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TMI Blog2017 (11) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... l is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-17, Mumbai dated 19.03.2015 for the Assessment Year 2011-12 arising out of the Assessment Order passed u/s. 143(3) r.w.s. 147 of the I.T. Act. 2. The assessee in his appeal raised the following grounds: 1 . The orders passed by the learned lower authorities are bad in law and bad in facts . 2 . The assessment order passed u / s 143 ( 3 ) r . w . s . 147 of the I . T . Act, 1961, is ab - initio void, inasmuch as . no notice u / s 143 ( 2 ) of the IT . Act, 1961, was issued served upon the appellant prior to completion of the assessment . 3 . The assessment order passed u / s 143 ( 3 ) r . w . s . 147 of the IT . Act, 1961, is ab - initio void, inasmuch as, no valid return of income in terms of sec 148 of the IT . Act, 1961, was available on record . 4 . The learned lower authorities have grossly erred in making / upholding an addition of Rs . 66 . 62,862 /-( peak amount 61,62,862 /-) by recourse to sec . 690 of the IT . Act, 1961, even though said provisions are not attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Greater Noida Industrial Development Authority [379 ITR 14] submits that it is mandatory requirement for initiation of assessment proceedings to issue notice u/s. 143(2) of the Act and in the absence of issue of notice u/s.143(2) the assessment made u/s. 143(3) r.w.s. 147 is invalid and void ab-initio. He also placed reliance on the decision of the Bombay High Court in the case of ACIT v . Geno Pharmaceuticals Ltd [214 Taxmann 83] and submits that the Hon'ble High Court held that notice u/s. 143(2) is mandatory and in absence of service of such notice Assessing Officer cannot proceed to make an inquiry on return filed in compliance with notice issued u/s. 148 of the Act. 4. Learned Departmental Representative on the other hand submits that assessee has fully cooperated in the Assessment Proceedings. Therefore, it shall be deemed that any notice under any provisions of this Act which is required to be served upon the assessee has been duly served in time in view of the provisions of Section 292BB of the Act which came into operation from 1.4.2008. He strongly supported the orders of the Ld.CIT(A) in holding that the assessee has never objected in the course of Assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been held that since the Assessing Officer failed to issue notice within the specified period u/s. 143(2) of the Act, the Assessing Officer had no jurisdiction u/s. 143(2) of the Act to make an assessment. It was further held that this defect could not be cured by recourse to the deeming fiction provided u/s. 292BB of the Act, while holding so the Hon'ble Allahabad High Court held as under: - 18 . Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008 . Section 292 BB of the Act provides a deeming fiction . The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act . The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was ( i ) not served upon him; or ( ii ) not served upon him in time; or ( iii ) served upon him in an improper manner . In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court held that the scheme of 1961 Act in so far as the notice for re - assessment was concerned was quite different than that contained under Section 34 of the Income Tax Act, 1922 . The Supreme Court held that a clear distinction has been made between issue of notice and service of notice under the Act . The Supreme Court held that once a notice is issued within the period of limitation, the Income Tax Officer gets the jurisdiction to proceed to reassess and make the assessment order . The mandate of Section 148 ( 1 ) of the Act is, that reassessment shall not be made until there has been a service of notice which is a condition precedent to making an order of assessment . The Supreme Court further held that the requirement of issue of notice is satisfied when a notice is actually issued and that service under the Act, 1961 is not a condition precedent to conferment of jurisdiction on the Income Tax Officer to deal with the matter but it is only a condition precedent to the making of the order of assessment . The Supreme Court held : Section 34, conferred jurisdiction on the Income - tax Officer to reopen an assessment sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ( 2 ) of the Act . The deeming fiction under Section 292BB of the Act is with regard to service of notice . Since the initial requirement of issuance of notice was not made by the Assessing Officer, the deeming fiction of service of notice under Section 292BB of the Act, consequently, does not arise and is not applicable . 22 . In the light of the aforesaid, since the Assessing Officer failed to issue notice within the specified period under Section 143 ( 2 ) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under Section 143 ( 2 ) of the Act and this defect cannot be cured by taking recourse to the deeming fiction provided under Section 292BB of the Act . Consequently, the Tribunal was justified in setting aside the order of the Assessing Officer as well as the order of the Appellate Authority . 23 . The contention that adequate opportunity was not given to the appellant before the Tribunal now becomes redundant in view of the specific finding given by us on the issuance of the notice under Section 143 ( 2 ) of the Act . However, we must observe that the appellant was not fair to the Court in al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een processed under Section 143 ( 1 ) for three of the AYs . There was no occasion for the AO, in the absence of any return having been filed by the Assessee pursuant to the notice issued under Section 148 of the Act, to issue a notice under Section 143 ( 2 ) of the Act . It was for the above reason that the AO thought it appropriate to issue the notice under Section 142 ( 1 ) of the Act . Relying on the decision in Alpine Electronics Asia Pte . Ltd . v . Director General of Income Tax ( 2012 ) 341 ITR 247, Mr . Sahni submitted that in the facts and circumstances of the present case, the failure of the AO to issue a notice under Section 143 ( 2 ) of the Act was not fatal to the reassessment proceedings . 11 . Dr . Rakesh Gupta, learned counsel for the Assessee, pointed out that the requirement of issuance of notice under Section 143 ( 2 ) of the Act prior to finalisation of the reassessment order was a jurisdictional one and the compliance of such requirement could not be dispensed with by resorting to the proviso to Section 292BB of the Act . Referring to the decisions of the Allahabad High Court in Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, from raising a contention regarding failure of the AO to issue a notice under Section 143 ( 2 ) of the Act . The legal position appears to be fairly well settled that Section 292BB of the Act talks of the drawing of a presumption of service of notice on an Assessee and is basically a rule of evidence . In Commissioner of Income Tax v . Parikalpana Estate Development ( P .) Ltd . ( supra ) in answering a similar question, the Court referred to its earlier decision in Commissioner of Income Tax v . Mukesh Kumar Agrawal ( 2012 ) 345 ITR 29 ( All .) and pointed out that Section 292BB of the Act was a rule of evidence which validated service of notice in certain circumstances . It introduces a deeming fiction that once the Assessee appears in any proceeding or has cooperated in any enquiry relating to assessment or reassessment it shall be deemed that any notice under any provision of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and the Assessee in those circumstances would be precluded from objecting that a notice that was required to be served upon him under the Act was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aleeq ( supra ). 16 . As regards the objection of the Revenue to the ITAT permitting the Assessee to raise the point concerning non - issuance of notice under Section 143 ( 2 ) of the Act for the first time in the appeal before the ITAT, the Court is of the considered view that in view of the settled legal position that the requirement of issuance of such notice is a jurisdictional one, it does go to the root of the matter as far as the validity of the reassessment proceedings under Section 147 / 148 of the Act is concerned . It raises a question of law as far as the present cases are concerned since it is not in dispute that prior to finalisation of the reassessment orders, notice under Section 143 ( 2 ) of the Act was not issued by the AO to the Assessee . With there being no fresh evidence or disputed facts sought to be brought on record, and the issue being purely one of law, the ITAT was not in error in permitting the Assessee to raise such a point before it . This finds support in the decision of the Supreme Court in National Thermal Power Co . Ltd . v . Commissioner of Income Tax ( supra ) and the decision of this Court in G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to the notice under Section 148 of the Act, then he should have drawn the attention of the Assessee to that fact . In the present case all that the AO did was to send a notice under Section 142 ( 1 ) of the Act . The Assessee was not made aware as to why he was required to file a return . Had a notice been issued to him under Section 143 ( 2 ) of the Act, the AO would have been obliged to let the Assessee know why he was being asked to file a return notwithstanding his letter dated 1st April 2011 . In the circumstances, the Assessee was justified in proceeding on the basis that it had not committed any default in communicating to the AO that the return already filed should be treated as the return filed pursuant to the notice under Section 148 of the Act . 20 . The proposal to reopen an assessment under Section 147 of the Act is to be based on reasons to be recorded by the AO . Such reasons have to be communicated to the Assessee . However, merely because the Assessee participates in the proceedings pursuant to such notice under Section 148 of the Act, it does not obviate the mandatory requirement of the AO having to issue to the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 323 ITR 249 ( Del ) and the recent decision in Pr . CIT v . Shri Jai Shiv Shankar Traders Pvt . Ltd . ( supra ) hold likewise . 23 . With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143 ( 2 ) of the Act, the ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable . 8. Since the Revenue could not produce before us any evidence to show that notice u/s. 143(2) has been issued or served to the assessee the re-assessment made u/s. 143(3) r.w.s. 147 is void ab-initio in view of the above decisions of the Hon'ble Allahabad High Court in the case of ACIT v . Greater Noida Industrial Development Authority (supra) and the Hon'ble Delhi High Court in the case of ACIT v . Geno Pharmaceuticals (supra). Thus, respectfully following the said decisions we hold that the re-assessment made u/s. 143(3) r.w.s. 147 of the Act is legally unsustainable. Thus, quash the re-assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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