TaxTMI 
TaxTMI 
2026 (4) TMI 402
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (Appeals) ought to have held that the notice issued u/s 148 is not in accordance with law and consequently the learned Commissioner of Income Tax (Appeals) ought to have quashed the notice as invalid. 3. The learned Commissioner of Income Tax (Appeals) is not justified in not holding that the assessing officer having not provided the Reasons recorded for reopening in spite of specific request by the appellant, the reassessment proceedings are liable to be quashed. 4. The learned Commissioner of Income Tax (Appeals) is not justified in not quashing the assessment order passed by the assessing officer on the ground that the notice u/s 143(2) of the Act was not issued within the time stipulated under the Act. 5. Without prejudice to Ground no.2 to 4, the learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs. 2,14,97,772 made by the assessing officer u/s 2(22)(e) of the Act towards deemed dividend. 6. Any other ground that may be urged at the time of appeal hearing." 2. Succinctly stated, the assessee had filed his return of income for the A.Y.2014-15 on 30.03.2015, declaring an income of Rs. 6,04,940/- al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held the excess amount withdrawn by the assessee, i.e., up to the extent of the accumulated profits available with the company as "deemed dividend" under section 2(22)(e) of the Act and made an addition of the same in the hands of the assessee. Accordingly, the AO, vide his order passed under section 143(3) r.w.s. 147 of the Act, dated 30.12.2019, determined the income of the assessee at Rs. 2,21,57,712/- along with agriculture income of Rs. 55,200/-. 7. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. For the sake of clarity, we deem it apposite to cull out the observations of the CIT(A), as under: - "6. Adjudication:- 6.1 I have considered the facts of the case and examined the documents uploaded by the appellant at the time of filing of appeal. The appeal is being decided after considering the same as below: 6.2 The first ground of appeal is general and needs no discussion. 6.3 In the second ground the appellant has stated that no fresh facts came to the knowledge of the assessing officer and the reopening was not justified. This claim of the appellant is not correct. His case was earlier assessed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le scenario as discussed above the ground is dismissed. 6.5 The fourth ground is that the AO completed the assessment under section 143(3) read with section 147 without issuing the notice under section 143(2) within the statutory time limit. It has been stated that the return was filed on 30th March 2019 and the notice was liable to be issued on or before 30th September 2019. However it was issued on 02.12.2019 which is beyond the prescribed time. In view of the same the assessment is claimed to be bad in law and liable to be quashed. This ground of appeal has been carefully considered. The proceedings under appeal were initiated u/s 147/148. The purpose of section 148 and 147 is reassessment i.e. assessment of the income again. Notice under section 143(2) is issued to inform the assessee about selection of his case under scrutiny and intimating him that his case will be scrutinized. In the case of reassessment there is no such option with the assessing officer once the notice under section 148 has been issued. This notice itself means that the case will be assessed under scrutiny. Therefore there is no requirement of issuance of notice under section 143(2) in such cases. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficient surplus with the company on the date of such advance. The claim of the appellant has been gone into and carefully considered. The decision of the Hon'ble tribunal quoted by the appellant has been based on earlier decision in the case of DCIT vs Hariprasad Bhararia ITA Nos. 435-441/Vizag/2014 dated 09.09.2016. Although in those cases also the assessee's had mortgaged/pledged their assets with the banks for the purposes of the concerned companies, there is a big difference. In those cases all the assets had been so mortgaged/pledged whereas the appellant has not made such a claim. Moreover he used the funds of the company to buy a property, against which too he could obtain loan from the bank. As such there was no pressing compulsion to borrow the funds from the company. The funds of the company were in fact used by the appellant because these were surplus and the appellant ran dictate to use these as per his will. In view of these facts, this usage is equivalent to dividend and is liable to be deemed as dividend within the meaning of section 2(22)(e) of the Income Tax Act 1961. In these circumstances the ratio of the case cite by the appellant is not applicable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed under section 143(3) r.w.s. 147 of the Act, dated 30.12.2019, in the absence of a valid notice issued under section 143(2) of the Act, therefore, the impugned assessment framed by him cannot be sustained and is liable to be quashed for want of a valid assumption of jurisdiction. The Ld. AR in support of his contention that a notice under section 143(2) of the Act is sine qua non for valid assumption of jurisdiction and framing of assessment by the A.O had pressed into service the judgment of the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon (2010) (321 ITR (SC) and CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC). The Ld. AR drawing support from his aforesaid contention, submitted that as the impugned assessment had been framed by the AO in the absence of a valid assumption of jurisdiction by him, therefore, the same on the said count itself cannot be sustained and is liable to be quashed. 10. Per contra, Shri K. Prasad, Learned Senior Department Representative (for short, "Ld. DR"), relied upon the orders of the authorities below. It was submitted by him that as the AO had validly issued notice under section 148 of the Act, dated 30.03.2019, and based....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice under section 148 was issued to him, therefore, no further obligation was cast upon the AO to thereafter issue any notice under section 143(2) of the Act for framing the reassessment. 13. We find that the controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not, pursuant to the return of income filed by an assessee in response to notice under section 148 of the Act, the notice under section 143(2) of the Act was mandatorily required to be issued by the AO within the time period prescribed under the statute for framing the reassessment? 14. We shall now deal with the abovementioned core issue involved in the present appeal, i.e., whether the AO, in response to the return of income filed by the assessee on 30.03.2019 for the subject year, i.e., AY 2014-15, in compliance to the notice issued under section 148 of the Act dated 30.03.2019, was statutorily obligated to have issued a notice under Section 143(2) of the Act within the time period prescribed under the statute. We find that section 143(2) of the Act contemplates that where the return of income has been furnished under section 139 of the Act, or in response to a notice under su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed by the assessee in response to notice under section 148 of the Act, there is no further obligation cast upon the AO to issue a notice under section 143(2) of the Act, but we are unable to concur with the same. We say so, for two reasons, viz., (i) as observed by us herein above, the return of income filed by the assessee in response to notice under section 148 of the Act is to be construed as if it is a return of income filed under section 139 of the Act; and (ii) that section 148 of the Act though provides for a notice to be issued to the assessee calling upon him to file his return of income, but the machinery for framing of the assessment is not provided in the said section and for the said limited purpose the return of income so filed by the assessee is to be construed as a return of income filed under section 139 of the Act and thus, for framing of the assessment pursuant to the return of income filed by the assessee in response to the notice under section 148 of the Act notice under section 143(2) of the Act is mandatorily required to be issued. 16. We have given thoughtful consideration to the aforesaid contentions of the Ld. Sr. DR, and are unable to persuade ourse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 124 (Madras) has held that where the AO did not issue notice under section 143(2) of the Act upon the assessee, then initiation of reassessment proceedings, order rejecting the assessee's objection against assumption of jurisdiction for reopening and also reference to the Transfer Pricing Officer (TPO) were to be quashed. We further find that the Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Nagendra Prasad (2013) 156 Taxmann.com 19 (Punjab & Haryana) had observed that where the notice was issued by AO under section 148 of the Act requiring the assessee to file a return within 30 days, but the said return was filed after 8½ months, since return of income was filed by the assessee in response to the notice under section 148 of the Act, though delayed, there should have been a notice issued under section 143(2) as the requirement to issue notice cannot be dispensed with. Further, the Hon'ble High Court of Delhi in the case of PCIT v. S.G. Portfolio Pvt. Ltd. (2023) 454 ITR 761 (Delhi) had, inter alia, held that where the assessee company had filed the return income in response to notice under section 148 of the Act, the AO was required to issue notice under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipated in the assessment proceedings and not objected to the notice under section 143(2) of the Act, therefore, he was precluded from raising any objection regarding the issuance of the same, we are unable to persuade ourselves to concur with the same. In our view, the failure of the AO in issuing the notice within the period of limitation under section 143(2) of the Act, i.e., a notice giving jurisdiction to him to frame the assessment cannot be condoned by referring to section 292BB of the Act. Our aforesaid view is supported by the judgment of the Hon'ble High Court of Karnataka in the case of Principal Commissioner of Income Tax, (Central), vs. Cherian Abraham (2022) 444 ITR 420 (Karnataka)/(2022) 137 taxman.com 73 (Karnataka), wherein it is held that a notice under section 143(2) of the Act issued beyond the period of limitation partakes the character of absence of notice itself in the eyes of law, and thus, section 292BB of the Act would not save such a notice de hors the limitation prescribed. Accordingly, the Hon'ble High Court after considering the judgment of the Hon'ble Supreme Court in the case of CIT vs. Lakshman Das Khandelwal (2019) 108 Taxmann.com 183/417 ITR 325 (S....