Dolphin Developers Ltd., Kanpur V. Dy. Commissioner of Income Tax, Central Circle-II, Kanpur

ITSSA 311/LKW/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0323 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Assessee Lawyers: S K GARG; P K KAPOOR
• Keywords: Principle of natural justice; Question of law; Accommodation entries; Procedural lapse; Block assessment; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 145; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER IT (SS) A NO. 311/LKW/2018 ASSESSMENT YEAR: 2008 - 09 DOLPHIN DEVELOPERS LTD. 7/71A, TILAK NAGAR KANPUR V. DY. CIT CENTRAL CIRCLE 2 KANPUR T AN /PAN : AABCD8079 (APP ELL ANT) (RESPONDENT) S.P. NO.15/LKW/2018 [IN IT (SS) A NO. 311/LKW/2018] ASSESSMENT YEAR: 2008 - 09 DOLPHIN DEVELOPERS LTD. 7/71A, TILAK NAGAR KANPUR V. DY. CIT CENTRAL CIRCLE 2 KANPUR T AN / PAN : AABCD8079 (APP LIC ANT) (RESPONDENT) ASSESSEE BY: SHRI S. K. GARG, ADVOCATE & SHRI P. K. KAPOOR, C.A. DEPARTMENT BY: SHRI S. K. MADHUK, CIT (DR) DATE OF HEARING: 28 0 2 201 9 DATE OF PRONOUNCEMENT: 29 0 3 201 9 O R D E R PER A. D. JAIN, V.P . : TH IS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE LD. CIT(A) - IV, KANPUR DATED 16/2/2018 FOR ASSESSMENT YEAR 2008 - 09, TAKING THE FOLLOWING GROUNDS OF APPEAL: - 1. BECAUSE THERE EXISTED NO 'MATERIAL' MUCH LESS 'RELEVANT MATERIAL' SO AS TO LEAD TO THE FORMATION OF REQUISITE 'REASON TO BELIEVE', OWING TO WHICH INITIATION OF PROCEEDINGS UNDER SECTION ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 2 OF 17 147 BY ISSUE OF NOTICE UNDER SECTION 148 DATED 24.03.2015 WAS ILLEGAL AND VIEW TO THE CONTRARY, AS HAS BEEN TAKEN BY 'CIT(A)' IN THE IMPUGNED ORDER, IS WHOLLY INCONSI STENT WITH THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. BECAUSE THE 'CIT(A)', ON A DUE CONSIDERATION OF THE ATTENDANT FACTS AND CIRCUMSTANCES OF THE CASE, PARTICULARLY THAT A) REGULAR ASSESSMENT ORDER IN THIS CASE FOR THE ASSESSMENT YEAR 2008 - 09 (Y EAR UNDER APPEAL) HAD ALREADY BEEN MADE VIDE ORDER DATED 31.03.2011 PASSED UNDER SECTION 143(3) OF THE ACT; B) THE 'REASONS RECORDED' DID NOT CONTAIN ANY MENTION OF ANY FAILURE OF REQUISITE TYPE FROM THE END OF THE APPELLANT; C) ACCORDINGLY, NOTICE ISSUED UNDER SECTION 148 DATED 24.03.2015, AFTER EXPIRY OF FOUR YEARS FROM THE ASSESSMENT YEAR 2008 - 09 WAS HIT BY THE PROVISO TO SECTION 147 THE PROCEEDINGS UNDER SECTION 147 WERE BARRED BY LIMITATION ALSO AND THE ASSESSMENT ORDER DATED 31.03.2016 PASSED IN PURSU ANCE THEREOF WAS NULL AND VOID. 2.2 BECAUSE LIMITATION OF FOUR YEARS [IN THE CASE WHERE ASSESSMENT HAD ALREADY BEEN COMPLETED UNDER SECTION 143(3)] IS NOT SAVED BY THE PROVISION CONTAINED IN SECTION 149( 1 )(B) AND THE 'CIT(A)' WENT WHOLLY WRONG IN HOLDING T HAT NOTICE UNDER SECTION 148 AS HAD BEEN ISSUED ON 24/3/2015 WAS WITHIN THE TIME LIMIT PRESCRIBED UNDER THE LAW. 3.1 BECAUSE ASSESSMENT ORDER DATED 31.03.2016, AS PASSED IN PURSUANCE OF NOTICE UNDER SECTION 148 DATED 24.03.2015 WAS LIABLE TO BE HELD AS VOI D AB - INITIO, FOR THE REASON THAT THERE WAS NO ISSUANCE AND SERVICE (ON THE APPELLANT) OF MANDATORY NOTICE UNDER SECTION 143(2). 3.2 BECAUSE, RELIANCE ON VARIOUS CASE LAWS REFERRED TO IN THE APPELLATE ORDER FOR HOLDING THAT 'I.T. ACT DOES NOT SPECIFICALLY P ROVIDE THAT ASSESSMENT MADE UNDER SECTION 147 SHOULD BE AFTER ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT', IS WHOLLY MISPLACED AND THE 'CIT(A)' GROSSLY ERRED IN UPHOLDING THE VALIDITY OF THE RE - ASSESSMENT ORDER DATED 31.03.2016, EVEN THOUGH NO NOTICE UNDER SECTION 143(2) HAD BEEN ISSUED AND SERVED ON THE APPELLANT. ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 3 OF 17 3.3 BECAUSE NON - ISSUANCE/NON SERVICE OF MANDATORY NOTICE UNDER SECTION 143(2) WAS AN IRREGULARITY IN THE PROCEEDINGS, WHICH OBJECTION HAD DULY BEEN TAKEN AND IN ANY CASE IN THE ABSENCE OF AN Y NOTICE UNDER SECTION 143(2) BEING SERVED ON THE APPELLANT SECTION 292BB DID NOT HAVE ANY APPLICATION IN THE CASE. WITHOUT PREJUDICE TO THE AFORESAID 4. BECAUSE THE APPELLANT COULD NOT HAVE BEEN, EITHER ON FACTS OR IN LAW SUBJECTED TO ASSESSMENT ON THE B ASIS OF BOOKS OF ACCOUNT SUPERSCRIBED AS 'M/S ABC' WHICH WERE THE PRINTOUTS TAKEN FROM THE HARD DISC SEIZED VIDE ANNEXURE - HD - 33, FROM EXCLUSIVE POSSESSION AND CONTROL OF SRI VISHWA NATH GUPTA. 5. BECAUSE DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE APPELLANT HAD PLACED AN AFFIDAVIT DULY SWORN - IN BY SRI RAGHU NATH GUPTA TO THE EFFECT THAT A ) THE SEIZED BOOKS OF ACCOUNT SUPERSCRIBED AS M/S ABC (SEIZED MATERIAL) HAD BEEN FOUND FROM THE POSSESSION AND CONTROL OF SHRI VISHWA NATH GUPTA. B ) WHEREVER THE NAME OF DOLPHIN DEVELOPERS LTD. (THE APPELLANT HERE) APPEARED IN THE SAID BOOKS OF ACCOUNT THE SAME WERE EXCLUSIVELY REFERABLE TO THE GAINS AND LOSSES OF SRI VISHWA NATH GUPTA ALONE IN HIS INDIVIDUAL CAPACITY; AND C ) THE ENTRIES/TRANSACTIONS APPEARING IN THE BOOKS OF M/S ABC HAD NOTHING TO DO WITH THE AFFAIRS OF M/S DOLPHIN DEVELOPERS LTD. (THE APPELLANT HERE) AND THE AVERMENTS SO MADE IN THE SWORN STATEMENT HAVING NOT BEEN REBUTTED, NOR EVEN PUT TO CROSS EXAMINATION, THE AUTHORITIES BELOW COULD NOT HAVE MAD E ADDITION/UPHOLD ADDITION ON ACCOUNT OF ENTRIES APPEARING IN THE SAID SEIZED MATERIAL. 6.1 BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN MAKING/SUSTAINING ADDITION FOR SUMS AGGREGATING RS.35,02,27,426/ - MADE UP AS UNDER: - I) CASH ALLEG ED TO HAVE BEEN RECEIVED IN THE FORM OF 'ON - MONEY 30,96,27,426 II) CASH ALLEGED TO HAVE BEEN PAID TO SRI ADITYA RAJ MAHESHWARI, CA. ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 4 OF 17 FOR GETTING ACCOMMODATION ENTRIES 4,06,00,000 TO THE INCOME OF THE APPELLANT ON THE BASIS OF SEIZED MATERIAL REFERRED TO ABOVE. 6.2. BECAUSE THERE WERE NO SUCH SUMS RECORDED IN THE BOOK OF ACCOUNT SUPERSCRIBED AS 'M/S ABC7 (SEIZED MATERIAL) WHICH COULD GO TO SHOW THAT THE APPELLANT WAS IN RECEIPT OF ON - MONEY AGGREGATING RS.30,96,27,426/ - SO AS TO CALL FO R AN ADDITION OF THE SAME IN THE INCOME OF THE APPELLANT. 