TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 225
X X X X Extracts X X X X
X X X X Extracts X X X X
....s seen from the order sheet that the Aa has issued notice u/s. 142(1) on 08.11.2011 calling for return of income. The return of income in response to above notice was filed' on 28.11.2011. The AO mentioned in the order that notice u/s. 143(2) and 142(1) Were issued on 14.12.2011. But perusal of order sheet shows that no such notice is mentioned therein. Further, there is no copy of notice nor acknowledgement of service of such notice is available on the record. The Aa who was present during the hearing was also enquired with. The AO could not produce any such evidence and stated that any evidence of service of notice is not readily available on record. In view of the factual and legal position as above, the assessment order suffer from legal infirmity and the same cannot be held to be valid. 6.1.1 In the case of ACIT Vs. Hotel Blue Moon 321 ITR 362 (SC), the Hon'ble Supreme court held as under: "The only question that arises for our consideration in this batch of appeals is, whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a pre-requisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 144 shall apply accordingly." 12) Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the Block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special procedure of Chapter XW-B is intended to provide a mode of assessment of undisclosed income; which has been detected as a result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing officer. Therefore, the income assessable in Block assessment under Chapter XIV-B is the income not disclosed but found and determined as the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, Why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block, return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislatur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [ (1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression "as far as practicable" has stated "without anything more the expression 'as far as possible' will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision; therein which may not be practicable to be applied." 16) The case of the revenue is that the expression 'so far as may be apply' indicates that it is not expected to follow the provisions of Section 142, sub-sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression 'so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143. 17) Section 158BH provides for application of the othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny effect on the judgment in Hotel Blue Moon(supra). It was held in Hotel Blue Moon's case (supra) that the very foundation of the jurisdiction of the AO is on the issuance of the notice under sec. 143(2)." 6.1.3 In the case of CIT, Lucknow Vs. Salarpur Storage Ltd 228 Taxmann 48 (Allahabad], the Hon'ble High Court held as under: "2. The assessee filed its return of income for AY 2008-09 on 30 September 2008. The Assessing Officer issued a notice under Section 143(2) of the Act on 6 October 2009. The assessment proceedings were completed and an order of assessment was passed under Section 143(3) of the Act on 24 December 2010. In appeal, the Commissioner of Income Tax(Appeals)-11, Lucknow held that the notice under Section 143(2) of the Act was not issued within the period stipulated in that provision. Hence, the question of its service either within or beyond the time permitted or its improper service within the meaning of Section 292BB of the Act would not according to the CIT(A) arise. In the view of the CIT(A) Section 292BB of the Act operated to debar any challenge by the assessee, who appears before the Assessing Officer with respect to non-service, service within....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., any evidence Or particulars specified therein or on which the assessee may rely, in support of such claim: Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003; (ii) notwithstanding anything contained in clause (i), if it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence, on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished." 7. Under clause (ii) of sub-section (2) of Section 143, the Assessing Officer is required to serve) on the assessee, a notice requiring him to attend the office or to produce evidence on which the assessee may rely in support of the return, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red iii any proceeding or co-operated in any inquiry relating to an assessment or reassessment. It shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in 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) upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment." 10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292BB 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 Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(2) of the Act cannot be dispensed with. 13. In our view, where the Assessing Officer fails to issue a notice within the period of six months as spelt out in the proviso to clause (ii) of Section 143(2) of the Act, the assumption of jurisdiction under Section 143(3) of the Act would be invalid. This defect in regard to the assumption of jurisdiction cannot be cured by to Icing recourse to the deeming fiction under Section 292BB of the Act. The fiction in Section 292BB of the Act overcomes a procedural defect in regard to the non-service of a notice on the assessee and obviates a challenge that the notice was either not served or that it was not served in time or that it was served in an improper manner, where the assessee has appeared in a proceeding or cooperated in an enquiry without raising an objection. Section 292BB of the Act cannot come to the aid of the revenue in a situation where the issuance of a notice itself was not within the prescribed period, in which event the question of whether it was served correctly or otherwise, would be of no relevance whatsoever, Failure to issue a notice within the prescribed period would result in the Assessing Officer assuming jurisdict....