Appeal details
Counselvise Citation
[2022] 102 COUNSELVISE.COM (IT) 9250 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s)
Appellant
Respondent
Appeal Type
Income Tax (International Taxation) Appeal
Pronouncement Date
05-12-2022
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
C
Next Hearing Date
04-12-2022
Assessment Year
2017-2018
Appeal Filed On
05-09-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri George George K, JM & Ms.Padmavathy S, AM IT(IT)A No.782/Bang/2022 : Asst.Year 2016-2017 IT(IT)A No.783/Bang/2022 : Asst.Year 2017-2018 IT(IT)A No.784/Bang/2022 : Asst.Year 2018-2019 M/s.Ibiden Singapore Pte Limited India Branch Office No.8 Ground Floor, Nitesh Times Square, M.G.Road Bengaluru – 560 001. PAN : AABCI8919E. v. The Assistant Commissioner of Income-tax, International Taxation, Circle 1(2) Bangalore. (Appellant) (Respondent) Appellant by : Sri.Ajay Rotti, CA Respondent by : Smt.Vandana Ramachandran, Addl.CIT(TP-1)-DR Date of Hearing : 05.12.2022 Date of Pronouncement : 06.12.2022 O R D E R Per George George K, JM : These appeals at the instance of the assessee are directed against three final assessment orders (all three are dated 29.07.2022), passed u/s 147 r.w.s. 144C(13) of the I.T.Act. The relevant assessment years are 2016-2017 to 2018-2019. Common issues are raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order. 2. The assessee has raised ground Nos.2.3 and 2.4, which are common for all the assessment years. The contention raised in ground 2.3 & 2.4 is that the draft reassessment IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 2 order passed is bad in law, since the A.O. has not issued notice u/s 143(2) of the I.T.Act. Ground Nos. 2.3 and 2.4 read as follows:- “2.3 The Hon’ble Panel erred in law and on facts and circumstances of the case in upholding the action of the ld.AO in completing the reassessment proceedings without issuance of notice under section 143(2) of the Act. 2.4 Without prejudice to the above, the Hon’ble Panel erred in law and on facts and circumstances of the case in holding that non-issuance of notice under section 143(2) of the Act is a curable defect. The Hon’ble Panel erred in law and on facts and circumstances of the case in upholding the action of the ld.AO in issuing the draft assessment order without providing the Appellant an opportunity of being heard by way of a show cause notice which is against the principles of natural justice.” 3. When the matter came up for hearing, we called for a remand report from the concerned Assessing Officer. The report was submitted vide letter dated 28.11.2022. In the said report, it is clearly mentioned that notice u/s 143(2) of the I.T.Act was not issued in the reassessment proceedings. The relevant part of the report reads as follows:- “3. The Hon’ble ITAT has called a report on the limited point whether notice under section 143(2) was issued in the reassessment proceedings. On verification of case records and ITBA proceedings, it was found that notice u/s 143(2) has not been issued in the above mentioned case.” 4. The learned AR submitted that since no notice has been issued u/s 143(2) of the I.T.Act, the reassessment orders for A.Y. 2016-2017 to 2018-2019 are bad in law. The learned AR relied on the following judicial pronouncements:- IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 3 (i) CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) (ii) R Dalmia v. CIT (1999) 152 CTR 383 (SC) (iii) PCIT (Central) v. Cherian Abraham (2022) 444 ITR 420 (Karnataka) (iv) CIT v. Silver Line (2016) 263 CTR 148 (Delhi) (v) PCIT v. Shri Jai Shiv Shankar Traders (P.) Ltd. (2016) 282 CTR 435 (vi) CIT v. Rajeev Sharma (2010) 232 CTR 303 (Allahabad) 5. The learned Departmental Representative, on the other hand, has filed a brief written submission. In the written submission, it is stated that u/s 147 / 148 of the I.T.Act, it is not mandatory to issue notice u/s 143(2) of the I.T.Act, unlike the block assessment under Chapter XIV-B. The learned DR sought to make a distinction between the provisions of section 158BC and section 147 / 148 of the I.T.Act. The learned DR placed reliance on the following judicial pronouncements:- (i) Madhya Bharat Energy Corporation Ltd. reported in 337 ITR 339 (ii) Areva T & T India Ltd. ACIT 294 ITR 233 (Madras) (iii) CIT v. M/s./Humdoldt Wedaga India Pvt. Ltd. (ITA No.149 of 2013) (Calcutta) (iv) Padinjarekara Agencies (P) Ltd. v. CIT (85 Taxmann.com 129) 6. In the light of the above submission, it was submitted by the learned DR that the grounds of assessee as regards the validity of the reassessment may be rejected. Further, it was also submitted that non-issuance