AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 355
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....: 1. The orders of the lower authorities are opposed to law, facts and circumstances of the case and are based on surmises and conjectures. 2. The orders of the lower authorities are passed in haste, without providing sufficient and reasonable opportunity of being heard. 3. The orders of the lower authorities are passed against the principles of natural justice and are liable to be quashed. 4. The ld. AO erred in framing the assessment under the provisions of section 144 r.w.s. 147 of the Act. 5. Without prejudice to ground no.4 above, the ld. AO erred in not following the procedure laid down in section 148 of the Act. 6. The ld. AO erred in not issuing notice u/s 143(2) of the I.T. Act. 7. Without prejudice to the above grounds, the ld. AO erred in disallowing the business expenditure aggregating to Rs. 28,60,000/- and the ld. CIT(A) erred in confirming the same. 8. The ld. AO and ld. CIT(A) ought to have appreciated that the expenditure was incurred wholly and exclusively for the purpose of the business of the appellant. 9. Without prejudice to the above grounds, while computing the assessed income, ....
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..... AO erred in not issuing notice u/s 143(2) of the I.T. Act. 7. Without prejudice to the above grounds, the ld. AO erred in disallowing the business expenditure aggregating to Rs. 28,60,000/- and the ld. CIT(A) erred in confirming the same. 8. The ld. AO and ld. CIT(A) ought to have appreciated that the expenditure was incurred wholly and exclusively for the purpose of the business of the appellant. 9. The ld. AO erred in levying interest u/s 234A and 234B of the Act. Total tax effect Rs. 12,51,125/- 5. Now the brief facts of the case are that the assessee being a private limited company came into existence on 18/11/2011 and carrying on the business of construction of apartments/residential houses. The assessee company filed its return of income for the AY 2015-16 on 28/09/2015 declaring total income of Rs. NIL. The return was thereafter processed u/s.143(1) of the Act by accepting the return income. A Survey u/s. 133A of the Act was conducted on 19/02/2018 at the business premise of the Assessee Company. The assessee company had developed a project by name "INTACT AVENUE" located at Sy. No. 307/2, Begur village, Begur Hobli, Bengaluru. The said projec....
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....48 of the Act was issued on 06/02/2019 and served after taking necessary approval from the Addl. Commissioner of Income Tax, Range-3(1), Bengaluru and accordingly one month time was given in the notice to file the return of income. The AO observed that the assessee did not file any Return either in response to notice u/s 148 of the Act or in response to reminder notice served on 12/03/2019. Finally, show cause notice u/s 144 r.w.s. 147 of the Act was issued to the assessee on 03/05/2019 proposing the completion of assessment. On 20/05/2019, the MD of the company filed a reply wherein it was requested to treat the return filed u/s. 139(1) of the Act on 28/09/2015 as the return filed in response to notice issued u/s.148 of the Act. Further, the copy of the return and acknowledgment of the return filed by the assessee company was also enclosed along with the letter. The AO is of the view that the reply filed by the assessee is not acceptable in view of the provision of law and decision of the Hon'ble Supreme Court in the case of GKN Driveshaft vs. ITO [2002] in 259 ITR 19. The AO was also of the view that when the notice u/s. 148 of the Act is issued, the assessee is duty bound to fil....
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.... hands of Assessee Company- A.Y. Contract charges as per ledger 2015-16 19,35,000/- 2016-17 45,57,010/- 2017-18 7,45,025/- Thus, the AO completed the assessment proceedings and passed the order 144 r.w.s 147 of the Act for the relevant AYs as detailed below:- AY Order passed u/s. Date of Order Income offered in return u/s. 139/148 Total Additions Made Income Assessed in order passed by AO 2014-15 144 r.w.s 147 30.08.2019 Rs. (-) 43,32,947/- Rs. 15,00,000/- Rs. (-) 28,32,947/- 2015-16 24.09.2019 Rs. 72,65,460/- (as per u/s. 143(3) order dated 29.12.2017 Rs. 43,60,000/- Rs. 1,16,25,460/- 2016-17 24.09.2019 Rs. 23,91,885/- Rs. 1,41,64,664/- Rs. 1,65,56,549/- 2017-18 24.09.2019 Rs. 23,01,559/- Rs. 19,33,025/- Rs. 42,34,584/- 6. Aggrieved by the assessment completed u/s.144 r.w.s 147 of the Act dated 24/09/2019, the assessee preferred an appeal before the CIT(A)-11, Bengaluru. 7. The ld.CIT(A)-11, Bengaluru, dismissed all the appeals of the assessee on the ground that the assessee had only submitted the copy of the details furnished before the AO & nothing more to prov....
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....tter filed by the assessee company on 20/05/2019 was much after the date granted by the AO as the notice u/s. 148 of the Act and accordingly the AO has rightly considered that no return of income was filed in response to notice u/s. 148 of the Act. In the above circumstances, the ld. DR prayed that as the notice u/s 143(2) of the Act was not required to be issued by the AO for the said assessment years, the legal ground raised by the assessee may be rejected. Lastly, the ld. DR submitted that the assessee shall be precluded from taking any objection with regard to service of notice if he has appeared in any proceedings or co-operated in any enquiry relating to an assessment. 11. We have heard the rival submission and perused the material available on record. The only legal issue in all these AYs under appeal raised by the assessee is with regard to non-issuance of notice u/s. 143(2) of the Act before concluding the re-assessment proceedings u/s. 147 of the Act. It is an undisputed fact that the AO had issued notice u/s. 148 of the Act on 06/02/2019 to file the return of income by granting 30 days time from the date of service of notice. It is also a undisputed fact that the mana....
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....case of the assessee for the assessment years in appeal, once the assessee had filed a reply letter by stating to treat the return filed u/s 139 of the Act to be the return in response to notice u/s 148 of the Act, then in our considered opinion the AO is duty bound to serve the statutory notice u/s 143(2) of the Act to assume jurisdiction as the notice u/s 143(2) of the Act is the jurisdictional notice and non-issuance of notice is not curable. The service of notice on the assessee under section 143(2) of the Act within the prescribed period of time is a prerequisite for framing the reassessment once the return has been filed by the assessee. 11.1 In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144 of the Act. Thus, the Section 144 of the Act concededly deals with the situation where inter alia, the assessee fails to file a return or fails to comply with all the terms of the notice issued under section 142 of the Act or fails to comply with the direction issued under sub section (2A) of section 142 or fails to comply with the terms of the....
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....ther 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. [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 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.] 11.3 After going through the above provisions, we tak....
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.... Act. We are of the considered opinion that it is not discretionary rather mandatory for an assessing officer to issue notice u/s 143(2) of the Act once the return of income is filed by assessee during the course of re-assessment proceedings. The only relaxation in the case of re assessment is that notice u/s 143(2) can be issued at any time before the expiry of time limit for completing assessment/ re assessment and the same will be deemed as valid notice. 11.5 Once notice u/s 148 of the Act, issued to the assessee required it to file a return within 30 days from the date of service of such notice, there is no provision in the Act, which would allow an AO to treat the return which was already subject to a processing u/s 143(1) of the IT Act, as a return filed pursuant to a notice subsequently issued u/s 148 of the Act. However, once an assessee itself declare before the AO that his earlier return can be treated as filed pursuant to notice u/s 148 of the IT Act, two results can follow. Assessing Officer can either say no, this will not be accepted, you have to file a fresh return or he has to accept the request of the assessee and treat the earlier returns as one filed pursuant ....
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....section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear 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 ....
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....bmitted by the Assessee in response to notice under Section, the entire procedure adopted for escaped assessment, shall not be valid." 15. In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. [2015] 228 Taxman 48 (All.) (Mag.) it was held as under: "10. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB 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 Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper ....
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....e 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." 18. As already noticed, the decision of this Court in Vision Inc. (supra) proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of "service" of notice was concerned and not with regard to failure to "issue" notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessm....
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....s follows: (1) If the time for issuance of the notice under Section 143(2) of the Act has expired or the time for completing the reassessment proceedings under Section 153(2) of the Act has run out, the failure to issue such notice under Section 143(2) of the Act would result in the entire proceedings, including any order of assessment, to be quashed. (2) Section 292BB of the Act does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the defect of service of such notice if an objection in such regard is not taken before the completion of the assessment or reassessment. In addition, it is held that in the light of the Supreme Court dictum in Hotel Blue Moon, the view expressed in Humboldt Wedag India Pvt. Ltd is per incuriam and, as such, not good law." 11.11 The Hon'ble Patna High Court in the case of Commissioner of Income-tax - 11 vs. Nagendra Prasad [2023] 156 taxmann.com 19 (Patna)[02-08-2023] has held as under- "3. The Tribunal found, relying on the decision in Hotel Blue Moon (supra) that the proceedings are liable to be struck down. It was held that the return was filed by the assessee in ....