TaxTMI 
TaxTMI 
2017 (12) TMI 1331
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....the action of the Assessing Officer in treating the long term capital gain of Rs. 1,06,95,000/- earned on redemption of IDBI deep discount bonds as interest income under the head of Income from Other Sources. 2. The learned CIT (Appeals) erred in confirming the transaction of transfer of bonds as a colourable device and thereby also erred in not granting the benefit of CBDT Circular dated 12/03/1996. 3. Without prejudice to the above grounds, the learned CIT (Appeals) erred in not holding that redemption of deep discount bonds is a transfer within the meaning of Section 2(47) of the Income Tax Act, 1961 as it is covered by extinguishment of right and relinquishment of right as provided in Section 2(47). 4. The learned CIT (Appeals) erred in not appreciating that the notice under Section 148 is bad in law. 5. The learned CIT (Appeals) erred in holding that reopening of assessment under Section 147 of the Income Tax Act, 1961 is not valid." but we may advert to the following Additional Ground of appeal which has been raised by the assessee :- "1. The learned CIT(A) erred in not quashing the assessment order passed under section 143(3) read with section 147 of the Act....
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....dditional Ground of appeal, we may briefly touch upon the background in which the present appeal has come up before the Tribunal. In this case, assessee-individual had filed return of income for Assessment Year 2002-03 on 29.07.2002, which was subsequently revised on 07.08.2003. The discussion in the assessment order reveals that the notice u/s 148 of the Act was issued on 29.01.2004, which was also revised on 13.05.2004 and, in response, assessee through a communication dated 31.05.2004 requested that the revised return filed on 07.08.2003 be treated as a return filed in response to notice issued u/s 148 of the Act. Notably, assessee is an individual who is deriving income from salary as a Director of SAF Yeast Company and also income from other sources, etc. In the revised return of income filed on 07.08.2003, assessee had, inter-alia, declared income by way of Long Term Capital Gain on redemption of 1150 Deep Discount Bonds issued by IDBI in 1992. The assessee had declared income by way of sale consideration of Rs. 1,38,00,000/-, and after reducing therefrom the original price, the balance of Rs. 1,06,95,000/- was declared as income by way of Long Term Capital Gain. In this cont....
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.... Gain, and not as interest income because if assessee would have received the equivalent proceeds from IDBI on account of redemption of originally held Bonds on maturity, the differential would have been taxed as 'interest income' under the head 'income from other sources'. Ostensibly, Long Term Capital Gain is assessable at a concessional rate of tax, whereas interest income under the head 'income from other sources' is liable to be taxed at the normal rate of taxation. The Assessing Officer also noted that the TDS certificate issued by the IDBI at the time of redemption on maturity also refers to the income as 'interest income' and, therefore, the treatment of such income by the assessee as Capital Gain on the basis of the transactions effectuated with his brother was intended to lower the ultimate tax liability. Thus, the Assessing Officer assessed the income as interest income under the head 'income from other sources'. It transpires that the said assessment came up before the Tribunal, and vide its order in ITA No. 774/PN/2006 dated 15.03.2007, the matter was restored back to the file of the CIT(A) without expressing any opinion on the merits of the case for afresh adjudicatio....
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....efore contended that in this case notice u/s 143(2) of the Act has not been issued prior to the finalisation of assessment u/s 143(3) r.w.s. 147 of the Act and, therefore, the assessment was void and illegal. On the legal position, reliance has been placed on the following decisions to contend that issuance of notice u/s 143(2) of the Act is mandatory before completion of assessment :- i) Assistant Commissioner of Income-tax vs. Hotel Blue Moon, 321 ITR 362 (SC); ii) CWT vs. HUF of H.H. Late J.M. Scindia, 300 ITR 193 (Bom.); iii) Assistant Commissioner of Income-tax vs. Geno Pharmaceuticals Ltd., [2013] 32 Taxmann.com 162 (Bombay); iv) Sapthagiri Finance & Investments vs. ITO, [2012] 25 taxmann.com 341 (Mad.); v) CIT vs. Rajeev Sharma, 336 ITR 678 (Allahabad); vi) Greater Noida Development Authority, 281 CTR 204; vii) Raj Kumar Chawla vs. ITO, [2005] 94 ITD 1 (Delhi)(SB); viii) DCIT vs. Dharmpal Satyapal Ltd., (2016) 175 TTJ 663 Delhi ITAT; ix) Santosh G. Sawant, ITA No. 830/Mum/2011 dated 30.06.2015; and x) M/s. Kanchanjunga Impex Pvt. Ltd. vs. ITO, ITA No. 6057/Mum/2013 dated 23.09.2015 8. On this aspect, the ld. DR has not made any specific contenti....
