There is no requirement of issuance of notice under section 143(2), when there is no valid return available before AO.

 

Short Overview When there was no valid return available before AO as assessee neither filed original return under section 139(1) nor filed any return in response to the notice issued under section 148 within the prior limit of 30 days as stated in the notice under section 148, there is no requirement of issuance of notice under section 143(2).

Assessee challenged legality of reassessment order passed by issuing notice under section 148 on the ground that no valid notice under section 143(2) was issued which is mandatory when case is reopened by AO. 

It is held that The assessee neither filed original return under section 139(1) nor filed any return in response to the notice issued under section 148 on 30-3-2017 within the prior limit of 30 days as stated in the notice under section 148. It filed the return of income only on 23-9-2017. Therefore, these returns cannot be considered as a return in response to the notice under section 148. Therefore, the return filed by the assessee was as such non-est. There is no requirement of issuance of notice under section 143(2), when there is no valid return available before AO. However, the judicial precedent clearly says that while framing the assessment order under section 143(3) read with section 147, AO must issue a notice under section 143(2) as per the proviso to section 143(2) which provides specifically that where a return has been filed by the assessee, either under section 139 or under section 143(1) or under section 148. In this case, there was no such return filed by the assessee. In view of this, it is categorically held that there is no infirmity in holding that there is no requirement of issue of notice under section 143 in the present case.

Decision : Against the assessee.

IN THE ITAT, DELHI BENCH

SUCHITRA KAMBLE, J.M. & PRASHANT MAHARISHI, A.M.

Rakesh Aggarwal v. ITO

M.A. No. 249/Del/2020 (in I.T.A. No. 2461/Del/2019)

A.Y 2010-11

15 December, 2020

Applicant by: Anil Kumar Jain, CA

Respondent by: Bhagwati Charan, Sr. Departmental Representative

Suchitra Kamble, J.M.

This Miscellaneous Application is filed by the assessee in ITA No. 2461/Del/2019 wherein the order of the Coordinate Bench passed on 15-5-2020 stated as under :–

“1. Your Honors have passed an Order, dated 15-5-2020 in ITA No. 2461/Del/2019 for assessment year 2010-11, as per annexure enclosed.

2. In the said appeal, the assessee has taken 10 grounds of appeal, which have been reproduced by the Hon’ble Tribunal in para-2 of the order.

3. That the order suffers from mistakes, which are apparent from record of the Hon’ble Tribunal, discussed in detail below and hence the need to rectify the same as may be required under the circumstances.

4. Mistakes in the order which are apparent from record :–

(a) In Para 10, the Hon’ble ITAT while deciding the ground of Appeal number 3, with regard to illegality of the assessment order as no valid notice under section 143(2) has been issued by the assessing officer, has held that “from the perusal of the records, the learned Commissioner (Appeals) Authorised Representative could not point out that the notice was not duly served upon the assessee. In fact, the records shows that the notice was served to the assessee but the assessee could not attend the assessment proceedings which leads to passing of assessment order under section 144 of the Act. The reliance of case laws by the learned Authorised Representative will not help in the present case, as the assessee could not demonstrate that the notice was not served to him at his address mentioned in the records. Thus ground No. 3 is dismissed.”

With regard to above it is humbly submitted that the above said facts are wrong. From the review of the Pg. 2 and 3 of the assessment order your kind honor will observe that the notice under section 142(1) was issued and not the notice under section 143(2) which was statutorily required. This can be further corroborated from the fact that on Pg 11 and 12 of the Commissioner (Appeals) order, the learned Commissioner (Appeals) has held that the provisions of issue of notice under section 143(2) do not cover in their ambit a case where a return has been filed in response to notice under section 148 as in the case of the appellant by following the judgment of the Hon’ble Delhi High Court in the case of CIT v. Madhya Bharat Corporation Ltd. (2012) 337 ITR 399 (Del) : 2012 TaxPub(DT) 0248 (Del-HC).

Thus from the above it can be inferred that no notice under section 143(2) was issued by the learned AO. And by following the judgment of Hon’ble Delhi High Court in the case of PCIT v. Shri jai Shankar Traders (P) Ltd. in ITA 519/2015 : 2015 TaxPub(DT) 4975 (Del-HC) and in the case of Alpine Asia (P) Ltd. v. DGIT (WPC 7932/2010) : 2012 TaxPub(DT) 0891 (Del-HC) the assessment made without issue of notice under section 143(2) is illegal and bad in law. And the judgment of CIT v. Madhya Bharat Energy Corporation Ltd. relied by the learned Commissioner (Appeals) has also been considered in the above judgment of PCIT v. Shri Jay Shiv Shankar Traders (P) Ltd. and distinguished as in this case appeal was not admitted on the question concerning the mandatory compliance with regard to issue of notice under section 143(2).

5. The mistake lies in failing to consider/ignoring the above arguments/contentions of the Authorised Representative in the order which leads to an incongruent conclusion, causing serious prejudice to the cause of the appellant. Hence the need for rectification of the same to consider this factual background and to consider the submissions of the learned Authorised Representative made on 5-3-2020 as enumerated above.

Prayer. It is therefore, prayed that the above mistake apparent from record be corrected under section 254(2) and a suitable order be made in accordance with the arguments and material on record as the Hon’ble Bench may deem fit under the circumstance.

2. The learned Authorised Representative supported the Miscellaneous Application by saying that though in Para No. 8 of the order of the Coordinate Bench the brief submission of the assessee was considered, however, in Para No. 10, the Coordinate Bench held as under :–

“We have heard both the parties and perused the material available on record. The learned Authorised Representative could not point out that the notice was not duly served upon the assessee. In fact, the records shows that the notice was served upon the assessee. In fact, the records shows that the notice was served to the assessee, but the assessee could not attend the assessment proceedings which leads to passing of Assessment Order under section 144 of the Act. The reliance of case laws by the learned Authorised Representative will not help in the present case, as the assessee could not demonstrate that the notice was not served to him at his address mentioned in the records. Thus, Ground No. 3 is dismissed.”

3. The learned Authorised Representative, therefore, submitted that it is an admitted fact that no notice under section 143(2) of the Act was issued in the present case in reopening assessment proceedings by issuing notice under section 148 of the Act. The learned Authorised Representative submitted that the assessing officer should have been issued notice under section 143(2) of the Act which is mandatory when case is reopened. The learned Authorised Representative submitted that in the present case, the notice under section 148 was issued on 30-3-2017 and the assessee has filed his return of income in response to the above notice on 23-9-2017. The learned Authorised Representative further submitted that the order of the assessment has also been passed under section 144 of the Act on 26-12-2017. The learned Authorised Representative, therefore, submitted that in view of the decision of the Hon’ble Delhi High Court in PCIT v. Shri Jai Shanker Traders (P) Ltd. in ITA 519/2015 : 2015 TaxPub(DT) 4975 (Del-HC) and in case of Alpine Asia (P) Ltd. v. DGIT (WPC 7932/2010) : 2012 TaxPub(DT) 0891 (Del-HC), this issue was allowed. The learned Authorised Representative also submitted that the Hon’ble Allahabad High Court in case of CIT v. Rajeev Sharma (2010) 336 ITR 678 (All) : 2010 TaxPub(DT) 1956 (All-HC) has also allowed this issue. The notice under section 143(2) should have been issued prior to the passing of the assessment order, as the Coordinate Bench held that despite non-issuing the notice under section 143(2) of the Act the assessment is valid.

4. The learned Departmental Representative submitted that there is no apparent mistake in the order of the Coordinate Bench and the respective decisions have been considered by the Coordinate Bench. The learned Departmental Representative further submitted that the Commissioner (Appeals) has dealt with this issue in the Order, dated 15-5-2020. The learned Departmental Representative further stated that there is no requirement of mentioning when the requisite notice has been issued by the assessing officer and, therefore, mere non-mentioning of notice under section 143(2) of the Act cannot invalidate the assessment. The learned Departmental Representative, otherwise, submitted that there is no prejudice caused to the assessee, as the addition on merit has been sent back to the file of the assessing officer and the assessee have full opportunity to contest the addition on merit.