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and especially a notice under Section 143(2) of the Act which is a notice giving jurisdiction to the AO to frame an assessment. The decision of the Allahabad High Court in Manish Prakash Gupta (supra) is also to the same effect. 13. In Shri Jai Shiv Shankar Traders (P.) Ltd. (supra), this Court has also discussed the distinction between a failure to 'issue' notice and a failure to 'serve' a notice on an Assessee. It was held, after noticing the decisions of the Allahabad High Court in CIT v. Rajeev Sharma (2011) 336 ITR 678/[2010] 192 Taxman 197 and CIT v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105/ (2015) 228 Taxman. 7/15/2019 www.taxmann.com. 6/7 48 (All.) (Mag.) and the decision of the Madras High Court in Sapthagiri Finance & Investments v. ITA [2012] 25 taxmann.com 341/210 Taxman 78 (Mag.), that Section 292BB of the Act would apply insofar as failure of 'service' of notice was concerned and not with regard to the failure to 'issue' notice. In other words, the failure of the Aa, 'in reassessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by ref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erent form for filing of returns. Consequently, the said return could not have been treated as a return filed pursuant to the notice issued to the Assessee under Section 148 of the Act. He further submitted that with no discrepancy having been found by the AO in the returns for AYs 2005-06 till 2007-08, which were processed under Section 143(1) of the Act, there was no occasion for the AO to issue Cl. notice under Section 143(2) of the Act. Mr. Sahni submitted that in the circumstances, the action of the AO in finalising the reassessment orders without notice under Section 143(2) of the Act was justified. 18. The wording of Section 143(2)(ii) of the Act, which is applicable in the present case, requires the AO to be satisfied on examining the return filed that prima facie the Assessee has "understated the income" or has "computed excessive loss" or has "underpaid the tax in any manner". The AO has the discretion to issue Cl. notice under Section 143(2) if he considers it "necessary or expedient" to do so. This exercise by' the AO under Section 143(2) of the Act is qualitatively different from the issuance of a notice under Section 142(1) of the Act, which as noted hereinbefor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the; notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s. 143(2) of the Act; the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s. 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s. 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s. 143(2) of the Act." 22. The decisions of the Allahabad High Court in Rajeev Sharma (supra) and Salarpur Cold Storage (P.) Ltd. (supra) also reiterate the above legal position. As far as this Court is concerned, the decision in DIT v. Society For Worldwide In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otice under section 143(2) of the Act is also not coming out from the order of the Assessing Officer. This fact has not been controverted by the learned D.R. even before us. In view of this, since the learned CIT (Appeals) dismissed the ground of the assessee on the basis of provisions of section 292BB of the Act, the only issue remaining before us is to decide whether in the absence of issue of notice under section 143(2) of the Act, the assessment framed under section 147 r.w.s. 143(3) of the Act is 'Valid in the background of provisions of section 292BB of the Act. The provisions of section 292BB read 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 any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in (sic) proceeding or inquiry under this Act that the notice as- (a) not served upon him; or (b) not served Upon him in time; o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:" 10. From the perusal of the above provisions, it is quite clear that the Assessing Officer has to issue and serve a notice under section 148 of the Act to the assessee before making assessment under section 147 of the Act. The notice under section 148 of the Act requires the assessee to furnish his return of income-within the time specified in the notice. This return has to be in the prescribed form and in the prescribed manner, It has been very categorically provided in the section that afterwards the provisions of this Act shall 'so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 of the Act. Therefore the provisions of section itself negate the arguments taken by the learned D.R. that once issuing notice under section 148 of the Act, the Assessing Officer cannot go into the provisions of other sections. Once the assessee files return in pursuance of notice unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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. Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment". 7. As submitted by the learned Counsel for the assessee, the provisions of section 292BB are applicable where there is a failure to serve the notice and not where there is a failure to issue the notice under section 143(2). He has contended that the issuance of notice under section 143(2) before completing the assessment is a statutory requirement as held by the Hon'ble Supreme Court in the case of Hotel Blue Moon [ 321 ITR 362] and the failure to issue notice under section 143(2) in compliance with such I.T.A. No. 526/KOL/2017 Assessment year: 2008-2009 statutory requirement is not covered under section 2928B. In support of this contention, he has relied on the decision of the Hon'ble Allahabad High Court in the case of ACIT vs. Greater Noida Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has held that: "28. The issue that, however, engages out attention more than the other issues is the contention of the learned counsel for the appellant that before making an assessment under Section 143(3) read with Section 147 of the Act, they ought to have been given a statutory notice under Section 143(2) of the Act. We must say that this contention, in our mind, assumes great significance. The question as to whether a notice has to be issued under Section 143(2) before making an assessment or re assessment under the provisions of Sections 143 and 147 respectively is no longer res integra and is not untouched by dicta. The Hon'ble Supreme Court has answered this with precision in Asstt. CIT v. Hotel Blue Moon 1201 DJ 321 ITR 1201 DJ : 321 ITR 362/188 Taxman 113 (SC) stating as under: "But s. 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under s. 143(2). However, it an assessment is to be completed under s. 143(3) read with s. 158BC, notice under s. 143(2) should be issued within one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to Section 148 notice that was issued on 11.01.2012. In any event of the matter, the fact that the above extracted notice can no way qualify itself to be a notice under Section 143(2) becomes obvious from the way Section 143(2) is engrafted in the Statute. 30. Section 143(2) of the Act, as it stood before being substituted by the Finance Act, 2016, reads as under: "Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be) if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any 'evidence on Which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the retu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice, which was required to be served and that he would, thereafter, be precluded from objecting that notice was not served upon him, or that it was served upon him in an improper manner or that it was not served upon him in time. In this case, it is admitted by the assessee that his representative had appeared before the Assessing Officer on 19.12.2012, 11.03.2013 and 27.03.2013. The Revenue, therefore, asserts that since the assessee had appeared in the proceeding and had cooperated with the inquiry, he shall be then precluded from raising any contention that no notice had been served on him. This submission at the first blush appears to be appealing. However, on a clear reading of the section it becomes inscrutable that the issue of estoppel would arise against the assessee only after he had appeared in the assessment proceeding pursuant to a notice validly issued. In this case, the learned. Counsel for the assessee maintains that since no notice under Section 143(2) was issued to the assessee and that they have only received a Section 148 notice, they had been co-operating with the Assessing Officer wider the bona fide impression that the proceedings that were going on was the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce the jurisdiction 'under Section 143 is founded on the issuance of a notice under Section 143(2), the assessing officer could have assumed jurisdiction only after issuing a notice under Section 143(2). Even the participation of the assessee would not provide' the benefit under Section 292BB to the Revenue. The requirement that a notice be issued is mandatory and the Assessing Officer has no other option but to issue the notice before commencing the jurisdiction. Here we draw support from. The judgment of the Hon'ble Supreme Court in Asstt. CIT v. Greater Noida Industrial Development Authority [2015] 379 ITR 14 (All.), wherein it was held as under: "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." 34. The only benefit that Section 292BB obtains to the assessing officer is that after the issuance of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for that year on 11.01.2012. It is beyond comprehension that even though the Assessing Officer had time till 30.09.2011 to issue notice under Section 143(2) and even though he had recorded the reasons for assuming jurisdiction under Section 147 for re-assessment on 21.09.2011, he had still not chosen to issue the notice which would have then given him the jurisdiction to continue with the proceedings. We are unable to obtain any reasons to these omissions and it is rather distressing, as we have recorded in the opening lines of the judgment) that on account of this omission and non compliance of mandatory and imperative provisions, the assessee would now be entitled to reliefs which they otherwise would not have able to obtain.' We have, therefore, no other option but to hold in the absence of a Section 143(2) notice, proceedings of assessment initiated, conducted and completed for the year 2009-10 will have to fail but for the year 2010-11, since the proceedings have been continued on the basis of a validly issued Section 143(2) notice, same is being upheld." 6.1.9 The jurisdictional ITAT in the case of ACIT, Thirupathi Vs. Dr. N. Madhava Reddy in ITA No. 1897/Hyd/20 11, dt.....