JAGDISH PRASAD AGARWALA,KOLKATA V. I.T.O., WARD - 44(1), , KOLKATA

ITA 1798/KOL/2024

AI Insights

The case involves Jagdish Prasad Agarwala, the appellant, contesting the validity of an assessment order passed by the Income Tax Officer, Ward-44(1), Kolkata, for the assessment year 2018-19. The primary legal contention was the issuance of a notice under Section 143(2) of the Income Tax Act, which was issued beyond the permissible time limit. The appellant argued that this procedural defect invalidated the assessment proceedings. The Income Tax Officer had initially issued a notice under Section 143(2) on January 16, 2023, which was beyond the deadline of September 30, 2022, applicable for the financial year 2021-22, due to amendments in the Act. The Commissioner of Income Tax (Appeals) upheld the assessment, citing Section 292BB, which addresses defects in the notice service but does not cure the absence of a timely notice. The Tribunal, referencing the Supreme Court's decision in CIT Vs Laxman Das Khandelwal, found that Section 292BB does not apply to the complete absence or late issuance of a notice under Section 143(2).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473870 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Other Referred Cases: Hotel Blue Moon ACIT v. Hotel Blue Moon, CIT Vs Laxman Das Khandelwal, CIT Vs C. Palaniapan, Iqwal Singh Atwal Vs CIT, Pr CIT Vs Shri Jai Shiv Shankar Traders Pvt Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.N. BARNWAL
• Assessee Lawyers: S.M. SURANA; SUNIL SURANA; ARS
• Keywords: Set aside; Invalid notice
• Section: 147; 292BB; 143(2); 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.1798/KOL/2024 (Assessment Year:2018-19) Jagdish Prasad Agarwala E-126, Atmosphere, 1001A, E.M. Bypass, Govinda Khatick Road, Kolkata-700046, West Bengal Vs. ITO, Ward-44(1) Income Tax Office, 3, Govt. Place (West), Kolkata-700001 West Bengal (Appellant) (Respondent) PAN No. ACQPA1306F Assessee by : Shri S.M. Surana & Sunil Surana, ARs Revenue by : Shri P.N. Barnwal, DR Date of hearing: 10.02.2025 Date of pronouncement : 17.03.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 14.08.2024 for the AY 2018-19. 02. The first issue raised by the assessee is against the order of ld. CIT (A), confirming the order of the ld. AO when the notice u/s 143(2) of the Act was issued beyond the limitation i.e. on 16.01.2023 which should have been issued on 30.06.2022 and the provisions of Section 292BB of the Act cannot save the delay in the issue of notice but the same relates to service of notice and the mere participation of the assessee in the assessment proceedings cannot cure the inherent non- availability of jurisdiction. Page | 2 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 03. The ground no.2 is also in support of ground no.1. 04. The facts in brief are that the assessee filed the return of income on 31.10.2018, declaring total income of ₹ 1,93,89,490/-. A search u/s 132 of the Act was carried out by the investigation Wing on various places of finance brokers on 30.11.2018. During the course of enquires of the Investigation wing, it was revealed that the assessee was engaged in dubious financial transactions with Anil Kumar Kesara, finance brokers Sanwaria & Kasera to the tune of ₹28,15,00,000/-. During the financial year 2017-18, the investigation wing found that the said broker was engaged in arranging cash loans to the interested parties in lieu of commission and the beneficiary of finance brokers were identified on the basis of analysis of Rukkas, Data available in public domain, market information, statements recorded and explanation provided by the broker. Accordingly, the proceeding u/s 147 of the Act were initiated after following the procedure as provided u/s 148 of the Act. The notice u/s 148 of the Act was issued to the assessee on 23.03.2022. The assessee complied with the said notices vide letter dated 25.03.2022, submitting therein that the return of income filed on 31.10.2018, may be treated as return filed in response to notice u/s 148 of the Act. Thereafter, the notice u/s 143(2) of the Act was issued on 16.01.2023. During the course of assessment, the assessee responded to various notices/ questionnaire issued by the ld. AO. The evidences collected during search and post-search proceeding, which revealed that the finance brokers were engaged in unaccounted cash transactions amounting to ₹28,15,00,000/-, for which the assessee has not produced any documentary evidences and accordingly, the ld. AO held that the assessee is engaged in various dubious transactions with Anil Kumar Kesara, finance brokers Page | 3 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 Sanwaria & Kasera to the above extent. Finally, the assessment was framed by the AO vide order dated 27.03.2023, passed u/s 147 read with section 144B of the Act by making an addition of ₹28,15,00,000/- u/s 69D of the Act. 05. Aggrieved assessee preferred an appeal before the ld. CIT (A), challenging