ITO, Ward - 2(1), , Kolkata V. M/s. Mahavir Vinimay Pvt. Ltd., Kolkata

ITA 1114/KOL/2019

AI Insights

The case involves the revenue's appeal against the order of the CIT(A) which quashed the assessment order passed by the Assessing Officer. The original assessment was reopened following directions under section 263 of the Income Tax Act, leading to a fresh assessment order that added a substantial amount as bogus share capital and premium. The CIT(A) quashed this order due to the absence of a notice under section 143(2) during the reassessment proceedings, a requirement contested by the revenue. The Tribunal, after considering legal precedents and the specifics of the Income Tax Act, found that a notice under section 143(2) was not mandatory in this context and thus set aside the CIT(A)'s order, remanding the case for a decision on merits.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 136122 (ITAT-KOLKATA)
• Duration Of Justice: 12 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 12-12-2022
• Assessment Year: misc
• Appeal Filed On: 09-04-2010
• Other Referred Cases: CIT vs. Jet Airways, CIT Vs. Sukhini P. Modi, DCIT Vs. Mahi Valley Hotels & Resorts, CIT Vs. Hotel Blue
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Reassessment proceedings; Set aside
• Section: 147; 148; 263; 139; 143(3); 142(1); 153A; 143(1); 250; 143(2); 139(1); 113; 153C

Judgement Text

। आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJPAL YADAV, HON’BLE VICE PRESIDENT AND SHRI GIRISH AGRAWAL, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 I.T.O., Ward – 2 (1), Kolkata Vs M/s. Mahavir Vinimay Private Limited 16, G.C. Avenue Kolkata - 700013 [PAN : AAFCM3833R] सुनवाई कᳱ तारीख/Date of Hearing : 15/12/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 20/12/2022 आदेश/O R D E R PER SHRI RAJPAL YADAV, VICE PRESIDENT: The present appeal is directed at the instance of the revenue against the order of the Learned Commissioner of Income Tax (Appeal) - 1, Kolkata (hereinafter the “ld. CIT(A)”) dt. 06/02/2019, passed u/s 250 of the Income Tax Act, 1961 (“the Act’), for Assessment Year 2008-09. 2. The revenue has raised three grounds of appeal. However, in brief its grievance is that the ld. CIT(A) has erred in quashing the assessment order by holding that notice u/s 143(2) of the Act was not issued by the Assessing Officer in the assessment proceedings instituted on the directions of the ld. Commissioner, issued u/s 263 of the Act. 3. Brief facts of the case are that the assessee has filed its return of income on 05/09/2008 declaring Nil income. This return was processed u/s 143(1) of the Act and it was accepted. Later on it came to the notice of the revenue that the assessee company was incorporated on 28/01/2008 and अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : None Revenue by : Shri G. Hukugha Sema, Addl. CIT, D/R I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 M/s. Mahavir Vinimay Private Limited 2 during financial year 2007-08 relevant to the impugned Assessment Year. It has raised share capital of Rs.22,50,00,000/- which included share value of Rs.10/- and a premium of Rs.490/- per share. Thereafter, the assessment was reopened by issuing notice u/s 148 of the Act, but ultimately, the Assessing Officer did not make addition of the above amount and passed the assessment order u/s 147 r.w.s. 143(3) of the Act on 28/04/2010. 4. The ld. Commissioner took cognizance u/s 263 of the Act and set aside this assessment order. He relegated the assessment proceedings to the office of the Assessing Officer for a fresh assessment order. In pursuance of the directions issued u/s 263 of the Act, by the ld. Commissioner under supervisory powers, the ld. Assessing Officer has passed a fresh assessment order on 28/03/2014. It is a well-reasoned order running into 7 pages as against one page order passed in the first round. The Assessing Officer has made addition of Rs.22,50,00,000/- by treating the said alleged share capital as well as share premium received by the assessee as bogus. 5. Dissatisfied with this assessment order, the assessee carried the matter in appeal before the ld. First Appellate Authority. The ld. CIT(A) quashed this assessment order vide its order dt. 06/02/2019, impugned in the present appeal. 6. In response to the notice of hearing, no one has come present on behalf of the assessee. The ld. Commissioner has held that notice u/s 143(2) of the Act was required to be issued by the Assessing Officer while passing the assessment order in pursuance of 263 order. The ld. Commissioner relied upon the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways reported in 239 CTR 113 (Bom.). The ld. D/R contended I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 M/s. Mahavir Vinimay Private Limited 3 that no notice is required to be served upon the Assessing Officer u/s 143(2) in an assessment proceeding instituted in pursuance of 263 directions. 6.1. We directed Shri K.M. Roy, Advocate, present in the Court, to assist on this issue because it is a legal issue and no one is appearing on behalf of the assessee. The hearing was adjourned from 13/12/2022 to 15/12/2022. Shri K.M. Roy, did a research and ultimately placed on record a synopsis containing brief note on the scheme of Income Tax proceedings in such type of circumstances. That note read as under:- “1. Broadly scheme of the Income Tax Act permits assessment in three formats; (i) acceptance of returned income, (ii) acceptance of returned income subject to permissible adjustments under section 143(1) of the Act, and (iii) a scrutiny assessment under section 143(3) of the Act. It is pertinent to note that where an assessee has taxable income, he is supposed to file his returned income under section 139(1) of the Act within the due date provided under this clause. If an assessee does not file his return, and an information came to the possession of the Revenue about the assessable income in the hands of such person, then before the end of the relevant assessment year i.e. assessment year in which due date for filing of the return came to an end, the AO can issue a notice under section 142(1) of the Act directing such person to file return of income in the time given in the notices. If the relevant assessment year came to an end and no such notice was issued upon an assessee, but Revenue has been possessing information about the taxable income of an assessee, then during time limit provided under section 149 of the Act, the AO can record reasons under section 147 of the Act, about his satisfaction for such escaped income, and thereafter, issue notice under section 148 after taking procedural approval from the competent authorities. 2. The last resort with the Revenue is that search conducted upon the premises of the assessee, and thereafter notice under section 153A is being issued inviting an assessee to file return of the undisclosed income unearthed during the course of search. I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 M/s. Mahavir Vinimay Private Limited 4 3. The next category of the assessees are those with regard to whom documents pertaining to/ belonging to were found during the course of search at the premises of other persons, then the AO of the searched person would record his satisfaction that income assessable in the hands of a person upon whom no search was carried out, and transmit those papers to the AO having jurisdiction over third person i.e. person upon whom no search was carried out. Notice under section 153C would be issued upon such person, and he be directed to file return within given period in the notice. 4. In all these proceedings before scrutinizing the return, a notice under section 143(2) is mandatory. In other words, either for the purpose of scrutinizing the return filed under section 139(1) in response to a notice under section 148 or in response to the notice under section 153A or 153C; a notice under section 143(2) is mandatory if an assessee has filed return in the time frame given under section 139(1) of the Act or within the time limit given in the notices. 5. Thus, there is no dispute with regard to the proposition that notice under section 143(2) is mandatory. A reference for buttressing this conclusion can be made to the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Sukhini P. Modi, 367 ITR 682 (Guj) and DCIT Vs. Mahi Valley Hotels & Resorts 287 ITR 360 (Guj) as well as the decision of Hon'ble Supreme Court in the case of CIT Vs. Hotel Blue, 321 ITR 362. A perusal of section 142(1) would indicate that it authorizes the AO to issue a notice upon the assessee who has not filed return under section 139(1) and due date for filing such return has been expired. In such cases, as per sub-clause (i), the ld.AO would require such assessee to file return of his income or the income of any other person in respect of which he is assessable under this Act. 6. In other words, before commencing an inquiry for collecting information for the purpose of scrutinizing the return, he is required to first provide an opportunity to the assessee to file his return under section 142(1) of the Act. 7. After filing of such return, a notice under section 143(2) would be given. In a given case, in spite of opportunity given by the AO an assessee may fail to comply with the notice issued under section 142(1) and did not file the return. In such cases no notice under section 143(2) would be required for scrutinising the return. 8. In case of set aside assessment proceedings u/s 263, the Assessing officer has to pass the order in accordance with the directions given by PCIT. There I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 M/s. Mahavir Vinimay Private Limited 5 is no requirement of filing fresh return. The return already filed earlier had been scrutinised for which notice u/s 143(2) had been admittedly been issued. Accordingly there is no requirement to submit fresh notice u/s 143(2) again while taking up the assessment u/s 263, since the original return had already been acted upon.” 6.2. Apart from the above, we have gone through the record carefully and we deem it appropriate to take note of Section 143(2) of the Act, which reads as under:- “(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 51 , as the case may be, if, considers it necessary or expedient 52 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 52 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” 6.2.1. A bare perusal of the above Section would indicate that basically for the purpose of determining the jurisdictional aspect it contains two compartments, namely, (a) it should be issued within the time limit stipulated in the Section and (b) it provides that where a return has been furnished u/s 139 of the Act, or in response to a notice u/s 142(1) then, 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 any evidence on which the assessee may rely in support of the return. In other words, it is the first opportunity to the assessee to submit the evidence in support of the claim made in the return. I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 M/s. Mahavir Vinimay Private Limited 6 7. The expression “any evidence on which the assessee may rely in support of the return” contemplates that something should be given in support of the return. The ld. First Appellate Authority has relied upon the judgment of the Hon’ble Bombay High Court in the case of Jet Airways (supra). In this case a return was filed in response to the notice issued u/s 148 of the Act. In other words, it is a reassessment proceedings where a fresh return is being invited by the Assessing Officer. Thus, wherever any return is being invited either u/s 142(1), 148, 153A or 153C or a voluntary return by the assessee u/s 139(1) of the Act, before taking cognizance of such a return for the purpose of scrutiny, a notice u/s 143(2) of the Act is must. There is no dispute with regard to the above proposition. Shri K.M. Roy, has made reference to large number of decisions in paragraph no. 5 of his synopsis extracted (supra). However, a proceeding instituted at the level of the Assessing Officer by exercising the revisionary powers of a higher authority, namely, ld. Commissioner u/s 263, no fresh return is either invited from the assessee nor the assessee has any right to file a return afresh and, therefore, no notice u/s 143(2) of the Act is required to be issued to the assessee. The Assessing Officer will be at liberty to initiate an assessment by issuing a questionnaire u/s 142(1) of the Act. The ld. Commissioner has erred in placing its reliance upon the judgment of the Hon’ble Bombay High Court in the case of Jet Airways (supra) and making reference to section 153, 147 etc. for harboring the belief that notice u/s 143(2) of the Act is also to be issued in an assessment proceedings commenced on the directions of the Commissioner issued u/s 263 of the Act. This order is not sustainable. I.T.A. No. 1114/Kol/2019 Assessment Year: 2008-09 M/s. Mahavir Vinimay Private Limited 7 8. Accordingly, we set aside the impugned order and restore the issues to the file of the ld. First Appellate Authority for re-adjudication because he has not decided the issues on merits. 9. In the result, appeal of the revenue is allowed for statistical purposes. Order pronounced in the Court on 20 th December, 2022 at Kolkata. Sd/- Sd/- (GIRISH AGRAWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT Kolkata, Dated 20/12/2022 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata