ACIT, Central Circle-2, Patna V. Janardhan Sharma , Patna

ITSSA 37/PAT/2016

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5644 (ITAT-PATNA)
• Duration Of Justice: 4 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 25-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY RASTOGI
• Keywords: Block assessment; Set aside
• Section: 145; 144; 143(3); 142(1); 292BB; 143(2); 158BC; 153

Judgement Text

1 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, (VIRTUAL HEARING AT KOLKATA) [Before Shri A. T. Varkey, JM & Shri Rajesh Kumar, AM] I.T(SS).A. No. 36/Pat/2016 Block Period: 1989-90 to 1998-99 Late Janardan Sharma through L/H Smt. Kamla Pandey (PAN:ANNPS1027R) Vs. Deputy Commissioner of Income-tax, Central Circle-4, Patna. Appellant Respondent & I.T(SS).A. No. 37/Pat/2016 Block Period: 1989-90 to 1998-99 Assistant Commissioner of Income-tax, Central Circle-2, Patna Vs. Late Janardan Sharma through L/H Smt. Kamla Pandey Appellant Respondent Date of Hearing 22.12.2021 Date of Pronouncement 23.12.2021 For the Assessee Shri Ajay Rastogi, Advocate For the Department Shri Sanjay Mukherjee, CIT, DR ORDER Per Shri A.T.Varkey, JM These are cross appeals preferred by the assessee and Revenue against the order of Ld. CIT(A)-3, Patna dated 20.10.2016 respectively for the block period 1989-90 to 1998- 99 u/s. 158BC/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). 2. At the outset, the Ld. Senior counsel for the assessee Shri A. K. Rastogi drew our attention to the additional grounds of appeal that has been preferred before us which reads as under: “1. For that the Assessing Officer has erred in completing the assessment without issuing notice u/s. 143(2) of the I. T. Act. 2. For that the order u/s. 158BC is ab initio void and illegal in absence of jurisdictional notice u/s. 143(2) of the I. T. Act.” 2 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 3. According to Shri Rastogi the aforesaid issues are legal issues and therefore, he prayed that the legal issue challenging the jurisdiction may be adjudicated even though it has been raised for the first time before this Tribunal and relied on the decision of the Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC). Per contra, the Ld. CIT DR Shri Sanjay Mukherjee submitted that this issue has not been raised before the Ld. CIT(A), so this issue may not be admitted. 4. After hearing both the parties regarding admitting these additional issues (supra), we note that the assessee has raised a legal issue which is challenging the jurisdiction of AO to frame reassessment order u/s. 158BC/143(3) without issue of mandatory notice u/s. 143(2) of the Act. Therefore, as per the ratio laid by the Hon’ble Supreme Court in NTPC (supra), we are inclined to admit the same and hear the legal issue first. We note that the assessee Shri Janardan Sharma has expired and the legal heir Smt. Kamla Pandey who is his wife has been substituted in his place. We also note that this matter was listed on 20 th December, 2021 wherein this legal issue was confronted to the Ld. CIT, DR i.e. whether the AO had issued statutory notice u/s. 143(2) of the Act before framing the re-assessment order u/s. 158BC/143(3) of the Act ? We requested the Ld. CIT, DR Shri Sanjay Mukherjee to go through the assessment folder of the assessee and the order sheet maintained by the AO and to examine as to whether there is any copy of the notice u/s. 143(2) of the Act or the AO has mentioned about the issuance/service of the notice u/s. 143(2) of the Act in the file of this assessee. 5. Today, when the appeal was heard the bench asked the Ld. CIT DR Shri Mukherjee whether he had inspected the file of the assessee and whether he was able to locate a copy of the notice u/s. 143(2) of the Act or whether he could find any mention about the issuance/service of notice u/s. 143(2) of the Act in the order sheet maintained by the AO, the Ld. CIT DR fairly admitted that he has examined the assessment folder of assessee but he could neither find any copy of the notice u/s. 143(2) of the Act nor any noting mentioning about issuance/service of 143(2) notice in the order sheet before framing the impugned order by the AO u/s. 158BC/143(3) of the Act dated 28.04.2000. However, Ld. CIT DR submitted that there were copies of notice u/s. 142(1) of the Act and further according to him, since assessee has participated in the assessment proceedings sec. 3 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 292BB would come to the rescue of the assessee. So, he wants us to dismiss the legal issue. Per contra, the Ld. Sr. counsel Shri Rastogi pointed out that section 292BB cannot come to the rescue of the department and cited the decision of Hon’ble Supreme Court in CIT Vs. Laxman Das Khandelwal 417 ITR 325 (SC). Further, according to him, by the admission of Ld CIT, DR, it is clear that AO has not issued the mandatory notice u/s. 143(2) of the Act, so the assessment was bad in law and cited the decision of Hon’ble Supreme Court in Hotel Blue Moon 321 ITR 362 (SC) and Hon’ble Patna High Court decision in Kiran Prakashan Vs. Department of Income Tax 391 ITR 31 (Pat). So, according to him, the legal issue need to be decided in favour of assessee. 6. Having heard both the parties, we note that AO had not issued mandatory notice u/s. 143(2) of the Act before framing order u/s. 158BC/143(3) of the Act by the admission of Ld CIT DR as discussed supra. In such a scenario and having gone through the assessment order where there is no whisper about the service of notice u/s. 143(2) of the Act, we find that the AO had not issued the mandatory notice u/s. 143(2) of the Act before framing the assessment order u/s. 158BC/143(3) of the Act. Having recorded this finding of fact, we rely on the decision of the Hon’ble Supreme Court in the case of ACIT Vs. Hotel Blue Moon 321 ITR 362 (SC) wherein the Hon’ble Supreme Court has held that issuance of notice u/s 143(2) of the Act is mandatory for assessment u/s 143(3) of the Act and block assessment u/s 158BC and the relevant portion of the order is re-produced as under: 15) We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. Section 158 BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply." An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read 4 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. 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 other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158 BC(b) specifically refers to applicability of the proviso thereto cannot be exclude. We may also notice here itself that the clarification given by CBDT in its circular No.717 dated 14th August, 1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of Section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the department that in view of the expression "So far as may be" in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh's case [1985] 155 ITR 166(SC). In this case, the Court has observed that Section 37(2) provides that "the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression "as far as practicable" has stated "without anything more the expression `as far as possible' will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied." 16) The case of the revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of Section 142, sub-sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143.”[Emphasis given] 6. We also rely on the decision of the jurisdictional High court in Kiran Prakashan Vs. Department of Income Tax 391 ITR 31 (Pat) wherein the Hon’ble jurisdictional High Court of Patna relying on the decision of the Hon’ble Supreme Court in the case of Hotel 5 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 Blue Moon held that without issuance of notice u/s. 143(2) of the Act the AO could not have passed the block assessment order. The Hon’ble High Court has held as under: “2 The challenge in the present writ application is to an order passed by the Commissioner, Income-tax (Appeals)-III, Patna. on September 9, 2015 whereby, in a case of block assessment, a finding was recorded that notice under section 143(2) of the Income-tax Act, 1961 was not issued, and that the judgment of the Supreme Court in Asst. err v. Hotel Blue Moon [2010] 321 ITR 362 (SC) is per incuriam in view of the judgment reported in Govt. of A. P. v. J. B. Educational Society [2005J 3 SCC 212 and State of Punjab v. Shamlal Murari [1976] 1 SCC 719. 3 In Hotel Blue Moon (supra), it is categorically held that the block assessment cannot be framed until notice under section 143(2) has been served upon the assessee. Since the Commissioner of Income-tax (Appeals) has recorded a finding that notice was not served, therefore, in view of the judgment in Hotel Blue Moon's case (supra), an order of assessment could not have been passed. 4 The reasoning given by the learned Commissioner that the judgment is per incuriam is based upon two Supreme Court judgments. The said finding is not tenable. Neither of the judgments refers/deals with the case of block assessment and of not serving a notice under section 143(2) which issue was raised and decided in Hotel Blue Moon's case (supra). 5 In view of the judgment in Hotel Blue Moon's case (supra), the learned Commissioner, Income-tax (Appeals) has committed grave illegality in holding that such judgment is per incuriam. 6 Consequently the writ petition is allowed. The order passed by the learned Commissioner of Income-tax (Appeals) is set aside.{Emphasis given} 7. In the light of the aforesaid decisions which are binding on this Tribunal and having found that the AO has not issued/served notice u/s. 143(2) of the Act to the assessee before framing assessment u/s. 158BC/143(3) of the Act, therefore, the order passed by the AO is null in the eyes of law and, therefore, is quashed. 8. Coming to the contention of the Ld. CIT DR Shri Sanjay Mukherjee that section 292BB of the Act would come to the rescue of the department. The Ld. Sr. Counsel Shri Ashok K Rastogi rightly submitted that this issue is no longer res integra and the Hon’ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal reported in (2019) 417 ITR 325 (SC) has decided similar argument which was taken by the department before the Hon’ble Supreme Court that deficiency in service of notice u/s. 143(2) of the Act can be cured in the light of section 292BB of the Act was repelled by the Hon’ble Supreme Court wherein the Hon’ble Supreme Court answered this question as under: “6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:- 6 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 “292BB. Notice deemed to be valid in certain circumstances. – Where an assessee has appeared in any proceeding or cooperated 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.” 7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections 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. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer. On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid. 8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Blue Moon’s case. The issue that however needs to be considered is the impact of Section 292BB of the Act. 9. 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 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 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 Section seeks to cure. The Section is not intended to cure complete absence of notice itself. 10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.”[Emphasis given] 9. Therefore, we find that the contention of the Ld CIT DR that section 292BB of the Act would come to the rescue of the department for non-issuance of notice u/s. 143(2) of the Act is fallacious and devoid of merits. Only when AO had issued the mandatory notice and assessee after participating in the assessment proceedings, later raises the plea of non- service of such a notice, then legal fiction under section 292BB will be applicable and is not applicable when the AO had not issued notice u/s 143(2) of the Act at all, which is the 7 IT(SS)A No.36-37/Pat/2016 Late Janardan Sharma through L/H Smt. Kamla pandey Block period 1989-90 to 1998-99 case before us. Therefore, in the light of the aforesaid discussion and having found supra that no notice u/s. 143(2) of the Act was issued by the AO before framing the assessment u/s. 158BC/143(3) of the Act, the assessee succeeds in his additional ground of appeal (supra) and, therefore, the assessment framed thereupon is held to be null in the eyes of law and so quashed. 10. In the result, the appeal of the assessee is allowed and appeal of the revenue is dismissed. Order is pronounced in the open court on 23 rd December, 2021. Sd/- Sd/- (Rajesh Kumar) (Aby. T. Varkey) Accountant Member Judicial Member Dated: 23.12.2021 JD(Sr.P.S.) Copy of the order forwarded to: 1. Assessee - Late Janardan Sharma Through L/H smt. Kamla Pandey, Road No. 10, Patel Nagar, Patna-23 2. Revenue – DCIT, CC-4, Patna & ACIT, CC-2, Patna. 3. CIT(A)-3, Patna 4. CIT, Patna. 5. DR, Patna Benches, Patna True Copy By Order Senior Private Secretary/DDO ITAT, Patna Bench, Patna