he additions on legal issue that the notice u/s 143(2) is barred by limitation, as the same was issued beyond a period of 3 months from the end of the financial year for which the return was furnished. The ld. CIT (A) dismissed the appeal of the assessee by holding that the delayed issuance of notice on 16.01.2023, would not invalidate assessment proceeding and the consequent assessment framed as the provisions of Section 292BB of the Act cure the defects which is procedural defect and moreover, the assessee participated in the assessment proceeding. The ld. CIT (A) after taking into account the contentions of the assessee dismissed the appeal of the assessee by observing and holding as under:- “7.2. Findings on Ground of Appeal 1: 7.2.1. The assessee submitted that the assessment is bad in law and should be quashed and assessment to be held invalid as no notice u/s 143(2) was issued within the time allowed under the statute when the assessee duly complied with the notice by filing a letter dated 25.3.2022 that the original return filed by the assessee u/s 139 on 31-10-2018 vide e-filing acknowledgement No 364691911311018 be treated as return u/s 148 which was sufficient compliance under the law. The assessee submitted that AO has issued notice u/s 143(2) issued on 16.1.2023 well beyond the time prescribed in section 143(2). 7.2.2. The assessee placed reliance heavily on the judgment in the case of Hotel Blue Moon ACIT v. Hotel Blue Moon [(2010] 321 ITR 362 (SC). The assessee also placed reliance on the judgments of various courts in his submission. The case laws cited by the assessee have been perused. 7.2.3. The undisputed fact of the case of the present assessee is that notice u/s 143(2) was issued by the AO on 16.1.2023 whereas the assessee filed a letter dated 25.3.2022 stating that return filed u/s 139 be treated as return filed u/s 148. The Page | 4 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 notice u/s 143(2) should have been issued on or before 30.09.2022, the due date which the AO has failed to adhere to. 7.2.4. However, this is not a case where the AO has failed to issue notice u/s 143(2). In the case laws cited by the assessee, the facts in most of the cases were that the AO has totally failed to issue notice u/s 143(2). Whereas in this case, notice u/s 143(2) was issued but not within time. Thus, the facts of the case as stated by the assessee in the case laws cited by him are different from the case of the present assessee. The issue of notice u/s 143(2) has been distinctly dealt with in the recent judgment of the Hon'ble Supreme Court in the case of CIT Vs Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC) wherein it was held- \"For section 292BB to apply, section 143(2) notice must have emanated from department and it is only infirmities in manner of service of notice that section seeks to cure and it is not intended to cure complete absence of notice itself\" The view of the Department has been that the assessee having participated in the proceedings, the defect, if any, stood completely cured u/s 292BB. This fact has been an issue of debate in earlier judgments. Thus, the Apex Court has put to rest the issue in its judgment(supra). The relevant extracts of the judgment in the case of CIT vs Laxman Das Khandelwal is reproduced here as under: \"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 143(2) 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 Hotel Blue Moon's case (supra). The issue that however needs to be considered is the impact of Section 29288 of the Act 9. According to Section 29288 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 2928B to apply, the notice must have Page | 5 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 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 11. These Appeals are, therefore, dismissed. No costs.\" 7.2.5. Thus, in the judgment delivered by the Hon'ble SC, the manifest interpretation is that section 292BB would cure defect if assessee has participated in the proceedings and notice u/s 143(2) would be valid if it has been issued during the assessment proceedings. The judgment sought to make invalid notice u/s 143(2) only in the event of complete absence of notice u/s 143(2). Here, in this case, notice was issued and it is not a case of non issue of notice u/s 143(2). Thus, the case laws especially the case of Hotel Blue Moon is not applicable in the present case and is distinguishable. In the case of Hotel Blue Moon, it was a case of non issue of notice u/s 143(2), which the Hon'ble SC in the case of Laxman Das Khandelwal has held to be incurable defect which cannot be cured by section 292BB. 7.2.6. In the light of the observations and discussions above, it is held the notice u/s 143(2) is valid and the assessment is valid as section 292BB is held to cure defect in issuance of notice u/s 143(2) as notice u/s 143(2) was issued during the proceedings. Accordingly, Ground of appeal 1 is hereby dismissed.” 