the 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. 10. Ms Aggarwal nevertheless urged that notwithstanding the above position, the decision of this Court in CIT v. Vision Inc. (2012) 73 DTR 201 (Del) would apply. The said judgment held that since on the facts of that case the Assessee had been properly served with the notice under Section 143(2) of the Act within the statutory time limit prescribed under the proviso thereto, the ITAT should not have set aside the re-assessment in toto. Ms Aggarwal placed reliance on Section 292BB of the Act and urged that the Assessee having not raised any objection about non service of the notice under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-Section 2 of Section 143 assigning reason 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 the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act. 18. As already noticed, the decision of this Court in CIT v. Vision Inc. proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of service of notice was concerned and not with regard to failure to issue notice. In other words, the failure of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer stated that notice u/s.143(2) dated 19.01.2015 was issued and served on the assessee. 6. In the case of CIT v. M/s. Salarpur Cold Storage (Pvt.) Ltd (supra) the Hon'ble Allahabad High Court considered a situation where the notice was issued beyond the period specified in the section and in such circumstances whether such notice is valid and consequent Assessment Order is valid or not. It was held that where the Assessing Officer fails to issue a notice within a period of six months as specified in the provisions of clause (ii) of Section 143(2) of the Act the assumption of the jurisdiction u/s. 143(3) of the Act would be invalid. While coming to such conclusion the Hon'ble Allahabad High Court also considered the decision of the ACIT v. M/s. Hotel blue Moon [321 ITR 362] and held as under: - 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 attend the office or to produce evidence on which the assessee may rely in support of the return, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-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 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 apply where the assessee has raised such objection before the completion of such assessment or reassessment. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spensed with. In our view, where the Assessing Officer fails to issue a notice within the period of six months as spelt out in the proviso to clause (ii) of Section 143 (2) of the Act, the assumption of jurisdiction under Section 143 (3) of the Act would be invalid. This defect in regard to the assumption of jurisdiction cannot be cured by taking recourse to the deeming fiction under Section 292 BB of the Act. The fiction in Section 292 BB of the Act overcomes a procedural defect in regard to the non-service of a notice on the assessee, and obviates a challenge that the notice was either not served or that it was not served in time or that it was served in an improper manner, where the assessee has appeared in a proceeding or cooperated in an enquiry without raising an objection. Section 292 BB of the Act cannot come to the aid of the revenue in a situation where the issuance of a notice itself was not within the prescribed period, in which event the question of whether it was served correctly or otherwise, would be of no relevance whatsoever. Failure to issue a notice within the prescribed period would result in the Assessing Officer assuming jurisdiction contrary to law. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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