TaxTMI 
TaxTMI 
2026 (8) TMI 563
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....assed without following the due procedure prescribed under Section 143(2) read with Section 148 of the Act. 5. On perusal of the records before this Court reveals that originally the Petitioner had filed a Return of Income under Section 139(1) of the Act on 31.07.2011. In the said Return of Income, the Petitioner had declared only a sum of Rs. 8,30,997/- as a gross total taxable income. 6. The Return was also processed under Section 143(1) of the Act on 15.10.2011. Subsequently, a summons was issued to the Petitioner on 21.08.2012 under Section 272A of the Act in response to which, the Petitioner replied on 28.08.2012, 29.08.2012 and 05.10.2012. 7. In this background, the Petitioner filed a Revised Return under Section 139(4) of the Act on 11.09.2012. In the Revised Return, the Petitioner declared a gross total taxable income of Rs. 17,29,621/- and paid a sum of Rs. 4,34,512/- towards income tax. 8. The Revised Return that was filed by the Petitioner under Section 139(4) of the Act was followed with a Section 148 Notice dated 29.03.2018. 9. In response to Section 148 Notice dated 29.03.2018, the Petitioner filed a Return on 22.05.2022 wherein the Petitioner reiterate....
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....sing out of the same. Therefore, there is clearly an escapement of income in this case for the Assessment Year 2011-2012 on account of non reporting of the non-compete fee received by the assessee from M/s.Edserve Ltd to the tune of Rs. 42,65,000/-. 4. In this case, a return of income was filed for the year under consideration but no scrutiny assessment under Section 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding under Section 147 of the Act is reason to believe which has been recorded above in Paragraph 2 above. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated under Section 2(40) of the Act was made and the return of income was duly processed under Section 143(1) of the Act. In view of the above, provisions of Clause (b) of Explanation 2 to Section 147 are applicable to facts of this case and the Assessment Year under consideration is deemed to be a case where income chargeable to tax has escaped assessment." 11. In this background, the Petitioner sent a reply on 03.10.2018 wherein the Petitioner has stat....
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....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 return is furnished." 19. It is submitted that as per Section 148 of the Act as it stood during the period in dispute, the provisions of the Act so far as may apply as if such Returns were required to be furnished under Section 139(1) of the Act. 20. A reference was made to the following decisions of the Hon'ble Supreme Court, Allahabad High Court, Delhi High Court and that of this Court:- i. Assistant Commissioner of Income-tax Vs. Hote....
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....Vs. Assistant Commissioner of Income-tax, [2007] 165 Taxman 123 (Madras) was rendered prior to the decision of the Hon'ble Supreme Court in Hotel Blue Moon's case (referred to supra) and therefore, it cannot be held to have any precedential value. 26. I have considered the arguments advanced by the learned counsel for the Petitioner and the learned Junior Standing Counsel for the Respondent. I have also perused the records and affidavit and counter affidavit filed on behalf of Petitioner and the Respondent. I have also examined the provisions of the Act. 27. The point for consideration is whether Section 143(2) Notice was required to be issued to the Petitioner or not before proceeding to pass the impugned Assessment Order dated 26.12.2018. 28. The Division Bench of this Court in Sapthagiri Finance & Investments Vs. Income-tax Officer, Ward I(4), Kanchipuram, [2012] 25 taxmann.com 341 (Mad.) was rendered in the context of an Assessment Order passed pursuant to a Section 148 Notice. 29. In Paragraph No.12 of the Order, the Division Bench of this Court observed as under:- "12. As far as the contention of the Revenue that failure to issue notice under Section 143(....
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....on. Thus, where the Assessing Officer repudiates the return filed by the assessee in response to notice under Section 158BC(a), the Assessing Officer must necessarily issue notice under Section 143(2) of the Act. Dealing with the contention that the issue of notice is not mandatory but optional and is to be applied to the extent practicable, in view of expression "so far as may be" in Section 153BC(b), the Apex Court pointed out that the expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. Rejecting the contention of the Revenue that it is not expedient to follow the provisions under Sections 142 and 143(2) and (3) strictly for the purpose of block assessment, the Apex Court held that in completing the assessment, when the officer repudiates the return filed under Section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142 and 143(2) and (3) of the Act." 30. The decision of the Hon'ble Supreme Court in Hotel Blue Moon's case referred to supra dealt with the special procedure for making assessment of search cases under Chapter XIV-B of the Act as it stoo....
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.... as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under Clause (I) of Sub-Section (1) of Section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under Section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this Clause shall not be entitled to file a revised return:] (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of Section 142, Sub-Sections (2) and (3) of Section 143 and Section 144 shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under Section 132 or requisitioned under Section 132A shall be retained to the extent necessary and the provisions of Section 132B shall apply subj....
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....ry and assessment. The said provision reads that: "158-BC. (b) the assessing officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158-BB and the provisions of Section 142, sub-sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply;" An analysis of this sub-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(1)(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 authorised to complete the assessment ex parte under Section 144. 22. Clause (b) of Section 158-BC by referring to Sections 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....
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....icable and no assessment could be made without issuing notice under Section 143(2) of the Act. 25. However, it is contended by Shri Shekhar, learned counsel for the Department that in view of the expression "so far as may be" in Section 158-BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Partap Singh case [(1985) 3 SCC 72 : 1985 SCC (Cri) 312 : 1985 SCC (Tax) 352 : (1985) 155 ITR 166]. In this case, the Court has observed that: (SCC p. 80, para 12) "12. Section 37(2) provides that 'the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(1)'. Reading the two sub-sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression 'so far as may be' has always been construed to mean that those provisions may be generally followed to the extent possible." 26. The learned counsel for the respondent has brought to our notice the observations made....
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.... then and the decision of the Division Bench of this Court in Sapthagiri Finance & Investments referred to supra, I shall now refer to a decision of the Division Bench of the Allahabad High Court cited by the learned counsel for the Petitioner in the case of Commissioner of Income-tax-II, Lucknow Vs. Salarpur Cold Storage Private Limited, [2014] 50 taxmann.com 105 (Allahabad). 42. There, the Division Bench of the Allahabad High Court following the view of the Hon'ble Supreme Court in Hotel Blue Moon's case referred to supra observed that the omission on the part of the Assessing Officer to issue a Notice under Section 143(2) of the Act is not a procedural irregularity and is not curable. 43. The requirement of a Notice under Section 143(2) of the Act cannot be dispensed with. The Division Bench of the Allahabad High Court also observed that 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 and that this defect in regard to the assumption of jurisdiction cannot be cured by taking recourse to t....
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....and Section 143(2) of the Act. 49. Section 143(2) of the Act as it stood during the period in dispute and Section 148 of the Act as it stood prior to its substitution before 01.04.2021 does not in any manner further the case of Petitioner. 50. Under Section 148(1) of the Act, a Return filed pursuant to a Notice under Section 148 of the Act is to be treated as a Return required to be furnished under Section 139 of the Act. However, the assessment has to be completed within the limitation prescribed under Section 153(2) of the Act i.e., within the period of nine months from the end of the Financial Year in which Section 148 Notice was issued. 51. In the facts of the present case, there is no dispute that the Petitioner had earlier filed a Return of Income under Section 139(1) of the Act on 31.07.2011, declaring income of only Rs. 8,30,977/- when indeed the Petitioner had received a sum of Rs. 42,65,000/- towards "non-compete fee" and a sum of Rs. 2,00,00,000/- on 04.11.2010, directly from M/s.Edserve Soft Systems Limited after the assets of M/s.Smartlearn Edutech Private Limited was transferred to former. 52. The amount that was payable for the sale of assets of M/s.Smart....
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.... of the Act. However, in his Letter dated 22.05.2018, the Petitioner requested the Respondent to consider his Return dated 22.05.2018 as a Return filed in response to the Notice under Section 148 of the Act. 59. Section 143 of the Act applies to Return filed under Section 139 or a Return filed in response to a Notice under Section 142(1) of the Act. A Return filed pursuant to Section 148 Notice is deemed to be a Return filed under Section 139 of the Act. 60. The scope for issuance of Section 143(2) Notice will arise only where the Assessing Officer considers it "necessary" or "expedient" as is evident from a reading of Section Section 143(2) of the Act. 61. For the sake of clarity, Section 143(2) of the Act is reproduced below:- "143. Assessment: (1) ..... (2) 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....
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....ment, Reassessment or Recomputation under Section 147 of the Act has to be passed within nine months from the end of the Financial Year in which the Notice under Section 148 of the Act was served i.e., on or before 31.12.2018. 66. If the Returns under Section 148(1) of the Act is said to have been filed on 22.05.2018 based on the said Letter, it is to be treated as if it were a Returns required to be furnished by the Petitioner under Section 139 of the Act, a Section 143(2) Notice ought to have been issued latest by 30.09.2019 i.e., after the due date for passing the Assessment Order on 31.12.2018 in terms of the limitation under Section 153(2) of the Act. This is evident from a reading of Section 148 of the Act as it stood during the period in dispute. 67. Thus, an anomalous situation arises, as in the present case, after a Section 148 Notice of the Act was issued, the Department could not have issued a Notice under Section 143(2) of the Act either after the date of the Revised Return was filed on 11.09.2012, or before the expiry of limitation for passing Orders under Section 147 read with Section 153(2) of the Act i.e., 31.12.2018 when the date of Revised Return i.e., Lette....
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.... Thus, it has to be held that the procedure prescribed under Section 143(2) of the Act is not mandatory and it has to be issued only where the Assessing Authority or the Assessing Officer as the case may be considers it "necessary" or "expedient" to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid tax in any manner. That apart, the Petitioner has not filed a Revised Return as is contemplated under Section 148 of the Act rather the Petitioner has merely reiterated the Revised Return that was filed on 11.09.2012. 74. The argument of the Petitioner that the reasons for reopening the assessment was different from the ultimate finding in the Impugned Assessment Order also cannot be countenanced. 75. Although pursuant to the issuance of Section 148 Notice, the Petitioner was asked to furnish the details of "non-compete fee" during the course of reassessment. It is noticed that the Petitioner claimed excessive loss to the tune of Rs. 27,97,576/- against the said income. There is a direct nexus between the reasons for reopening and the disallowance made in the Order passed under Section 147 of the Act. Thereafter, the Pet....