06. The ld. AR vehemently submitted before us that the notice u/s 143(2) of the Act which was issued on 16.01.2023, was beyond the permissible time limit specified in first proviso to Section 143(2) of the Act. The ld. AR submitted that prior to 01.04.2021, the time given for issuance of notice was 6 months, however, the same was substituted by three months by Finance Act, 2021, with effect from 01.04.2021. Therefore, the notice has to be issued within a period of three months from the end of the financial year in which the return of income was filed by the assessee. In the present case, the return of income was filed by the assessee on 25.03.2022. The ld. Counsel for the assessee therefore submitted that the financial year ended on 31.03.2022 and three months in terms of first proviso to Section 143(2) expired on 30.06.2022, and accordingly, the notice u/s 143(2) of the Act was Page | 6 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 barred by limitation. The ld. AR while strongly assailing the conclusion drawn by the ld. CIT (A) to the fact that the notice issued beyond the permissible time limit under first proviso to Section 143(2) of the Act is curable defect which has taken care of the provisions of Section 292BB of the Act as assessee has also participated in the assessment proceedings. The ld. AR submitted that the ld. CIT (A) relied on the decision of CIT Vs Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC), wherein it was held by the Hon'ble Supreme Court that for section 292BB to apply, section 143(2) notice must have emanated from department and it is only infirmities in manner of service of notice that section seeks to cure and it is not intended to cure complete absence of notice itself. The ld. AR submitted that in the said decision the Hon'ble Apex Court has held if the notice emanated from the department then the only service of notice is taken care of by the provisions of Section 292BB of the Act and not the delay issuance of notice after the timeline provided under the first proviso to Section 143(2) of the Act. Therefore, the finding of the ld. CIT (A) are completely misplaced and require to be reversed. 07. The ld DR on the other hand relied on the order of ld CIT(A) on this and submitted that the delay in issuing notice is taken care of by nthe provisions of section 292BB of the Act and therefore the legal ground raised by the assessee may be dismissed. 08. We have heard the rival contentions and perused the materials on records as placed before us. Undisputedly the notice u/s 143(2) was issued after the time line as mentioned in the first proviso to section 143(2) of the Act. The facts qua the notice u.s 143(2) are already discussed above and are not being repeated again.The ld DR candidly admitted that the notice was issued late by the AO however that Page | 7 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 would not render the proceedings as invalid as the infirmirites in the issue of notice would be taken care of by the provisions of section 292BB of the Act. In our opinion , the notice u/s 143(2) of the Act has to mandatorily issued with the period of three months from the end of financial year in which the return was filed but it was issued late. Therefore in our considered view the same is barred by limitation. The mere participation of the assessee in the proceedings before the AO would not cure the defect or the provisions of section 292BB would not come to the rescue of the revenue. Even the decision relied by the ld CIT(A) is in favour of the assessee. The Honble Apex Court in the decision CIT Vs Laxman Das Khandelwal (Supra) has categorical observation in para 9 that section 292BB cures the infirmities in the issuance of notice u/s 143(2) and not the absence of notice. The Hon’ble Apex Court in /hotel Blue Moon 321 ITR 362)held that issuance of notice u/s 143(2) is mandatory for scrutiny assessment even if the assessments are after search u/s 132(1) of the Act. Similar ratio has been laid down by the Hon’ble Madras High /court in the case of CIT Vs C. Palaniapan (284 ITR 257), Hon’ble Calcutta High Court in Iqwal Singh Atwal Vs CIT (1984)(147 ITR 599) and Delhi High Court in Pr CIT Vs Shri Jai Shiv Shankar Traders Pvt Ltd (2016)(383 ITR 448). Accordingly we set aside the order of ld CIT(A) on this issue by holding that the notice issued u/s 143(2) is barred by limitation and therefore the consequent assessment framed is also invalid and is quashed. 09. Since we have allowed the appeal of the assessee on issue of notice issued u/s 143(2) being barred by limitation , the other grounds raised on legal issues as well as on merits are not being decided at this stage Page | 8 ITA No. 1798/KOL/2024 Jagdish Prasad Agarwala; A.Y. 2018-19 and are being left open to be decided at later stage if need arises for the same. 010. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 17.03.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 17.03.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "