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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 ..... ssessing Officer as the alleged profit generated out of unaccounted labour payment of Rs. 11,12,00,785/-. 4. The CIT(Appeals) erred in upholding the addition of Rs. 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 Rs. 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 Rs. 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 Rs. 26,96,96,060/- made by the Assessing Officer as the estimated unaccounted initial investment of the assessese and in further rejecting the contention of telescoping thereof in other additions and therefore, not requiring a separate addition even if such addition is to be made. 7. The CIT(Appeals) erred in upholding the addition of Rs. 3,94,20,598/- made by way of estimated unaccounted initial investment by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/-, thereafter on 11.04.2012 a cost of Rs. 50,000/- and then on 04.09.2012 a cost of Rs. 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 vide an order dated 14th March, 2008. The relevant extract of the order sheet is reproduced below: "IT(ss)A No.306/Ahd/2002 & IT(ss)A No.313/Ahd/2002 [Block period 1989-90 to 1998-99 & upto 7/1/99] Reg : M/s. M. Kantilal & Co. Ltd., Surat These cross appeals by the Assessee and the Revenue are subject matter of early hearing as per orders of the Hon'ble Vice Presi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic 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 passage of time since year 2000. Search action took place on 7-1-1999 and 158BC notice was issued on 08-6-2000. 3. It may however, be noted that in this case, notice u/s. 142(1) was admittedly served on the assessee on 31-08-2000. The assessee has complied with this notice vide letter dated 6-9-2000. Subsequent to this, various correspondence took place. Further the defect in the block return filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 for tracing out the relevant documents." 3.2 From the above correspondence one thing for sure emerges that the ITAT Bench had given due opportunity to the Revenue Department to place on record the correct position about the existence as also the service of Notice U/s 143(2) of the Act. But no specific/ cogent evidence had been produced. Rather the Department had failed to place on record the existence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, within seven days of receipt of this notice, further proceedings will be iniated against you without giving any further opportunities. Expecting cooperation from your side. (Anand Mohan) Deputy Commissioner of Income Tax Central Circle-2, Surat. 3.3. Although this letter was issued by the Department but from the side of the appellant, before us, a serious question has been raised that whether it could be akin/ analogous to a notice u/s 143(2). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,.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 reason thereof. 6. The Dy. CIT, Central Circle-2, Surat, vide letter No. SRT/DCIT/CC-2/M. Kantilal. & Co/07-08 dated 27th March 2008 addressed to the CIT(ITAT)-III, Ahmedabad stated that the-matter relates to the F.Y. 2000-01 and all relevant records now stand shifted to the records room. He has only one clerk at the disposal who was on leave. Since the matter is very old and sensitive one, it is mandatory on the part of the Dy. CIT to minutely verify each and every document before rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred 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 the Act is not available on record of this office." 3.3.2 Therefore Ld A.R. has vehemently argued that in the light of the above correspondence it has now abundantly clear that the Revenue has miserably failed to place before the Hon'ble Bench any evidence to prove the issuance of notice U/s 143(2). He has thus reiterated that due this very reason the assessee has challenged the validity of the impugned order. 4. Further, from the side of the assessee, it was placed on record that under " Right to Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 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 assessment was completed on 30th of March, 2001 but only after issuing a notice u/s.143(2) of IT Act. He has also pointed out that the information given in respect of a notice u/s.143(2) was the notice issued in the case of the firm dated 23rd of March, 2001 directing the assessee to attend the office on 27th of March, 2001. The reference of the said notice was also made available on paragraph 6 of the order of the firm dated 30th of March, 2001, already extracted above. At this juncture, it is therefore imperative to comment that the information given un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur 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 of photo copies of seized material if assessee is required to offer any approach Income-Tax Settlement Commission as Return of undisclosed Income has already been filed, so that no penalty u/s.158DFA(2) is levied. 4. Kindly, therefore, treat the Return of Undisclosed Income filed on 29.09.2000 as a valid Return. The prosecution proceedings proposed in the Notice should therefore be dropped. 5. The assessee request your honour to issue a Notice u/s.143(2) of the Act to commence assessment proceedings. Your honour has commended assessment proceedings vide n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 are evident from paragraph 6 of the assessment order dated 23-03-2001 wherein it had been stated that:- "A notice u/s.158 BC of the IT Act is issued and properly served on the assessee company on 16-08-2000 to file block return of income within sixteen days. On the request of the assessee company, the period is extended upto 30- 09-2000. The assessee company filed block return of income on 29-09-2000, disclosing a total undisclosed income of Rs. NIL." More over in support of above a copy of above letter dated 08-09-2000 issued by the A.O. is enclosed here with at Pg. No.12 conforming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proposing following question stated to be substantial question of law i.e. "whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and in cancelling the assessment for block period on the ground that notice u/s. 143(2) of the Act was not served?" Thus, by raising the above stated sole ground only, the Revenue has thus accepted the following decision of the ITAT 'A' Bench Ahmedabad ITAT:- "a block return which is filed beyond the time limit prescribed in the notice but before completion of assessment is a valid return and the same cannot be ignored by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 vs. Vasude S. Wadhwani and further held by the Honorable Delhi High Court in the case of Alpine Electronics Asia Pvt. Ltd. V. Director General of Income Tax (2012) 341 ITR 247. 6. Lastly, an alternative plea is also taken by the Revenue by placing reliance on the decision rendered in the case of Devendra G. Chaturvedi in IT(ss)A- 168/Ahd/2006 by stating that: "additional ground regarding non issue of notice u/s.143(2) has to be admitted but where the revenue did not get occasion to examine this issue in details, the matter is to be sent to the file of CIT(Appeals) for recording the relevant fats and for providing rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 block assessment (23-03-2001). II) On 12-06-2012 the assessee filed an application under the RTI Act before the ITO ward 1(a) Surat seeking information on notice u/s.l43(2) of the Act for the block period A.Y. 1989-90 to A.Y. 1998-99 upto 07-01-1999 with a request to supply a copy of such notice, if any issued in response to return of income filed on 29-09-2000. (Pg.No.l7) III) On 27-06-2012 the ITO ward 1(4) Surat gave a reply under RTI Act stating that notice u/s. 143(2) of the Act was issued on 23.03.2001 & served upon the assessee on 23-03-2001 for block period 1989-90 to 1993-94 as per the enclosure. The enclosed noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 Systems Ltd. [2012] 344 ITR 204 (Guj). (Page No.84 to 90) 15) Pai Vinod v. DCIT [2013] 353 ITR 622 (Karn). (Page No.91 to 96) 7. From the side of the Revenue, learned DR Mr. T. P. Krishna Kumar has submitted that the admitted factual position was that a notice u/s.142(1) was issued. He has pleaded that the decision of Hon'ble Apex Court in the case of Hotel Blue Moon, 321 ITR 362 (SC) as relied upon by the appellant in respect of a stand of lack of a notice u/s.143(2) vitiating proceedings ab initio clearly sets out the proposition that the issue of notice u/s.142 is sufficient to meet the statutory requirement of issue of notice for obtaining jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 proceedings. For this legal proposition, case law cited are CIT Vs. Vision Inc., (2012) 21 taxmann.com, 515 (Del), Samir Kumar Aditya, (2012) 17 taxmann.com 128 (Del), Chatturam Vs. CIT, (1947) 15 ITR 302, Estate of Late Rangalal Jajodia Vs. CIT, (1971) 79 ITR 505, CIT Vs. Jai Prakash Singh, (1996) 219 ITR 737. 7.4 Lastly, he has argued that the provisions of Section 292B of the Act have been specifically introduced with an intent to cure such defects. The provisions of this section clearly cover the point of lack of jurisdiction. He has also mentioned that the provisions of Section 292BB are curative in nature and to be applied retrospectively. Reliance was placed on ITO Vs. Varia Pratee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 representative to attend the assessment proceedings before the AO. Our comment is that the situation is altogether different in the present appeal because the Revenue Department has been asked to show the existence of Section 143(2) of IT Act, moreover that too was challenged in a communiqué to the AO. Next, learned DR has cited a decision of Delhi High Court in the case of Samir Kumar Aditya (supra) and the issue was that the notice u/s.143(2) was served on the assessee on the last date of prescribed period of limitation by affixture. This case law is also misplaced because in the present case the very existence of notice u/s.143(2) was not established by the Revenue Department. Learned DR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uishable 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 the case of Vaishali Builders and Colonizers (supra). But on careful reading, we have noted that the entire issue was in respect of the 'power to transfer a case' by the Income Tax Authorities. It did not pertain to the legal issue of noncompliance of a mandatory requirement and for this reason alone debarring an authority to continue with the proceeding. Learned DR has also cited a decision of Hon'ble ITAT Ahmedabad Bench pronounced in the case of Manharlal V. Shah (supra) and on the question of jurisdiction it was held that no material was produced by the assessee to show that the AO was not vested with the territorial jurisdiction; hence, the objection was rejected. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 position was that there was no notice u/s.143(2) of IT Act whilst the assessment was finalized u/s.153A of IT Act. The Hon'ble Court has held that the issue of notice u/s.143(2) is not mandatory for finalization of assessment u/s.153A of IT Act. In this decision, the case law of Hotel Bluemoon, 321 ITR 362 (SC) has also been recorded. We have carefully examined this decision of the Hon'ble Delhi High Court. We have also carefully perused the provisions of Section 153A as well as the provisions of Section 158BC. We have noted that there is a vast distinction between the language of these two Sections of I.T.Act. In our humble understanding of law, the provisions of Section 153A set out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the statute has been considered and thereupon these two judgments were delivered and rightly so. There are series of decisions pronounced, on the issue in hand, following Hotel Bluemoon (supra) or the decision of Smt. Bandhana Gogoi, 209 CTR 31 (Guwahati). To start with, we hereby discuss the decision of Hotel Bluemoon, 321 ITR 362 (SC) wherein the observations were as under: "7. The only question that arises for our consideration in this batch of appeal is, whether service of notice on the assessee under s. 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the IT Act, 1961?............ 15. We may now revert back to s. 158BC(b) which is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression 'so far as may be apply'. In our view, where the AO in repudiation of the return filed under s. 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of s. 142, sub-ss. (2) and (3) of s. 143............... 17. On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning the conclusion reached by the High Court. 9.4 The Hon'ble Court has thus given a clear verdict that considering the provisions of Chapter XIV-B, the AO himself necessarily issue notice u/s.143(2) of IT Act. Next, a decision of Hon'ble ITAT &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus 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 whereof Authority did not have a jurisdiction to proceed further, then a such a default cannot be cured. 9.6 The appellant has cited even the decision of Mukesh Kumar Agarwal, 345 ITR 29 (Alld) wherein it was held that Section 292BB is a rule of evidence which validates the notice in certain circumstances. It provides that where an assessee has appeared in any proceedings or cooperated in assessment, it shall be deemed that any notice required to be served upon him, has duly been served upon him and the assessee shall be precluded from taking any objection, but the Court has held that the requirement of notice u/s.143(2) could not be dispensed with because the Authority did not have a jurisdiction to proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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