of notice u/s 143(2) of the I.T.Act is a mere procedural irregularity and the impugned assessment order may be set aside to the A.O. with the direction to issue notice u/s 143(2) of the I.T.Act and to consider the matter afresh after giving an opportunity to the assessee. IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 4 7. We have heard rival submissions and perused the material on record. The admitted facts are that for assessment years 2016-2017 to 2018-2019, notice u/s 148 of the I.T.Act dated 09.07.2019 was issued by the A.O. requiring the assessee to furnish the returns of income. In response to the notice’s issued u/s 148 of the I.T.Act, the assessee filed returns for the above said assessment years on 02.08.2019. The assessee also filed submissions requiring the reason for the A.O.’s belief that income chargeable to tax has escaped assessment. Thereafter, admittedly, no notice u/s 143(2) of the I.T.Act was issued (only notice u/s 142(1) of the I.T.Act was issued calling for certain details from the assessee). Section 143(2) and the proviso to the same reads as follows:- "143. (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 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 three months from the end of the financial year in which the return is furnished." 8. From the reading of the above section, it is clear that the A.O. is to be satisfied on examining the return filed that prima facie the assessee has not understated the income or has not IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 5 computed excess loss or has not underpaid the tax in any manner. The A.O. has discretion to issue notice u/s 143(2) if he consider it necessary or expedient to do so. In other words, once the return of income has been filed pursuant to the notice issued u/s 148 of the I.T.Act and the return of income is to be tinkered with, the A.O. has to necessarily issue notice u/s 143(2) of the I.T.Act. This is the principle laid down by the Hon’ble Apex Court in the case of CIT v. Hotel Blue Moon reported in (2010) 321 ITR 362 (SC). The exercise done by the A.O. u/s 143(2) of the I.T.Act is qualitatively different from the issuance of notice u/s 142(1) of the I.T.Act. The Hon’ble High Court of Delhi in the case of Pr.CIT v. Silver Line reported in (2016) 383 ITR 455 (Delhi) had clearly held that failure of the A.O. to issue notice u/s 143(2) of the I.T.Act was fatal to the order of the reassessment. Similar view has also been held by the Hon’ble Delhi High Court in the case of Pr.CIT v. Shri Jai Shiv Shankar Traders (P.) Ltd. reported in (2016) 383 ITR 448 (Delhi). The relevant finding of the Hon’ble Delhi High Court in the case of Pr.CIT v. Silver Line (supra) reads as follows:- “17. On the question of whether the notice under section 143(2) of the Act was in the facts and circumstances mandatory, Mr. Sahni sought to distinguish the long line of decisions including the recent decision of this court in Principal CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra) on the ground that there was no occasion for the Assessing Officer to issue any notice under section 143(2) of the Act since the assessee had, in fact, not filed a return. He submitted that the original return was filed in the "Saral Form" which had since been replaced with a different form for filing of returns. Consequently, the said return could not have been treated as a return filed pursuant to the notice issued to the assessee under section 148 of the Act. He further submitted that with no discrepancy having been found by the Assessing Officer in the returns for the assessment years 2005-06 till 2007-08, which were processed under section 143(1) of the Act, there was no occasion for the Assessing Officer to issue a notice under section 143(2) of the Act. Mr. Sahni submitted that in the circumstances, the action of the Assessing Officer in finalising the IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 6 reassessment orders without notice under section 143(2) of the Act was justified. 18. The wording of section 143(2)(ii) of the Act, which is applicable in the present case, requires the Assessing Officer to be satisfied on examining the return filed that prima facie the assessee has "understated the income" or has "computed excessive loss" or has "underpaid the tax in any manner". The Assessing Officer has the discretion to issue a notice under section 143(2) if he considers it "necessary or expedient" to do so. This exercise by the Assessing Officer under section 143(2) of the Act is qualitatively different from the issuance of a notice under section 142(1) of the Act, which as noted hereinbefore, is in a standard pro forma. 