Whether issuance of notice under section 143(2) is necessary for completing assessment under section 153A?

short overview : Issuance of notice under section 143(2) is necessary for completing assessment under section 153A.

Assessee preferred an appeal contending that notice under section 143(2) was not issued within the stipulated period of six months before completing the assessment under section 153A read with section 143(3). Revenue submitted that the first notice under section 143(2) was issued in time.

it is held that It is well settled that non-issuance of notice under section 143(2) is not a requirement for completing assessment under section 153A. However, in view of the fact that first notice under section 143(2) was issued within the stipulated period and assessee also evinced interest in keeping the issue alive to be taken up before the higher forums rather than extensively arguing before the Tribunal, the said issue was decided against the assessee without going further deep into it.

Decision: Against the assessee.

Referred: Pr. CIT Delhi-18 v. M/s. N.S. Software (Firm) (2018) 403 ITR 259 (Del): 2018 TaxPub (DT) 2127 (Del-HC), Ashok Chaddha v. ITO (2011) 337 ITR 399 (Delhi): 2012 TaxPub (DT) 248 (Del-HC), Smt Sumanlata Bansal v. Asstt. CIT Central Circle-8, Mumbai in (ITA Nos. 525 to 530/Mum/2008, dt. 20-5-2015).

IN THE ITAT, PUNE BENCH

R.S. SYAL, V.P. & PARTHA SARATHI CHAUDHURY, J.M.

Rajesh Madanlal Partani v. Asstt. CIT

ITA Nos. 499 to 510, 850 to 855, 1016 to 1025, 1761 to 1763/PUN/2012

6 September, 2019

Assessee by: Hari Krishan

Revenue by: Pankaj Garg

Per Bench

This batch of 31 appeals contains 28 quantum appeals and 3 appeals against penalty imposed under section 271B of the Income Tax Act, 1961 (hereinafter called ‘the Act’) by different but connected assessees for the years captioned above. As some common issues are involved in these appeals, we are, therefore, proceeding to dispose them off by this consolidated order.

2. The first legal ground raised in lead appeal by Sh. Rajesh Madanlal Partani for the assessment year 2005-06 (ITA No. 852/PUN/2012), which is common in almost all the quantum appeals, is against failure to issue and service notice upon the assessee under section 143(2) of the Act within the time prescribed. On an earlier occasion, this ground was not pressed on behalf of the assessee.

However, the assessee has again chosen to press this ground of appeal.

The learned Counsel submitted that notice under section 143(2) was not issued within the stipulated period of six months before completing the assessment under section 153A read with section 143(3) of the Act. This was factually controverted by the learned Departmental Representative who submitted that the first notice under section 143(2) was issued in time.

3. We have briefly heard the parties on this issue. The learned Authorised Representative fairly pointed out that the Third Member bench of the Mumbai Tribunal in Smt. Sumanlala Bansal v. ACIT (TM) vide its Order dt. 20-5-2015 (ITA No. 525-530/Mum/2008), following the direct judgment of the Hon’ble Delhi High Court in Ashok Chaddha v. ITO (2011) 337 ITR 399 (Delhi) : 2012 TaxPub(DT) 248 (Del-HC), has held that non-issuance of notice under section 143(2) is not a requirement for completing assessment under section 153A. However, relying on another judgment in CIT v. N.S. Software (Firm) (2018) 403 ITR 259 (Del) : 2018 TaxPub(DT) 2127 (Del-HC), the learned Authorised Representative contended that the provisions of section 143(2) apply to the proceedings under section 153A as well, even though it was not a direct issue before the Hon’ble High Court. In view of the fact that the learned Departmental Representative contended that the first notice under section 143(2) of the Act was, in fact, issued within the stipulated period and further that the learned Authorised Representative also evinced interest in keeping the issue alive to be taken up before the higher forums rather than extensively arguing before the Tribunal, we decide this issue against the assessee without going further deep into it.

ITA Nos. 850-855/PUN/2012 and 1016-17/PUN/2012 –Shri Rajesh Madanlal Partani

4. Briefly stated, the facts of the lead year 2005-06 (in ITA No. 852/PUN/2012) which are mutatis mutandis similar to the other seven quantum appeals are that the assessee is a member of Partani group in which a survey was initially conducted under section 133A of the Act on 4-7-2007, which was converted into search under section 132 on the same day. The Partani group is engaged in doing business on commission agency and financing of auto rickshaw vehicles through personal finance as well as finance through Shree Gangadhar Nagari Sahakari Pat Sanstha. Sixteen diaries were found during the course of search and seizure containing details regarding old and new vehicles arranged by the assessee. It had further details of the commission received from each transaction, finances made to the borrowers and interest etc. Statement of the assessee was recorded on 4-7-2007.

The assessee made a surrender of Rs. 2.00 crore spread over certain years in his individual hands, however the same was not fully offered in the returns filed pursuant to the search. The assessee filed his return for the lead year at total income of Rs. 31,55,980 including the amount surrendered for the year at Rs. 26,02,000, but the assessment was completed at a total income of Rs. 1,63,73,720 making additions on account of suppressed commission income of Rs. 83.78,812; interest income of Rs. 55,87,963; suppressed profit of Rs. 14,63,000; and suppressed interest of Rs. 3,88,967. The assessee appealed before the learned Commissioner (Appeals) but remained unrepresented, as a result of which this appeal and host of other appeals came to be decided ex parte qua the respective assesses. This is how, the assessee has approached the Tribunal.

5. We have heard the rival submissions and considered the relevant material on record. It is seen that the learned Commissioner (Appeals) fixed the appeal of the assessee for hearing on 14-10-2010. Adjournment was sought, which was granted for 22-11-2010. Series of adjournments were taken by the assessee as has been recorded in para 3 of the impugned order.

Since the assessee could not represent himself before the learned Commissioner (Appeals), the learned first appellate authority was left with no alternate option but to proceed with the material available on record. That is how, most of the additions came to be countenanced by the learned Commissioner (Appeals). The learned Authorised Representative contended that the assessee’s father was not keeping good health during the course of relevant proceedings which prevented him from putting in appearance before the learned Commissioner (Appeals).

6. The learned Departmental Representative vehemently argued that the assessee was given proper opportunity by the learned Commissioner (Appeals) but the assessee failed to avail the same. It was thus prayed that the appeals of the assessee be dismissed. It was further pointed out by him that the assessment was getting time barred but the assessee failed to adduce the evidence in time enabling the assessing officer to embark upon proper enquiry. It was thus prayed that the additions so made and sustained be confirmed.

7. Both the sides admitted that the facts and circumstances of the other seven appeals are almost similar on merits.

8. In view of the fact that the assessee was prevented by reasonable cause from appearing before the learned Commissioner (Appeals) as his father was not well and the fact that the assessing officer could not properly appreciate the evidence because of limitation period setting in, both the sides fairly agreed that it would be in the interest of justice if the impugned orders are set-aside and the matter is restored to the file of assessing officer. Considering the totality of the facts and circumstances of the instant case, we are satisfied that the assessee deserves to be given one more chance to present his case before the assessing officer. We order accordingly. Setting aside the impugned orders, we direct the assessing officer to frame the assessments for the years under consideration afresh as per law after allowing reasonable opportunity of hearing to the assessee.

9. In the result, all the eight appeals are allowed for statistical purposes.

Partani Udyog (P) Ltd., in ITA Nos. 499 to 503/PUN/2012

Rajesh M. Partani (HUF) in ITA Nos. 504 & 505/PUN/2012

Madanlal Gangadhar Partani (HUF) in ITA Nos. 507 & 508/PUN/2012

Nitin Madanlal Partani (HUF) in ITA Nos. 509 & 510/PUN/2012

Madanlal Gangadhar Partani in ITA Nos. 1018 & 1019/PUN/2012

10. Apart from the legal issue which we have discussed herein above, the only issue raised in these appeals is against the estimation of commission income.

11. Both the sides are in agreement that the commission income has been estimated in the same way as has been done in the case of Sh. Rajesh Madanlal Partani in the lead case as discussed supra.

Following the same view, we set-aside the impugned orders and remit the matter to the file of the respective assessing officer’s for fresh decision.

Needless to say, the assessee will be allowed reasonable opportunity of hearing to the assessee.

12. In the result, all the above appeals are allowed for statistical purposes.

Rajesh M. Partani (HUF) in ITA Nos. 506/PUN/2012

13. This appeal was not pressed by the learned Authorised Representative. The same is, therefore, dismissed.

Madanlal G. Partani in ITA Nos. 1020 to 1025/PUN/2012

14. These six appeals by Sh. Madanlal Gangadhar Partani relate to the assessment years 2003-04 to 2008-09. A common issue raised in all these six appeals is against the confirmation of addition on account of cash deposited in the bank account.

15. Briefly stated, the facts for the assessment year 2003-04 are that the assessing officer, on perusal of statement of S.B. A/c. No. 8166 maintained by the assessee with Mahesh Sahkari Bank, Raviwar Peth, Pune observed that the assessee deposited cash of Rs. 52,000, Rs. 11,500, Rs. 11,500, Rs. 11,500, Rs. 12,000, Rs. 12,000, Rs. 11,500 on 13-5-2002, 15-7-2002, 6-8-2002, 16-8-2002, 16-9-2002, 17-9-2002 and 16-10-2002 respectively. Total of such cash deposits came at Rs. 1,22,000. In the absence of the assessee furnishing any explanation about the source of such cash deposits, the assessing officer made addition, which came to be confirmed in the first appeal.

16. The learned Authorised Representative submitted that the said bank account is a part of the assessee’s regular books of account maintained prior to search and has been properly reflected in the Balance sheet as well. The learned Authorised Representative submitted that all the entries of cash deposits find place in the regular books of account.

17. Having heard both the sides and gone through the relevant material on record, it is seen that the assessing officer made the addition simply by considering the amounts of cash deposits on different dates in the bank account. Addition on account of cash deposits can be made only if the source of the deposits remains unexplained. If, on the other hand, the cash deposits in the bank are from the regular books of account maintained by the assessee, then such transactions cannot be said to be unexplained. The learned Authorised Representative has taken the argument that the said bank account is part of the assessee’s regular books of account which was reflected in the balance sheet prior to the date of search.

Under these circumstances, we set-aside the impugned order and remit the matter to the file of assessing officer for examining if all the transactions, for which the addition has been made, were reflected in the assessee’s regular books of account maintained prior to the date of search. In case such entries find their place in the regular books of account maintained prior to the date of search, then obviously no addition can be made. In the otherwise scenario, the assessing officer will consider the issue afresh as per law.

18. Facts and circumstances of the other five appeals are stated to be mutatis mutandis similar.

19. In the result, all these appeals are allowed for statistical purposes.

Shri Rajesh Madanlal Partani in ITA Nos. 1761 to 1763/PUN/2012

20. These appeals are directed against the confirmation of penalty under section 271B of the Act in relation to the assessment years 2006-07 to 2008-09.

21. We have heard both the sides and gone through the relevant material on record. It is a common submission by both the sides that the quantum of penalty in these appeals is dependent upon the gross receipts in the quantum assessment, which issue we have restored above for fresh adjudication. Consequently, the impugned orders are set aside and the penalty matters are also sent back to the assessing officer for considering the amount of gross receipts to be finally includible in the fresh determination of income of the assessee and then ascertaining the correct amount of penalty leviable, if any.

22. In the result, these three appeals are allowed for statistical purposes.