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TMI Blog2019 (9) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income under any of the provisions of section 139 and had failed even in terms of notice issued under section 142(1) of the Act, then the provisions of section 144 are attracted and the AO has the power to pass an order to the best of his judgment. The third condition of having filed return of income and not complying with notice issued under section 143(2) do not apply to the present facts. In such scenario, we hold that the order passed under section 143(3) r.w.s. 147 of the Act suffers from infirmity and the Act itself provides an alternate for completing the assessment under section 144 Whether the defect in applying the said section is curable under section 292B of the Act or not? - Section 292B of the Act cannot be pressed into action to cure the defect in the assessment made in the present case. Accordingly, we hold that assessment order passed in the present case is both invalid and bad in law. Thus, the additional ground of appeal raised by assessee is allowed. - ITA No.1663/PUN/2014 - - - Dated:- 6-9-2019 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM For the Appellant : Shri P.S. Shingte For the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the Learned Assessing Officer has erred in making an addition of ₹ 33,42,078/- without realising the fact that corresponding Capital Gain on account of sale of jewellery to the tune of ₹ 26,80,205/- was already offered by your appellant for taxation and therefore further taxing the Gross consideration one more time has led to taxing the same amount twice. 6. Without prejudice to above grounds, on the facts and in the circumstances of the case and in law Learned CIT(Appeals), Nashik has erred in passing the Appellate order without giving proper opportunity of hearing and without providing opportunity of cross examination of the persons whose statements are used against the appellant. 7. Without prejudice to above to the above ground, on the facts and in the circumstances of the case and in law, the CIT (Appeals), Nashik has erred in not allowing the claim of indexation on cost of assets which your appellant has not claimed inadvertently while filing the return. Your appellant seeks appropriate relief. 8. On the facts and in the circumstances of the case and in law, the Learned CIT (Appeals), Nashik erred in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the Assessing Officer issued notice under section 142(1) of the Act. However, no return of income was filed by assessee, though he participated in the assessment proceedings. Consequent thereto, order was passed under section 143(3) r.w.s. 147 of the Act on 14.02.2014. The question is whether where no notice under section 143(2) of the Act was issued, can order be framed under section 143(3) r.w.s. 147 of the Act? The proceedings before the Assessing Officer were thus, completed and the issue which has been adjudicated by the CIT(A) was on merits, with which we are not concerned at the moment. 7. The learned Authorized Representative for the assessee pointed out that the assessee had filed first return of income on 16.08.2010, which admittedly, was non-est. Thereafter, notice was issued under section 148 of the Act on 28.03.2013, in response to which the assessee did not file any return of income. In the initial dates of hearing, the learned Authorized Representative for the assessee had stressed that when no notice under section 143(2) of the Act has been issued to the assessee, then the assessment completed against assessee in the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicate the issue, we need first to look at the facts of the case. The assessee had furnished one return of income on 16.08.2010 for assessment year 2006-07, which admittedly was non-est return and cannot stand in the eyes of law. The Assessing Officer recorded reasons for reopening the assessment and issued notice under section 148 of the Act on 28.03.2013. The assessee failed to furnish any return of income in response to the said notice issued under section 148 of the Act. Thereafter, no notice under section 143(2) of the Act was issued but the Assessing Officer issued notice under section 142(1) of the Act on 09.12.2013. The assessee participated in the assessment proceedings and the order was passed under section 143(3) r.w.s. 147 of the Act on 14.02.2014. The aforesaid order is questioned by the assessee and it is case of assessee that the basic requirement of completing assessment under section 143(3) of the Act is that notice under section 143(2) of the Act must be issued. Let us look at the provisions of section 143(2) of the Act, which reads under:- 143(1)... (2) Where a return has been furnished under section 139, or in response t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of such assessment. 15. The requirement of section is that after issuing notice under sub-section (2) and after hearing such evidences and after taking into account such particulars of income, the assessment needs to be completed determining the total income or loss in the hands of assessee. Once no notice under section 143(2) of the Act has been issued, then no assessment can be completed under section 143(3) of the Act. 16. The second stage which needs adjudication is what happens in such scenario? Then we must look at the other provisions of the Act, in the present case, which is section 144 of the Act. In order to understand the same, we may refer to the provisions of said section, which reads as under:- 144 (1) If any person- (a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under subsection (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has the power to pass an order to the best of his judgment. The third condition of having filed return of income and not complying with notice issued under section 143(2) of the Act do not apply to the present facts. In such scenario, we hold that the order passed under section 143(3) r.w.s. 147 of the Act suffers from infirmity and the Act itself provides an alternate for completing the assessment under section 144 of the Act. 19. The connected issue which arises is whether the defect in applying the said section is curable under section 292B of the Act or not? 20. The Mumbai Bench of Tribunal in S.Kumar Enterprises (Synfabs) Ltd. Vs. JCIT (supra) had considered the aspects of the case and had observed as under:- 8. We have given our thoughtful consideration to the rival contentions, perused the material on record, and duly considered the applicable legal position as also factual matrix of the case. The issue before us is by and large covered by the Special Bench decision in the case of Raj Kumar Chawla (supra) wherein it has been held that even in the case of a reopened assessment under s. 147, the procedure laid down in sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 143(3) may not be necessary and the summary assessment could be perfectly justified and desirable. Take for example a case in which an assessment is reopened because an assessee has not offered a particular income which is clearly taxable in view of the current legal position. In the return filed in response to notice under s. 147, the assessee offers that income to tax and pays the due taxes thereon. In such a situation, the AO may as well conclude that scrutiny assessment is not necessary. There can be other situation in which the assessee offers an income to tax by way of belated return and the only way to regularize it is issuance of a reassessment notice under s. 147. What could not have been done under s. 143 because the time limit for framing the normal assessment having expired, can be done under s. 143 r/w s. 147 upon the successful reopening of the assessment. In that sense it sets the clock back but then there is no escape from the procedures laid down under ss. 142, 143 and 144. In some of the old amnesty schemes, the notices under s. 147 were routinely issued but the assessments were still completed under s. 143(1)(a) because the AO anyway could not have quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person has not made a return within the time allowed under sub-s. (1) of s. 139 , in that case and in the light of the provisions of s. 148(2), is to be read as 'where such person has not made a return within the time allowed under sub-s. (1) of s. 148 . The assessment can thus follow under s. 144 after giving an opportunity of hearing as to why the assessment should not be completed on the basis of best of his judgment. Undoubtedly, where a notice under s. 142(1) is served upon the assessee, even this opportunity of hearing is not necessary. However, in the present case, neither any notice under s. 142(1) is issued, nor opportunity of hearing under s. 144 is issued. It is not, and it cannot be, treated as a best judgment assessment either. The next question then is whether an earlier notice under s. 143(2) can validate the proceedings subsequent to the original return being treated as return in response to notice. When the notice issued under s. 143(2) has been held to be invalid, it cannot have any consequences in law. We have noticed that revenue itself does not accept the validity of the letter filed by the assessee s tax consultant on 12th Nov., 1998. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of s. 292B cannot be pressed into service for holding an assessment valid even on non-issuance of a mandatory notice. We have held that the assessment is vitiated in law because there is no valid notice under s. 143(2) which is sine qua non for an assessment under s. 143(3). The notice under s. 143(2) has been held to be vitiated in law because there was no return in existence at the point of time when the notice was issued and since existence of a valid return is sine qua non for issuance of notice under s. 143(2). There is no dispute that there was no valid return in existence at the relevant point of time. On this set of facts, it is difficult to comprehend as to how the provisions of s. 292B can turn this fundamental illegality into 'a mistake, defect or omission which s. 292B seeks to cover. This argument could have been considered perhaps in a case where assessment under s. 143(3) was mandatory in every case of reopened assessment and the issuance of notice under s. 143(2) was only a mechanical formality but then that is not the legal position. The option for assessment under s. 143(3) is, as we have held earlier, is not an automatic consequence of the successful reope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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