19. The court is unable to accept the submission of the Revenue that in the present case, no return was filed by the assessee pursuant to the notice issued to it under section 148 of the Act. If after receiving the letter dated April 1, 2011, of the assessee the Assessing Officer was of the view that the return originally filed in the Saral Form could not be treated as the return pursuant to the notice under section 148 of the Act, then he should have drawn the attention of the assessee to that fact. In the present case all that the Assessing Officer did was to send a notice under section 142(1) of the Act. The assessee was not made aware as to why he was required to file a return. Had a notice been issued to him under section 143(2) of the Act, the Assessing Officer would have been obliged to let the assessee know why he was being asked to file a return notwithstanding his letter dated April 1, 2011. In the circumstances, the assessee was justified in proceeding on the basis that it had not committed any default in communicating to the Assessing Officer that the return already filed should be treated as the return filed pursuant to the notice under section 148 of the Act. 20. The proposal to reopen an assessment under section 147 of the Act is to be based on reasons to be recorded by the Assessing Officer. Such reasons have to be communicated to the assessee. However, merely because the assessee participates in the proceedings pursuant to such notice under section 148 of the Act, it does not obviate the mandatory requirement of the Assessing Officer having to issue to the assessee a notice under section 143(2) of the Act before finalising the order of the reassessment. 21. In this context reference may be made to the decision of the Madras High Court in Sapthagiri Finance and Investments v. ITO (supra) where again the assessee did not file a return pursuant to section 148 of the Act. The Assessing Officer then issued a notice to it under section 142(1) of the Act. The assessee thereafter appeared before the Assessing Officer and stated that the original return filed should be treated as the return filed in response to the notice under section 148 of the Act. In those circumstances, the High Court observed that if there was some explanation that was required to be offered by the assessee, notwithstanding the above submission made by it, the Assessing Officer ought to have issued a notice under section 143(2) of the Act. The Madras High Court observed : "Merely because the matter was discussed with the assessee and the signature is affixed, it does not mean the rest of the IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 7 procedure of notice under section 143(3) 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 under section 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 under section 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the Assessing Officer 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 under section 143(3) and there being no waiver, we do not find any justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued under section 143(2) of the Act." 22. The decisions of the Allahabad High Court in CIT v. Rajeev Sharma (supra) and CIT v. Salarpur Cold Storage (P.) Ltd. (supra) also reiterate the above legal position. As far as this court is concerned, the decision in DIT v. Society for Worldwide Inter Bank Financial, Telecommunications [2010] 323 ITR 249 (Delhi) and the recent decision in Principal CIT v. Shri Jai Shiv Shankar Traders (P.) Ltd. (supra) hold likewise.” 9. The Hon’ble Delhi High Court in the case of Shri Jai Shiv Shankar Traders (P.) Ltd. (supra), had also distinguished its earlier judgment in the case of Madhya Bharat Energy Corporation Limited (supra) (the case strongly relied on by the learned DR). The relevant finding of the Hon’ble Delhi High Court in the case of Shri Jai Shiv Shankar Traders (P) Ltd. distinguishing its earlier judgment in case of Madhya Bharat Energy is reproduced below:- “8. When this appeal was first listed before this Court on 29th July, 2015 reliance was placed by Ms Suruchi Aggarwal, learned Senior Standing counsel for the Revenue on the decision of this Court in CIT v. Madhya Bharat Energy Corporation Ltd. [2011] 337 ITR 389/[2012] 20 taxmann.com 557 (Delhi) which purported to hold that non-issue of notice under Section 143(2) of the Act on an Assessee prior to completion of the reassessment would not be fatal to the reassessment. She also sought to distinguish the decision IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 8 in Hotel Blue Moon (supra) on the ground that it pertained to a block assessment. 9. Dr. Rakesh Gupta, learned counsel appearing for the Assessee, at the outset drew the attention of this Court to an order passed by this Court on 17th August, 2011 in Review Petition No.441/2011 in ITA No.950/2008 (CIT v. Madhya Bharat Energy Corporation) whereby this Court reviewed its main judgment in the matter rendered on 11th July 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under Section 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17th February, 2011 after noticing that in the said case that no notice under Section 143(2) had ever been issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned.” 10. Further, the question to be answered is whether non- issuance of notice u/s 143(2) of the I.T.Act is only a procedural irregularity, which can be cured u/s 299BB of the I.T.Act. The Hon’ble jurisdictional High Court in the case of Pr.CIT & Anr. v. Cherian Abraham reported in (2022) 444 ITR 420 (Kar.) had held that non-issuance of notice u/s 143(2) of the I.T.Act is a foundational infirmity for completion of an assessment and the same cannot be cured by taking aid to the provisions of section 292BB of the I.T.Act. The relevant finding of the Hon’ble jurisdictional High Court reads as follows:- “9. Section 292BB of the Act has come into force with effect from April 1, 2008 and the same reads thus : IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 9 "292BB. Notice deemed to be valid in certain circumstances.— Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him ; or (b) not served upon him in time ; or (c) served upon him in an improper manner : Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment." 10. In the case of Padinjarekara Agencies (P.) Ltd. (supra), the hon'ble High Court of Kerala while considering the income escaping assessment in the course of reassessment proceedings, held that mere omission to mention section 143(2) of the Act equally in any one of the notices so issued is held to be not fatal and would not invalidate the assessment order. In that context, it has been held that the court is not prepared to think that there was absence of notice under section 143(2) of the Act or that any prejudice was caused to the assessee in defending the case against the State. 11. In the case of Venkatesan Raghuram Prasad (supra), the hon'ble High Court of Madras referring to the decision in the case of R. K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163 (SC) and CIT v. Chetan Gupta [2016] 382 ITR 613 (Delhi), has observed that without prejudice, even if the assessee were to assume so, to succeed on the question of section 292BB and further, presuming a valid objection regarding service of notice under section 149 of the Act, it would necessitate examination of the assessee's objections on merits, the matter shall have to necessarily travel back to the file of the Assessing Officer to cause service and assessment a fresh, for which a time limit shall run from the date of the said service. 12. In the case of Chetan Gupta (supra), admittedly notice was issued within the prescribed period of limitation. The requirement of issue of notice being satisfied, which is the mandate of section 148(1) of the Act, it has been observed that once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to make the assessment. 13. The hon'ble High Court of Punjab and Haryana in the case of Aravali Engineers (P.) Ltd. (supra), was dealing with the plea raised that since the notice under section 143(2) of the Act was not served within the stipulated time, the assessment was barred by limitation. In IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 10 such a scenario, the Tribunal had refused to entertain the plea raised by the assessee while upholding the findings of the Tribunal. 14. The aforesaid judgments cited by the Revenue would enunciate that the notice issued within the period of limitation, if found not served on the assessee within the stipulated period, i.e. defective service of notice cannot invalidate the assessment, or in other words, the existence of the notice well within the period of limitation prescribed under the provision is sine qua non for invoking section 292BB of the Act. 15. This view is further fortified by the instructions issued by the Central Board of Direct Taxes in Circular No. 1 of 2009 dated March 27, 2009 wherein, it has been observed that notices under sub-section (2) of section 143 of the Act though issued by registered post within the period of limitation, the same have been held invalid on the ground that the assessee had received the notice after the limitation date. In order to address these issues and to reduce litigation, a new section, viz., section 292BB has been inserted and the provisions of section 143(2) of the Act has been amended. 