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TMI Blog2014 (11) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had not taken the cognizance and proceeded to finalize the assessment without issuing the said requisite notice u/s.143(2) of IT Act. The notice must have been served otherwise there was no occasion for the assessee's representative to attend the assessment proceedings before the AO - There was evidence that the assessee had participated in the assessment proceedings pursuant to the said notice; hence, it was held that the notice u/s. 143(2) was validly served - by virtue of the provisions of Section 147/148 itself the assessment must not be rendered as null and void - u/s.158BC(b) the AO should proceed to determine the undisclosed income of the Block Period in the manner laid down in the provisions of Section 143(2) and (3) of the Act so far as may apply. This section does not provide for accepting the return as provided u/s 143(1)(a) - The AO has to complete the assessment u/s 143(3) only - In case of default in not filing the return or not complying with the notice under s. 143(2)/142, But s. 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) erred in upholding the addition of ₹ 11,26,79,955/- made by the Assessing Officer on the basis of the documents seized from the residence of Smt. Labhuben Zaverbhai Patel 3. The CIT(Appeals) erred in upholding the addition of ₹ 10,76,61,299/- made by the Assessing Officer as the alleged profit generated out of unaccounted labour payment of ₹ 11,12,00,785/-. 4. The CIT(Appeals) erred in upholding the addition of ₹ 3,94,20,598/- made by the Assessing Officer on the basis of seized Annexure LS/18 by taking 18.44% profit on the turnover of ₹ 21,37,77,646/- though the said production is recorded in the books of M/s. R. Vipul Co. and M/s. Anjana Export. 5. The CIT(Appeals) erred in upholding the addition of ₹ 29,94,73,761/- made by the Assessing Officer by way of unaccounted production is seized Annexure A/10 and A/12 found from the residence of Shri Jagdish Gor, failing to appreciate that the same related to M/s. Premkumar Co., Mumbai and not to the assessee. 6. The CIT(Appeals) erred in upholding the addition of ₹ 26,96,96,060/- made by the Assessing Officer as the estimated unaccounted initial investment of the assessese a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that these are very old appeals pending since the year 2002. In the past, as per the noting of the order sheets, these appeals have been adjourned year after year. We have also noted that due to number of adjournments sought from the side of the assessee, it was decided by the Bench to impose a cost. Vide an order sheet dated 19.01.2010 a cost of ₹ 5,000/-, thereafter on 11.04.2012 a cost of ₹ 50,000/- and then on 04.09.2012 a cost of ₹ 75,000/- have also been imposed. Earlier, there was a requirement of the Bench to know about the outcome of the protective assessments and the implication of the substantive additions. Coupled with that issue, there was an information that the matter might have gone to Settlement Commission. On account of those uncertainties, the hearing had been adjourned time and again. Then in the year 2008 (13th March, 2008), the assessee has raised an Additional Ground reads as under: The block-assessment order is bad because the same is passed without giving section 143(2) notice to the assessee. 2.1 For the admission of additional ground a hearing was granted to both the sides and thereafter the same was admitted by the Bench vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed u/s. 158BC(c) dated 23rd March, 2001. Further, as per paragraph (7) of the assessment order, it has also been noted by the AO that a notice u/s.142(1) was issued and Sri Ashwin Parikh C.A. attended time to time. Upto this extent, there was no dispute among the parties that a return u/s.158BC was filed and that a notice u/s.142(1) was issued. Because the assessee has raised specific ground that the assessment order was passed without issuing a notice u/s.143(2) of IT Act, therefore, vide an order sheet entry dated 11th June, 2013, it was directed by the Bench to Revenue Department to produce the evidence regarding issuance of notice u/s.143(2). Again vide an order sheet entry dated 7th of August, 2013, the Revenue Department was directed to place on record the correct position of the issuance of notice u/s.143(2) of IT Act. From the side of the Revenue, a letter has been placed on record dated 13th August, 2013, contents of which are reproduced verbatim: In the above appeal, at the time of hearing on 07-08-2013, the status of the notice issued u/s.143(2) in the above case was sought for. 2. It has not been possible to trace the notice issued in view of the passa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper service of notice is not prima facie acceptable, then the matter may be sent back to the file of the CIT(Appeals) for recording the relevant facts and for providing reasonable opportunity to both sides in the interest of natural justice. 3.1 Again on 2nd September, 2013, learned CIT-DR has filed a letter before us and the same is extracted below: I am submitting alongwith the letter dated 24.06.2013 received from Assessing Officer (A.O.) in relation to the request for copy of 143(2) notice in this case, as directed by members at the time of appeal hearing on 13.08.2013. 2. As may be seen, this case had undergone change of jurisdiction in terms of decentralization of case pursuant to completion of block assessment. As such, the matter of availability of notice u/s.143(2) had been taken up by the present AO with the erstwhile assessing officer Deputy CIT, Central Circle-2, Surat, and nothing has been heard from this office, as of now, as is evident from the penultimate para of the present Assessing Officer's Letter. 3. In view of the passage of time and delay so far, I have requested the Jurisdictional Commissioner of Income Tax to urgently depute an official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block period is full true. Please also note that there is no provision in the IT Act for filing of revised block return of income. 4. However, from the enclosed paper with notings, it is clear that there is undisclosed income related to the block period. Under this circumstances, your verification is incorrect and wrong. Therefore, it cannot be considered and wrong. Therefore, it cannot be considered as filed in response to the notice u/s. 158 BC of the Act. Further, you are liable for prosecution as per law for the non-compliance. 5. In this regard, you are requested to 'show cause' as to why (i) Your return of income filed in form 2B should not be treated as invalid. (ii) Necessary prosecution proceedings should not be initiated against you. 6. You are further directed to pay the tax on the undisclosed income for the block period determined by you immediately and produce the proof of payment for verification of the undersigned. No further delay should be made in this regard. 7. Please note that the reply to the show cause must be produced before the undersigned within seven days of receipt of this notice. If no reply is received from your side, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal ground of appeal vide order sheet entry dated 14.03.2008 and both the parties were informed of the admission of additional ground and matter was adjourned for hearing on merit of additional ground to 28.03.2008. In the meantime, the Ld. D.R. was directed to furnish his reply confirming or denying the issuance and service of notice u/s. 143(2) of the Act upon the assessee on or before the date of completion of Block Assessment (23.03.2001) on 23.03.2008. 5. The CIT (ITAT)-III,.vide his letter dated 25.03.2008 addressed to the Add. CIT, Central Range, Surat, stated that Notice u/s. 158BC was issued in this case on 16.08.2000. Return for the undisclosed income for the block period was furnished by the assessee on 29.09.2000 declaring undisclosed income at Rs. NIL. From the assessment order it is not borne out as to whether notice under section 143(2) was issued or not. Therefore, requested to direct the Assessing Officer concerned to let them know by fax as to whether notice under section 143(2) was issued and served on the assessee after filing of the return of undisclosed income for block period or any time before the date of passing of the assessment order. If not, the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.10.2007 addressed to the CIT, Central-1, Ahmedabad, requesting him to arrange for copies of documents mentioned therein. However, the copies of the said documents are not received till date. Since the search folder of the assessee has not been transferred alongwith case records, the Dy. CIT, Central Cir-2, was requested vide this office letter dated 22.08.2008 to supply copy of notice u/s. 143(2) issued if any for the block period and copies of documents as mentioned in your letter referred to above. 10. Further, the then ITO, Ward-1 (4), Surat, vide his letter dated 30.12.2010 furnished the information called for by the CIT-I, Surat in para (b) as under: (b) Quantum of revenue involved out of aforesaid in case where the notice u/s. 143(2) has not been issued. In this regard, it is submitted that notice u/s.143(2) of the IT Act, is not available on record. The then AO had written a letter to the Dy. CIT, Central Circle-2, Surat requesting him to furnish the details regarding the notice u/s.143(2) of the Act. Nothing is heard from the Central Circle-2, Surat in this matter till date. In view of the above fact/correspondence, notice under Section 143(2) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kantilal Co. Learned AR has also placed on record the assessment order of a Registered Firm, in the name of M/s. Kantilal Co. on which an assessment was made u/s.158BC(c) of IT Act dated 30th of March, 2001. The said firm was assessed after issuance of notices u/s.143(2)/142(1). The fact about the issuance of those notices were also duly mentioned in para 6 of the order of the firm, for ready reference reproduced below: 6. Notices u/s.143(2) (142)(1) and a letter dated 27.03.2001 were issued. In response to notices u/s.142(1) 143(2), Shri Mehta Kothari, C.A., alongwith Shri Ashwin Parekh, C.A. and Shri Pravinbhai. Sr. Partner, attended and discussed the case and the seized materials with them. They have also submitted written submission on the contents of the seized documents vide letter dated 28.03.2001. 4.3 Therefore, the first argument of learned AR before us is that the impugned assessment order of the assessee, now under appeal, being dated 23rd of March, 2001, was passed without issuing any notice u/s.143(2) of IT Act, as it is now admitted by the Revenue Department through various letters. But simultaneously during that period in the case of the firm the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act the notice u/s. 143(2) is required to be issued. We shall submit all explanation in the absence of Notice u/s.143(2) of the Act under protest unquote. For ready reference the reply of the assessee dated 07.11.2000 is reproduced below: 1. The assessee had received a Notice dtd. 31.08.2000 u/s. 142(1) of the Act in the absence of any Return of undisclosed Income. The assessee therefore intimated your honour to issue a Notice u/s. 158BC and thereafter a notice u/s.143(2) of the Act to correctly assessee the undisclosed income. 2. Your honour issued a notice u/s.158BC of the Act dtd 17.08.2000 to file the Return of undisclosed income by 16.09.2000. Your honour vide letter dtd. 08.09.2000 allowed extension to file Return of Undisclosed Income by 30.09.2000. The assessee filed Return of Undisclosed Income on 29.09.2000. 3. The third note to Return of undisclosed Income has been written because your honour issued notice u/s.158BC of the Act and required the assessee to file Return of Undisclosed Income without giving photo copies of seized material. In this absence of copies of seized material the assessee filed Return of undisclosed Income at Rs. Nil. After receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not possible to trace the notice issued. In view of the present reply filed on 13-08-2013 that it is not possible to trace the notice issued, the same tantamounts to the denial of issuance service of such notice to the assessee. 3. The provisions of section 142(1) of the Act reads as under.- For the purpose of making an assessment under this Act, the 1[Assessing] Officer may serve on any person who has made a return under section 139 2 [or in whose case the time allowed under sub- section (1) of that section for furnishing the return has expired] a notice requiring him, on a date to be therein specified The section itself contemplates that such notice can only be issued on the person if; 1) has made a return or 2) the time limit allowed for furnishing such return has expired. The facts of the Appellant's case are that 1) Firstly a notice u/s.158BC dated 17-08-2000 was issued. 2) The time limit to file the return was extended by the A.O. upto 30-09- 2000 vide his letter dated 08-09-2000 issued in response to assessee's request letter dated 06-09-2000 filed on 07-09-2000. 3) The return of income was filed on 29-09-2000. The said facts ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ss)/A/376/Ahd/2002 is inapplicable, misplaced and distinguishable on the facts and circumstances of the assessee's case in as much as that the said decision was rendered in context of a presumption that the return was filed beyond the allowable time limit whereas in the case of assessee such return is filed on 29-09-2000 i.e. before the extended time limit allowed up to 30.09.2000 to file such return. Further even otherwise if a return is filed beyond the prescribed time limit in the search cases cannot be held as non-est in view of the decision of the coordinated bench as affirmed upheld by the jurisdictional High Court of Gujarat in the case of Prakash Metal Works vs DCIT Central Circle-1, Ahmedabd in IT(ss)A No.168/Ahd/2003 (Block period: 1.4.1988 to 8.12.1998) pronounced on 10-4-2008 by ITAT A bench, Ahmedabad and as affirmed upheld by the Hon'ble Gujarat High Court in the case of CIT-1 vs Prakash metal works, in TAX APPEAL No.69 of 2009 (Guj). It is noteworthy to mention here that while disposing the said tax appeal the Honorable Bench of the High Court has taken note that Revenue has challenged order of ITAT Ahmedabad Bench 'A' dated 10.04.2008 by propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the provision of section 292B of the Act on the ground that the intention of the notice served is quite clear. There is a fallacy in stating so as in the case of assessee neither any such notice u/s.143(2) was issued nor therefore it was served on the assessee. The provision so enacted is an enabling provision in a situation where firstly any such notice is issued but is subsequently found to be invalid on the ground of any mistake, defect or omission then also it should not be treated as invalid or deemed to be invalid on account of such mistake, defect or omission in the notice. In the case on hand no such notice is either issued by the A.O. or served upon the assessee. Therefore the provisions of sections 292B of the Act cannot be made applicable in the absence of such notice and its service upon the assessee within the stipulated time limit. The Honorable Punjab Haryana High Court on similar ground has held that absence of notice is not curable u/s.292BB of the Act in the case of CIT v Cebon India Ltd. [2012] 347 ITR 583 (P H) as also held by the jurisdiction High Court of Gujarat in its judgment delivered on 23-06-2011 in TAX Appeal No.205 of 2008 in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched finality on the issuance and service of such notice. Therefore, the facts of the assessee are totally different from the cited case as such inapplicable to the assessee's case as such deserved to be rejected at threshold. 7. Without prejudice to the above and as duty bound to assist this Honorable forum which is the highest fact finding authority the assessee in all possible permissible means tried his level best to unearth the truth facts of the case as related to the notice u/s. 143(2) of the Act. The result made available on his efforts by way of documentary evidence as supplied by the revenue authority itself are listed below to determine the factual aspect of the matter to decide the additional ground on the basis of such facts placed on record. In order to appreciate resolve the issue the same are listed below date wise:- I) On 14-03-2008 additional ground is admitted by the bench and matter is adjourned. For hearing on merit of additional ground to 28-03-2008 with a direction to the DR to furnish his reply conforming or denying the issuance and service of notice u/s. 143(2) of the Act upon the assessee on or before the date of completion of bloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AL No. 69 OF 2009(GUJ). (Page No.7 to 12). 3) The Honorable Gujarat High Court in the case of CIT-1 v. Vasudev S. Vadhwani, in Tax Appeal No.205 of 2008(Guj). (Page No. 13 to 15) 4) CIT vs Bihari Lal Agrawal, (2012) 346 ITR 0067(All). (Page No.16 to 18) 5) CIT vs Mukesh Kumar Agrawal, (2012) 345 ITR 0029(All).(Page No,19 to 21) 6) CIT vs Pawan Gupta, (2009) 318 ITR 322 (Del). (Page No.22 to 34) 7) Virendra Dev Dixit vs. ACIT, (2010) 233 CTR (All) 177. (Page No.35 to 42) 8) Jitendra Prabhudas Chotalia vs Dy.CIT, Spl Range-5, Ahmedabad in IT(ss) A No.199/Ahd/1997 (Block Period : 01/04/1985 to 31/03/1995) pronounced on 10/8/2007.(Page No.43 to 49) 9.) Janak K.Kansara vs DCIT, Central Circle-1(4), Ahmedabad in IT(ss)A No.146/Ahd/2003 (block period: 1.4.1988 to 8.12.1998) pronounced on 28/3/2008(Page No.50 to 53) 10) CIT v. Cebon India Ltd., [2012] 347 ITR 583 (P H) (Page No.54 to 55) 11) Alpine Electronics Asia Pte.Ltd. v. DGIT [2012] 341 ITR 0247(DEL) (Page No.56 to 64) 12) Arunlal v. ACIT [2010] 001 ITR (Trib) 0001 (Agra Bench). (Page No.65 to 81) 13) CIT v. Mascomptel India Ltd. [2012] 345 ITR 58 (Delhi). (Page No.82 to 83) 14) DCIT v. Maxima Syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the assessment was completed. The question of lack of jurisdiction has been raised after the lapse of so many years is, therefore, out of the ambits of the laid down provisions of IT Act as per Section 124(3) of IT Act. Reliance was placed upon the case of Vaishali Builders Colonizers Vs. Additional CIT, Jodhpur, (2012) 25 taxmann.com 464 (Jodhpur) and Manharlal V. Shah Vs. Joint CIT, Ahmedabad, (2011) 10 taxmann.com 64 (Ahd). 7.2 Thereafter, he has pleaded that a notice u/s.143(2) is nothing but a procedural formality to call for the details in respect of the return filed. For this reason, even a communication addressed to the assessee is sufficient to meet the requirement of notice u/s.143(2) of IT Act. He has also pleaded that there is no prescribed proforma for issuing notice u/s.143(2) of IT Act. He has placed reliance upon the case of Ashok Chaddha Vs. ITO, (2012) 20 Taxmann.com 387 (Del) and K.J. Thomas Vs. CIT, (2008) 301 ITR 301 (Ker). 7.3 Further enlarging his arguments learned DR has pleaded that whereupon assessee had participated in the assessment proceedings time and again then he must not thereafter question the legality of the jurisdiction of the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceiving that letter the assessee has responded on 07.11.2000 and requested the AO to issue notice u/s.143(2) of IT Act by specifically mentioning that in block assessment proceedings to be held u/s.158BC it is mandatory to issue a notice u/s.143(2) of IT Act. It was also clarified that in the absence of the requisite notice u/s.143(2), the participation in the proceedings by the assessee was under protest. Even after pointing out to the AO about the mandatory requirement of the issuance of notice u/s. 143(2) of IT Act, the AO had not taken the cognizance and proceeded to finalize the assessment without issuing the said requisite notice u/s.143(2) of IT Act. 9 However, from the side of the Revenue, learned DR has still pleaded that there as few case laws wherein it was held that the issuance of notice u/s.143(2) is not mandatory. In this connection, first he has placed reliance on a decision of ITAT Mumbai Bench in the case of Thistle Properties (supra), wherein the assessee had challenged the service of notice u/s.143(2) after a gap of five years. The Tribunal has taken a view that the notice must have been served otherwise there was no occasion for the assessee's representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-ordinate Bench where principle of natural justice has otherwise been met then the Appellate Authority should proceed to decide the case on merits. We are of the view that the Tribunal has considered the procedural aspect in terms of Section 147/148 of IT Act and not in terms of the provisions of Section 158BC of IT Act. We shall discuss the distinction hereinbelow, but at the moment, it is worth to mention that u/s.158BC(b) the Assessing Officer should proceed to determine the undisclosed income of the Block Period in the manner laid down in the provisions of Section 143(2) and (3) of the Act so far as may apply. Therefore rest of the case laws of the Revenue as well are distinguishable on this legal point. 9.1 Learned DR, Mr. T.P. Krishna Kumar has also raised an another legal point that in terms of Section 124(3); no person/assessee is entitled to call in the question of jurisdiction of the AO where he has made a return, after the expiry of one month from the date on which he was served with a notice u/s. 142(1) or after the completion of the assessment, whichever is earlier. In support of this legal issue, learned DR has placed reliance upon ITAT Jodhpur Bench decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 124 of IT Act that the lack of jurisdiction may be of many varieties. Lack of jurisdiction may be due to want of jurisdiction over the place. Likewise, lack of jurisdiction could be due to want of jurisdiction in respect of a person. The other variety of lack of jurisdiction could be due to no Authority under law or no Authority to decide a particular matter. There could be a possibility of statutory bar to proceed with a matter. Therefore, while dealing with a case where the question of jurisdiction is raised, the distinction between want of territorial jurisdiction or an irregular exercise or a wrong assumption of jurisdiction should be borne in mind. We, therefore, hold that the impugned objection of learned DR that the jurisdiction was required to be challenged within one month has no legal force, because the operation of Section 124 is entirely in different direction which is nowhere near to the provisions of Section 158BC to be read with the provisions of Section 143(2) of IT Act. This objection is turned down. 9.2 Learned DR has placed vehement reliance on a decision of Delhi High Court in the case of Ashok Chaddha (supra). In this case, the admitted factual positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the notice a return in the prescribe form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;] (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of Section 142, sub-sections (2) and (3) of section 143 [section 144 and section 145] shall, so far as may be, apply. 9.3 Due to the above distinction, we may be permitted by the Hon'ble Courts to hold that both the decisions, one by the Hon'ble Apex Court in the case of Hotel Bluemoon (supra) and the other by the Hon'ble Delhi High Court in the case of Ashok Chaddha (supra) have been passed in the context of two distinct provisions of IT Act; hence both are accurate as also acceptable in the context of respective provisions. The distinction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be dispensed with. The other important feature that requires to be noticed is that the s.158BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the AO while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This section even speaks of sub-sections which are to be allowed by the AO. Had the Intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the AO, if for any reason, repudiates the return filed by the assessee in response to notice under s.158BC(a), the AO must necessarily issue notice under s.143(2) of the Act within the time prescribed in the proviso to s.143(2) of the Act within the time prescribed in the proviso to s.143(2) of the Act . 16. The case of the revenue is that the expression 'so far as may be apply' indicates that it is not expected to follow the provisions of s. 142, sub-ss. (2) and (3) of s. 143 strictly for the purpose of block assessement. We do not agree with the submissions of the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goi Vs. CIT (2007) 289 ITR 28 and Hotel Blue Moon (supra). In the said decisions the Hon'ble High Court has held that a return filed for the block period cannot be interfered by the AO without issuance of notice u/s.143(2) of the Act. Hence, respectfully following the same we have no hesitation to hold that in this case where non-issuance of notice is an admitted fact then such default has invalidated the impugned assessment. 9.5 Likewise, in the case of Vasudev S. Wadhwani (Tax Appeal No.205 of 2008, order dated 23.06.2011), the observation of the Hon'ble Jurisdictional High Court was that the omissions on the part of the AO to issue notice u/s. 143(2) could not be a procedural irregulatory thus the same is not curable. The requirement of notice u/s.143(2) could not be dispensed with. In the case of CIT Vs. Biharilal Agarwal, 346 ITR 67 (Alld), this issue was answered in the manner that no notice u/s.143(2) was served upon the assessee although participated in the proceedings but matter is squarely covered by Hotel Bluemoon. It was also opined that the question of applicability of Section 292BB does not arise in view of Mukesh Kumar Agarwal, 345 ITR 29 (Alld) because wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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