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....02. The intention of the A.O is clearly expressed as one relating to A.Y 2002-03 though mistakenly the assessment year is mentioned as 2001-02. Therefore, the ground no. 2 of the appellant is hereby dismissed." 9. We have carefully considered the rival submissions. Insofar as the legal position on the point canvassed by the assessee is concerned, the same is quite potent. The Hon'ble Madras High Court in the case of Sapthagiri Finance & Investments (supra) was considering a similar objection and Revenue contended therein that omission to issue notice u/s 143(2) of the Act was a procedural irregularity and it would not invalidate the assessment. The Hon'ble High Court held that in the absence of a notice u/s 143(2) of the Act, the assessment made u/s 148 of the Act could not be held to be validly made. In coming to such conclusion, the Hon'ble High Court noted that even in a situation where the matter was discussed with the assessee and his signature was affixed, it would not mean that the procedure of notice u/s 143(2) of the Act stood complied with or that the assessee had waived notice. Thus, as per the judgment of the Hon'ble Madras High Court, the absence of a....
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.... 23.11.2004 and do not find the same to have been issued in the context of Sec. 143(2) of the Act. The contents of the said communication addressed to the assessee by the Assessing Officer have been perused by us. Firstly, it refers to the some office note issued u/s 148 of the Act on 29.01.2004 in response to which assessee is stated to have filed letter dated 23.03.2004 seeking extension of time for filing reply. Secondly, it refers to the revised notice u/s 148 dated 13.05.2004, in response to which assessee is stated to have filed letter dated 31.05.2004 asking for reasons for issuance of notice u/s 148 of the Act. After making the aforesaid averments, the said communication addresses to the assessee, a copy of the reasons recorded before issuing notice u/s 148 of the Act; the reasons recorded by the Assessing Officer have been extracted in this communication. In the end, assessee has been requested to file exhaustive/elaborate reply or by filing an I.T return as early as possible, preferably by 03.12.2004. The contents of the said communication though referring to Assessment Year 2001-02 (which is apparently a mistake since the correct Assessment Year is 2002-03), do not justi....
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....time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. With reference to Sec. 292BB of the Act, the stand of the assessee before us is that the said section does not cover cases where mandatorily required notice has not been issued at all. For the said proposition, reliance has been placed on the following judgments :- i) Pr. Commissioner of Income-tax vs. Silver Line, 383 ITR 455 (Delhi); ii) Pr. Commissioner of Income-tax vs. Shri Jai Shiv Shankar Traders (P.) Ltd., 383 ITR 448 (Delhi); iii) Amiti Software Technologies Pvt. Ltd., ITA No. 540/Bang/2012 dated 07.02.2014; and iv) Travancore Diagnostics (P.) Ltd. vs. ACIT, 390 ITR 167 (Kerala) 13. Notably, the Hon'ble Delhi High Court in the case of Silver Line (supra) was considering whether the failure by the Assessing Officer to issue notice u/s 143(2) of the Act was fatal to the reassessment proceedings finalised u/s 147/148 of the Act. The defence of the Revenue was based on the provisi....
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....rried out on the assessee u/s 132(1) of the Act dated 30.11.2006. The Assessing Officer notes that in response to the notice issued u/s 153A of the Act, assessee filed his return of income declaring income of Rs. 1,20,28,255/-, which was the same as declared in the revised return filed on 07.08.2003 declaring total income of Rs. 1,20,28,255/-. In the ensuing assessment finalised u/s 153A r.w.s. 143(3) of the Act dated 27.11.2008, the total income has been determined at Rs. 1,20,28,255/-, which was the same as the income determined in the reassessment order passed u/s 143(3) r.w.s. 147 of the Act dated 24.03.2005 (supra), which has been dealt with by us in the earlier paras. Though there was no difference between the assessed and the returned income, the only difference was that the income from the Bonds of Rs. 1,06,95,000/- declared by the assessee as Capital Gain has been assessed as income from other sources in consonance with the order earlier passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act dated 24.03.2005 (supra). This has been affirmed by the CIT(A), against which assessee is in appeal before us. 18. It was a common point between the parties that our decisio....