5. During the course of hearing of this Miscellaneous Application, the Bench specifically asked the learned Authorised Representative to state as to whether the original return under section 143(2) of the Income Tax was filed or not. To this, the learned Authorised Representative submitted that the assessee has not filed the original return of income

6. We have carefully heard rival contention and perused the Order, dated 15-5-2020 passed by the Co-ordinate Bench. In the present case, the facts show that the assessee individual has not filed any return of income under section 139(1) of the Income Tax Act. The assessment order was reopened by notice under section 148 of the Act issuing on 30-3-2017. The assessee did not file any return of income within the prior limit of 30 days as stated in the notice under section 148 of the Act. However, undoubtedly the assessee filed his return of income on 23-9-2017. Admittedly, also no notice in this case under section 143(3) of the Act was also issued. On these facts of the case, it is required to be determined whether notice is required to be issued under section 143(2) of the Act or not?. In fact, when section 148 notice was issued to the assessee, the assessee was given time for 30 days to file the return of income. The assessee neither filed original return under section 139(1) of the Act nor filed any return in response to the notice under section 148 of the Act within the time given by the assessing officer. The assessee filed the return of income only on 23-9-2017. Therefore, these returns cannot be considered as a return in response to the notice under section 148 of the Act. Therefore, the return filed by the assessee is as such non-est. There is no requirement of issuance of notice under section 143(2) of the Act, when there is no valid return available before the assessing officer. However, the judicial precedent clearly says that while framing the assessment order under section 143(3) read with section 147 of the Act, the assessing officer must issue a notice under section 143 (2) of the Act as per the Proviso to sub-section 143(2) of the Act provides specifically that where a return has been filed by the assessee, either under section 139 or under section 143(1) or under section 148 of the Act. In this case, there is no such return filed by the assessee. In view of this, we categorically held that there is no infirmity in the order of the Coordinate Bench in holding that there is no requirement of issue of notice under section 143 of the Act in the present case.

7. Coming to the judicial precedent stated before us by the learned Authorised Representative of Shri Jai Shiv Shankar Traders (P) Ltd. (supra), the Hon’ble Delhi High Court observed that the assessee has filed return of income under section 139(1) of the Act in time and further stated that the return filed may be treated as return filed in response to the notice under section 148 of the Act. Therefore, in this case, the return was available before the assessing officer. In the case of Alpine Asia (P) Ltd. (supra), the fact also shows that the assessee has filed original return of income in time and in response to notice under section 148 of the Act, stated the original return filed may be treated as return in response under section 148 of the Act. In case of Shri Rajiv Sharma (supra) of the Hon’ble Allahabad High Court also speaks about the same facts. Therefore, in all the above judgments cited before us, it was apparent that there was original return available with the assessing officer under section 139(1) of the Act and the assessee has stated that such return filed may be treated as return and response to the notice under section 148 of the Act. Therefore, even before the expiry of the time limit of 30 days in the issuance of notice under section 148 of the Act, the assessing officer was having return of income and notice under section 143(2) could have been issued. The Hon’ble High Court in all these judgments has categorically held that in such case notice under section 143(2) of the Act is mandatory even in case of reopened assessment under section 147 of the Income Tax Act. Facts in the present case are different and distinguishable. In the present case, the assessee did not file the original return of income as well as also not filed return of income in response to the notice under section 147 of the Act within the time allowed by the assessing officer of 30 days. Therefore, the assessee does not gate any support from the above judicial precedent.

8. Thus the issue is whether in case the return filed by the assessee as late as in the month of September, 2017 can be treated as valid return or not. The answer is clearly ‘No’ as even after 30 days any return of income filed by the assessee would not have been taken cognizance by the assessing officer. There is no requirement of the law that if the return is filed any time before assessing officer under section 148 read with 143 (3) of the Act, the assessing officer should have been issued notice under section 143(2). The question will arise then that if the assessee was issued a notice under section 148 of the Act and he does not file any return of income till the date of framing of the assessment order or also filed a return before passing of the assessment order under section 143(2) of the Act, then what is the stand Revenue should take? In such case, it is not at all possible that the assessee can contest that notice under section 143(2) should have been issued, in all such cases where reassessment is required to be made. The onus of filing of return of income on the assessee is a responsibility which is cast upon him to be fulfilled by him, if he fails to take benefit of any of the provisions of law the assessee cannot plea that he will not comply with the law and not follow time limit before the assessing officer and the assessing officer he is duty bound to follow the law even in belated compliance by the assessee.

9. In view of the above findings, we do not find any merit in the Miscellaneous Application. Hence, same is dismissed.