16. The parameters set out in section 292BB of the Act are that the notice was : (a) not served upon assessee ; or (b) not served in time ; or (c) served upon assessee in an improper manner. Thus, what is significant is service of notice. It is obvious that the issuance of notice is a precondition to cure the defects in service of notice. 17. In the case of Lakshman Das Khandelwal (supra), the hon'ble apex court has considered the law laid down by the hon'ble apex court in the case of Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC) regarding the question whether notice under section 143(2) of the Act would be mandatory for the purpose of making an assessment under the said provision and thereafter, considered the question whether section 292BB which came into effect on and from April 1, 2008 has effected any change. It has been held that the law on the point as regards applicability of notice under section 143(2) of the Act is quite clear in the decision in the case of Hotel Blue Moon (supra). However, considering the impact of section 292BB on the issue, it has been held thus (page 333 of 417 ITR) : "According to section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in the said section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on the part of the assessee. It is, however, to be noted that the section does not save complete absence of notice. For section 292BB to apply, the notice must have emanated from the Department. It is only the infirmities in the manner of service of notice that the IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 11 section seeks to cure. The section is not intended to cure complete absence of notice itself." 18. This judgment has a direct bearing on the facts of the present case. In the light of this judgment, it is clear that the infirmities in the manner of service of notice alone would be amenable to being cured under section 292BB of the Act, but not the complete absence of notice itself. Notice issued beyond the period of limitation partakes the character of absence of notice itself in the eye of law. As such, section 292BB would not save such a notice dehors the limitation prescribed. 19. Though the learned counsel for the Revenue contended that Hotel Bluemoon (supra) was rendered in the regime prior to the insertion of section 292BB of the Act, the said judgment has been considered by the hon'ble apex court in the case of Lakshmandas Khandelwal (supra) as aforesaid, which is squarely applicable to the facts of the present case. 20. The Tribunal has rightly observed that the foundation process of reassessment is under section 148 of the Act, but such jurisdiction is subject to further compliance as being stipulated in the statute itself and thus, quashed the assessment being invalid. It is a well settled legal principle that issuance of notice beyond the period of limitation or absence of notice goes to the root of the matter and is the jurisdiction aspect, not a procedural irregularity and the same is not curable. 21. Thus, we are of the view that the failure of the Assessing Officer in issuing the notice within the period of limitation under section 143(2) of the Act which is a notice giving jurisdiction to the Assessing Officer to frame assessment cannot be condoned by referring to section 292BB of the Act. We find no ground to interfere with the impugned order of the Tribunal. 22. For the reasons aforesaid, we answer the substantial question of law in favour of the assessee and against the Revenue.” 11. In the light of the above two judicial pronouncements, cited supra, we hold that the reassessment orders passed by the A.O. for assessment years 2016-2017 to 2018-2019 without issuance of notice u/s 143(2) of the I.T.Act is fatal and we quash the reassessment orders. It is ordered accordingly. 12. Since we have quashed the reassessment orders for assessment years 2016-2017 to 2018-2019, the other legal IT(IT)A Nos.782-784/Bang/2022. M/s.Ibiden Singapore Pte Limited India Branch Office 12 grounds and the grounds raised on merits are not adjudicated and are left open. It is ordered accordingly. 13. In the result, the appeals filed by the assessee are partly allowed. Order pronounced on this 06 th day of December, 2022. Sd/- (Padmavathy S) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 06 th December, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The DRP-1, Bangalore. 4. The CIT (International Taxation), Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore
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