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TMI Blog2018 (6) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... at if the issue on jurisdiction is decided against the Appellant, opportunity would be given to present the case on merits in respect of claim u/s.54 of the Income Tax Act? (iii) Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal was right in law in upholding the reassessment, in spite of notice u/s.148 dated 31.03.2012 being neither issued nor served on the Appellant; and can the Respondent take shelter u/s.292BB of Income Tax Act, 1961, to validate such action of reassessment? (iv) Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal is right in law in upholding that impugned reassessment by observing that such non-issue or non-service of notice u/s.148 cannot make the reassessment void or a nullity in view of the provision of Section 292BB of Income Tax Act, 1961? (v) Whether on the facts and in the circumstances of the case the Income-Tax Appellate Tribunal is right in law in holding that the onus lies on the Appellant to exhibit that the Assessing Officer retained control over the notice u/s. 148 and was not put in the process of its service, when the Assessing Officer had not provided any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot find his favour, in view of Section 292BB of the Act, inasmuch as, without doubt no objection qua the service of notice, under Section 148(1) was raised during the course of the assessment proceedings. 3. Aggrieved, the assessee was in second appeal in I.T.A.No.3119/Mds/2016, before the Income-Tax Appellate Tribunal, which dismissed the appeal on 12.07.2017, as follows: "3.1 The question that arises is if s. 292BB is applicable to the impugned assessment or not. The assessee's case, relying on the decisions in CIT v. Chetan Gupta [2016] 382 ITR 613 (Del) and Kuber Tobacco Products (P.) Ltd. v. Dy. CIT [2009] 117 ITD 273 (Del)(SB), is that the provision is prospective, so that it shall apply to proceedings for AY 2008-09 and subsequent years. The Revenue, on its part, places reliance on the decision in CIT v. Panchvati Motors (P.) Ltd. [2011] 59 DTR 289 (P&H). Section 292BB of the Act, inserted on the statute book by Finance Act, 2008 w.e.f. 01.04.2008, reads as under: 'Notice deemed to be valid in certain circumstances. 292BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing retrospective in operation. In fact, even the Circular by the Board admits this position, making it abundantly clear that only the proceedings pending as on 01.04.2008, the date on which amendment comes into effect, would be subject to the amended law. That is, the proceedings concluded or assessment completed before 01.04.2008 is not impacted by the said amendment in any manner; the curb on the assessee's untrammeled right to raise objection/s qua service of a notice at any stage (even where he participates or cooperates in the proceedings) coming into effect from 01.04.2008 only. That is, the curbbecomes applicable from a particular, specified date. How, then, one wonders,could it possibly relate to or have reference to a particular assessment year, stated to be AY 2008-09 onwards? It is a mere coincidence that the specified date is from the beginning of a previous year, and may well have been from any other date, viz. 01/2/2008; 01/06/2008, et. al. Further, even the Hon'ble Court in Chetan Gupta (supra) does not state it to be effective for the assessment for a particular year (i.e., the previous year ending 31/3/2008 or fy 2007-08) and subsequent years. The provision w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment relate, the pendency of the relevant proceedings on the said date. The Board Circular (supra), which is in the nature of contemporaneous exposito, referred and relied upon in Panchvati Motors (P.) Ltd. (supra), clearly spells out the correct legal position in this regard. 3.2 On the mind of the Bench in this regard being conveyed during hearing to the ld. AR, he would raise another objection, claiming that notice u/s. 148(1) dated 31.03.2012 was not validly issued. In-as-much as the same raises a legal issue, the ground, raised orally, was admitted in pursuance to r. 11 of the Income Tax (Appellate Tribunal) Rules, 1963, making it at the same time clear that the same, i.e., the said ground, raised for the first time before the tribunal, could be answered only on the basis of undisputed facts, i.e., as borne out by the record. The assessee's charge is that the notice u/s. 148 is not issued in-as-much as it had not travelled outside the control of the issuing officer, the AO, so that it could not therefore be regarded as 'issued'. Before considering this fresh objection by the assessee, it would be relevant to advert to the leading decisions qua the import of a notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction on the Income-tax Officer to deal with the matter but it is a condition precedent to the making of the order of assessment.' (pg. 165) How could then, one may ask, even de hors s. 292BB, and assuming non service of notice u/s. 148, lead to the assessment under the Act being void or a nullity? It is no more than a defect or an irregularity, which would, on challenge, require being corrected, as clarified in Estate of Late Rangalal Jajodia (supra), by, following the law in the matter, restoring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not handed over to the postal department, which only shall mark its issue. This, given the settled law that 'issue' implies the notice being put in the process of service, with the issuing authority loosing effecting control over the same, is a question of fact, precluding its admission in-as-much as the relevant facts are disputed. Further, even otherwise, it is the assessee on whom the burden lies to exhibit, at least prima facie, that the apparent is not real, and that, though signed, the AO retained control over the notice and was not put in the process of its' service. So however, to ensure that the Revenue has some basis to claim issue of notice on 31.03.2012, the ld. DR was called upon by the Bench to furnish any material with the Revenue in this regard. He submitted the following documents: a). List of approved cases, which bears assessee's name with the approval date (for issue of notice u/s. 148(1)) as at 31.03.2012 (a system generated report). b). The status report which carries the remarks by the approving authority i.e., as of being satisfied with the reasons recorded by the AO that it is a fit for reopening, and which also bears several dates, including the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s. 148 on 31.03.2012. The said objection by the ld.AR cannot therefore, i.e., in any case, be admitted. 4. In sum: The decision in Chetan Gupta (supra) does not, in ratio, lay down the law as being ascribed to it; there being in fact no discussion on that aspect of the matter therein. The decision in Panchvati Motors (P.) Ltd. (supra), on the other hand, clearly lays down the stated legal position. The assessment year involved in that case was AY 1998-99, and the assessee had, as in the present case, admittedly not raised any objection in respect of the service of notice u/s. 148. The Hon'ble Court, whose order is thus squarely applicable, clarified that where no objection regarding a service of notice u/s. 148 of the Act was raised before the AO, the argument that there was no valid service of notice, as advanced by the assessee before it, fails (refer para 13 of the decision). The question of law (i) raised before it, i.e., as to whether the tribunal was, in the facts and circumstances of the case, right in law to hold that the service of notice u/s. 148 was not valid and, therefore, was not correct in quashing the assessment order on the said ground, by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with regard to the service of notice u/s. 148(1). The decision by the ld. CIT(A) is accordingly upheld, dismissing the assessee's Grounds 1.1 to 1.4. Needless to add, there has accordingly been no examination of the assessee's objections qua service of the said notice on merits, and this order may not be construed as expressing any opinion thereon. Without prejudice to the foregoing, the concomitant of non-service or an invalid service of notice u/s. 148, assuming an objection/s in its regard could be validly raised, is a set aside to the stage of the said service for framing the assessment pursuant thereto, for which the time limit shall run from the date of the service (s. 153(2)). The same renders the controversy as to the applicability of s. 292BB qua the impugned assessment as of little consequence. The plethora of materials brought on record by the Revenue, which are also saved by the presumption as to regularity of official acts, fails the legal challenge to the issue of notice u/s. 148(1) on 31/3/2012, raised for the first time before the tribunal. Further, even as no contradicting material, disputing or rebutting the same has been brought on record by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in proper perspective. (v) The Income-Tax Appellate Tribunal erred in observing that provisions of Section 292BB of Income Tax Act, 1961 is applicable to the impugned assessment, empowering such presumption with regard to issue and service of notice u/s.148. The Income-Tax Appellate Tribunal erred in observing that the provisions of section 292BB of Income Tax Act, 1961 shall stand attracted to the pending proceedings as on 01.04.2008, irrespective of the year to which the proceedings or assessment relate. (vi) The Income-Tax Appellate Tribunal erred in placing reliance on Clause 42.7 of Circular 1 of 2009 dated 27.03.2009 issued by Central Board of Direct Taxes. The Income-Tax Appellate Tribunal erred in placing reliance on various decisions, which are distinguishable on the facts of the case of the appellant and not even referring to the direct authorities relied on by the appellant. (vii) The Income-Tax Appellate Tribunal ought to have properly appreciated the interpretation of section 292BB to extend its applicability to the mandatory notice u/s.148 for validly reopening an assessment, would provide absurd results nullifying the provisions of Income Tax Act, 1961, emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to notice u/s.148 which was neither issued nor served on the Assessee. (xi) The