Income Tax Appellate Tribunal - Agra
Aligarh Auto Centre, Aligarh vs Department Of Income Tax on 27 December, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 220/Agra/2011
Asstt. Year : 2001-02
Income-tax Officer (AO), vs. M/s. Aligarh Auto Centre,
Ward 1(4), Aligarh. G.T. Road, Masoodabad,
Aligarh.
(PAN : AAKFA 7675 H)
(Appellant) (Respondent)
Appellant by : Shri K.K. Mishra, Jr. D.R.
Respondent by : Shri Akhilesh Kumar, Adv.
Date of hearing : 27.12.2012
Date of pronouncement of order : 04.01.2013
ORDER
Per Bhavnesh Saini, J.M.:
This appeal by the Revenue is directed against the order of ld. CIT(A), Ghaziabad dated 28.03.2011 for the assessment year 2001-02 on the following grounds :
"1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in holding that in absence of issuance of notice u/s. 143(2), the assessment was null and void not appreciating provisions u/s. 292BB of the I.T. Act, 1961.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in holding that issue of notice u/s. 148 was without valid reasons and hence the assessment is a nullity.2 ITA No. 220/Agra/2011
3. The Ld. 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 ld. 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 ld. CIT(A) in holding the assessment order to be null and void in absence of issuance of notice u/s. 143(2) of the IT Act without appreciating the provisions of section 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.1,06,203/-. Subsequently, notice u/s. 148 was issued and the AO completed the reassessment proceedings u/s. 143(3)/147 of the IT Act on dated 27.12.2006 computing the total income of assessee at Rs.26,22,306/- by making additions. The assessee challenged the assessment order before the ld. CIT(A) on the ground that since no notice u/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 09.08.2006, Shri Manoj Kumar Agarwal, FCA appeared during the course of proceedings and stated that return already filed may be treated in response to notice u/s. 148. The assessee similarly explained that since the original 3 ITA No. 220/Agra/2011 return was filed and in response to the notice u/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 u/s. 148. Therefore, there is compliance to the notice u/s.
148. Copy of the acknowledgement of filing of the original return and intimation u/s. 143(1) were also filed. The ld. CIT(A), considering the explanation of the assessee and the material on record held that since no notice u/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 ld. CIT(A) in para 7.1 of the impugned order are reproduced as under :
"7.1. On the issue of notice u/s. 143(2):
This is now an undisputed fact that no notice u/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 u/s. 148, was not enough. According to AO, there was no requirement of issue of notice u/s. 143(2), because no return has been filed by the assessee.
I find that AO's stand tantamount to distortion of fact. There is an order sheet entry dated 09.08.2006 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 4 ITA No. 220/Agra/2011 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 u/s. 148 (order sheet entry dated 24.03.2006) 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 u/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 Section 144 should have been mentioned in place of Section 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 u/s. 148 by referring to original return; the AO made a serious legal error of not issuing any notice u/s 143(2) even till the time of completion of assessment u/s 143(3) r.w. 147. This lapse has made the entire assessment liable to be quashed, as being null and void.
Following amendments and case laws are relevant:
(i). Amendment :
Time limit for issue of notice u/s. 143(2) for the purposes of making assessment or reassessment u/s. 147 Under the existing provisions of subsection (1) of section 148 it has been provided that before making any assessment, reassessment or re-computation u/s. 147, the assessing officer shall serve a notice u/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 5 ITA No. 220/Agra/2011 to such notice were a return required to be furnished u/s. 139.
A proviso is inserted to sub-section (1) so as to provide that where a return has been furnished during the period from 1st October, 1991 to 30th September, 2005, in response to a notice served u/s. 148 and, subsequently a notice has been served u/s. 143(2) after the expiry of twelve. months specified in the proviso to sub-section (2) of section 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 re-computation as specified in sub-section (2) of section 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 1stOctober, 1991 to 30th September, 2005 in response to a notice served u/s. 148 and, subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or re-computation as specified in sub- section (2) of section 153, such notice shall be deemed to be valid notice.
This amendment takes effect retrospectively from the 1st October, 1991.
(ii) Case of Punjab State Co-operative Supply and Marketing Federation Ltd. v. UOI l2007]290 ITR 15 (P & H):
Proviso to section 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.
Income-tax Act, 1961, section 148 (as amended by Finance Act, 2006, with effect from 01.10.1991) 6 ITA No. 220/Agra/2011
(iii) Case of CIT v. C. Palaniapan [2006] 284 ITR 257 (Mad):
Notice u/s 148 was issued for reassessment.
