Income Tax Appellate Tribunal - Jaipur
Padam Chand Dhadda Huf, Jaipur vs Acit, Jaipur on 31 October, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 40/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2011-12.
M/s Padam Chand Dhadda HUF cuke Assistant Commissioner of Income
1387, Ganesh Bhawan, Vs. Tax,
Partaniyon Ka Rasta, Circle-1,
Johri Bazar, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AADHP 6433 K
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Sidharth Ranka (Advocate)
jktLo dh vksj ls@ Revenue by : Shri Prithvi Raj Meena (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 17.10.2017.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31/10/2017.
vkns'k@ ORDER
PER SHRI KUL BHARAT, JM.
The appeal by the assessee is directed against the order of Ld. CIT(Appeals)-
I, Jaipur dated 27.09.2016 pertaining to Assessment Year 2011-12.
The assessee has raised the following grounds of appeal:-
"1. That on the facts and in the circumstances of the case, the learned lower authorities grossly erred in issuing notice u/s. 148 of the Income- tax Act, 1961 which is issued without any reason to believe, based on Audit Objection, based on Change of opinion and thus the entire proceedings of reassessment deserves to have be quashed.
1.1. That the proceedings u/s. 148 of the Income-tax Act, 1961 suffers from non-issuance of notice u/s. 143(2) and the ld. CIT (A) quashed the assessment order on this ground only but on the other hand he has given directions to the ld. Assessing Officer to initiate fresh re- assessment proceedings by issue of notice u/s 148 of the Act and such directions of the Id. CIT (A) is illegal, bad in law, beyond his jurisdiction and competence and which will lead to second round of 2 ITA No. 40/JP/2017. M/s Padam Chand Dhadda HUF, Jaipur.
reassessment proceedings against the assessee appellant and thus deserves to be quashed.
2. That on the facts and in the circumstances of the case, the ld. CIT (A) grossly erred in not deciding the grounds on merits of the case and he ought to have decided the case on merits of the case as well otherwise it will lead to second round of litigation against the assessee appellant.
2.1. That the learned Assessing Officer grossly erred in restricting the benefit of exemption claimed by the assessee appellant u/s. S4F of the Income-tax Act to Rs. 2,939,001/-instead of Rs. 11,756,003/- claimed by the assessee appellant and thus disallowing Rs. 8,817,002/- by holding that the assessee has invested in (4) four different flats and the benefit is to be restricted to only 1 (one) flat.
2.2. That the learned Assessing Officer grossly erred in disallowing the brokerage paid by the assessee appellant of Rs. 1,537,000/- by account payee cheques towards sale of agricultural property.
2.3. That the learned Lower authorities grossly erred in disallowing the indexed cost of expenses incurred on account of boundary wall and small two rooms with kitchen amounting to Rs. 1,249,969/-.
3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing."
2. The appeal filed by the Assessee is barred by 28 days. Ld. Counsel for the assessee filing an affidavit stating that the reasons for non-filing of the appeal within prescribed period of limitations.
2.1 Ld. Counsel for the assessee reiterated the averments made in affidavit.
2.2 Ld. D/R opposed the submissions, and submitted that no reasonable cause is shown for condoning delay.
2.3 After hearing the rival contentions, and considering the material placed before us, we deem it proper to condone the delay. Hence the appeal is admitted for hearing.
3 ITA No. 40/JP/2017.M/s Padam Chand Dhadda HUF, Jaipur.
3. Briefly stated the facts are that the case of the assessee was reopened and the assessment under section 147 r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) framed vide order dated 30.09.2015. While framing the assessment, the AO made addition of Rs. 15,37,000/- on account of disallowance of transfer expenses and also made addition in respect of the disallowance of indexed cost of construction. Further, the Assessing Officer disallowed deduction u/s 54F of the Act amounting to Rs. 88,17,002/-. Aggrieved by this order, asssessee preferred an appeal before Ld. CIT(A), who after considering the submissions decided the issue in favour of the assesse holding that the assessment framed is void ab-initio. However, the Ld. CIT(A) gave liberty to the Assessing Officer to initiate the fresh assessment proceedings. Further, the Ld. CIT(A) in respect of disallowance of indexed cost of construction, and the other did not decide the same. Against this, the assessee is in further appeal before this Tribunal.
