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ITA Nos.1560 & 1597/Hyd/2019

8. We stay back in the assessee's additional grounds going to the root of the matter and notice that the CIT(A) has dealt with this issue of validity of impugned assessment as under :

" 7. The grounds of appeal no.7 to 9 relate to the validity of the scrutiny assessment order passed u/s. 143(3) of the IT. Act. 7.1 The original return of income was filed on 04.07.2014 and the same was selected for scrutiny assessment. Later, revised return of Income was filed on 16.11.2015. Even if the revised return of income is a valid return, the scrutiny assessment proceedings, initiated by duly serving the necessary notices u/s.143(2) and 142(1), with reference to the original return of income, continue to be valid and such legal proceedings will have to be taken to their logical conclusion. There is nothing in law which states that the pending proceedings, in respect of the original return, shall abate or will automatically get invalidated with the filing of the revised return, by the appellant. If the argument of the appellant is accepted, then, the same will lead to an absurd proposition and to defeat the pending legal proceedings, all that the assessee will have to do is to file a revised return and say that the revised return has substituted the original return and, therefore, the pending scrutiny assessment proceedings initiated, on the basis of the original return, no longer survive.

ITA Nos.1560 & 1597/Hyd/2019 7.4 Similarly, the other decisions in the cases of Niranjan Lal Ram Chandra and Machine Tool Corporation of India Limited, cited by the appellant, do not support the argument made by the appellant. Nowhere it is said that the validly initiated pending legal proceedings, on the basis of the original return, will die a natural death with the filing of the revised return. 7.5 As the scrutiny assessment proceedings were already pending (based on original return), there was no legal requirement to once again initiate the proceedings, separately, with reference to the revised return. Legally, the AO was required to logically conclude the pending scrutiny assessment proceedings. Also, to treat the revised return as a valid return and consider the same for the purpose of making assessment. Both of these have been done.

4. In reply, Ld.DR submitted that the assessee had objected to the non-issuance of notice u/s.143(2) only on 27.03.2015 which is also extracted by the AO in Page No.27 of this order. It was a further submission that the assessee having been granted substantial opportunities as has been extracted by the AO in Page No.6 of this Order, it was a submission that the assessment was liable to be upheld.

5. We have considered the rival submissions. Admittedly, the last revised return filed by the assessee on 26.02.2014. This was admittedly a valid revised return. The AO has also not rejected the revised return. The assessee has also given his Explanation for filing the said revised return. In fact, after the said revised return was filed, notice u/s.142(1) has been issued on 10.12.2014 and show cause notice have been issued on 23.12.2014 and on 12.03.2015. In response to the show cause notice issued by the AO on 23.03.2015, intimating the assessee to provide his response by 27.03.2015, the assessee has intimated that the notice u/s.143(2) has not been issued on the assessee within the prescribed time. In fact, before the show cause notice being issued by the AO, the assessee never had an opportunity to intimate the AO that notice u/s.143(2) had not been issued. A perusal of the provisions of Sec.143(2) shows that the said notice is not assessment year ITA Nos.1560 & 1597/Hyd/2019 specific but it is return specific. Its time limit is computed from the end of the financial year in which the return is furnished. It is mandatory for the issuance of notice u/s.143(2) in the event that the AO proposes to make assessment u/s.143(3). In the present case, the AO having not issued notice u/s.143(2) in respect of a valid revised return filed on 26.02.2014 and more so, the said return have not been treated as invalid, the consequential assessment is bad in law, in view of the principles laid down in the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon reported in 321 ITR 362 (SC). Further, in view of the position in law that if a revised return is filed u/s.139(5) and if such return is a valid return then the assessment can be completed only on the basis of such revised return as has been held by the Hon'ble High Court of Orissa in the case of Orissa Rural Housing Development Corporation Ltd. reported in 343 ITR 316, the assessment is liable to be annulled.

6. In these circumstances, as notice u/s.143(2) has not been issued in respect of the valid revised return filed by the assessee u/s.139(5) on 26.02.2014, the consequential Assessment Order u/s.143(3) dated 30.03.2014 for the AY 2012-13, in the case of the assessee is bad in law and stands annulled.

7. In the result, the appeal filed by the assessee in ITA No.22/Mds/2016 is stands allowed, the appeal filed by the Revenue in ITA No.351/Mds/2016 is stands dismissed and the CO No.56/Mds/2016 filed by the assessee is stands dismissed."