Income Tax Appellate Tribunal being final fact finding authority is duty bound to give a finding on fact, grossly failed by not admitting the grounds raised in respect of non-service of notice u/s.148 while challenging the jurisdiction of the Assessing Officer in reopening the assessment. (xii) The Income Tax Appellate Tribunal erred in dismissing the ground Nos.2.1 to 2.3 raised on merits in respect of claim u/s.54 of the Income Tax Act, as not pressed, even after indicating at the time of hearing that if the issue on jurisdiction 1st decided against the Appellant, opportunity would be given to present the case on merits in respect of claim under Section 54 of the Income Tax Act. The Income Tax Appellate Tribunal ought to have afforded an opportunity to the Appellant to present the case on merits and considered the grounds raised in respect of claim u/s.54 of the Income Tax Act." Heard the learned counsel appearing for the parties and perused the materials available on record. 5. Before adverting to the rival contentions, we deem it fit to extract Sections 147, 148 and 292BB of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153, every such notice referred to in this clause shall be deemed to be a valid notice : Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of subsection (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. 292BB. Notice deemed to be valid in cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to dispose of the same by passing a speaking order. (f) The assessee if desires can file a writ challenging the order or can proceed with the assessment. However the assessee has still a right to challenge the reopening of assessment after the assessment order is passed, before Appellate Authority. 8. In Mayawati v. CIT reported in (2010) 321 ITR 349, the Delhi High Court observed as under:- "Various issues had arisen in that case, none of which, in our opinion, are of any relevance to the determination of the questions which fall for determination by us. In Haryana Acrylic it had, inter alia, been opined that for Section 147 to become operational it is essential that it should be alleged that escapement of income is a consequence of the assessee having failed to fully and truly disclose all material facts necessary for the comprehensive completion of the assessment. What had transpired in that case was that whilst the initiation of the proceedings by the AO for approval of the Commissioner of Income Tax mentioned the failure on the part of the Assessee to disclose fully and truly all material facts relating to the alleged accommodation entries, the "reasons" disclosed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fortiori, since the word, "served" is conspicuous by its absence in Section 149 and that the legislature has deliberately used the word "issue", actual service within the period of four and six years specified in the section, would not be critical. The Delhi High Court held as under:- "5. On a plain reading of these Sections it is palpably plain that Section 148 of the IT Act enjoins that the AO must serve on the assessee a notice requiring him to furnish a return of his income, in respect of which he/she is assessable under this Act during the previous year corresponding to the relevant assessment year. Firstly, the notice contemplated by this Section relates to the furnishing of a return and not to the decision to initiate proceedings under Section 147 of the IT Act; secondly, the period of thirty days (omitted by the Finance Act, 1996) is with regard to the furnishing of the return. 6. In stark contrast, Section 149 of the IT Act speaks only of the issuance of a notice under the preceding Section within a prescribed period. Section 149 of the IT Act does not mandate that such a notice must also be served on the assessee within the prescribed period. Speaking for the Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce thereof on the assessee and further held that the "service of notice" under Section 148 is only required before the assessment, reassessment or re- computation. At the end, the Hon'ble Delhi High Court, held as follows: "18. In view of our discussions as above, we are of the view that service of notice, a contemplated pre-condition before assessment would be a question of fact depending upon the facts and circumstances of each case. In the present case, not only that no objection was raised with regard to non-issue of notice dated 27.03.2006, the assessee vide its letter dated 11 th December, 2006 adopted the return as originally filed as the return in response to the said notice under Section 148. It was only thereafter that the AO proceeded with the reassessment proceedings. During the assessment proceedings, certain queries were raised to which the assessee gave detailed response. Even during the reassessment proceedings no objection was raised of any kind with regard to defect or irregularity in the notice. In a given situation, as in the present case when the assessee appears before the Assessing Officer and is given copy thereof before assessment and also makes corre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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