Assessment on the basis of AIR without notice us 143(2) void ab initio without jurisdiction and liable to be quashed, as no notice issued – ITAT
ABCAUS Case Law Citation:
ABCAUS 1141 (2017) (02) ITAT
Assessment Year : 2006-07
Date/Month of Pronouncement: February, 2017
Brief Facts of the Case:
The case of the assessee was selected for scrutiny based on AIR information that assessee had deposited cash in his bank account. However, the assessee failed to respond to various notices issued by the AO and the assessment was completed exparte u/s 144 treating the entire cash deposit as the undisclosed income. On appeal CIT(A) upheld the addition.
The assessee filed appeal before the Tribunal against the CIT(A) in sustaining addition on account of alleged unexplained income under section 69A of the Income Tax Act, 1961.
However, later the assessee filed an Application for admission of additional ground of Appeal alleging that the assessment order passed by the assessing officer was without jurisdiction and void-ab-initio and was liable to be quashed, as no notice under section 143(2) was issued and served on the assessee.
At the time of hearing also only the additional ground was argued.
Observations made by the Tribunal:
The Tribunal, in view of the decision of the Hon’ble Supreme Court of India in the case of NTPC Limited 229 ITR 383 admitted the additional ground raised by the assessee on the ground that it was purely legal ground and did not require fresh facts which is to be investigated and goes to the root of the matter.
The Tribunal found considerable cogency in the assessee’s submissions that the assessment order passed by the assessing officer was without jurisdiction and void-ab-initio and is liable to be quashed, as no notice under section 143(2) of the Act was issued and served on assessee.
In support of the above view, the Tribunal placed reliance on the following judgment of the Hon’ble Supreme Court of India, Hon’ble High Courts, Coordinate Benches of the ITAT:
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ACIT & Anr. vs. Hotel Blue Moon: [(2010) 321 ITR 362 (SC)] |
HELD: “It is mandatory for the AO to issue notice u/s 143 (2). The issuance and service of notice u/s 143 (2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid Reassessment—–Notice—– Assessee intimating original return be treated as fresh return— Reassessment proceedings completed despite assessee filing affidavit denying serviced of notice under section 143(2)—- Assessing Officer not representing before Commissioner (Appeals) that notice had been issued—- Reassessment order invalid due to want of notice under section 143(2)— Income-tax Act, 1961, ss. 143, 147, 148(1), prov.—-ITO v. R.K. GUPTA [308 ITR 49 (Delhi)Tribu.,” |
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CIT vs. M/s Panorama Builders Pvt. Ltd. in Tax Appeal no. 435 of 2011 of Hon’ble Gujarat High Court |
Issue Involved: “Whether non-issuance of the notice u/s 143(2) within the prescribed time, made the whole block assessment order null and void and bad in law, despite the assessee not having raised any objection before the passing of the assessment order and despite the provisions of section 292BB of the Act? “ Held: “In this case, Hon’ble High Court has held that section 292BB cures the defects in service of notice but section 292BB is ‘confined to only service of notice under this Act and this section does not apply to ‘Issuance of notice’ under the provisions of Act. It does not lay down that if a mandatory notice is required to be issued by the assessing officer and it has not been issued within the period of limitation fixed under the law, then such notice shall be deemed to have been issued within time. It has been further held that resort cannot be taken by the Revenue to section 292BH to give a go-bye to mandatory requirement of issuance of notice within the statutory fixed by the proviso to section I43(2) of the Act.” |
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CIT vs Rajeev Sharma 336 ITR 678, High court of Allahabad. |
“In view of above submissions and case laws, it has been established that no notice u/s 143(2) was issued in the present case and therefore the impugned assessment is liable to be annulled.” |
| M/s Sapthagiri Finance and Investments vs. ITO: TC(A). No. 159 of 2006 dated 17.07.2012 (Mad HC) [(2013) 90 DTR (Mad) 289] |
“13. As far as the present case is concerned, the provisions of Section 148 also uses the expression “so far as may be apply accordingly as if such return were a return required to be furnished under Section 139”. Thus, understanding this provisions in the background of the decision of the Apex Court, on the facts available, we are of the view that in completing the assessment under Section 148 of the Act, compliance of the procedure laid down under Sections 142 and 143 (2) is mandatory. On the admitted fact that beyond notice under Section 142(1), there was no notice issued under Section 143(2), and in the light of the fact that the very basis of the reassessment was the failure on the part of the assessee in not disclosing the capital gains arising on the transfer of property for assessment and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to Section 148 of the Act, we hold that there was total failure on the part of the Revenue from complying with the procedure laid down under Section 143(2) of the Act, which is mandatory one as held by the Apex Court.” |
| Alpine Electronics Asia Pte Ltd. vs. DGIT & Ors: [(2012) 341 ITR 247 (Del) | Held: “The service of notice u/s 143(2) within the statutory time limit is mandatory and is not an inconsequential procedural requirement. Omission to issue notice u/s 143 (2) is not curable and the requirement cannot be dispensed with. S. 143(2) is applicable to proceedings u/s 147 & 148.” |
| JYOTI PAT RAM VS. ITO [(2005) 92 ITD 423 (Lucknow) -ShreeJai Shiv Shonhor Traders (P) Ltd. -A.Y.-2008-09 | “Reassessment order passed under section 143(3)/148 without issue of a valid notice under section 143(2) was illegal.” |
| RAJ KUMAR CHA WLA AND ORS. VS. ITO -(2005) 94 ITD 1 (Del)(SB) | Limitation for re-assessment- Service of notice u/s143(2) in time – A.Y.1995-96. “It was presumed by legal fiction that a return filed uls 148 of the Income Tax Act 1961 would be treated as a return filed u/s 139 of the Act. The assessee had filed its return in response to a notice issued u/s 148 of the Income Tax Act 1961. The service of notice u/s143(2) of the Act within 12 months of filing the return u/s 148 of the Act was mandatory, but the notice had been served beyond 12 months. Therefore, as the re-assessment was barred by limitation, no reassessment could be made u/s 143(3) r/w S.147 of the Act.- ITAT Delhi ‘F’ Special Bench.” |
| CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) | We also may mention here that the question of section 292BB of the Act pressed into service by the Revenue herein came up for consideration before this court in Income Tax Appeal No.286 of 20 11, decided on November 23, 2011 (ClT v. Mukesh Kumar Agrawal since reported in [2012l 345 ITR 29 (All)) and this court has held that the proviso to section 292BB is not applicable in a case where the authority did not have jurisdiction to proceed further and male assessment |
| Hon’ble Delhi High Court in the case CIT vs. Delhi Kalyan Samiti | Mr. Jain’s contention that a belated return filed by the assessee prior to the assessee cannot be ignored as an invalid return, prima facie, appears to be merited. However, in the facts of the present case, the said question does not arise as the AO had issued a notice under section 142(1) of the Act on 30 th November, 2011, inter alia, calling upon the assessee to file its return. Further, on 10 th December, 2007, the AO was informed that the Assessee was in the process of filing its reutnr and an adjournment was requested. The AO had acceded to his request, which would be wholly unnecessary if the AO was of the view that a belated return would be invalid. Thus, in the facts of the present case, the returns filed by the assessee could not be ignored by the AO.” |
Held:
Following the precedents as aforesaid, it was held that the Jurisdictional AO had not issued any notice u/s 143(2) of the I.T. Act to the assessee. Hence, the assessment order was invalid, void abnitio and against the provisions of the law and was not sustainable in the eyes of law.
The assessment order and the appellate order was cancelled and appeal of the assessee was allowed.
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