4. Ground nos. 1 to 2 are against the decision of the Ld. CIT(A) to give liberty to the Assessing Officer to the fresh assessment proceedings by issuing a notice u/s 148 of the Income Tax Act 1961 (hereinafter referred to as the Act).
4.1 Ld. Counsel for the assessee reiterated the submissions as made before the Ld. CIT(A) and submitted that once the reassessment found to be illegal, no liberty can be given to initiate fresh reassessment. There is no provision under the law to make reassessment twice. Further, he submitted that the Ld. CIT(A) has no power to remand the matter to the Assessing Officer, for making fresh assessment.
4 ITA No. 40/JP/2017.M/s Padam Chand Dhadda HUF, Jaipur.
4.2 On the contrary, Ld. D/R supported the order of the authorities below.
4.3 We have heard the rival contentions, perused the material available on record and gone through the order of the authorities below. We find that Ld. CIT(A) has decided the issue of reopening as under:-
"(ii) I have duly considered the submissions of the appellant, remand report of the AO and its rejoinder by the appellant, material placed on record and the various judicial pronouncements relied upon by the appellant. It is evident from the above remand report of the AO that no notice u/s 143(2) of the Act was issued by the AO at any time within the stipulated time. Further, according to the AO, the appellant has not filed any return of income in compliance to notice issued u/s 148 of the Act and thus there was no occasion for the AO to issue notice u/s 143(2) of the Act. It is an undisputed fact that vide letter dated 26.03.2015, the appellant stated that earlier return of income filed by it on 31.07.2011 may be treated to have been filed in compliance to notice u/s 148 of the Act which was totally ignored by the AO.
It is noted that if the AO required the assessee to file its return of income in response to notice issued u/s 148 of the Act, then nothing in the Act or the Rules prevented the AO in requiring the assessee to file its return of income. The AO just cannot ignore the above referred letter dated 26.03.2015 of the appellant wherein it was stated that the return filed on 31.07.2011 may be taken as a return filed in compliance to notice issued u/s 148 of the Act.
(iii) Further, it could be seen from the number of judicial pronouncements relied upon by the AR in its rejoinder to the remand report of the AO that if a notice u/s 148 of the Act has been issued to the assessee requiring it to file its return of income and if the assessee feels that it is not necessary to file a fresh return and that the earlier return filed by it u/s 139 of the Act should be treated as the return for the purpose of reassessment u/s 147 and 148 of the Act, it may inform the AO of its decision and in that event, the earlier return 5 ITA No. 40/JP/2017. M/s Padam Chand Dhadda HUF, Jaipur.
will be treated as the fresh return submitted in response to notice issued u/s 148 of the Act.
(iv) It may be mentioned that in the case of ACIT Vs Hotel Blue Moon 321 [2010] ITR 362 (SC), in the context of block assessments it was held by the Hon'ble Apex Court that:
"Where the Assessing Officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142 and sub-sections (2) and (3) of section 143. [Para 16]"
(v) In the case of Pr. CIT Vs Shri Jai Shiv Shankar Traders (P) Ltd [2015] 64 taxmann.com 220 (Delhi), the Hon'ble High Court considered the above referred case of Hotel Blue Moon and other cases of various high courts and held as under:
"12. The narration of facts as noted above by the Court makes it clear that no notice under Section 143(2) of the Act was issued to the Assessee after 16th December 2010, the date on which the Assessee informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act.
13. In DIT v. Society for Worldwide Interbank Financial Telecommunications [2010] 323 ITR 249 (Delhi), this Court invalidated an reassessment proceedings after noting that the notice under Section 143(2) of the Act was not issued to the Assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under Section 143(2) of the Act only after the return filed by the Assessee is actually scrutinized by the AO.
14. The interplay of Sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court. In CIT v. Rajeev Sharma [2011] 336 ITR 6781[2010] 192 Taxman 197 (All.) it was held that a 6 ITA No. 40/JP/2017. M/s Padam Chand Dhadda HUF, Jaipur.
plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under Section 143 (2) of the Act. It was observed:
"the provisions contained in sub-Section (2) of Section 143 is mandatory and the legislature in their wisdom by using the word 'reason to believe' had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the AO to serve a notice under 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/[2015] 228 Taxman 48 (All.) (Mag.) 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 into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act, however, carves 7 ITA No. 40/JP/2017. M/s Padam Chand Dhadda HUF, Jaipur.
out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292 BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under Section 143 (3) of the Act, it is necessary to issue a notice under Section 143 (2) of the Act and in the absence of a notice under Section 143 (2) of the Act, the assumption of jurisdiction itself would be invalid."
16. In the same decision in Salarpur Cold Storage (P.) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with."
17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2012] 25 taxmann.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 8 ITA No. 40/JP/2017. M/s Padam Chand Dhadda HUF, Jaipur.
the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(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 Vision Inc. (supra) 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 AO, in re- assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalizing the re-assessment order, cannot be condoned by referring to Section 292BB of the Act.
19. The resultant position is that as far as the present case is concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment.
20. Consequently, there is no legal infirmity in the impugned order of the ITAT. No substantial question of law arises. The appeal is dismissed."
9 ITA No. 40/JP/2017.M/s Padam Chand Dhadda HUF, Jaipur.
(vi) In the case of PCIT vs. Silver Line [2016] 65 taxmann.com 137 (Del.) it has been held by the Hon'ble High Court that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the assessee u/s 143(2) of the Act, ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable.
(vii) In the instant case under consideration, it is an admitted fact that no notice u/s 143(2) of the Act was issued by the AO to the appellant when the appellant stated vide its letter dated 26.03.2015 that the original return of income filed on 31.07.2011 may be treated as return of income in compliance to notice issued u/s 148 of the Act. The issue of notice u/s 143(2) of the Act is mandatory in nature and since in the instant case under consideration, no notice u/s 143(2) of the Act was issued, the AO has no jurisdiction to make the assessment. Further, non issue of notice u/s 143(2) of the Act is even not curable by the provisions of section 292BB of the Act as held by a number of Judicial Authorities as stated earlier in this order and as relied upon by the appellant.
(viii) Therefore, in view of the above discussion and the judicial pronouncements, it is held that the assessment order under consideration was void ab initio and thus quashed. However, the AO is free to initiate fresh assessment proceedings by issue of notice u/s 148 of the Act, if deemed fit. It is clarified that these are not to be considered as the directions to the AO for issue of notice u/s 148 of the Act."
The Revenue has not filed any appeal against this finding. Section 251 of the Act confers following powers on CIT(A):-
10 ITA No. 40/JP/2017.M/s Padam Chand Dhadda HUF, Jaipur.
"(1). In disposing of an appeal, the [Commissioner (appeals)] shall have the following powers-
(a) In an appeal against an order of assessment, he may confirm, reduce, enhance or annual the assessment.
[(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245H A, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduced, enhance or annual the assessment.]
(b) In an appeal against an order imposing a penalty, he may confirm or cancle such order or vary it so as either to enhance or to reduce the penalty.
(c) In any other case, he may pass such orders in the appeal as he thinks fit. (2) The [Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduced the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.
[Explanation- In disposing of an appeal, the [Commissioner (Appeals)] may consider and decided any matter arising out of the proceedings in which the order appealed against was passes, notwithstanding that such matter was not raised before the [Commissioner (Appeals)] by the appellant."
From the above, it is clear that the Ld. CIT(A) is not empowered to direct the AO for making fresh assessment. Therefore, we modify the order of the Ld. CIT(A). The liberty as given by the Ld. CIT(A) to the AO in para 3.1.2 for making fresh reassessment is held to be not within the power of the Ld. CIT(A) u/s 251 of the Act.
11 ITA No. 40/JP/2017.M/s Padam Chand Dhadda HUF, Jaipur.
Accordingly, same is hereby quashed. Thus, Ground no. 1 to 2 of this order is allowed in the terms as stated herein before.
5. Ground nos. 2.1 to 2.3 are on merit. Ld. CIT(A) has not given any finding on these grounds. Moverover, we have sustained the finding of the Ld. CIT(A) for quashing the assessment. Therefore, these grounds have become academic only.
6. Ground no. 3 is general in nature and needs no separate adjudication.
7. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on Tuesday, the 31st day of October 2017.
Sd/- Sd/-
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(VIKRAM SINGH YADAV) ( KUL BHARAT )
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 31/10/2017.
Pooja/
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- M/s Padam Chand Dhadda HUF, Jaipur.
2. The Respondent- Assistant Commissioner of Income Tax, Cirlce-1, Jaipur.
3. The CIT
4. The CIT (A)
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 40/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 12 ITA No. 40/JP/2017. M/s Padam Chand Dhadda HUF, Jaipur.