7. BECAUSE IN ANY CASE, AND WITHOUT ANY ADMISSION, IT IS STATED THAT SUMS APPEARING IN THE SAID SEIZED MATERIAL SHOWED AN AGGREGATE DEBIT OF RS.5,19,94,932 - AGAINST CREDITS AGGREGATING RS.4,27,72,7 28/ - , RESULTING INTO A LOSS/OUTGOINGS OF RS.92,22,204/ - (RS.5,19,94,932 RS.4,27,72,728) AS PER THE SEIZED MATERIAL, WHICH DESERVED TO BE LFLOWED AS SET OFF OUT OF ASSESSED INCOME, INSTEAD OF THE ADDITIONS AS HAVE BEEN MADE IN THE SUSTAINED BY THE AUTHORI TIES BELOW. 8. BECAUSE THE DEBIT ENTRY OF RS.4,06,00,000/ - (OVER AND ABOVE THE ABOVE MENTIONED DEBITS/CREDITS) COULD NOT HAVE BEEN TREATED TO BE AN ITEM OF ADDITION IN THE ASSESSMENT OF THE APPELLANT/ EITHER ON FACTS OR IN LAW, AND MORE SO FOR THE REASONS (A) THAT 'PAYER' OF THE SAME REMAINED UNIDENTIFIED; AND (B) THE PURPOSE, AS HAD BEEN INFERRED BY THE ASSESSING OFFICER WAS NO WHERE BORNE OUT FROM THE RECORDS SO FAR AS THE APPELLANT WAS CONCERNED. 9. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO T HE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 2 . APROPOS GROUND NOS. 3.1 TO 3.3, THE CONTENTION OF THE ASSESSEE IS THAT NO NOTICE UNDER SECTION 143(2) OF THE ACT WAS EVER SERVED ON THE ASSESSEE. THIS GRIEVANCE WAS RAISED BY THE ASSESSEE BEFORE THE LD. CI T(A) BY WAY OF GROUND NO.4, WHICH READS AS FOLLOWS: 4. BECAUSE THE MANDATORY NOTICE UNDER SECTION 143(2) HAVING NOT BEEN ISSUED BY THE ASSTT. CIT, WITH REFERENCE TO THE RETURN FILED BY THE APPELLANT IN COMPLIANCE WITH NOTICE UNDER SECTION 148 ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 5 OF 17 DATED 24/3 /2015, THE ASSESSMENT ORDER DATED 31/3/2016 AS ALSO ADDITIONS AS STAND COMPRISED THEREIN ARE LIABLE TO BE QUASHED. 3 . THE LD. CIT(A) HAS DECIDED THIS ISSUE BY HOLDING AS FOLLOWS: - 5.5 AS REGARD OF THE ISSUE OF THE NOTICE U/S. 143(2) OF THE ACT , IT IS STATE D THAT THIS WILL NOT INVALIDATE THE PROCEEDING U/S. 147 OF THE ACT, AS PROPER NOTICE U/S. 148 IS ISSUED BY THE A.O , FURTHER, HON'BLE BLE DELHI HIGH COURT IN THE CASE OF CIT VS MADHYA B HARAT ENERGY COOPERATION LTD. (0E L) 337 ITR 389 HAS HELD THAT I . T ACT DO ES NOT SPECIFIC A LLY PROVIDE THAT ASSE SSMENT MADE U/S. 147 SHOULD BE AFTER ISSUE OF NOTICE 143(2) OF THE ACT . IT WAS ALSO OBSE RVED AND HELD IN THE SAME CASE T HAT A .O HAS THE BASIC JURISDICTION TO ASSESS THE INCOME U/ S . 147 AND 148 OF THE ACT. SIMILAR VIEW I S ALSO OBSERVED BY THE HON'BLE MADR A S HIGH COURT IN THE CASE OF AREVA T & D INDIA LTD. VS ACIT (M A D.) 29 4 IT R 233. THE CASES RELIED UPON BY THE LD. AR ARE ON T HEIR OWN FOOTINGS; AND DISTINGUISHABLE ON FACTS AND ARE NOT APPLICABLE TO THE PRESENT CASE. THEREFO RE, IN VIEW OF THE ABOVE, LEGAL OBJECTION OF THE A PPELLANT IS REJECTED AND DISMISSED. 4 . IN THE PROCEEDINGS BEFORE US, SHRI RAG H U NATH GUPTA, ONE OF THE PROMOTERS OF THE ASSESSEE COMPANY, HAD FILED AN AFFIDAVIT, IN WHICH ALSO, THE SAME GRIEVANCE HAD BEEN RA ISED. THIS AFFIDAVIT IS AT APB : 1 - 12 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO FILED A COPY OF A.OS ORDER SHEET NOTINGS. THE ORDER SHEET NOTIN G DATED 5/2/2016 (APB:168) READS AS FOLLOWS: - NOTICE U/S 142(1) ISSUED FOR COMPLIANCE ON 11/2/2016 ALONG WITH QUESTIONNAIRE. THIS ORDER SHEET NOTING IS ALSO SCANNED AND REPRODUCED HERE, FOR READY REFERENCE: ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 6 OF 17 (STRESS, BY WAY OF ASTERISK, SUPPLIED) ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 7 OF 17 5 . THE DEPARTMENT HAS FILED A REPLY TO THE AFORESAID AFFIDAVIT OF THE ASSESSEE. THIS HAS BEEN PLACED IN THE APPEAL FI LE. IN THE RELEVANT PARA 3.2, THE DEPARTMENT CONTEN D S AS UNDER: THE CONTENTS OF THIS GROUND ARE NOT CORRECT. AS PER RECORD, NOTICE U/S 143(2) OF THE ACT DATED 05.02.2. 016 WA S ISSUED AND SERVED ALONG WITH NOTICE U/S 142(1) OF THE ACT DATED 05.02.2016. IN COMPLIANCE TO THE ABOVE SAID NOTICES, THE WRITTEN SUBMISSION ALONG WITH ENCLOSURES/DOCUMENTS WAS FURNISHED BY THE DEPONENT IN THE OFFICE OF THE ASSESSING OFFICER ON 11.02.2016. FURTHER, IF IT W ERE SO, THE OBJECTION IN THIS REGARDS SHOULD HAVE BEEN RAISED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BUT NO SUCH OBJECTIONS WERE RAISED BY THE DEPONENT DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AND ACCORDINGLY PROVISIONS OF SECTION 292BB OF THE ACT ARE APPLICABLE IN THIS CASE. 6 . THUS, IN THEIR REPLY, THE DEPA RTMENT STATES THAT NOTICE DATED 5/2/2016 WAS ISSUED UNDER SECTION 143(2) TO AND SERVED ON THE ASSESSEE ALONG WITH NOTICE DATED 5/2/2016 UNDER SECTION 142(1) OF THE ACT. 7 . IN VIEW OF THE ABOVE POSITION, WE HAD SUMMONED THE RECORD OF THE CASE. THIS RECORD H AS BEEN PRODUCED AND IT HAS BEEN PERUSED BY US. WE FIND FROM THE RECORD THAT OUT OF THE FOLLOWING TWO NOTICES (SCANNED COPIES ), ONLY THE FIRST ONE, I.E., NOTICE ISSUED U/S 142(1) OF THE ACT HAS BEEN SERVED ON ONE SANJAY . ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 8 OF 17 ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 9 OF 17 ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 10 OF 17 ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 11 OF 17 8 . IT IS FROM THESE COPIES OF NOTICES IN ITS RECORD, THAT THE DEPARTMENT HAS INFERRED, AS RELATED IN ITS REPLY (SUPRA) TO THE AFFIDAVIT OF SHRI RAGHU NATH GUPTA, ONE OF THE PROMOTERS OF THE ASSESSEE COMPANY, THAT THE NOTICE UNDER SECTION 143(2), DATED 5/2/2016, WAS ISSUED AND SERVE D ON THE ASSESSEE ALONG WITH THE NOTICE DATED 5/2/2016 UNDER SECTION 142(1). 9 . THE ASSESSEE HAS DISPUTED THE SERVICE. IT IS NOTICEABLE THAT THE FIRST NOTICE, ISSUED UNDER SECTION 142(1) OF THE ACT WAS SIGNED BY AFORESAID SANJAY, WHEREAS THE OTHER NOTICE, ISSUED UNDER SECTION 143(2) OF THE ACT, DO ES NOT CONTAIN ANY SIGNATURE. THEREFORE, EVIDENTLY, THE NOTICE UNDER SECTION 143(2) OF THE ACT CANNOT BE STATED TO HAVE BEEN SERVED ON THE ASSESSEE. 10 . IN THE ORDER SHEET NOTING (SUPRA) DATED 5/2/2016, THE A.O TALKS OF ISSUANCE ONLY OF NOTICE UNDER SECTION 142(1) WITH QUESTIONNAIRE, AND NOT ABOUT ANY NOTICE UNDER SECTION 143(2) OF THE ACT. IN DR. Y.D. SINGH VS. DCIT, 10 ITR (TRIB.) 698 (ALLAHABAD), LIKEWISE, THE A.OS ORDER SHEET ENTRIES DID NOT SHOW ISSUANCE OF A NOTICE UNDER SECTION 143(2) OF THE ACT (SEE PARA 23 OF THE ORDER). THIS WAS TAKEN TO GO AGAINST THE DEPARTMENT. FURTHER, EVEN IN THE ASSESSMENT ORDER, IN PARA 4 THEREOF OBSERVED THAT IT IS NEEDLESS TO MENTION THAT SUBMITTING A LETTER LIKE THIS (IN RESPO NSE TO NOTICE UNDER SECTION 148) AMOUNTS TO FILING OF RETURN IN DUE COMPLIANCE WITH THE NOTICE UNDER SECTION 148. THE LD. CIT(A) HAS ALSO DULY TAKEN INTO CONSIDERATION TH E NON - SERVICE OF NOTICE, WHEN IN THE IMPUGNED ORDER, IN THE ABOVE QUOTED PARA 5.5 THEREOF, THE LD. CIT(A) HAS OBSERVED THAT AS REGARD OF THE ISSUE OF THE NOTICE U/S. 143(2) OF THE ACT, IT IS STATED THAT THIS WILL NOT INVALIDATE THE PROCEEDING U/S. 147 OF THE ACT, AS PROPER NOTICE U/S. 148 IS ISSUED BY THE A.O... FROM THIS, IT IS E VIDENT THAT THE LD. CIT(A) HAS HIMSELF ACCEPTED THE NON - SERVICE OF THE NOTICE ON THE ASSESSEE. THUS, THE AVERMENT MADE BY THE ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 12 OF 17 DEPARTMENT BEFORE US IN ITS REPLY (SUPRA) TO THE AFFIDAVIT IS MISCONCEIVED AS BEING AGAINST THE RECORD. 11 . T HE ISSUE IS AS TO WHETHE R NON - SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT IS DETRIMENTAL TO THE VALIDITY OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE LD. CIT(A) HAS RELIED ON CIT VS. MADHYA BHARAT ENERGY CORPORATION LTD. 337 ITR 389 (DEL) AND AREVA T& D INDIA LTD. VS. ACIT 29 4 ITR 233 (MAD). HOWEVER, THESE DE CISIONS ARE NO LONGER GOOD LAW. 12 . MADHYA BHARAT (SUPRA) WAS REVIEWED BY THE HON'BLE DELHI HIGH COURT IN REVIEW PETITION NO.441/2011, IN ITA NO.950/2008, VIDE ORDER DATED 17/8/2011, NOTING THAT AT THE TIME OF ADMISSION OF THE APPEAL ON 17/2/2011, AFTER NOTICING THAT IN THE SAID CASE THAT NO NOTICE UNDER SECTION 143(2) HAD EVEN BEEN ISSUED, THE COURT HELD THAT NO QUESTION OF LAW AROSE ON THAT ASPECT. THESE FACTS HAVE ALSO BEEN NOTED IN PR. COMMISSI ONER OF INCOME TAX VS. SHRI JAI SHIV SHANKAR TRADERS PVT. LTD., 383 ITR 448 (D EL) (IN PARA 9 OF THE JUDGMENT), AS FOLLOWS: 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 AUGUST 17, 2011 IN REVIEW PETITION NO. 441 OF 2011 IN I. T. A. NO. 950 OF 2008 (CIT V. MADHYA BHARAT ENERGY CORPORATION) WHEREBY THIS COURT REVIEWED ITS MAIN JUDGMENT IN THE MATTER RENDERED ON JULY 11, 2011 ON THE GROUND THAT THE SAID APPE AL 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 FEBRUARY 17, 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 CIT V. MADHYA BHARAT ENERGY CORPORATION (SUPRA) IS NOT OF ANY ASSISTANCE TO THE REVENUE AS FAR AS THE ISSUE IN THE PRESENT CASE IS CONCERNED. ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 13 OF 17 13 . SO FAR AS REGARDS AREVA (SUPRA), THE SAME HAS BEEN DEALT WITH, AS FOLLOWS IN SAPTHAGIRI FINANCE & INVESTMENTS VS. ITO', 2010 TAXMAN 78 (M AD), IN VIEW OF THE SUPREME COURT JUDGMENT IN ASSTT. CIT VS. HOT EL BLUE MOON, 321 ITR 362 (SC): 6. REPLYING TO THE STAND OF THE ASSESSEE, LEARNED STANDING COUNSEL FOR THE REVENUE PLACED RELIANCE ON THE DECISION IN AREVA T & D INDIA LTD. V. ASSTT. CIT [2 007] 294 ITR 233/ 165 TAXMAN 123(MAD.) AND SUBMITTED THAT THE FAILURE TO ISSUE NOTICE IS ONLY AN IRREGULARITY. CONSEQUENTLY REASSESSMENT ORDER COULD NOT BE HELD AS ILLEGAL AND DEFECT INCURABLE. . 