NIKESH A GADA (HUF), MUMBAI V. ITO 15(2)(2), MUMBAI

ITA 2714/MUM/2014

• Counselvise Citation: 271419914 RSA 2014
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Search and seizure; Assessment record; Block assessment
• Section: 143(3); 142(1); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 2714/MUM/2014 (ASSESSMENT YEAR: 2005-06) NIKESH A. GADA (HUF) VS. INCOME TAX OFFICER -15(2)(2) A-11, SARDAR PATEL SOCIETY NEHRU ROAD, OPP. PETROL PUMP VILE PARLE (E), MUMBAI 400057 MUMBAI PAN - AADHG5425J APPELLANT RESPONDENT APPELLANT BY: SHRI RAHUL SARDA RESPONDENT BY: SHRI SATYAJIT MANDAL DATE OF HEARING: 08.09.2014 DATE OF PRONOUNCEMENT: 08.09.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-26, MUMBAI AND IT PERTAINS TO AY 2005-06. 2. BRIEF FACTS, NECESSARY FOR THE PURPOSE OF DISPOSAL OF THE APPEAL, ARE STATED BELOW. CONSEQUENT TO SEARCH AND SEIZURE ACTI ON UNDER SECTION 132 IN THE CASE OF M/S. MAHASAGAR SECURITIES PVT. LTD. (NO W ALAG SECURITIES PVT. LTD.) IT WAS NOTICED THAT THE ASSESSEE IS ALSO ONE OF THE BENEFICIARIES IN THE ACCOMMODATION BILLS PROVIDED BY THE SAID COMPANY TH ROUGH ITS DIRECTORS SHRI MUKESH M. CHOKSI AND JAYESH K. SAMPAT AND HENCE THE INCOME OF THE ASSESSEE ALSO ESCAPED ASSESSMENT. IN RESPONSE TO TH E NOTICE ISSUED UNDER SECTION 148 OF THE ACT, ASSESSEE, VIDE LETTER DATED 30.06.2011, REQUESTED THE AO TO CONSIDER THE ORIGINAL RETURN OF INCOME FILED AS RETURN FILED IN PURSUANCE OF NOTICE UNDER SECTION 148. THOUGH THE AO ISSUED A NOTICE UNDER SECTION 142(1), THE MANDATORY NOTICE TO BE ISSUED UNDER SEC TION 143(2) WAS OMITTED TO BE ISSUED AND ASSESSMENT WAS COMPLETED BY COMPUTING THE TOTAL INCOME AT ` 2,26,930/- UNDER SECTION 143(3) OF THE ACT R.W.S. 1 47 OF THE ACT. THE CIT(A) HAVING DISMISSED THE APPEAL OF THE ASSESSEE A FURTH ER APPEAL IS FILED BEFORE THE TRIBUNAL. APART FROM THE ORIGINAL GROUNDS ANNEX ED TO FORM NO. 36 ITA NO. 2714/MUM/2014 NIKESH A. GADA (HUF) 2 ASSESSEE RAISED ANOTHER GROUND BEFORE THE TRIBUNAL CHALLENGING THE VALIDITY OF THE ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT ; THE CASE OF THE ASSESSEE IS THAT THE AO HAD NOT ISSUED THE MANDATORY NOTICE UNDER SECTION 143(2) OF THE ACT AND HENCE THE ASSESSMENT MADE BY THE AO IS LIABLE TO BE QUASHED. SINCE THE ISSUE GOES TO THE ROOT OF THE MATTER AND THE FACTS ARE ALREADY ON RECORD, THE ADDITIONAL GROUND IS ADMITTED AND THE L EARNED D.R. IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE, AS AFFIRMED IN TH E AFFIDAVIT, BY VERIFYING THE ASSESSMENT RECORD. THE CASE WAS ACCORDINGLY POSTED FOR HEARING TODAY. 3. AT THE TIME OF HEARING THE LEARNED D.R. FAIRLY CONC EDED THAT NOTICE WAS NEITHER PREPARED NOR ISSUED TO THE ASSESSEE UNDER S ECTION 143(2) OF THE ACT. HE, HOWEVER, CONTENDED THAT THE ASSESSEE COOPERATED WITH THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HENCE ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT SHOULD ONLY BE TREATED AS PROCEDURAL, AND HENCE ASSESSMENT WILL NOT BECOME A NULLITY IN THE LIGHT O F THE PROVISIONS OF SECTION 292B OF THE ACT. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT SECTION 292B IS APPLICABLE ONLY WHEN NOTICE IS ISSUED WHICH CONTAINS A MISTAKE, DEFECT OR OMISSION WHEREAS IN THE INSTANT CASE NO NOTICE AT ALL WAS ISSUED. FURTHER IT WAS SUBMITTED THAT ISSUANCE OF N OTICE UNDER SECTION 143(2) IS MANDATORY; SINCE IT IS A MACHINERY PROVIS ION, FAILURE TO ISSUE SUCH NOTICE WOULD INVALIDATE THE ASSESSMENT PROCEEDINGS. IN THIS REGARD HE RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF ACIT VS. HOTEL BLUE MOON 321 ITR 362. HE ALSO RELIED UPON THE DECISION OF TH E HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRATAPBHAI K. SONI 261 ITR 201 AND AN UNREPORTED DECISION OF THE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. GENO PHARMACEUTICALS LTD. (TA NO. 75, 76, 77 & 78 O F 2012). 5. THE LEARNED D.R. SUBMITTED THAT IN THE CASE OF AREV A T AND D INDIA LTD. VS. ACIT 294 ITR 233 THE HON'BLE MADRAS HIGH C OURT CONSIDERED IDENTICAL ISSUE AND OBSERVED THAT IF THERE IS A VAL ID REOPENING OF ASSESSMENT AND THE ASSESSEE PARTICIPATED IN THE ASSESSMENT PRO CEEDINGS, MERELY BECAUSE THERE ARE PROCEDURAL IRREGULARITIES IN COMP LETING THE ASSESSMENT THE ASSESSMENT WOULD NOT BECOME NULL AND VOID BUT THE A O CAN BE DIRECTED TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO RAISE ALL CO NTENTIONS RELATING TO THE ITA NO. 2714/MUM/2014 NIKESH A. GADA (HUF) 3 REOPENING OF ASSESSMENT AS WELL AS MERITS OF THE CA SE BY REMANDING THE MATTER TO THE FILE OF THE AO. HE MAINLY STRESSED TH AT THE ASSESSEE NEVER RAISED THIS ISSUE EITHER BEFORE THE AO OR BEFORE TH E CIT(A) AND VOLUNTARILY PARTICIPATED IN THE PROCEEDINGS. BECAUSE OF MERE OM ISSION TO FOLLOW THE PROCEDURAL PROVISION THE ASSESSMENT SHOULD NOT BE T REATED AS NULL AND VOID. 6. JOINING THE ISSUE THE ASSESSEE SUBMITTED THAT WHEN A NOTICE IS ISSUED UNDER SECTION 142(1) OF THE ACT AND DIRECTS THE ASS ESSEE TO APPEAR, NON- APPEARANCE MAY RESULT IN PENALTY AND SUMMONS AND HE NCE ASSESSEE HAS NO OTHER ALTERNATIVE BUT TO APPEAR BEFORE THE AO AND C OOPERATE IN THE ASSESSMENT PROCEEDINGS WHEREAS SECTION 143(2) IS A MACHINERY PROVISION WHICH HAS TO BE MANDATORILY FOLLOWED BY THE AO AND SUCH AN IRREGULARITY IS NOT CURABLE. 7. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE RECORD. IN THE CASE OF HOTEL BLUE MOON (SUPRA) THE HON'BLE SUPREME COURT OBSERVED, VIS-A-VIS THE BLOCK ASSESSMENT, THAT NON- ISSUANCE OF NOTICE UNDER SECTION 143(2) CANNOT BE CONSIDERED AS PROCEDURAL I RREGULARITY AND THE SAME IS NOT CURABLE; REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH AND FAILURE TO ISSUE NOTICE WOULD RE SULT IN HOLDING THE ASSESSMENT AS NULL AND VOID. SIMILAR VIEW WAS TAKEN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRATAPBHAI K. SONI (SUPRA ). IN PARTICULAR, THE HON'BLE BOMBAY HIGH COURT, IN AN UNREPORTED DECISIO N PLACED BEFORE THIS BENCH, OBSERVED THAT NOTICE UNDER SECTION 143(2) OF THE ACT IS MANDATORY AND OMISSION TO ISSUE A NOTICE IS VITAL TO ASSESSME NT PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. CONSISTENT WI TH THE VIEW TAKEN IN THE AFOREMENTIONED CASE I AM OF THE VIEW THAT THE ASSES SMENT MADE IN THE INSTANT CASE IS NULL AND VOID. I THEREFORE QUASH TH E ASSESSMENT PROCEEDINGS AND ALLOW THE APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH SEPTEMBER, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 8 TH SEPTEMBER, 2014 ITA NO. 2714/MUM/2014 NIKESH A. GADA (HUF) 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 26, MUMBAI 4. THE CIT IX, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.