Kindly mail this to bansalji for makrana case
IT : Absence of notice under section 143(2) makes reassessment null and void
IT : Provisions of section 292BB are prospectively
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[2013] 34 taxmann.com 211 (Agra - Trib.)
IN THE ITAT AGRA BENCH
Income-tax Officer
v.
Aligarh Auto Centre*
BHAVNESH SAINI, JUDICIAL MEMBER
AND A.L. GEHLOT, ACCOUNTANT MEMBER
AND A.L. GEHLOT, ACCOUNTANT MEMBER
IT APPEAL NO. 220 (AGRA) OF 2011
[ASSESSMENT YEAR 2001-02]
[ASSESSMENT YEAR 2001-02]
JANUARY 4, 2013
I. Section 147, read with section 143, of the Income-tax Act, 1961 - Income escaping assessment - General [Issue of notice under section 143(2)] - Assessment year 2001-02 - Whether where no notice under section 143(2) had been issued or served upon assessee, reassessment proceedings under section 147 would be null and void - Held, yes [Para 5] [In favour of assessee]
II. Section 292BB of the Income-tax Act, 1961 - Notice deemed to be valid in certain circumstances [Scope of provision] - Assessment year 2001-02 - Whether since provisions of section 292BB has been inserted by Finance Act, 2008 with effect from 1-4-2008, same would not apply prior to said date - Held, yes - Whether further, absence of notice is not curable under section 292BB - Held, yes [Para 5] [In favour of assessee]
CASE REVIEW-II
Kuber Tobacco Product (P.) Ltd. v. Dy. CIT [2009] 117 ITD 273/28 SOT 292 (Delhi)(SB) and CIT v. Cebon India Ltd. [2012] 347 ITR 583/[2009] 184 Taxman 290 (Punj & Har) (para 5) followed.
CASES REFERRED TO
Areva T&D India Ltd. v. Asstt. CIT [2007] 294 ITR 233/165 Taxman 123 (Mad.) (para 4), Virendra Dev Dixit v. Asstt. CIT [2011] 331 ITR 483 (All.) (para 4), Asstt. CIT v. Hotel Blue Moon [2010] 321 ITR 362/188 Taxman 113 (SC) (para 4), CIT v. CPR Capital Services Ltd. [2011] 330 ITR 43/11 taxmann.com 150 (Delhi.) (para 4), CIT v. Cebon India Ltd. [2012] 347 ITR 583/[2009] 184 Taxman 290 (Punj & Har) (para 4), Dy. CITv. Mahi Valley Hotels & Resorts [2006] 287 ITR 360 (Guj.) (para 4), Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 341/210 Taxman 78 (Mad.) (Mag.) (para 4) and Kuber Tobacco Product (P.) Ltd. v. Dy. CIT [2009] 117 ITD 273/28 SOT 292 (Delhi) (SB) (para 5).
K.K. Mishra for the Appellant. Akhilesh Kumar for the Respondent.
ORDER
Bhavnesh Saini, Judicial Member - This appeal by the Revenue is directed against the order of learned CIT(A), Ghaziabad, dt. 28th March, 2011 for the asst. yr. 2001-02 on the following grounds :
| "1. | Whether on the facts and circumstances of the case, the learned CIT(A) was right in holding that in absence of issuance of notice under s. 143(2), the assessment was null and void not appreciating provisions under s. 292BB of the IT Act, 1961 ? | |
| 2. | Whether on the facts and circumstances of the case, the learned CIT(A) was right in holding that issue of notice under s. 148 was without valid reasons and hence the assessment is a nullity ? | |
| 3. | The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 25,16,103 made under various heads like unexplained investment, loans raised and unexplained capital, when assessee failed to explain the same." |
2. We have heard the learned representatives of both the parties, perused the findings of authorities below and considered the material available on record.
