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TMI Blog2015 (3) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) GNIDA is declared as Industrial Township by the Governor of Uttar Pradesh under proviso to clause (1) of Article 243 Q of the Constitution of India. It is a Local Authority in as much as, it is bestowed with the authority to discharge functions of an industrial Township as well as municipality. GNIDA does not have a separate municipality. (iii) GNIDA discharges functions of maintaining sewerage, water, electricity, roads and social infrastructure such as school, colleges, universities, dispensaries, hospitals, parks, community centers etc for the benefit of public at large. 2.1. The Income of GNIDA was exempt both under section 10(20A), as well as 10(20) of the Income Tax Act, 1961 till 31.3.2003. Section 10(20A) was omitted vide Finance Act, 2002 and an Explanation to Section 10(20) was inserted whereby section 10(20) was restricted to the Municipalities. Exemption from tax of income of GNIDA was denied u/s. 10(20) by the Assessing Officer. 2.2. Facts of the case as recorded by the Ld.CIT(A) at para 2 of his order of A.Y. 2006-07 are as follows. "In this case in view of amendment in s.10(2) of the I.T.Act wef 1.4.2003 the AO was of the view that GNIDA is no more a Local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, exempt in many cases, do not relate to the financial year etc. To sum up, the computation of income as per the provisions of Income Tax Act, 1961 have not been undertaken and the entire surplus has been taken as income. 7. That the authorities below have erred to appreciate the fact that GNIDA does not and cannot undertake any business activity and, therefore, the surplus, if any, is not taxable under any head of income. 8. That the authorities below have failed to appreciate the fact that surplus as per the income and expenditure account has further been allocated /provided for the activities of GNIDA and, therefore, the amounts being in the nature of provision, there is no surplus available to taxation after reducing these allocations / provisions. 9. That the authorities below have failed to give credit for the tax collected by them from banks and institutions with whom GNIDA was maintaining deposits and getting interest thereon. 10. That the authorities below have erred in granting credit for TDS by allottees and banks and ignored the huge amounts of tax appearing in Form 26AS/Form 16A. 11. That the authorities below have failed to appreciate the fact that GNIDA can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing depreciation on it without giving an adequate opportunity of being heard. (ix) That the Ld. AO has erred as a matter of fact in initiating the penalty under section 271A of the Income Tax Act, 1961 as no books of accounts were ever required to be produced during the assessment proceedings by the Ld. A.O.; (x) That the Ld. AO has erred as a matter of fact and in law by initiating the penalty under section 271B for non submission of Audit Report under section 44AB despite the fact that Appellant is not mandated to carry out any business activity by Section 3 of Uttar Pradesh Industrial Development Act, 1976; (xi) That the Ld. AO has erred as a matter of fact in initiating the penalty under section 272B for failure to comply with the provisions of sections 139A (5) or (SA) regarding quoting of "PAN" in Income Tax Return or challan or correspondence with income tax authority or intimating to the person responsible for deducting tax under Chapter XVIIB of the Income Tax Act,1961; (xii) That the Ld. AO has erred as a matter of fact in initiating the penalty under section 271(1)( c) regarding concealment of particular of income or furnishing inaccurate particulars of income; (xi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Department requesting it to provide 'Reasons to believe' for issuance of the said Notice on the o5th day of May 2013 in terms of the provisions of section 148 of the Income Tax Act, 1961; (Copy of letter for AYs 06-07, 07-08,08-09,09-10,10-11 and 11-12 enclosed as Annexure 2 of Synopsis) . 5.4 Income Tax Department vide its letter dated 03rd day of December 2013 provided the Appellant with a Statement of Reasons (hereinafter referred to as 'the said Statement of Reasons') for issuance of the Notice under section 148 of the Income Tax Act, 1961. The Income Tax Department took more than 6 months to reply to the request of the Appellant for providing the Statement of Reasons; (Copy of statement of reasons enclosed) (Refer pg 439-442 of Paper book) 5.5 The Ld. AO issued a notice dated 10th day of December 2013 under section 142 (1) of the Income Tax Act, 1961 along with a detailed questionnaire and fixed the date of compliance on 19th day of December, 2013 and started the proceedings under section 147 of the Act (hereinafter referred to as the 'First Proceeding Notice'); (copy of notice enclosed) (Refer Pg 443-465 of Paper book). 5.6 On the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sheets, after paying necessary fee for inspection and copy of the notings were taken from the assessment record. These documents are filed before the ITAT as part of the paper book. He submitted that a perusal of these notings demonstrated, that no notice u/s 143(2) was issued at all, by the AO. He further pointed out that nowhere in the assessment order, the AO mentioned that a notice u/s 143(2) was issued. Mr.Ajay Wadhwa further pointed out that, during the arguments before the Tribunal, on the Stay Petition, the assessee had specifically raised this issue of non issuance of notice u/s 143(2) and the department chose to remain silent, even though the assessment folders were readily available with them and under those circumstances the Tribunal granted stay of demand to the assessee and had directed the revenue to produce all the assessment records before the Tribunal during the course of final hearing. 3.5. He further made the following legal submissions. (a) Issual of notice u/s 143(2) is mandatory, even where a return of income has been filed in pursuance to notice u/s 148 of the Act. For this proposition he relied on the following Jurisdictional and other High Court judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 days from the date of service of this notice. However, letter dt. 2.5.2013 was received in this office on 9.5.2013 from the counsel of the assessee asking for copy of the reasons recorded for issuing notice u/s 148 of the Act. Certified of the same was furnished to him on 3.12.2013. Return of income for AY 2006-07, wherein income of Rs. 68,84,43,757.74 has been claimed exempt u/s 10(20) of the Act has been filed on 12.4.2013. Further, notice u/s 142(1) along with questionnaire of the Act was also issued on 10.12.2013 and fixing the date of compliance on 19.12.2013. 7.1. From a reading of the above recording in the assessment order, it is clear that the assessee has filed a return on 12.5.2013 in response to notice u/s 148 of the Act and that only a notice u/s 142(1) has been issued. There is no mention of issuance of a notice u/s 143(2) of the Act. 7.2. We now extract the relevant provisions of the Act. Section 143(2) of the Act, reads as under: "Where a return has been furnished under section 139,or in response to a notice under sub-section (1) of section 142,the Assessing Officer shall,- ................................................. (ii) notwithstanding anything co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act was not at all issued for all the impugned AYs, could not be factually controverted by the Revenue. During the hearing of the Stay Petition, the Revenue was specifically directed to produce the assessment record, for all these Assessment Years, during the final hearing. This was not done. During the course of final hearing the Bench has directed the Revenue to produce the assessment record within one week from the date of hearing. This is not done till date. The Revenue is silent on this factual matter till date. Hence we draw a conclusion that, the Revenue could not rebut the factual submissions of the assessee, that no notice u/s 143(2) was issued to the assessee, for any of these Assessment Years. 7.4. Be it as it may, the assessee, in this case, has inspected the assessment records, after paying inspection fee and has filed copies of the notings taken from the assessment records. At pages 466 to 468 of the paper book, the correspondence and noting, in this regard is enclosed. At pages 469 to 476 are enclosed extracts of order sheet entries for each of the impugned AYs, as noted by the counsels, during the course of inspection of records on 5.11.2014 and 14.11.2014. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of filing of the return. Further, it may be mentioned that omission on the part of the assessing officer to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable, and, therefore, the requirement of notice under section 143(2) cannot be dispensed with as already observed in Hotel Blue Moon (supra). 9. In view of the above, the impugned order passed by the Tribunal is hereby sustained along with the reasons mentioned therein. The answer to the substantial question of law is in favour of the assessee and against the revenue. The appeal has no merits and the same is dismissed." Again the Jurisdictional High Court in the case of CIT vs. Rajeev Sharma (2010) 192 Taxman 197 (All.) at para 45 has held as follows. "45. In view of the above, the provision contained in s.143(2) of the Act is mandatory in nature and it shall be obligatory for the AO to apply mind to the contents of the return filed in response to notice u/s 148 of the Act and record reasons and thereafter, issue notice u/s 143(2) of the Act before proceeding to decide the controversy with regard to escaped assessment." The Hon'ble Delhi High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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