ACIT vs Ravi Construction Pvt. Ltd.

1.

The CIT(A) erred in quashing the assessment in the absence of issuance of notice u/s. 143(2) of the Act, the proceedings u/s. 147 of the Act were invalid, despite the fact that the assessee’s reply dated 31.3.2023, treating the originally filed return of income as the return in response to notice u/s. 148, was not signed by the Director or any authorized person, as required under section 140 of the Act.

2.

The CIT(A) erred in deleting the addition u/s. 68 of the Act on account of unsecured loan / unexplained credit to the amount of Rs. 1,25,00,000/- for obtaining accommodation entries from non-descript entities.

3.

The Ld. CIT(A) erred in deleting the addition u/s. 69C of the Act for Rs. 2,38,621/-paid to non-descript entities against unsecured loan/unexplained credit to the amount of Rs. 1,25,00,000/-.

1.

The initiation of the proceedings under section 147, 148A and 148 of the Act without satisfying and complying with the statutory and mandatory pre-requisite conditions, particularly as required by section 147 to 151A of the Act; which are sine qua non for assumption of valid jurisdiction to initiate the proceedings and complete the assessment is invalid, untenable, illegal, bad in law, null and void ab initio and deserves to be annulled.

2.

The assessment order dated 30.3.2024 issued u/s. 147 r.w.s. 144 of the Act by the Ld. DCIT, CC-4, New Delhi is invalid, untenable, illegal, bad in law, null and void ab initio and deserves to be annulled.

3.

The assessment order as well as the order of the CIT(A) is against the facts and circumstances of the case as well as law.

“8.

We have carefully considered the preliminary issue on the basis of the record produced before us. It is a fact that no notice was issued under Section 143(2) of the Act. In addition to the absence of any evidence or even indication in the assessment record to show that such a notice was issued, there are also other circumstances to show that the notice was not issued. These are that (a) the assessee repeatedly drew the attention of the Assessing Officer to the fact that no notice under this sub-section was issued by the Assessing Officer and despite the same the Assessing Officer did not draw the attention of the assessee to any notice issued and served on him and (b) the fact that the assessee filed an affidavit before the CIT (Appeals) denying service of notice under Section 143(2); even then, the Assessing Officer did not represent before the CIT(A) that the notice had been issued and served. All that he stated before the CIT(A) was that this objection was not taken during the assessment proceedings. When no notice under Section 143(2) has been issued the reassessment order is invalid as has been held by the Special Bench Delhi in the case of Raj Kumar Chawla v. ITO (2005) 94 ITD 1 (SB). In this order, it has been held that the proviso to Section 143(2) which mandates service of notice within the period of 12 months from the end of the month in which the return is filed also applies to returns filed pursuant to notice under Section 148. It has further been held that if the notice is not served within the said period the Assessing Officer loses his jurisdiction to make an assessment under Section 143(3) read with Section 147. This judgment squarely applies the facts of the present case. In fact, in the present case, no notice under Section 143(2) was issued at all and thus it is a fortiori. The cases of Lunar Diamond Limited (supra) and Vardhman Estate (supra), both of the Hon'ble Delhi High Court, are not cases of reassessment under Section 147 but that, in our opinion, should make no difference to the result because even where an assessment is reopened under Section 147 read with Section 148, the assessment order is ultimately passed only under the provisions of Section 143(3). Therefore, the ratio of these judgments is applicable to cases of reassessments also. The judgment of the Rajasthan High Court in the case of Tiwari Kanhaiya Lal v. CIT (supra) is authority for the proposition that if an assessee feels that it is not necessary to file a fresh return in response to notice under Section 148 and that the earlier return filed by him under Section 139 should be treated as sufficient compliance of the reassessment notice, he may inform the Assessing Officer of his decision to treat his previous return as the return filed under Section 148 and in that event, the earlier return will have to be treated as a return under Section 148 (pages 114 - 115 of the judgment). Therefore, the return filed by the assessee in the original assessment proceedings on 31.8.1995 must be taken as the return filed also in response to the notice under Section 148, with the rider that the date of filing of such a return would be the date on which the assessee wrote the letter to the Assessing Officer requesting him to treat the original return as the return filed under Section 148. In the present case, the letter was written on 23.3.2000 and it is not in dispute that such a letter was received by the Assessing Officer. Therefore, the date of filing the return under Section 148 was 23.3.2000 with the result that the last day for issue of the notice under Section 143(2) was 31.3.2001 as per the proviso to the sub-section. As already noted, no notice under Section 143(2) was issued to the assessee before this date or at any time thereafter. Even if we were to consider the notices issued under Section 142(1) as notices calling for the return of income, they having been issued after 31.3.2001 are beyond the time prescribed by the proviso to Sub-section (2) of Section 143 and would be barred by limitation. In point a fact however, these notices are not notices calling for the return of income; they have only called for certain information from the assessee. Section 292B has been rightly distinguished on behalf of the assessee and it cannot come to the rescue of the department since no notice was issued at all. The section does not have the effect of deeming that such a notice was issued when in fact it was not issued. It only says that if the notice issued contains some innocuous mistakes or omissions, the notice cannot be considered to be invalid for that reason. As far as the objection of the department that the assessee participated in the proceedings is concerned, the assessee did participate in the proceedings by virtue of the notices issued under Section 142(1); in any case, the assessee's participation does not absolve the Assessing Officer of the statutory duty of issuing and serving the notice under Section 143(2) within the stipulated time. The non-issue of the notice is a fetter on the Assessing Officer from completing the assessment under Section 143(3). He can only accept the return as such. As regards the judgment of the Madras High Court (supra) cited by the learned Senior DR, in view of the judgments of the Hon'ble jurisdictional High Court, the former cannot be given effect to.

9.

We are unable to agree with the CIT(A) that a notice "appears" to have been issued under Section 143(2). He has examined the record and has found that "the copy of the same is not on record at present". He has used guarded words, such as "at present". Nevertheless, he has proceeded to hold that a notice "appears" to have been issued. We are unable to appreciate how in the absence of any evidence for issue or service of the notice, or even a copy of the notice on file, such a finding could have been recorded by the CIT(A).

10.

We have also examined the proviso to Section 148(1) inserted by the Finance Act, 2006 with retrospective effect from 1-10-1991 to find out its applicability to the present case. The first proviso saves the validity of a reassessment order where a notice under Section 143(2) was not served within the prescribed period - 12 months from the end of the month in which the return was filed. But the saving is subject to certain limitations. Firstly, the assessee should have filed the return between 1-10-1991 and 30-9-2005 in response to a notice issued under Section 148. In the present case the assessee has been held to have filed such a return on 23-3-2000 and thus this condition is satisfied. The other condition is that the notice under Section 143(2) should have been served within the time-frame prescribed under Clause (b) of the proviso. This condition is not satisfied in the present case because no notice has at all been served under Section 143(2) as found by us. The clause applies only to save a notice served on the assessee, though not within the period of 12 months from the end of the month in which the return was filed. When no notice at all has been served, the clause does not apply to save the validity of the reassessment order. Therefore, the first proviso to Section 148(1) does not save the situation.

11.

For the above reasons, we accept ground No. 1 taken by the assessee in his cross objection and hold that the reassessment made under Section 148 read with Section 143(3) of the Act is invalid and is quashed. In the view we have taken, it is not necessary to adjudicate upon the other grounds taken in the cross objection or to deal with the appeals filed by the assessee and the department.

12.

In the result, the assessee's cross objection is allowed and the appeals filed by the assessee and the department are dismissed as infructuous.”

“Section 154, read with section 292B, of the Income Tax Act, 1961 – Rectification of mistake – Apparent from record – assessment years 1988-89 ad 1989-90 – Whether if a statutory provision is capable of two interpretation, taking one such interpretation can give rise to an error apparent from record – Held, no – Notice under section 154 was issued to assessee stating that return filed by it having not been signed by person named under section 140 was non est and proceedings taken on basis of that return were void ab initio – Assessee’s contention that in view of section 292B, return could not be questioned, was rejected – Held, yes – whether applicability or otherwise of section 292B being a debatatble question of law, section 154 could not be invoked – Held, yes. Section 292B of the Income tax Act, 1961 – Returns, etc., not be invalid on certain grounds – whether absence of proper signature or verification is curable one and assessee must have opportunity to rectify it – Held, yes.”