3. On ground No. 1, the Revenue challenged the order of the learned CIT(A) in holding the assessment order to be null and void in absence of issuance of notice under s. 143(2) of the IT Act without appreciating the provisions of s. 292BB of the IT Act. The assessee-firm is engaged in the purchase and sale of motorcycles and spare parts. In this case, the return was filed declaring income of Rs. 1,6,203. Subsequently, notice under s. 148 was issued and the AO completed the reassessment proceedings under s. 143(3)/147 of the IT Act on 27th Dec, 2006 computing the total income of assessee at Rs. 26.22,306 by making additions. The assessee challenged the assessment order before the learned CIT(A) on the ground that since no notice under s. 143(2) has been issued in this case, therefore, reassessment proceedings are null and void. The comments of the AO were called for and in the remand report, the AO stated that on 9th Aug., 2006, Shri Manoj Kumar Agarwal, FCA appeared during the course of proceedings and stated that return already filed may be treated in response to notice under s. 148. The assessee similarly explained that since the original return was filed and in response to the notice under s. 148 of the IT Act, the assessee stated before the AO that the original return may be treated to have been filed in response to the notice under s. 148, therefore, there is compliance to the notice under s. 148. Copies of the acknowledgement of filing of the original return and intimation under s. 143(1) were also filed. The learned CIT(A), considering the explanation of the assessee and the material on record held that since no notice under s. 143(2) of the IT Act has been issued in the assessment proceedings, therefore, reassessment order is without jurisdiction and accordingly, reassessment order was set aside. The findings of the learned CIT(A) in para 7.1 of the impugned order are reproduced as under :
"7.1 On the issue of notice under s. 143(2):
This is now an undisputed fact that no notice under s. 143(2) was ever issued in this case.
The AO in remand report tries to justify this by arguing that as no details of return filed earlier, were furnished, so appellant's counsel simply stating that return already filed may be treated as return in response to notice under s. 148, was not enough. According to AO, there was no requirement of issue of notice under s. 143(2), because no return has been filed by the assessee.
I find that AO's stand tantamounts to distortion of fact. There is an order sheet entry dt. 9th Aug., 2006 in the assessment folder 'Shri Manoj Agarwal, FCA appeared and said that return already filed may be treated in response to the return already filed....'
Now, if AO wanted any specific details of return originally filed, he would have asked the counsel to furnish such details. Not asking anything clearly signals that AO was aware of the return filed earlier.
Further, the opening sentence of the assessment order itself accepts, without any doubt, that 'in this case, return was filed declaring income of Rs. 1,06,203'. The reference to income declared leaves no doubt that AO was in full knowledge of the original return of income.
Furthermore, had the AO been kept in dark about earlier return, the recording of satisfaction for notice under s. 148 (order sheet entry dt. 24th March, 2006) would have mentioned such fact of no return being on record.
And finally, if inspite of AO asking, counsel had not furnished the details regarding return originally filed, then such non-furnishing of details should have been mentioned in the assessment order, and assessment should have been completed under s. 144. In fact, while commenting in remand report, the AO has seemingly become aware of such anomaly, and has tried to underplay it by saying that s. 144 should have been mentioned in place of s. 143(3). But I find this only a face saving argument.
I find, all the facts and circumstances, considered together, establish that although appellant responded to notice under s. 148 by referring to original return, the AO made a serious legal error of not issuing any notice under s. 143(2) even till the time of completion of assessment under s. 143(3) r/w s. 147. This lapse has made the entire assessment liable to be quashed, as being null and void.
Following amendments and case law are relevant:
(i) Amendment:
Time-limit for issue of notice under s. 143(2) for the purposes of making assessment or reassessment under s. 147. Under the existing provisions of sub-s. (1) of s. 148 it has been provided that before making any assessment, reassessment or recomputation under s. 147, the AO shall serve a notice under s. 148, on the assessee, requiring him to furnish his return of income and the provisions of the Act shall apply as if the return furnished in response to such notice were a return required to be furnished under s. 139.
A proviso is inserted to sub-s. (1) so as to provide that where a return has been furnished during the period from 1st Oct., 1991 to 30th Sept., 2005, in response to a notice served under s. 148 and, subsequently a notice has been served under s. 143(2) after the expiry of twelve months specified in the proviso to sub-s. (2) of s. 143 as it stood immediately before the amendment of said sub-section by the Finance Act, 2002, but before the expiry of the time-limit for making the assessment, reassessment or recomputation as specified in sub-s. (2) of s. 153, such notice shall be deemed to be valid notice.
