TaxTMI 
TaxTMI 
2022 (12) TMI 198
X X X X Extracts X X X X
X X X X Extracts X X X X
....posite order. 3. First we will decide the appeals filed by the Assessee. Facts and issues involved in ITA Nos. 7598/Del/2018 and 7599/Del/2018 are exactly similar and therefore for the sake of brevity, we will refer the facts and issues involved in ITA No. 7598/Del/2018 and result of the same shall also be applicable to ITA No. 7599/Del/2018. ITA No. 7598/Del/2018 4. Brief facts of the case for adjudication of the issues involved in the instant appeal are that the Assessee had filed its return of income on dated 31.03.2006 by declaring 'Nil' income which was processed and resulting into passing of the assessment order u/s 143(3) of the Act on dated 21-09-2007. Later on it came to the knowledge of the AO that the Assessee has re-audited its books of account on dated 22.09.2011 from Assessment Year 2005-06 onwards but the Assessee has never submitted the same to the revenue department till the time in-consistencies were recorded, therefore it was observed by the AO that the books of account are in the form of history and cannot be revised any time in the future as they are to be accepted by the Annual General Body meeting by all members and therefore become final documents o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... meaning of provision of section 2(15)." For brevity and ready reference, the concluding part of the Assessment order is reproduced herein below: 2................................................................................................... ..................................................................................................... The explanation given by the assessee is not tenable, as no reason for not correctly maintaining the books of accounts have been given by the assessee. The Patronage Welfare Society and the assessee society have three common trustees u/s- 13(3) of the Act. There is continuous transaction of funds between the Patronage Society and assessee society throughout the year which is clear violation of S-11(5). No explanation for tire transfer of funds between the Patronage Society and assessee society has been given. The balance sheet on 31.03.05 of the Patronage Society show's that the specified person u/s 13(3) of the assessee society has given unsecured loan to it during the year. There is clear circulation of funds between the two societies in form of unsecured and repayment. This is clear violation of S-13(1)(d) r.w.s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facts from the AO during the first assessment proceedings and furnished incorrect information as well. In view of clear violation of Sec-13(l)(d) r.w.s 13(30 r.w.s 11(5) of Act, 1961, exemption u/s 11 and 12 are denied to the assessee. 6. Hence, the income of the assessee in taxed as per rates applicable to an AOP, as its claim of exemption for being a charitable institution is denied due to reasons already discussed above. 'No fixed asset schedule has been attached by the assesse along with the original return of income, therefore, no claim on depreciation can be given for the A.Y. 2005-06 and nor has the assessee claimed for it in the original Income and Expenditure A/c. Assessee has failed to provide the Revised audited accounts of the financial year 2004-05 i.e. A.Y, 2005-06, in place of it, the Assessee has submitted the Audited a/c financial year 2006-07. Computation of income:- Heads Amount (Rs.) Amount Gross Receipts 24,285/- Add: Unexplained cash withdrawal of 15,00,000/- Add: Unexplained 3,5571267/- Add: Amount given to Patronage Society 28,79,190/- Total Income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee were not in accordance with its objects and that the society is not entitled to the claim of exemption under section 11. The loan given to the Patronage Society was also added to the income along with unexplained cash withdrawal. 4.1.2 I have considered the assessment order and the submissions of the appellant Analysis of the differences the original and re-casted accounts is as under: Assets Original Revised Differences Land 16705324 16209467 -495857 Building 5829960 18677360 12847400 Computers 1600020 1600020 Furniture 1240000 1240000 Books & periodicals 50000 1250000 1250000 Lab equipment '1970000 1970000 FDR 3000000 3000000 0 Central Bank of India 4979 4979 0 Indian Bank 23276 23276 TDS 3921 3921 0 Cash in hand 2676 10283 7607 Miscellaneous expenses (I&E) 1195085 1195085 25596860 45184391 19587531 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd none of the expenditure incurred was verifiable. In view of this the finding of the Assessing Officer that the society' was not entitled for the claim of exemption cannot be faulted. It is to be noted that even besides the issue regarding loan from the Patronage Society on the basis of which the Assessing Officer has invoked the provisions of section 13, which in turn is a transaction for which no satisfactory explanation is available, it is apparent from the facts of the case that the accounts of tire assessee were poorly maintained and had to be re-casted subsequent to the special audit conducted for assessment year 2009-10. In such a scenario the audit report in Form No. 10B cannot be relied upon and as per the provisions of section 12A, one of the conditions for allowing exemption is that the account should be audited, and report of such audit is required to be submitted along with the return of income. The Assessing Officer is also noted that there were gross violations on the part of tire assessee and auditors and the original audit report does not indicate that the assessee society had dealing with any specified persons as defined in section 13(3). In view of these fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal as legal grounds and submitted that notice issued u/s 143 (2) on dated 01.05.2012 is bad in law and consequential assessment framed in response to the said notice in un-sustainable and assessment framed u/s 148 read with section 143(3) after treating the return filed on dated 12.10.2012, in response to notice u/s 148 of the Act, as non-est, is unwarranted and liable to be set aside as it is settled law that notice u/s 143(2) of the Act is not only mandatory but in the absence of such notice, the AO cannot proceed to make enquiry. 7.1 The ld. counsel also submitted that the AO has erred in holding that the return filed on dated 12.10.2012 in response to the notice u/s 148 after specified time limit of 30 days is non-est. 7.2 It was further claimed by the Ld. Counsel that the reasons recorded and the reopening u/s 148 is bad in law since no proper approval as required u/s 151 has been obtained. 7.3 The Ld. A R in support of its contentions also relied upon various judgments. 8. On the contrary the ld. DR supported the impugned order passed by the Ld. Commissioner and submitted that the same is not suffered from any perversity, impropriety and illegality and therefore ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... non-issuance of notice u/s 143(2) is not a procedural irregularity and same cannot be cured u/s 292 BB of the Act. Notice issued u/s 143(2) of the Act to the Assessee prior to filing of return of income, being invalid notice and assessment order passed in pursuance to the notice deserves to be set aside. 9.6 Hon'ble High Court of Bombay in the case of ACIT, Circle-2(1) Vs. Geno Pharmaceuticals Ltd (2013) 32 taxmann.com 162 (Bombay) approved the view of the ITAT wherein the ITAT held that notice u/s 143(2) is mandatory and in absence of such service, the AO cannot proceed to make an enquiry on the return filed in compliance with the notice issued u/s 148 of the Act. 9.7 Hon'ble Jurisdictional High Court in the case of DIT Vs. Society for Worldwide Inter Bank Financial, Telecommunication (2010) 323 ITR 249 (Delhi) dealt with the same situation where the notice was served uponthe authorized representative simultaneously on its filing of the return and the Hon'ble Court held that notice was ready even prior to filing of the return of income and therefore, on its face value would amount to gross violation of the scheme of section 143(2) of the Act. 9.8 The Hon'ble jurisdictional ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.................... ................................................................................. 12. Since, in the instant case, admittedly, no notice u/s 143(2) of the Act was issued and served on the assessee after the return in response to notice u/s 148 of the Act was filed by stating that the original return filed may be treated as return filed in response to notice u/s 148, therefore, the reassessment order passed by the Assessing Officer is not sustainable in law. We, therefore, accept the additional ground raised by the Assessee and quash the order passed u/s 143(3)/147 for non-issuance of notice u/s 143(2) of the Act which is mandatorily required. The additional ground raised by the assessee is accordingly allowed. Since the assessee succeeds on this legal ground, the other grounds being academic in nature are not being adjudicated. (highlighted by us ) 9.10 From the judgments referred above it is clear that for processing the revised return filed in response to the notice u/s 148 of the Act, issuance of notice u/s 143(2) of the Act is necessary and mandatory. Non-issuance of the notice u/s 143(2) is not a procedural irregularity and therefore the same can....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the year under consideration was filed by the Assessee on dated 27.03.2008 by declaring 'Nil' income which was processed u/s 143(1) of the Act. Subsequently, the case of the Assessee was selected for scrutiny and resulted into issuance of notice u/s 143(2) of the Act and ultimately, the AO made the additions of Rs. 19,63,366/- on account of net profit as per I&E Account and Rs. 5,09,62,944/- on account of unexplained cash credit u/s 68 of the Act by passing the Assessment order dated 23.12.2009 u/s 143(3) of the Act. 12. Aggrieved by the assessment order, the Assessee challenged the said additions before the ld. Commissioner who vide impugned order annulled the assessment order itself by holding as under:- "7.5. The facts of the case have been carefully considered. I have personally perused the assessment record. The assessment folder is page numbered from page 156 to 456. Besides that some papers relating to recovery of demand and of appellate proceedings are also kept in the folder which are not numbered. It is noticed that order-sheet entry dt. 30.07.2008 is recorded as under: "The assessee trust/society has filed return declaring gross receipt including do....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act. Subsequently another notice u/s 143(2) was issued to the same address. A copy of the notice dtd. 30/07/08 is enclosed herewith. 2. The notice was issued by speed post through Department of Post, Delhi which was tantamount to proper service as per law. As already mentioned vide point-1, the notices were sent to the address per record to available to the Department at the time of issue of notice. 3. The notices were not returned which indicates service of the same. 4. The notice dated 12.08.2009 was just a formality as the undersigned has taken over jurisdiction of your case from the previous incumbent Shri V.S. Kapoor. " Surprisingly, the enclosed copy of notice dt. 30.07.2008 is nothing but unsigned copy of notice u/s 142(1) only. Even the unsigned copy of the notice u/s 143(2) of the Act does not find place neither as enclosure of the AO's letter nor anywhere in the assessment record. The subsequent replies of the AO during the appellate proceedings are all evasive and highlighting the behavior of the appellant in the proceedings for AY 2010- 11. Such attempts on the part of the present AO are nothing but defending the indefensible. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rescribed time cannot be a mere procedural irregularity and the same not curable, as the notice under section 143(2), was issued beyond the period of limitation, the proceedings initiated pursuant to the notice are vitiated. 7.8. Accordingly, as this statutory requirement of section 143(2) has not been complied with, it cannot be treated as a defect in service of notice which is curable under section 292B. Further, resort cannot be taken to S. 292BB of the Act as well, because vide letter dt. 18.09.2009 filed by the assessee to the AO and placed in the assessment record the objection relating to the service of notice being beyond the limitation date and therefore the proceedings u/s 143(2) being net lawful has been raised by the assessee. Consequently, as the assessment order is finalized on the basis of subsequent notice u/s 143(3) dt. 12.08.2009 which is barred by limitation, the assessment order passed on the basis of such notice is held re null and void. Therefore, the assessment order passed by the AO is bad in the eyes of law and deserves to be annulled. Ground No. 6 of the appeal is allowed. 8. Since the assessment itself has been annulled, the additions ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entioned that notice u/s 143(2) was issued to the Assessee on 30.07.2008 however, no such notice was ever issued by the AO within the time barring period. The Assessee before the Ld. Commissioner in appellate proceedings also filed an affidavit dated 21.01.2011 qua non-receipt of notice u/s 143(2) of the Act on which the comments of the AO were sought by the Ld. Commissioner in response to which the AO submitted its comments and explanation before the Ld. Commissioner, who while considering the same has observed that it is clear that the AO has failed to issue notice u/s 143(2) of the Act within stipulated time as provided in the section. Notice u/s 143(2) dated 12.08.2009 was definitely barred by limitation as provided in proviso to section 143(2)(ii) of the Act. Accordingly, as this statutory requirement of section 143(2) has not been complied with,it cannot be treated as defect in service of notice which is curable u/s 292BB. Consequently, the notice u/s 143(2) dated 12.08.2009 issued by the AO is barred by limitation and the assessment order passed on the basis of such notice, is held to be null and void, deserves to be annulled. 14.2 We have given thoughtful consideration t....