TaxTMI 
TaxTMI 
2016 (9) TMI 709
X X X X Extracts X X X X
X X X X Extracts X X X X
....consolidated order. 3. First, we shall take up the cross appeals filed by the assessee and the Revenue for adjudication of quantum appeal. ITA No.2405/PN/2012 (By Assessee) : 4. In this appeal, the assessee has raised the following Grounds of Appeal :- "1. On the facts and in the circumstances of the case the CIT(A) ought to have held that the order passed u/s. 148 is bad in law on the following grounds:- i. The notice u/s. 148 has been issued to the appellant HUF which in fact was not in existence. ii. Notice u/s. 148 issued in the name of the appellant mentioning the PAN of Shri. D.G. Kalbhor - Individual. iii. The reasons recorded for issuing the notice u/s. 148 are not relevant to the appellant which in fact was not in existence. iv. Notice is issued u/s. 143(2) based on the return filed by Shri. Dnyneshwar G. Kalbhor (Individual), while the appellant has not filed the return. v. The assessment order is inconclusive hence not an order as the Assessing Officer requests the appellate authority to pass the Assessment Order by adjudicating all the vital issues namely the:- a. Taxable entity, b. Year of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances of the case the CIT(A) has erred in holding that appellant HUF is the partner in M/s. N.D. Construction sharing 50% profit. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice." 5. The assessee has inter-alia challenged the jurisdiction of the Assessing Officer assumed under section 147/148 of the Act and has assailed the order passed by the Assessing Officer under section 143(3) r.w.s. 147 dated 30.12.2010 as bad in law. Since the assessee has challenged legality of reopening action which being jurisdictional issue and goes to the root of the matter, it will be appropriate to adjudicate this aspect of the appeal first. 6. The relevant facts germane to the adjudication of jurisdictional issue are as follows. A return of income was filed by 'Shri Dnyaneshwar Govind Kalbhor' in his individual capacity on 28.01.2008 declaring total income of Rs. 1,07,095/- for the assessment year 2007-08. No return of income was filed by the assessee HUF namely Shri Dnyaneshwar Govind Kalbhor (HUF). From the material placed on record, it is borne out that one M/s N. D. Construction (a partnership firm) entered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sable in millions to tax has escaped assessment for the A.Y. 2007-08. Issue notice under section 148 for the A.Y. 2007-08. Sd/- 31.03.2010" 6.2 In response to the aforesaid notice under section 148, the assessee denied its liability to capital gains alleged to have escaped assessment on the ground that transfer envisaged under section 2(47) has not taken place by virtue of such impugned development agreement. 6.3 The assessee HUF did not file its return of income in response to impugned notice under section 148 of the Act. As a sequel to notice under section 148, notice under section 143(2) and 142(1) was issued and the assessment was completed. Before the Assessing Officer, the assessee did not raise any formal objection to validity of notice under section 148 of the Act. Long term capital gain amounting to Rs. 5,64,65,159/- was consequently brought to tax in the hands of the assessee (HUF). 7. Before the CIT(A) however, the assessee questioned the validity of action under section 147/148 of the Act and pleaded that the assessment order under section 143(3) r.w.s. 147 is bad in law. The CIT(A) nevertheless rejected the objection on assumption of jurisdiction under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... filed by the assessee for assessment year 2007-08. He vociferously exhorted that no such return as referred to in the notice under section 143(2) was ever filed by the assessee HUF for the said assessment year. The date of return noted in aforesaid notice coincide with the return filed by the Individual (Karta). The Ld. AR contended that in the absence of return of income filed by the assessee HUF, the impugned notice issued under section 143(2) dated 13.12.2010 is non-est and bad in law and consequently, assessment framed under section 143(3) r.w.s. 147 of the Act suffers from the lack of jurisdiction and thus vitiated in law. The Ld. AR for the assessee thereafter with a view to pre-empt the argument on behalf of the Revenue submitted that the defects pointed out above impinges upon the jurisdiction and thus goes to the root of the matter. The defects are substantive in nature and not merely technical defect and accordingly such substantive defects in the re-opening notice and the re-assessment order cannot be cured by taking shelter of section 292B or 292BB of the Act. The Ld. AR accordingly pleaded that the re-opening of notice under section 148 and re-assessment order under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eloper M/s N. D. Construction and therefore capital gain has been rightly taxed in the hands of the assessee HUF. As regard defects pointed out on behalf of the assessee with respect to issuance of notice under section 148 and making re-assessment order under section 147, the Ld. DR extensively relied upon the provisions of section 292B and submitted that these are defects of venial and ordinary nature which are quite curable. He extensively relied upon the order of the CIT(A) and submitted that the Assessing Officer has committed no illegality while framing the reassessment under section 147 of the Act in the hands of the assessee HUF. He accordingly pleaded that no interference with the order of the CIT(A) is called for. 12. We have examined the purported reasons for initiating action under S. 148/ 147 of the Act and have carefully considered the rival submission on this fundamental aspect of validity of the re-assessment proceedings. The jurisdiction of Assessing Officer to open an assessment under section 148 depends on issuance of valid notice. If the notice issued by the Assessing Officer is invalid for any reason, consequential proceedings taken by him would become void f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at and would not legitimize the action. Clearly, impugned notice issued under section 143(2) is without any objective consideration of underlying records and seeks to chase a will-o-the-wisp. This also depicts non application of mind of the AO to the basic facts. Return of income is concomitant for issue of notice under S. 143(2) of the Act. The Assessing officer has not proceeded on the basis of non filing of return by assessee HUF but has founded his entire action based on return filed in individual capacity while making additions of purported escapement of income. To reiterate, in the absence of return of income filed by the assessee, the impugned action taken under section 143(2) is a complete non-starter. Section 148 confers jurisdiction merely to issue notice and calling for a return in cases where income has escaped assessment for making assessment as provided under section 147. Notice issued under section 143(2) must be a valid notice and not a mere empty formality to grant jurisdiction to complete assessment. It is not the case of the AO that the assessee has not filed any return of income to say that notice under S. 143(2) was not required at all. Thus, on this score also....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and thus seeks to disturb an assessment which has otherwise reached finality. S. 147 thus cannot be invoked lightly or perfunctorily as an ipse dixit of the Assessing officer without meeting the benchmark set out in the provision. S. 147 is a substantive provision and imparts jurisdiction. A jurisdictional defect cannot be ascribed to be a mere technical defect and thus cannot be condoned by invoking section 292B of the Act. There is a marked distinction between want of basic and inherent jurisdiction and irregular exercise of jurisdiction. Defect on irregular exercise of jurisdiction alone can possibly be cured by taking shelter of section 292B. As noted, the action of the AO starting from issuance of notice to the completion of reassessment suffers from multi faceted defects of cardinal nature in serious transgression of statutory requirements. The notice was issued to HUF under a wrong PAN while the underlying reasons giving cause of action thereon were recorded in the hands of other person i.e. Individual. Thus, legally speaking, the reasons were not recorded qua the HUF. Similarly, the basis for issuance of notice under section 143(2) addressed to HUF is found to be non-existe....