Further, a proviso is inserted in the said sub-section so as to provide that where a return has been furnished during the period from 1st Oct., 1991 to 30th Sept., 2005 in response to a notice served under s. 148 and, subsequently a notice has been served under cl. (ii) of sub-s. (2) of s. 143 after the expiry of twelve months specified in the proviso to cl. (ii) of sub-s. (2) of s. 143, but before the expiry of the time-limit for making the assessment, reassessment or recomputation as specified in sub-s. (2) of s. 153, such notice shall be deemed to be valid notice.
This amendment takes effect retrospectively from the 1st Oct., 1991.
(ii) Case of Punjab State Co-operative Supply & Marketing Federation Ltd. v. Union of India (2006) 206 CTR (P&H) 194 : (2007) 290 ITR 15 (P&H)
Proviso to s. 148 : Constitutional validity of proviso.
The proviso is applicable to particular period intended to validate notices. The proviso was necessitated by conflict in judicial opinion.
The proviso is valid.
IT Act, 1961, s. 148 (as amended by Finance Act, 2006, w.e.f. 1st Oct., 1991)
(iii) Case of CIT v. C. Palaniapan [2006] 284 ITR 257 (Mad.):
Notice under s. 148 was issued for reassessment.
However, notice under s. 143(2) was not issued within twelve months. It was held that the completion of reassessment proceedings was not valid.
In the case of a reopened assessment, issue of notice under s. 143(2) within twelve months is statutory.
(iv) Case of CWT v. HUF of H.H. Late J.M. Scindia [2008] 217 CTR (Bom.) 531 : [2008] 5 DTR (Bom.) 19 : [2008] 300 ITR 193 (Bom.)
Effect of s. 17 :
Procedure under ss. 14 to 16 applicable. Notice under s. 16(2) was issued beyond time-limit prescribed under provision of the Act. Reassessment was not valid. The crucial words in s. 17 of the WT Act, 1957, are 'and the provisions of this Act shall, so far as may be, apply as if the return were a return required to be furnished under s. 14'. All the provisions of Chapter IV will have to be read in tandem so as to bring about a uniformity and certainty to an order of assessment.
The proviso to s. 16(2) is in the nature of an embargo on the AO, if the period has expired not to issue notice after that period. In other words, the AO is bound to accept the return as filed. Though the notice under s. 16(2) may be procedural, the proviso is not merely procedural but is in the nature of a limitation on the power of the AO not to proceed further in a case of reassessment under s. 17, the provisions of ss. 14 and 16 to the extent applicable, for the purpose of making an order of reassessment will have to be followed which will include the time-limit for notice under s. 16(2).
Once the language of s. 17 itself requires that the other provisions to be applicable considering the return as filed under s. 14, it contemplates that both procedural and substantive provisions will apply. Therefore, while invoking the powers under s. 17, the AO is bound by the mandate of the proviso to s. 16(2) and on failure the order of reassessment will be without jurisdiction and consequently the order of reassessment will have to be set aside."
4. The learned Departmental Representative in support of the grounds of appeal submitted that the learned CIT(A) failed to consider the provisions contained under s. 292BB of the IT Act. The learned Departmental Representative, however, admitted that no notice under s. 143(2) was ever issued in this case at reassessment proceedings. Copy of the order sheet is filed at p. 20 of the paper book. The learned Departmental Representative relied upon the decision of Hon'ble Madras High Court in case of Areva T&D India Ltd. v. Asstt. CIT [2007] 294 ITR 233/165 Taxman 123 (Mad.), in which it was held that when the assessee participated in reassessment proceedings—failure to consider the objections and failure to issue notice under s. 143(2)—reassessment order not void, but irregular and the matter was remanded to the AO to consider the issue afresh. On the other hand, the learned counsel for the assessee reiterated the submissions made before the authorities below and relied upon the following decisions:
| (i) | Decision of Allahabad High Court in the case of Virendra Dev Dixit v. Asstt. CIT [2011] 331 ITR 483, in which it was held that the AO must issue notice under s. 143(2) within the prescribed time-limit. The appeal of the assessee was allowed. | |
| (ii) | Decision of Hon'ble Supreme Court in the case of Asstt. CIT v. Hotel Blue Moon [2010] 321 ITR 362/188 Taxman 113, in which it was held that the issue of notice under s. 143(2) within prescribed time is mandatory. | |
| (iii) | Decision of Delhi High Court in the case of CIT v. CPR Capital Services Ltd. [2011] 330 ITR 43/11 taxmann.com 150, in which it was held as under : | |
| "Held, dismissing the appeal, that mere noting in the order sheet would not suffice and the copy of the notice issued under s. 143(2) of the Act was not available on record. Since the Department had failed to produce the copy of the notice under s. 143(2) of the Act, there was no option but to agree with the findings of the Tribunal that no such notice was prepared and served upon the assessee. In the absence of this mandatory requirement of issuing statutory notice under s. 143(2) of the Act, the Tribunal had rightly quashed the assessment as null andvoid." | ||
| (iv) | Decision of Punjab & Haryana High Court in the case of CIT v. Cebon India Ltd. [2012] 347 ITR 583/[2009] 184 Taxman 290 in which it was held as under : | |
| "CIT(A) as well as the Tribunal having recorded concurrent finding that the notice under s. 143(2) was not served on the assessee within the stipulated time, impugned assessment was not valid; absence of notice is not a curable defect under s. 292BB." | ||
| (v) | Decision of Gujarat High Court in the case of Dy. CIT v. Mahi Valley Hotels & Resorts [2006] 287 ITR 360 in which it was held— | |
| "Notice under s. 143(2) having been issued beyond the statutory period of one year from the end of the month in which the return was filed, CIT(A) and the Tribunal were correct in holding that the assessment was void ab initio; contention that the objection raised by the assessee was not maintainable as it was raised for the first time before the CIT(A) and that there was acquiescence and/or waiver on the part of the assessee as it had participated in the proceedings has no merit." | ||
| (vi) | Decision of Madras High Court in the case of Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 34l/210 Taxman 78 (Mag.), in which it was held that merely because the matter was discussed with the assessee and signature is affixed, it does not mean rest of procedure of notice under s. 143(2) stood complied with. |
5. We have considered the rival submissions and the material on record. It is not in dispute that the assessee filed original return of income and at the reassessment proceedings, the assessee contended before the AO that the original return filed earlier may be treated to have been filed in response to the notice under s. 148, which is also supported by order sheet entry dt. 9th Aug., 2006 (PB-20). It is also not in dispute that AO never issued any notice under s. 143(2) of the IT Act. The Revenue merely contended that the CIT(A) should have appreciated the provisions of s. 292BB of the IT Act. Sec. 292BB of the IT Act provides as under:
"292BB. Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, winch 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." |
The above provision has been inserted by the Finance Act, 2008 w.e.f. 1st April, 2008. Tribunal, Delhi Special Bench in the case of Kuber Tobacco Product (P.) Ltd. v. Dy. CIT [2009] 117 ITD 273/28 SOT 292 (Delhi) held that s. 292BB has been inserted by Finance Act, 2008, has no retrospective effect and is to be construed prospectively. The assessment order under appeal is 2001-02. Therefore, the provision of s. 292BB of the IT Act would not apply in the case of the assessee. Further, no notice under s. 143(2) has been issued or served upon the assessee. Therefore, the decision of Hon'ble Punjab & Haryana High Court in the case of Cebon India Ltd. (supra) squarely applies against the Revenue. It was held in this case that absence of notice is not curable defect under s. 292BB of the IT Act. Considering the above discussion and the case law cited above, the sole objection of the Revenue is not maintainable. Therefore, the learned CIT(A) was justified in setting aside the entire assessment order. We, therefore, do not find any infirmity in the order of the learned CIT(A) for interference. Ground No. 1 of appeal of the Revenue is accordingly dismissed.
6. In view of the finding on ground No. 1 above, when entire reassessment order has been set aside and quashed by the learned CIT(A) and confirmed by us above, rest of the grounds in the Departmental appeal regarding reopening of assessment under s. 148 and deletion of addition on merits are left for academic discussion only. Therefore, we do not propose to decide the same at this stage, as no notice under s. 143(2) was issued in this case. Therefore, there would not be any valid reassessment proceedings under s. 147 of the IT Act and all resultant additions made in such reassessment order would stand deleted.
7. In the result, Departmental appeal fails and is dismissed.
Regards
Prarthana Jalan
__._,_.___
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