12. AS FAR AS THE CONTENTION OF THE REVENUE THAT FAILURE TO ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT IS ONLY CURABLE DEFECT IS CONCERNED, THE DECISION RELIED ON BY THE ASSESSEE REPORTED IN HOTEL BLUE MOON'S CASE (SUPRA), ALSO COVERS THE SAID ISSUE. IT IS NO DOUBT TRUE THAT THE SAID DECISION DEALT WITH THE ASSESSMENT DONE UNDER CHAPTER XIV RELATING TO BLOCK ASSESSMENT. THE ASSESSEE THEREIN RAISED A CONTENTION THAT THE FAILURE TO ISSUE NOTICE UNDER SECTION 143(2) WITHIN THE PRESCRIBED TIME FOR T HE PURPOSE OF BLOCK ASSESSMENT COULD BE FATAL TO THE VALIDITY OF THE ASSESSMENT MADE UNDER CHAPTER XIVB OF THE INCOME TAX ACT, 1961. IN OTHER WORDS, THE ASSESSEE CONTENDED THAT THE ISSUANCE OF NOTICE UNDER SECTION 143(2) WITHIN THE PRESCRIBED PERIOD OF TIM E FOR THE PURPOSE OF BLOCK ASSESSMENT IS MANDATORY FOR ASSESSING THE ASSESSEE'S UNDISCLOSED INCOME FOUND DURING THE SEARCH. THE REVENUE TOOK THE STAND THAT ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT WAS ONLY PROCEDURAL IRREGULARITY WHICH WAS CURABLE. THE APEX COURT POINTED OUT TO SECTION 158BC(B) PROVIDED FOR DETERMINATION OF THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142, SUB SECTIONS (2) AND (3) OF SECTION 143, SECTION 144 AND SEC TION 145 SHALL, SO FAR AS MAY BE, APPLY. THE APEX COURT POINTED OUT AFTER RETURN IS FILED, THE ASSESSING OFFICER HAS TO FOLLOW THE PROCEDURE LIKE THE ISSUE OF NOTICE UNDER SECTION 143(2)/142 AND COMPLETE THE ASSESSMENT UNDER SECTION 143(3). IN THE EVENT, T HE ASSESSEE IS NOT FILING THE ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 14 OF 17 RETURN OR NOT COMPLYING WITH THE NOTICE UNDER SECTION 143(2)/142, THE OFFICER IS AUTHORISED TO COMPLETE THE ASSESSMENT EX PARTE UNDER SECTION 144. THE APEX COURT FURTHER POINTED OUT THAT NOTICE UNDER SECTION 143(2) WOULD BECOM E NECESSARY ONLY WHERE THE BLOCK RETURN DOES NOT CONFORM UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES. THUS, IF AN ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 158BC, NOTICE UNDER SECTION 143(2) SHOULD BE ISSUED WITHIN ONE YEAR FR OM THE DATE OF FILING OF THE BLOCK RETURN. THE APEX COURT FURTHER HELD THAT OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE, AND THEREFORE, THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. THE LEGISLATION REFERRING TO THE COMPLIANCE OF THE PROVISIONS UNDER SECTION 143, 144 AND 145 OF THE ACT IS A LEGISLATION BY INCORPORATION. THUS, WHERE THE ASSESSING OFFICER REPUDIATES THE RETURN FIL ED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 158BC(A), THE ASSESSING OFFICER MUST NECESSARILY ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT. DEALING WITH THE CONTENTION THAT THE ISSUE OF NOTICE IS NOT MANDATORY BUT OPTIONAL AND IS TO BE APPLIED TO THE EXTENT PRACTICABLE, IN VIEW OF EXPRESSION 'SO FAR AS MAY BE' IN SECTION 153BC(B), THE APEX COURT POINTED OUT THAT THE EXPRESSION 'SO FAR AS MAY BE' HAS ALWAYS BEEN CONSTRUED TO MEAN THAT THOSE PROVISIONS MAY BE GENERALLY FOLLOWED TO THE EXTENT POSSIBL E. REJECTING THE CONTENTION OF THE REVENUE THAT IT IS NOT EXPEDIENT TO FOLLOW THE PROVISIONS UNDER SECTIONS 142 AND 143 (2) AND (3) STRICTLY FOR THE PURPOSE OF BLOCK ASSESSMENT, THE APEX COURT HELD THAT IN COMPLETING THE ASSESSMENT, WHEN THE OFFICER REPUDI ATES THE RETURN FILED UNDER SECTION 158BC(A) PROCEEDS TO MAKE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISIONS OF SECTION 142 AND 143 (2) AND (3) OF THE ACT. 14 . THE ABOVE POSITION HAS BEEN TAKEN INTO CONSIDERATION IN PR. CIT VS. OBEROPI HOTELS PVT. L TD., ORDER DATED 22/6/2018 PASSED BY THE HON'BLE CALCUTTA HIGH COURT IN ITA NO.152 OF 2015, AS FOLLOWS: - THE REVENUE HAS SOUGHT TO RELY ON A MADRAS HIGH COURT JUDGMENT REPORTED AT 294 ITR 233 (AREVA T & D INDIA LTD. V. ACIT) WHERE THE VIEW TAKEN WAS THAT 'THE NON - ISSUANCE OF A ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 15 OF 17 NOTICE UNDER SECTION 143(2) OF THE ACT, WILL NOT MAKE THE REASSESSMENT NULLITY IN LAW, WHICH IS VALIDLY INITIATED UNDER SECTION 148 OF THE ACT'. HOWEVER, SUCH JUDGMENT OF THE MADRAS HIGH COURT WAS NOTICED AND DISCUSSED IN A LATER JU DGMENT OF THE SAME REPORTED AT 2010 TAXMAN 78 (SAPTHAGIRI FINANCE & INVESTMENTS V. ITO). IT WAS HELD THEREIN THAT THE VIEW TAKEN IN AREVA T & D INDIA LTD WAS NO LONGER GOOD LAW IN VIEW OF THE SUPREME COURT JUDGMENT IN HOTEL BLUE MOON THE ASSESSEE HAS ALSO RELIED ON ANOTHER UNREPORTED JUDGMENT OF THE MADRAS HIGH CII'F F NOVEMBER 19, 2014 IN TAX CASE (APPEAL) 766 OF 2014 (N. AHAMED ALI V. ITO) WHERE IT WAS HELD THAT A NOTICE UNDER SECTION 143(2) OF THE ACT WAS MANDATORY AND THE JUDGMENT IN AREVA T & D INDIA LTD WAS NOT GOOD LAW. 15 . THE GENESIS OF THIS DISPUTE LIES IN SECTION 148(1) OF THE ACT, ACCORDING TO WHICH, BEFORE MAKING REASSESSMENT UNDER SECTION 147, THE A.O SHALL SERVE ON THE ASSESSEE, A NOTICE REQUIRING HIM TO FURNISH, WITHIN SUCH PERIOD AS MAY B E S PECIFIED IN THE NOTICE, A RETURN OF HIS INCOME FOR THE RELEVANT YEAR AND THE PROVISIONS OF THE I. T. ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY, AS IF SUCH RETURN W AS A RETURN RE QUIRED TO BE FURNISHED U/ S 139 OF THE ACT. 16 . S ECTION 147 OF THE ACT SAYS THAT WHERE THE AO HAS REASON TO BELIEVE ESCAPEMENT OF INCOME FR OM ASSESSMENT, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, REASSESS SUCH INCOME. THUS, A CASE OF REASSESSMENT IS SUBJECT TO, INTER ALIA, SECTION 148. SECTION 148(1) REQUIRES A NOTICE TO BE ISSUED FOR FILING OF RETURN AND IT PROVIDES THAT THE PROVISIONS OF THE ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY, AS IF, SUCH RETURN W AS A RETURN REQUIRED TO BE FURNISHED U/S 139. THIS IS WHERE SECTION 143(2) GETS TRIGGERED. SECTION 143(2) MANDA TES A NOTICE TO BE ISSUED TO T HE ASSE S SEE, TO PRODUCE EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF HIS RETURN . IT IS IMPORTANT TO NOTE THAT THE OPEN IN G WORDS OF SECTION 143(2) ARE 'WHETHER A RETURN HAS BEEN FURNISHED U/S ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 16 OF 17 139, OR IN RESPONSE TO A NOTICE UNDER SUB - SECTION 142, THE AO SHA LL.. IN EITHER CASE, I.E., WHETHER THE RETURN WAS FILED IN RESPONSE TO SECTION 148, O R I F IT WAS FILED IN RESPONSE TO THE NOTICE U/S 142(1), A NOTICE U/S 143(2) WOULD NECESSARILY BE REQUIRED TO BE ISSUED . 17 . IN CIT VS. RAJEEV SHARMA, 336 ITR 678 (ALL), IT HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT THAT AS PER SECTION 148, IT IS INCUMBENT ON THE A.O TO SEND A NOTICE U/S 143(2) WITHIN THE STATUTORY PERIOD SPECIFIED THEREIN; THAT THE PROVISIONS OF SECTION 143(2) ARE MANDATORY AND THE LEGISLATURE, IN ITS WISDOM, BY USING THE WORDS 'REASON TO BELIEVE', HAS CAST A DUTY ON THE A.O TO APPLY HIS MIND TO THE MATERIAL ON RECORD AND SERVE A NOTICE AFTER BEING SATISFIED WITH REGARD TO INCOME ESCAPING ASSESSMENT; THA T THUS, AFTER RECEIPT OF RETURN IN RESPONSE TO NOTICE U/S 148, IT IS MANDATORY FOR THE A.O TO SERVE A NOTICE U/S 143(2), ASSIGNING REASONS THEREIN; AND THAT IN THE ABSENCE OF A NOTICE U/S 143(2) AFTER RECEIPT OF FRESH RETURN, THE ENTIRE PROCEDURE ADOPTED F OR ESCAPED ASSESSMENT SHALL BE INVALID. 'SHRI RAJEEV SHARMA (SUPRA) HAS BEEN FOLLOWED IN 'UPSIDC VS . CIT, RENDERED, AGAIN, BY THE HON'BLE JURISDICTIONAL HIGH COURT, IN ITA NO. 11/2015. SHRI RAJEEV SHARMA' (SUPRA) AND 'UPSIDC' (SUPRA), THEREFORE, ARE SQU ARELY APPLICABLE TO THE PRESENT CASE. HENCE, IN KEEPING WITH THE PROVISIONS OF THE ACT, AS CONSIDERED HEREINABOVE AND IN ACCORDANCE WITH 'SHRI RAJEEV SHARMA' (SUPRA) AND 'UPSIDC' (SUPRA), BOTH RENDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT, TO BOTH OF WHICH, NO CONTRADICTORY DECISION HAS BEEN CITED, WE HOLD THAT SINCE THE ASSESSEE HAD , IN THE REASSESSMENT PROCEEDINGS, REQUEST ED THE A .O TO TREAT THE ORIGINAL RE TURN FILED AS A RETURN FILED IN THE REASSESSMENT PROCEEDINGS, AND THAT THIS BEING SO, IT WAS IN CUMBENT ON THE A .O TO ISSUE AND SERVE A NOTICE U/S 143(2) TO THE ITA NO.311/LKW/2018 & S.P. NO.15/LKW/2018 PAGE 17 OF 17 ASSESSEE. THIS HAVING NOT BEEN DONE, THE REOPENING OF THE COMPLETED ASSESSMENT OF THE ASSESSEE CANNOT SURVIVE AND IT IS QUASHED. 18 . IN VIEW OF THE ABOVE, IT STANDS SETTLED THAT IN THE ABSENCE OF SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT, PROCEEDINGS UNDER SECTION 147 OF THE ACT ARE INVALID. 19 . THEREFORE, FINDING THE GRIEVANCE OF THE ASSESSEE BY WAY OF GROUND NOS.3.1 TO 3.3 TO BE JUSTIFIED, THE SAME IS ACCEPTED AND THE PROCEEDINGS UNDER SECTI ON 147 OF THE ACT, CULMINATING IN THE IMPUGNED ORDER, ARE SET ASIDE AND QUASHED. NOTHING FURTHER SURVIVES FOR ADJUDICATI ON , NOR WAS ANYTHING ELSE ARGUED. 20 . IN THE RESULT, THE APPEAL IS ALLOWED AND THE STAY PETITION IS DISPOSED OF AS INFRUCTUOUS. ORDER PRON OUNCED IN THE OPEN COURT ON 29 / 0 3 /201 9 . SD/ - SD/ - [ T. S. KAPOOR ] [ A. D. JAIN ] ACCOUNTANT MEMBER VICE PRESIDENT DATED: 29 TH MARCH, 201 9 JJ: 0103 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR BY ORDER ASSISTANT REGISTRAR