Income Tax Appellate Tribunal - Mumbai
Raj Files & Stationers P .Ltd, Mumbai vs Ito 1(3)(1), Mumbai on 5 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " SMC" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM
ITA No.7553/Mum/2016
(A.Y:2009-10)
Raj Files & Stationers P. Ltd Income Tax Officer W D
150 Modi Street GR Floor, 1(3)(1)
Shaheen Apt Fort Vs. Mumbai
Mumbai-400 001
P AN No. AADCR0650B
Appellant .. Respondent
ITA No.5994/Mum/2016
(A.Y:2009-10)
Income Tax Officer WD Raj Files & Stationers P.
1(3)(1) Ltd
Mumbai 150 Modi Street GR Floor,
Vs.
Shaheen Apt Fort
Mumbai-400 001
P AN No. AADCR0650B
Appellant .. Respondent
Revenue by .. Shri Rakesh Ranjan, DR
Assessee by .. Devendra Jain, AR
Date of hearing .. 06-06-2017
Date of pronouncement .. 05-07-2017
ORDER
PER MAHAVIR SINGH, JM:
This two cross appeals are arising out of the order of CIT(A)-3, Mumbai, in appeal No. CIT(A)-3/ITO 1(3)(1)/IT-95/2014-15 dated 23-04- 2014. The Assessment was framed by ITO 1(3)(1), Mumbai for the A.Y. 2018-09 vide order dated 12-03-2014 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter 'the Act').
2. At the outset, the learned Counsel for the assessee stated that the appeal filed by the assessee is barred by limitations by 42 days and assessee has filed condonation petition supported by affidavit stating the reasons that the CIT(A)'s order was not served on the assessee but was collected by Chartered Accountant and the date of collection was 12-19- ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 2016 and appeal was filed on 23-12-2016. There was delay of 42 days and the reason presented in the affidavit reads as under: -
"1. The company is in fact not active at present. Hence, the order of Commissioner of income tax (appeals) for assessment year 2009-10 could not be served and was finally collected by the Chartered Accountant who attended the appeal before the Commissioner. We were confused about the further action to be taken since the company is not active.
2. Thereafter, when we consulted the said Chartered Accountant, he advised us to file the appeal to higher authorities and also advised us to approach another Firm of Chartered Accountants. Then, we took the decision to file the same. Hence, there was delay in filing of appeal.
3. Secondly, when we handed over the papers to the said firm of Chartered Accountants, they expressed their inability to file the same before 30 th November, 2016 as they were busy in transfer pricing audits, amnesty scheme of MVAT and GST registration for which the last date was 30 th November."
I find the reasons stated by assessee as reasonable and hence, the delay is condoned and appeal is admitted.
3. The first legal issue raised by assessee in ITA No. 7553/Mum/2016 is as regards to the non-issue of notice under section 143(3) of the Act by the AO and hence, the assessment is bad in law.
4. At the outset, the learned Counsel for the assessee took us through the issue raised before CIT(A) at page 5 Para 1.3 of the appellate order. The issue was raised before the CIT(A). The assessee Page 2 of 8 ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 made submissions dated 22-01-2016 before CIT(A) and the same are reproduced in Para 4.1 subject to Para 1 which reads as under: -
"1. Pursuant to Your Honor's letter / order dated 09-11-2015, the Respondent AD submitted the remand report and has, inter-alia, claimed submitted that (a) reasons recorded were furnished to assessee tilde his letter dated 17-02-2014, (b) notice u/s 143(2) was not issued because the assessee has not filed return physically or electronically, pursuant to notice u/s 148 and latter to rely upon the original return filed u/s 139 cannot fulfill the statutory requirement to issue notice u/s 143(2) before selection, (c) compiled the information AY wise of parties and reiterated the findings of impugned assessment orders on merits as well as legal aspects, and (d) attempted to justify the addition of miscellaneous expenses relying upon the relevant proviso to sec. 147 which authorizes him to add without satisfying the words "as escaped assessment" of that proviso. In sum and substance, he justified his impugned assessment order for all three years under appeal. Nowhere in remand report the AO admitted for issuing and service of notice u/s 143(2) and thus, it is an admitted fact that notice u/s 143(2) was not issued in any assessment year under appeal."
5. The learned Counsel for the assessee, now before me filed copy of remand report No. 1TO-1(3)(1)/Remand Report/2015-16 Dated 22-12- 2015 wherein the AO recorded the fact that notice under section 143(2) was not issued which reads as under: -
"the notice u/s. 148 dated 18.03.2013 was issued and served on 19.03.2013 In response to 148, Page 3 of 8 ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 assessee vide letter dated 2 1.03.2013 received in this office on 21.03.2013, requested to treat original Income tax returns filed for A.Ys. 2009-10, 2010-11 & 2011-12 as Income tax returns filed in response to notice u/s. 148. The notice u/s. 142(1) dated 30.08.2013, 11.10.2013, 21.10.2013, 18.12.20131 04.02.2014 & 17.02.2014, issued to the assessee. Again assessee vide letter dated I 31.12.2013 received in this office on 11.03.2014 requested to treat the original returns for A.Y. 2009-10, 2010-11 and 2011-12 as returns filed in response to notice u/s 148 and requested to provide the basis/ reasons for issuing notice u/s. 148 (copy enclosed). As per records, the reasons are provided to the assessee company vide letter dated 17.02.2014.
The assessee aggrieved that notice u/s 143(2) not received.
The part of section 143(2) of the Income Tax Act reproduced as under, [(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, --
(I) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible......
Thus, as per Act notice u/s 143(2) shall be issued where a return has been furnished under section 139, or in response to a notice u/s 142(1). The assessee had not filed physical or e-filed return of income in response to notice u/s 148. Merely Page 4 of 8 ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 submitting letter that treat original return as return in response to notice u/s 148, cannot fulfill the statutory requirement to issue notice under section 143(2) before selecting for scrutiny.
The assessee had not raised an objection for non-issuance of notice u/s 143(2) during the course of assessment proceedings.'"
Aggrieved, assessee preferred the appeal before CIT(A).
6. CIT(A) also confirmed the action of the AO vide Para 6.10 which reads as under: -
""The observations made in the judgments of the Federal Court in Chatturam's case (supra) and the Supreme Court in the judgments cited above are to be understood as reminders that whenever a case is set up by the assessee that there has been no valid or proper service of the notice issued under Section 143(2)/147 of the IT Act, be it for the purpose of regular assessment under Section 143(3) of the Act or re-assessment or for the purpose of a block assessment under Chapter XIV-B or for the purpose of an-assessment under Section 153A, such a plea has to be examined thoroughly and in-depth by taking a practical and reasonable view of the matter, not ) inconsistent with the statutory provisions, keeping in mind the basic principle that the liability to pay tax, which is founded on the charging provisions of the statute, is not to be nullified on suspicious or unjustified pleas taken by the assessee."'
7. The learned Counsel for the assessee also relied on the judgement of Hon'ble Bombay High Court in the case of ACIT vs. Geno Page 5 of 8 ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 Pharmaceuticals Ltd. (2013) 214 Taxman 83 (Bom) wherein it is held as that notice u/s 143(2) of the Act is mandatory and in absence of such service, AO cannot proceed to make an inquiry on return filed in compliance with the notice issued u/s 148 of the Act. The learned Counsel for the assessee brought before me the fact relating to filing of letter before the AO to treat the original return filed u/s 139(1) of the Act as return filed u/s 148 of the Act.
8. I have heard both the sides and gone through the facts and circumstances of the case. I find that admittedly no notice u/s 143(2) of the Act was issued in the present case despite the fact that the assessee filed a letter in response to notice u/s 148 of the Act that the return originally filed u/s 139(1) of the Act can be treated as return filed u/s 148 of the Act. Hon'ble Bombay High Court in the case of Geno Pharmaceuticals Ltd. (Supra) has very categorically held as para 5 and 6 as under: -
"5. Apart from that, it is an admitted position that no notice under Section 143(2) had been issued while making assessment under Section 143(3) read with Section 147. The Apex Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 has held that the Tribunal has discretion to allow or not to allow a new ground to be raised. But in a case where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The ITAT, after relying on the judgment of the Apex Court in R. Dalmia v. CIT [1999] 236 ITR 480/102 Taxman 702, came to the conclusion that Page 6 of 8 ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 issuance of notice under Section 143(2) was mandatory. The ITAT has taken into consideration the relevant provisions and has also taken into consideration the judgment of the Apex Court and relying on the said judgments, the ITAT 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.
6. Under these circumstances, no case is made out for interfering with the Tax Appeals No.77/2012 and 78/2012 since no substantial question of law is raised in both the appeals."
9. Respectfully following Hon'ble Bombay High Court, I quash the assessment framed in the absence of notice u/s 143(2) of the Act. The appeal of the assessee on this jurisdictional issue is allowed.
10. As regards to the Revenue's appeal, the assessee's appeal is allowed on jurisdictional issue and assessment is quashed, Revenue's appeal will not survive and hence dismissed.
11. In the result, the appeal of assessee is allowed and Revenue's appeal is dismissed.
Order pronounced in the open court on 05-07-2017.
Sd/-
(MAHAVIR SINGH) JUDICIAL MEMBER Mumbai, Dated: 05-07-2017 Sudip Sarkar /Sr.PS Page 7 of 8 ITA No.7553 &5994/ Mum/2016 Raj Files & Stationers P. Ltd . A.Y:09-10 Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Page 8 of 8