INCOME TAX OFFICER, WARD 3(1), DELHI, DELHI V. ARTISTIC FINANCE PRIVATE LIMITED, DELHI

ITA 2650/DEL/2023

AI Insights

The case involves an appeal by the Income Tax Officer (ITO) against Artistic Finance Pvt. Ltd., challenging the order of the Commissioner of Income Tax (Appeals) which had reversed the additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The primary legal contention was the non-issuance of a notice under Section 143(2) before the re-assessment order was passed. The Tribunal examined whether the procedural requirements for issuing notices were met and whether the absence of a notice under Section 143(2) affected the validity of the re-assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314461 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Other Referred Cases: Ranbaxy Laboratory Ltd. vs CIT, PCIT vs Dart Infrabuild (P.) Ltd., Principal Commissioner of Income-tax v. Shri Jai Shiv Shankar Traders (P.) Ltd., CIT v. Rajeev Sharma, CIT v. Salarpur Cold Storage (P.) Ltd., DIT v. Society for Worldwide Interbank Financial Telecommunications, Vision Inc., Hotel Blue Moon, Sapthagiri Finance & Investments v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT KUMAR
• Assessee Lawyers: SURESH GUPTA
• Keywords: Reassessment proceedings; Block assessment; Rectification of order; Reason to believe; Procedural lapse
• Section: 148; 143(3); 142(1); 68; 6

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “A” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.2650/Del/2023 [Assessment Year : 2014-15] ITO Ward-3(1) New Delhi vs Artistic Finance Pvt. Ltd. 100/28, Shiva Tower Rajapur, Sector-9, Rohini Delhi-110085 PAN-AAACA0546Q APPELLANT RESPONDENT Revenue by Shri Ravi Kant Kumar Chaudhary, Sr. DR Assessee by Shri Suresh Gupta, CA Date of Hearing 28.04.2025 Date of Pronouncement 08.05.2025 ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal has been filed at the instance of the Revenue seeking to assail the First Appellate order dated 06.06.2023 passed by Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 26.12.2018 passed u/s 144/147/148 of the Act pertaining to assessment year 2014-15. 2. As per the grounds of appeal, the Revenue has challenged the reversal of additions of INR 2,74,71,418/- made by the AO under s. 68 of the Act. In the Revenue’s appeal, the assessee has filed application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 (“the Rules”) to support the order of CIT(A) by raising following points:- (i) No notice under s. 143(2) was issued before passing the re-assessment order against the Return of Income filed in response to notice issued under s. 148 of the Act. ITA No.2650/Del/2023 Page | 2 (ii) The underlying order of re-assessment is not sustainable in law in the absence of any additions for which the case was re-opened. The additions on the basis of reasons recorded do not survive after the rectification order passed by the AO dated 19.03.2020 and hence, other additions made dehors the reasons recorded are unsustainable in law in view of the judgement rendered in the case of Ranbaxy Laboratory Ltd. vs CIT 336 ITR 136 (Delhi High Court). (iii) The re-assessment order is not sustainable in law in the absence of any application of mind by the sanctioning authority under s. 151 of the Act. 3. To support the aforesaid points raised in application filed under Rule 27 of the Rules, the Ld. Counsel for the assessee referred to para 3 of the assessment order during the re-assessment proceedings and submitted that tabulations made by the AO includes issue of notice dated 29.10.2018 under s. 143(2) of the Act but however, no such notice was actually issued by the AO in reality. As a matter of fact, on 29.10.2018, notice under s. 142(1) of the Act was issued without issuance of any notice under s. 143(2) of the Act. This fact of issuance of notice under s. 142(1) and non-issuance of notice under s. 143(2) of the Act is discernible and verifiable from ‘Screenshot of e-proceedings portal’ which shows that on 29.10.2018, no notice other than notice under s. 142(1) was issued. 3.1. This grievance was raised before the CIT(A). The CIT(A) however rejected the objection of the assessee for the reason that since the assessee has attended the re-assessment proceedings, the question of non-issuance of notice do not survive. The CIT(A) also rejected the objection for reason that the assessee has not raised such objection of non-issuance of notice under s. 143(2) of the Act before the AO. 3.2. The Ld. Counsel for the assessee pointed out that once the factum of non-issuance of notice under s. 143(2) is ascertainable and established, mere participation of the assessee in the re-assessment proceedings would not cure the substantive defect of non- issuance of notice under s. 292BB of the Act. The Ld. Counsel for the assessee relied upon the judgement rendered in the case of PCIT vs Dart Infrabuild (P.) Ltd. [2023] 118 CCH 174 (Delhi High Court) judgment dated 17.11.2023 for the proposition that it was incumbent upon the ITA No.2650/Del/2023 Page | 3 AO to mandatorily issue notice under s. 143(2) of the Act on Return of Income having been filed by the assessee consequent upon notice issued under s. 148 of the Act. The Ld. Counsel for the assessee inter-alia observed that firstly, the screenshot clearly demonstrates mere issuance of notice under s. 148 and 142(1) of the Act only without any reference to issue of notice under s. 143(2) of the Act; secondly, there is no evidence that such so-called notice under s. 143(2) claimed to have been issued by AO has been actively served upon the assessee at any point of time. 3.2. The AO claims to have generated notice dated 26.10.2018 under s. 143(2) of the Act however, there is no evidence that any such notice has been issued and served. The Ld. Counsel alleged that notice under s. 143(2) might have been ‘prepared’ but neither issued nor served as self evident from digital records maintained by the Department. 4. The Ld. Sr. DR for the Revenue relied upon the assessment order. 5. We have carefully considered the rival submissions and perused the material available on record. As noted in the preceding paragraphs with reference to application under Rule 27 of the Rules, it is the case of the assessee that the factum of non-issuance of notice under s. 143(2) of the Act is ascertainable and demonstrable from ‘Screenshot of e-proceedings portal’ and absence of any proof of actual service of notice upon the assessee company, the ratio of judgment rendered in the case of PCIT vs Dart Infrabuild (P.) Ltd. (Supra) would thus apply squarely. 5.1. It will be apt to render to the judgement rendered in the case of PCIT vs Dart Infrabuild (P.) Ltd. (supra) wherein the identical controversy has been addressed is reproduced hereunder for ready-reference:- 13.2 “Since the objection was taken before the completion of the assessment/reassessment proceedings, in our opinion, the provision of Section 292BB would have no application. 14. Although we may note that submissions based on Section 292BB were not advanced on behalf of the appellant/revenue before the Tribunal, in our opinion, since it was a pure legal submission, that by itself, cannot come in the way of the appellant/revenue. However, in this case, the provision can have no applicability as the respondent/assessee ITA No.2650/Del/2023 Page | 4 objected to the notice under Section 148 not being directed to the correct address. 15. This brings us to the second aspect of the matter, i.e., the consequences of the failure of the appellant/revenue to issue notice under Section 143(2) of the Act before framing the assessment order. Concededly, the appellant/revenue did not issue a notice under Section 143(2) of the Act, although it had on record the ROI filed by the respondent/assessee for the AY in issue, i.e., 2010-11. The return was, concededly, filed on 04.12.2015. This return was considered while framing the assessment under Section 147/144 of the Act. The only reason furnished for not issuing a notice under Section 143(2) of the Act is that the ROI was not filed within the thirty (30) days provided via the notice dated 30.03.2015 issued under Section 148. This argument does not impress us because if we were to hold [as we have], that the said notice was directed towards the wrong address, the respondent/assessee could have not adhered to the timeline provided in the said notice. 15.1 The respondent/assessee became aware of the Section 148 notice being issued after it received the notice dated 12.06.2015 under Section 142(1) of the Act. The fact that the respondent/assessee had filed an ROI on 04.12.2015 is not disputed. The fact that this ROI, as noticed above, was taken into account is also not in dispute. Therefore, in our opinion, before framing an assessment order, the AO ought to have issued a notice under Section 143(2) of the Act. The submission advanced on behalf of the appellant/revenue that, while it could consider the invalid return while framing the assessment order, it was not obliged to issue a notice under Section 143(2) of the Act because it was not filed within the timeframe given in the Section 148 notice is untenable in law, since the ROI, which was belated, was considered by the AO while carrying out the assessment. 15.2 The absence of notice, under Section 143(2), impregnates the proceedings with a jurisdictional defect and, hence, renders it invalid in the eyes of the law. This position is no longer res integra, as demonstrated by the observations made in Principal Commissioner of Income-tax v. Shri Jai Shiv Shankar Traders (P.) Ltd. (2015) 64 taxmann.com 220 (Delhi): \"12. The narration of facts as noted above by the court makes it clear that no notice under section 143(2) of the Act was issued to the assessee after December 16, 2010, the date on which the assessee informed the Assessing Officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Act. 13. In DIT v. Society for Worldwide Interbank Financial Telecommunications [2010] 323 ITR 249 (Delhi), this court invalidated a reassessment proceeding after noting that the notice under section 143(2) of the Act was not issued to the assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under section 143(2) of the Act only ITA No.2650/Del/2023 Page | 5 after the return filed by the assessee is actually scrutinised by the Assessing Officer. 14. The interplay of sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court in CIT v. Rajeev Sharma [2011] 336 ITR 678 (All) it was held that a plain reading of section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act. It was observed (page 687): \"The provisions contained in sub-section (2) of section 143 of the Act is mandatory and the Legislature in its wisdom by using the word „reason to believe' had cast a duly on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under section 148, it shall be mandatory for the Assessing Officer to serve a notice under sub-section (2) of Section 143 assigning reason therein . . . In absence of any notice issued under sub-section (2) of section 143 after receipt of fresh return submitted by the assessee in response to notice under section 148, the, entire procedure adopted for escaped assessment, shall not be valid.\" 15. In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All), it was held as under: \"10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from April 1, 2008. Section 282BB 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 manner. The proviso to section 292BB of the Act, however, carves out an exception to the effect that the section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292BB of the Act cannot obviate the requirement or complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment ITA No.2650/Del/2023 Page | 6 under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdiction itself would be invalid.\" 16. In the same decision in Salarpur Cold Storage (P.) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not \"a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.\" 17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 341/210 Taxman 78 (Mad.) (Mag.). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. However, the Assessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act. Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. It was observed that: \"Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the 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 ITA No.2650/Del/2023 Page | 7 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-assessment order, cannot be condoned by referring to Section 292BB of the Act. 19. The resultant position is that as far as the present case is concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re- assessment.\" [Emphasis is ours] 5.2. The burden is on Revenue to prove the service of notice under s. 143(2) of the Act. Digital records suggests otherwise. The factum of actual service of notice under s. 143(2) is not supportable by any evidence. The burden on the Revenue is not discharged. In this view of the matter, the ratio of judgement in PCIT vs Dart Infrabuild (P.) Ltd. (supra) would squarely apply. Hence the re- assessment order stands vitiated in law and rendered nonest. We are thus not inclined to engage ourselves in other legal and factual aspects raised in application under Rule 27 of the Rules on behalf of the assessee and objections raised by the Revenue on merits of the additions which were discredited by the CIT(A). 6. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 08th May, 2025. Sd/- Sd/- (VIMAL KUMAR) JUDICIAL MEMBER (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER *Amit Kumar, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "