INCOME TAX OFFICER, SURAT V. GAUTAM DHARMICHAND JAIN, SURAT

ITA 261/SRT/2024

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals), which had quashed the assessment order due to the non-issuance of a notice under section 143(2) of the Income Tax Act. The assessment in question was for the assessment year 2012-13, arising from an earlier assessment order. The Revenue contended that the assessee's return, filed in response to a notice under section 148, was non-est as it was filed beyond the time limit specified in the notice. The tribunal, however, upheld the CIT(A)'s decision, noting that the return was not treated as invalid by the Assessing Officer and that the mandatory notice under section 143(2) was not issued, which is essential for a valid assessment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29803 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Next Hearing Date: 09-10-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 06-03-2024
• Other Referred Cases: CIT Vs Premium Capital Market and Investment Limited, Madhya Bharat Energy Corporation Limited, Ram Narain Bansal, CIT Vs Panchwati Motors, K.J Thomas, CIT Vs Areva T & D Limited, ACIT Vs Hotel Blue Moon, CIT Vs Nagendra Prasad, Chand Bihari Agarwal Vs CIT, PCIT Vs Davendra Nath G Chaturvedi, PCIT Vs Merck Bioscience Limited, Ajay Kumar Muraraka Vs ACIT, Mukesh Mahavirprasad Vs Sen, PCIT Vs Silverline, ITO vs. Lakhmani Mewal Das
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: PRAKASH JHUNJHUNWALA; PAWAN JAGETIA
• Keywords: Set aside; Unexplained cash credit; Procedural lapse
• Section: 148; 292BB; 143(2); 192; 139(1); 68; 113; 13

Judgement Text

" आयकर अपीलीय अिधकरण, सूरत Ɋायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 261/SRT/2024 (AY 2012-13) (Hearing in Physical Court) Income Tax Officer, Ward-1(1)(4), Surat, Room No. 113, Aaykar Bhawan, Majura Gate, Surat- 395001 बनाम Vs Gautam Dharmichand Jain 101, Aakash Ganga Mala Sheri, Raghunathpura, Surat-395003 [PAN : ABBPJ 5222 B] अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Prakash Jhunjhunwala, CA & Shri Pawan Jagetia, CA राजˢ की ओर से /Revenue by Shri Ritesh Misra– CIT-DR अपील पंजीकरण/Appeal instituted on 07.03.2024 सुनवाई की तारीख/Date of hearing 09.10.2024 उद ्घोषणा की तारीख/Date of pronouncement 29.10.2024 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals)[for short to as “NFAC/Ld.CIT(A)] dated 09.01.2024 for assessment year (AY) 2012-13. which in turn arises out of assessment order dated 30.12.2019. The Revenue has raised following grounds of appeal: “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the assessee has failed to comply with the terms of noticed issued u/s 148 of the Act and filed return of income after considerable lapse of time as allowed in notice u/s 148 of the Act, therefore the return of income filed by the assessee is non-est and hence the Assessing Officer has rightly not issued and served notice u/s 143(2) of the Act. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the AO failed to issue notice to the assessee u/s 143(2) of the Act against the return filed in response to the notice u/s 148 of the Act, even ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 2 though the assessee has filed the return of income on 18.11.2019 i.ee., beyond the time limit allowed by the AO which cannot be treated as valid return of income. 3. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) is justified in ignoring the facts that the assessee has participated in the assessment proceedings and never raised the issue of issuing and serving of notice u/s 143(2) of the Act and hence in the light of various judicial pronouncements, the assessment order was validly passed. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee only on technical grounds and not adjudicating the issue of addition made by AO of Rs.12,43,80,854/- on account of unexplained cash credits u/s 68 of the Act as the assessee has failed to prove the genuineness of the transactions found in his bank accounts. Thus, the order of CIT(A) is not as per law and deserves to be set aside. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has ignored the fact that in the case of same assessee for AY 2011-12, on the same issue, Ld.CIT(A)/NFAC has upheld the addition made by the AO vide order dated 30.1.2021 by observing that assessee has failed to prove the transactions were genuine by cogent evidences and hence, held that the additions are accordance with the provisions of law. 6. It is therefore prayed that the order of the Ld. CIT(a) may kindly be set aside and that of the Assessing Office be restored. 7. The appellant craves leave to add, alter, amend and / or withdraw any grounds of appeal either before or during the course of hearing of the appeal.” 2. We have heard the rival submissions of both the parties and have gone the orders of lower authorities carefully. The ld Commissioner of Income tax / departmental representative (ld CIT-DR) for the revenue submits that ld CIT(A) quashed the assessment order by holding that notice under section 143(2) was not issued by the Assessing Officer (AO) before passing assessment order. The assessee has not filed return of income as per the time allowed in notice under 148, thus, the return of income filed beyond the time ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 3 allowed in notice under section 148 is non-est. The AO has rightly not issued notice under section 143(2). Objection against reopening was not raised by assessee. The assessee has not raised such objection at the time of assessment. The assessee duly participated in the assessment proceeding without raising any such objections. The assessee has raised legal ground of appeal for the first time before CIT(A), therefore, such ground of appeal was not to be entertained for admission. The ld CIT-DR for the revenue submits that there are decisions of various High Court in favor of revenue holding that when the assessee participated in the assessment proceedings, non-issuance of notice under section 143(2) is mere irregularity, particularly when the assessee availed full opportunity during assessment. The non-issuance of notice under section 143(2) is mere irregularity and not illegality. To support his submissions, the ld CIT-DR for the revenue relied on the following decisions;  CIT Vs Premium Capital Market and Investment Limited (2006) 151 Taxman 194 (MP),  Madhya Bharat Energy Corporation Limited, 337 ITR 389 (Delhi),  Ram Narain Bansal (2011) 13 taxmann.com 216 (P& H),  CIT Vs Panchwati Motors (2011) 200 taxmann.com 216 (P&H),  K.J Thomas (2008) 301 ITR 301(Kerla) and  CIT Vs Areva T & D Limited (2010) 327 183 (Mad). On merit, the ld CIT-DR of revenue submits that once the assessee participated in the proceeding and contested such assessment proceeding, and has not shown whether he has suffered any prejudice for such non-issuance of notice. The ld CIT-DR for the revenue finally submits that order of ld CIT(A) may be set aside and matter may be restored back to his file to decide the grounds of appeal raised by assessee against the addition under section 68. ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 4 3. On the other hand, the ld authorised representative (ld AR) of the assessee supported the order of ld CIT(A). The ld AR of the assessee submits that the assessee filed his return of income under section 139(1) on 29.09.2022 declaring income of Rs. 5,87,710/-. The assessee further in response to notice under section 148, filed his return of income on 28.11.2019. the time limit for passing assessment was up to 31.12.2019. Thus, the AO was having sufficient time for issuing notice under section 143(2). Despite filing return of income, the AO has not mentioned such facts in assessment order that assessee has filed return of income. The AO after filing return of income issued detailed show cause notice to the assessee vide notice dated 23.12.2019 and directed to submit reply on or before 26.12.2019. though, the AO allowed very short period to respond, yet the assessee filed his reply as accepted by AO in para 6.2 of assessment order. The AO despite taking reply of assessee on his record passed his order under section 144. Before ld CIT(A) the assessee again filed copy of return of income and raised legal issue that the assessee has in fact filed return of income in response to notice under section 148. The ld CIT(A) called remand report from AO. The AO failed to furnish his remand report despite repeated directions of ld CIT(A). the ld CIT(A) also sent notice to the AO through range head for furnishing his remand report. The ld AR of the assessee invited our attention on para 6.2 of order of ld CIT(A) wherein all such facts are duly recorded. On one hand, the AO not responded to various notices and reminders issued by ld CIT(A) to give his comment on the legal issue and on other hand, now raised issue that non- issuance of notice under section 143(2) is only irregularity. The Hon’ble Apex Court in ACIT Vs Hotle Blue Moon (2010) 188 Taxman 113(SC) clearly held that ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 5 AO must necessarily issue notice under section 143(2). It was also held that omission on the part of AO to issue notice under section 143(2) cannot be a procedural irregularity and same is not curable and not to be dispense with. 4. To support his contentions, the ld AR for the assessee relied on the following decisions;  ACIT Vs Hotel Blue Moon (2010) 188 Taxman 113 (SC),  CIT Vs Nagendra Prasad (2023) 156 taxmann.com 19 (Patna),  Chand Bihari Agarwal Vs CIT (2023) 154 taxmann.com 245(Patna),  PCIT Vs Davendra Nath G Chaturvedi (2017) 83 taxmann.com 141 (Gujarat),  PCIT Vs Merck Bioscience Limited 106 taxmann.com 399 (Gujarat)  Ajay Kumar Muraraka Vs ACIT in ITA No.56 &202/Ran/2019 dated 13/12/2023,  Mukesh Mahavirprasad Vs Sen in ITA No.106/Srt/2017,  PCIT Vs Silverline 65 taxmann.com 137 (Delhi)  ITO vs. Lakhmani Mewal Das – 103 ITR 437 (SC) 5. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by the parties. First, we propose to consider the validity order of ld CIT(A), on the legal issue of non-issuance of notice under section 143(2) before passing assessment order by AO. We find that this ground of appeal is purely legal in nature which goes to jurisdiction of Assessing Officer. It is settled law that legal issue can be raised even at this stage of appeal. We find that notice under section 148 was issued to the assessee on 30.03.2019 to file return of income within 30 days of receipt of such notice. Though, the assessee admittedly not filed return of income within time allowed in notice under section 148. It is matter of record that assessee filed return of income on 18.11.2019, as it has been accepted by ld CIT(A) in his finding. We find that neither such return of income filed on 18.11.2019, was neither rejected by AO, nor such return was ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 6 treated as invalid. We find that the AO has even not mentioned in assessment order, if any return in response to notice under section 148 is filed. Though, the assessee made compliance during assessment proceedings, yet the assessment was completed under section 144. We further find that on the submissions of assessee that the assessee filed return of income though not as per time allowed in notice under section 148, the ld CIT(A) called remand report from AO. The AO despite repeated notices and reminder not furnished his remand report for the reason better known to him. The ld CIT(A) ultimately presumed that claim of the assessee is correct. Such finding of ld CIT(A) is not assailed by AO in the present appeal. 6. We find that jurisdictional High Court in case of PCIT vs. Devendranath G. Chaturvedi, (2017) 83 taxmann.com 141 (Guj.) held that where return of income for blocked period filed by assessee belatedly was not discarded as invalid, in such case, if AO wanted to frame assessment at higher income, he was bound to issue notice under section 143(2). Further, in case of PCIT vs. Marack Biosciences Limited, (2019) 106 taxmann.com 399 (Guj.) held that non-issuance of notice under section 143(2) is not a procedural irregularity and same cannot be cured under section 292BB. Hon’ble Patna High Court in CIT vs. Nagendra Prasad, (2023) 156 taxmann.com 19 (Patna) also held that where notice was issued by Assessing Officer under section 148, requiring the assessee to file return within 30 days, but return was filed after eight and a half months, since return was filed by assessee in response to said notice though delayed, there should have been a notice issued under section 143(2) as requirement of issue notice could not be dispensed with. Hon’ble Delhi High Court in case of PCIT vs. Silver Line, (2016) ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 7 383 ITR 455 (Delhi) / 65 taxmann.com 137 (Delhi) also held that merely because assessee participated in proceeding pursuance to notice under section 148, it would not obviate mandatory requirement of Assessing Officer to issue a notice under section 143(2) before finalizing order of assessment. We further find that Division Bench of Surat Tribunal in case of ITO vs. Mukesh Mahavirprasad Singh, (2021) 131 taxmann.com 348 (Surat – Trib) also held that issuance of notice under section 143(2) is a prerequisite of assuming jurisdiction under section 147/148 and section 292BB does not cure defect of non-issuance of notice under section 143(2). 7. So far as reliance on various case laws by ld CIT-DR of the revenue is concerned, we find that all such decisions are of non-jurisdictional High Courts, with utmost regards to ratio of such decision, we are of the view that when there are contrary decisions of various High Court on same issues, the decisions of jurisdictional High Court have binding precedent on this bench. Thus, all such decisions are not helpful to the revenue. Even otherwise when there are conflicting decisions of different Hon'ble High Courts on similar issue, as per the decision of Hon'ble Apex Court in the case of CIT Vs Vegetable Products, 88 ITR 192 (SC), the decision favourable to the assessee may be followed. However, on the issue in our hand, decision of jurisdictional High Court, is available as mentioned above. 8. Now again turning to the facts of case in hand qua issue under discussion, we find that notice under section 143(2) was never issued by AO. Thus, considering the aforesaid legal and factual discussion, we are of the view that in absence of issuance of notice under section 143(2), the assessment order is invalid. Hence, the additional ground of appeal is allowed. Further considering the facts that we ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 8 have allowed legal issue in favour of assessee, therefore, adjudication on other grounds of appeal raised by the revenue have become academic. 9. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 29/10/2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) लेखा सद˟/Accountant Member Ɋाियक सद˟/Judicial Member सूरत / Surat Dated: 29/10/2024 Self/ Amit Ranjan Sr.P.S* आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT  आयकर आयुƅ (अपील)/ The CIT(A)  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "