Pelican Tobacco India Pvt. Ltd. vs Income Tax Officer

“4.1

I have considered the mater ial on record including writte n submission of the AR of the appellant filed in course of appe llate procee dings. I have pe rused the assessment order u/s 147 r.w.s. 144 of the Income Tax Act passed by the Assessing Officer. In the present appe al the appellant has raised five grounds of appeal and one additio nal gro und o f appe al.

4.1.1

In Additio nal Gro und of appeal, the appellant has contended that Assessing Officer has erred in law and on facts in framing the impugned reassessment order without se rving the mandato ry notice u/s 143( 2) of the Act as per law.

4.1.2

Since the additio nal ground of appeal addresses the issue which is the very basis of carrying out the assessment u/s 147 o f the Income Tax Act; the additional gro und is adjudicate d at the beginning before examining the other grounds. As per the assessment order , the appellant has file d a return of income on 30.09.2012 declaring a total income as Nil. Subse que ntly in vie w of the information receive d from the Investigatio n wing and after recording the reasons and taking necessary approval from the competent authority, notice u/s 148 was issued and ser ved upon the appellant on 31.03.2019. I n respo nse to the notice u/s 148, no communication was received from the appellant. Subsequently notice u/s 143(2)/ 143(1) date d 23.10.2019 were issued and served upo n the appe llant. The above facts mentio ned i n the assessment order results in the following conclusio ns:

1.

No return was filed in response to notice u/ s 148 of Income Tax Act by the appe llant.

2.

Notice u/s 143(2) date d 23.10.2019 was issue d and served upon the assessee.

4.1.3

The appe llant in a submission m entio ned that a notice u/s 143(2) was not issued during the course of reassessment pr oceedings. Ho we ver, as per the Assessing Office r in the assessment order , a notice u/s 143(2) of Income Tax Act dated 23.10.2019 was issued during the co urse of reassessment proceedings. Similarly, in the paper book file d before the undersigned the appellant did not file a co py of re turn filed in response to the notice u/s 148 of I ncome Tax Act. T he appe llant in its submission mentioned that the Assessee company has filed the Income Tax Return on 28.09.2019 but did no t provide either the return of income or ITBA screensho t as a proof o f filing a valid re turn of inco me. The appellant was gr ante d se veral oppor tunities vide notice dated 28.08.2023, 05.09.2023, 27.09.2023, 02.11.2023 and 08.11.2023 but the appellant did neither atte nded the pro ceedings no r the copy o f the retur n filed u/s 148 of Incom e Tax Act, if any, was made available during the co urse of appe llate proceedings.

4.1.4

As per the case laws, it is undisputed fact that the notice u/s 143(2) of Income Tax Act was re quired to be served upon the assessee on or before the prescribed timelines and no t serving such a no tice wo uld be a fatal error and the re assessment car ried out subse quent to issue of an invalid notice u/s 143( 2) of Income Tax Act canno t be considered as valid and as pe r law. Ho wever , these case laws ar e only applicable for the cases whe re a valid re tur n is filed during the co urse o f reassessment proceedings and a notice u/s 143(2) of Income Tax Act is not issued upon the appellant within the prescribed timelines. In this case, during the course o f appellate proceedings, the appe ll ant failed to prove that a valid return of income was filed subsequent to issue of no tice u/s 148 of Income Tax Act. Furthe r, issuance of notice u/s 143(2) is specifically mentione d in the assessm ent order . T he assessment order specifically mentions that notice u/s 143(2) and 142( 1) we re issued on 23.10.2019, the appe llant had not disputed that the no tice u/s 142(1) was issued on the said date . In view of the abo ve, it could not be conclusively prove d that whethe r a valid return o f income was filed in respo nse to notice u/s 148 of Income Tax Act and whether a notice u/s 143(2) of Income Tax Act was issued/serve d in the stipulate d time frame . The appellant de spite o f several opportunities provide d to it could not conclusively establish the facts pertaining to filing of a valid return and se rvice of no tice. Therefore, the additional ground o f the appeal raised during the course of appellate pr oceedings cannot be allo wed and the j urisdictio n of the Assessing Officer to frame the reasse ssment in this case is valid. A dditio nal Ground of appeal is dismissed.”

“15.

This br ings us to the second aspect o f the matter, i.e., the conseque nces o f the failure o f the appe llant/ reve nue to issue notice unde r Section 143(2) of the Act before framing the assessment order . Concede dly, the appellant/re venue did not is sue a no tice under Section 143(2) of the Act, although it had on record the ROI filed by the respondent/assessee for the AY in issue, i.e ., 2010- 11. The return was, conce dedly, filed on 04.12.2015. This retur n was considered while framing the assessment under Se ction 147/ 144 o f the Act. The only reason furnished for not issuing a no tice under Sectio n 143(2) of the Act is that the ROI was not filed within the thirty ( 30) days pro vide d via the no tice date d 30.03.2015 issued under Sectio n 148. This argument does no t impress us because if we were to hold [as we have], that the said no tice was directed to wards the wrong address, the respondent/assessee could have not adhered to the timeline provide d in the said notice .

15.1

The respondent/assessee became aware of the Section 148 no tice being issue d after it rece ive d the notice date d 12.06.2015 under Section 142(1) of the Act. The fact that the respondent/assessee had file d an ROI on 04.12.2015 is not disputed. The fact that this ROI, as notice d abo ve, was taken into account is also not in dispute . The refo r e, in our opinio n, be fore framing an assessment order , the AO ought to have issued a notice under Sectio n 143(2) of the Act. The submission advance d on behalf of the appellant/revenue that, while it could consider the invalid return while framing the assessment o rder, it was no t o bliged to issue a no tice under Section 143(2) of the Act because it was not filed within the timeframe given in the Section 148 notice is untenable in law, since the R OI, which was belated, was conside red by the AO while carrying out the assessment.

15.2

The absence of notice, under Section 143(2), impregnates the proceedings with a jurisdictional defect and, hence, rende rs it invalid in the eyes of the law. This position is no longer res integra, as demonstrate d by the observations made in Principal Com missioner of Inco me-tax v. Shri Jai Shiv Shankar Traders (P.) L td. [2015] 64 taxmann.com 220/ 383 ITR 448 ( Delhi) :

"12.

The nar ration of facts as noted abo ve by the co urt makes it cle ar that no no tice unde r section 143(2) of the Act was issued to the assessee after December 16, 2010, the date o n which the assessee informed the Assessing Officer that the return originally file d sho uld be treated as the return filed pursuant to the no tice under section 148 of the Act.

13.

In DIT v. Society for Worldwide Interbank F inancial Telecommunicatio ns [2010] 323 ITR 249 (Delhi), this court invalidated a reassessment proceeding after noti ng that the notice unde r sectio n 143(2) of the Act was not issued to the assessee pursuant to the filing of the re turn. In other words, it w as held mandatory to serve the notice unde r section 143(2) of the Act only afte r the re tur n file d by the assessee is actually scrutinised by the Assessing Officer.

14.

The interplay of sectio ns 143 (2) and 148 of the A ct formed the subject matter of at least two decisions o f the Allahabad High Court in CIT v. R aje ev Sharma [2010] 192 Taxman 197/336 ITR 678 (Allahabad) it was held that a plain reading o f sectio n 148 of the Act re veals that within the statutory pe riod specifie d the rein, it shall be incumbent to se nd a notice under sectio n 143(2) of the Act. It was observed (page 687):

"The provisions contained in sub-sectio n (2) of section 143 o f the Act is m andatory and the Legislature in its wisdom by using the wo rd „re ason to be lieve' had cast a duly on the Assessing Officer to apply mind to the material o n recor d and afte r be ing satisfied with re gard to escaped liability, shall ser ve notice specifying particulars o f such claim .

In view of the above, after receipt o f return in response to no tic e under section 148, it shall be mandator y fo r the Assessing Office r to se rve a no tice under sub-section (2) of Section 143 assigning re ason therein

in absence of any notice issue d unde r sub- sectio n (2) of section 143 after receipt of fresh return submitte d by the assessee in response to notice unde r section 148, the, entire procedure ado pted fo r escape d assessment, shall not be valid."

15.