However, notice u/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 u/s. 143(2) within twelve months is statutory.
(iv). C/o CWT vs. HUF of H.H. Late J.M. Scindia (2008) 300 ITR 193 (Bom) Effect of section 17 :
Procedure u/s. 14 to 16 applicable. Notice u/s. 16(2) was issued beyond time-limit prescribed under provision of the Act. Reassessment was not valid. The crucial words in section 17 of the Wealth-tax 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 section 14." All the provisions of Chapter IV will have to be read in tandem so as to bring about an uniformity and certainty to an order of assessment.
The proviso to section 16(2) is in the nature of an embargo on the Assessing Officer, if the period has expired not to issue notice after that period. In other words, the Assessing Officer is bound to accept the return as filed. Though the notice u/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 Assessing Officer not to proceed further in a case of reassessment under section 17, the provisions of section 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 u/s.16(2).
Once the language of section 17 itself requires that the other provisions to be applicable considering the return as filed under section 14, it contemplates that both procedural and substantive 7 ITA No. 220/Agra/2011 provisions will apply. Therefore, while invoking the powers u/s. 17, the Assessing Officer is bound by the mandate of the proviso to section 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 ld. DR in support of the grounds of appeal submitted that the ld. CIT(A) failed to consider the provisions contained u/s. 292BB of the IT Act. The ld. DR, however, admitted that no notice u/s. 143(2) was ever issued in this case at re-
assessment proceedings. Copy of the order sheet is filed at page 20 of the paper book. The ld. DR relied upon the decision of Hon'ble Madras High Court in case of Areva T & D India Ltd. vs. ACIT, 294 ITR 0233, in which it was held that when the assessee participated in reassessment proceedings - failure to consider the objections and failure to issue notice u/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 ld. 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 vs. ACIT, 331 ITR 483, in which it was held that the AO must issue notice u/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 ACIT vs. Hotel Blue Moon, 321 ITR 362 (SC), in which it was held that the issue of notice u/s. 8 ITA No. 220/Agra/2011 143(2) within prescribed time is mandatory.
(iii). Decision of Delhi High Court in the case of CIT vs. CPR Capital Services Ltd., 330 ITR 43, 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 section 143(2) of the Act was not available on record. Since the Department had failed to produce the copy of the notice under section 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 section 143(2) of the Act, the Tribunal had rightly quashed the assessment as null and void."
(iv). Decision of Punjab & Haryana High Court in the case of CIT vs. Cebon India Ltd., 229 CTR (P&H) 188, 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 Gujrat High Court in the case of DCIT vs. Mahi Valley Hotels Resorts, 201 CTR (Guj) 308, 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."9 ITA No. 220/Agra/2011
(vi). Decision of Madras High Court in the case of Sapthagiri Finance & Investments vs. ITO, 25 Taxmann.com 341 (Mad), 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 section 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 u/s. 148, which is also supported by order sheet entry dated 09.08.2006 (PB-20). It is also not in dispute that AO never issued any notice u/s. 143(2) of the IT Act. The Revenue merely contended that the CIT(A) should have appreciated the provisions of section 292BB of the IT Act. Section 292 BB of the IT Act provides as under :
"292BB. Where an assessee has appeared in any proceeding 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 this Act that the notice was--
(a) not served upon him; or
(b) not served upon him in time; or
10 ITA No. 220/Agra/2011
(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. 01.04.2008. ITAT, Delhi Special Bench in the case of Kuber Tobacco Product Pvt. Ltd. vs. DCIT, 117 ITD 273 held that section 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 section 292BB of the IT Act would not apply in the case of the assessee. Further, no notice u/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 u/s. 292BB of the IT Act. Considering the above discussion and the case laws cited above, the sole objection of the Revenue is not maintainable. Therefore, the ld. CIT(A) was justified in setting aside the entire assessment order. We, therefore, do not find any infirmity in the order of the ld. CIT(A) for interference. Ground No. 1 of appeal of the Revenue is accordingly dismissed.
11 ITA No. 220/Agra/2011
6. In view of the finding on ground No. 1 above, when entire re- assessment order has been set aside and quashed by the ld. CIT(A) and confirmed by us above, rest of the grounds in the departmental appeal regarding reopening of assessment u/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 u/s. 143(2) was issued in this case. Therefore, there would not be any valid re-assessment proceedings u/s. 147 of the IT Act and all resultant additions made in such re-assessment order would stand deleted.
7. In the result, departmental appeal fails and is dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy