Commissioner of Income Tax, Chennai vs Alstom T and D India Limited, Pallavaram, Chennai

Chitra Venkataraman, J.—The above Tax Case (Appeals) arise out of the order of the Tribunal relating to assessment year 1994-95.

Following arc the questions of law raised for consideration in the above Tax Case (Appeals):

(i) 1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the re assessment framed u/s 143(3) read with 147

for the assessment year 94-95 is invalid on the ground that no notice u/s 143(2) was served before framing the re-assessment?

(2) Whether in the facts and circumstances of the case, the Tribunal was right in holding that expenditure on renting a guest house is allowable as a

business expenditure as per Section 37(4)?

(3) Whether in the facts and circumstances of the case, the Tribunal was right in holding that Lucknow property which was exchanged for another

property in respect of which the assessee had forgone the tenancy rights was acquired for a valuable consideration and allowing depreciation u/s

32?

T.C. (A). No. 1183 of 2006 relates to jurisdictional aspect in not issuing notice u/s 143(2) of the Act. T.C. (A). No. 1186 of 2006 deals with

merits of the reassessment.

It is seen from the order of assessment that a notice u/s 148 of the Act was issued on 17.3.1997. Since there was no response, notice u/s 142

of the Act was issued on 26.11.1997. The assessee is stated to have filed a letter dated 16.4.1997 stating that the company has already filed its

return of income on 30.11.1994 declaring loss and requested to treat the said return as the correct and conclusive return. In response to the notice

u/s 142 of the Act, the assessee filed a letter dated 11.1.1999 seeking reasons for reopening of the assessment. The letter dated 11.1.1999 further

pointed out to the letter dated 16.4.1997 requesting the Assessing Officer to treat the return filed earlier as a return filed pursuant to the notice u/s

148 of the Act. The Officer however replied on 29.1.1999 by stating that the reasons for reopening the assessment need not be communicated to

the assessee as per the decision of the Apex Court in S. Narayanappa and Others Vs. Commissioner of Income Tax, Bangalore, thus the

Assessing Officer called upon the assessee to comply with the notice issued u/s 148 of the Act. The said letter from the Joint Commissioner of

Income Tax revealed receipt of the letter dated 11.1.1999 and the assessee was asked to comply with the notice issued u/s 148 of the Act.

Ignoring the contents of the assessee''s letter dated 11.1.99, the Assessing Officer however viewed that since the assessee had not filed the return,

after discussing the matter, the assessment was completed. Aggrieved by this, the assessee went on appeal before the Commissioner of Income

Tax (Appeals) questioning the reopening of the assessment on merits as well as on non compliance of the requirements u/s 143(2) of the Act.

The first Appellate Authority upheld the reopening of the assessment u/s 147 of the Act. On the quantum, the Commissioner of Income Tax

(Appeals) granted partial relief reassessment. As against the same, assessee filed an appeal before the Income Tax Appellate Tribunal. The

Revenue too on its part filed the appeal as against the order of the Commissioner of Income Tax (Appeals) granting partial relief to the assessee.

The Tribunal pointed out that the Assessing Officer had not issued notice u/s 143(2) of the Act before completing the assessment. Placing reliance

on the decision of this Court rendered in CIT v. M. Chellappan T.C. (A). No. 696 to 698 and 707 to 709 of 2004 dated 9.11.2004, the Tribunal

held that completion of the assessment proceedings u/s 143(3) read with 147 without issue of notice u/s 143(2) was bad in law. Hence, the

Tribunal cancelled the assessment. In view of the same, jurisdictional issue raised was decided in favour of the assessee. The Revenue''s appeal on

the merits of the assessment was dismissed. Aggrieved by the same, the Revenue is before this Court.

The facts as stated above are not in dispute. As rightly pointed out by the learned counsel for the assessee, even in the matter of finalisation of

the assessment u/s 148 of the Act, compliance of the procedure laid down under Sections 142 and 143(2) is mandatory vide order dated

17.7.2012 in Sapthagiri Finance & Investments V. Income Tax Officer, Ward 1(4), Kanchipuram T.C. (A). No. 159 of 2006. Referring to the

Apex Court in the decision in Assistant Commissioner of Income Tax and Another Vs. Hotel Blue Moon, holding that completion of the

assessment proceedings u/s 143(3) read with 147 without issue of notice u/s 143(2) was bad in law, this Court held that when there was failure on

the part of the Revenue from complying with the procedure laid down u/s 143(2) of the Act, the assessment had to fail.

As already seen, the facts of the case are no different from the case already decided by this Court. When the assessee had requested the officer

to treat the return already filed as one in response to Section 148 proceedings, further proceedings regarding compliance of the procedure u/s

143(2) is mandatory in nature. On the admitted fact position that there was no notice issued u/s 143(2) of the Act, we have no hesitation in

confirming the order of the Tribunal. Consequently, T.C. (A). No. 1183 of 2006 is dismissed. In view of the decision taken in T.C. (A). No. 1183

of 2006, T.C. (A). No. 1186 of 2006 is also dismissed. There is no necessity to go into the merits of the assessment. Accordingly, both the

appeals are dismissed. No costs.