In a subse quent judgment in CIT v. S alarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105/ 228 Taxman 48 (Allahabad) , it was held as under:

"10.

Section 292BB of the Act was inser ted by the Finance Act, 2008 with e ffe ct fro m April 1, 2008. Section 282BB of the Act provides a deeming fictio n. The deeming fiction is to the effect that o nce the assessee has appeared in any proceeding or coope rated In any enquiry relating to an assessment o r reassessment, it shall be deemed that any noti ce unde r the provisio ns o f the Act, which is required to be served o n the asse ssee, has been duly served upon him in time in acco rdance with the provisions o f the A ct The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him ; or (ii) not served upon him in time ; or (iii) served upon him in an im prope r manner . IN other wo rds, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a no tice , service within time or se rvice in an improper manner. The proviso to section 292BB of the Act, howe ver, carves out an exception to the e ffect that the se ction shall not apply where the assesse e has raised an objection befo re the completion o f the assessment o r reassessment. Sectio n 292BB of the Act canno t o bviate the requirement o r complying with a jurisdictional conditio n. Fo r the Assessing Officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdictio n itse lf would be invalid."

16.

In the same decision in Salar pur Cold Storage (P.) Ltd. (supra) , the Allahabad High Court notice d that the decision of the Supreme Court in Ho tel Blue Moon (supra) where in relation to block assessment, the S upre me Court held that the requirement to issue notice under Section 143(2) was mandato ry. It was no t "a proce dural irre gular ity and the same is no t curable and, there fore, the requirement of notice under Section 143(2) cannot be dispe nsed with."

17.

The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 341/ 210 T axman 78 (Madras) (Mag.). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. Howe ver , the Assessee did not file a return and therefore a notice was issued to it unde r Sectio n 142 (1) of the Act. Pursuant thereto, the Assessee appe are d be fo re the A O and stated that the original retur n filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observe d that if there after, the AO fo und that there were pro blems with the return which re quired explanation by the Assessee then the AO ought to have followed up with a notice unde r Section 143(2) of the Act . It was o bser ved that:

"Merely because the matter was discusse d with the Assessee and the signature is affixed it does not mean the rest of the procedure of no tice under Section 143(2) of the Act was complied with or that o n placing the objection the Assessee had waived the no tice fo r fur ther processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assesse e had placed its objectio n and reiterated its e arlie r re turn filed as one file d in response to the notice issue d u/s 148 o f the Act and the Officer had also noted that the same would be conside red for co mpleting of assessment, would sho w that the AO has the duty of issuing the notice unde r Section 143(3) to lead on to the passing o f the assessment. In the ci rcumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifi able gr ound to acce pt the vie w of the Tribunal that the re was a waiver of right of notice to be issued u/s 143(2) o f the Act."

18.

As already noticed, the decision of this Co ur t in Vision Inc. (supra) proceede d on a different se t of facts. In that case, the re was a clear finding of the Court that service of the notice had been effecte d on the Assessee under Section 143 (2) of the Act. As already furthe r noticed, the legal position regarding Section 292BB has already been m ade explic it in the aforementione d decisions of the Allahabad High Co urt. That provision would apply insofar as failure of "service" of no tice was concerne d and no t with regard to failure to "issue" notice . In othe r words, the failure of the A O, in re-assessment pro ceedings, to issue notice under Se ction 143( 2) o f the Act, prior to finalising the re-assessment orde r, canno t be condoned by refe rring to Section 292BB of the Act.

19.

The resultant position is that as far as the present case is co ncerned the failure by the AO to issue a no tice to the Assessee unde r Section 143(2) of the A ct subsequent to 16th December 2010 when the Assess ee made a statement before the AO to the effect that the original return filed should be treated as a re tur n pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment." [Emphasis is o urs]

IV. Co nclusion:

16.

On both aspects, the Tribunal is right. The Tribunal has returne d findings o f fact o n the two issues adverted to he reinabo ve.

17.

T hus, for the fore going reasons, which are ( i) that notice under Section 148 o f the Act was improperly served, and (ii) that notice unde r Section 143( 2) should have been issued before framing of assessment or der under Section 147/144 of the Act, w e are no t incline d to interfe re with the impugned or der passed by the Tribunal.”