Allahabad High Court
Assistant Commissioner Of Income ... vs M/S Greater Noida Industrial ... on 4 August, 2015
Bench: Tarun Agarwala, Surya Prakash Kesarwani
HIGH COURT OF JUDICATURE AT ALLAHABAD
AFR
Court No.37
Income Tax Appeal No.142 of 2015
Asstt. Commissioner of Income ........ Appellant
Tax Circle-3 Noida
Vs.
M/s Greater Noida Industrial ....... Respondents
Development Authority
With
Income Tax Appeal No.143 of 2015
Asstt. Commissioner of Income ........ Appellant
Tax Circle-3 Noida
Vs.
M/s Greater Noida Industrial ....... Respondents
Development Authority
With
Income Tax Appeal No.146 of 2015
Asstt. Commissioner of Income ........ Appellant
Tax Circle-3 Noida
Vs.
M/s Greater Noida Industrial ....... Respondents
Development Authority
With
Income Tax Appeal No.147 of 2015
Asstt. Commissioner of Income ........ Appellant
Tax Circle-3 Noida
Vs.
M/s Greater Noida Industrial ....... Respondents
Development Authority
With
Income Tax Appeal No.148 of 2015
Asstt. Commissioner of Income ........ Appellant
Tax Circle-3 Noida
Vs.
M/s Greater Noida Industrial ....... Respondents
Development Authority
With
Income Tax Appeal No.149 of 2015
Asstt. Commissioner of Income ........ Appellant
Tax Circle-3 Noida
Vs.
M/s Greater Noida Industrial ....... Respondents
Development Authority
Hon'ble Tarun Agarwala, J.
Hon'ble Surya Prakash Kesarwani, J.
(Per: Tarun Agarwala, J.)
1. This group of appeals under Section 260A of the Income Tax Act (hereinafter referred to as the Act) relates to the reassessment proceedings for the assessment year 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12. The dispute in all these assessment years is common and are, accordingly, being decided together. For facility , the facts of assessment year 2007-08 is being taken into consideration.
2. Proceedings under Sections 147, 148 of the Act was initiated after obtaining approval from the Joint Commissioner of Income Tax under Section 151 (2) of the Act, pursuant to which notice under Section 148 of the Act was issued. Upon receipt of the notice under Section 148 of the Act, a return of income was filed declaring an income of Rs.1,04,30,38,635/-, which was claimed as exempted under Section 10(20) of the Act. The Assessing Officer after considering the matter, passed an assessment order holding that the assessee was not a local authority as per Section 10(20) of the Act and added the surplus income and expenditure of the account and few other amounts on the total income. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who dismissed the appeal and affirmed the order of the assessing authority holding that the exemption claimed by the assessee under Section 10(20) was not tenable as it was not a local authority within the meaning of Section 10(20) of the Act.
3. The assessee, being aggrieved, filed a second appeal before the Income Tax Appellate Tribunal on various grounds. However, at the time of consideration of appeal only ground no.5 was attacked namely:
"That the order of Ld. AO is void ab initio in as much as, no mandatory notice u/s 143(2) of IT Act, 1961 was issued at any stage of the assessment proceedings."
4. The Tribunal allowed the appeal and quashed the assessment orders passed by the Assessing Officer as well as the order of the Appellate Authority holding that the Assessing Officer had wrongly passed a reassessment order for all the assessment years. The Tribunal held that the mandatory requirement of issuance of a notice under Section 143(2) was not followed and, therefore it was incurable and that the defect in the assumption of jurisdiction by the Assessing Officer could not be cured by taking recourse to the deeming fiction under Section 292BB of the Act. The Department, being aggrieved by the order of the Tribunal, has filed the present appeal under Section 260A of the Act.
5. The Tribunal, while allowing the appeal and holding that no notice under Section 143(2) was issued, came to this conclusion on the basis of the inspection of the records and the notings of the order sheet made by the assessee as well as on account of the fact that inspite of time being granted, the Department failed to produce the original records of the assessment proceedings. The Tribunal further found that the Department had not factually controverted the claim of the assessee, namely, that no notice under Section 143(2) of the Act was ever issued.
6. Sri Ashok Kumar, the learned counsel for the Department contended that adequate opportunity was not given to the Department to produce the original assessment records and, had a proper opportunity being given, the Department would not only have produced the record but would have satisfied the Tribunal that a notice under Section 143(2) of the Act was issued to the assessee. It was also contended that the requirement of issuance of notice under Section 143(2) of the Act was not a mandatory requirement as no format has been provided under the Act or the Rules for the issuance of the notice. Further, the assessee participated in the reassessment proceedings and, therefore, could not assert at the stage of the Tribunal that notice was not served under Section 143(2) of the Act. It was contended that in view of Section 292BB of the Act, the assessee, after having participated in the proceeding under Section 143(2) of the Act, could not contend that the entire reassessment proceedings were a nullity on the ground that the notice was not served.
7. In this background, we have heard Sri Ashok Kumar, the learned counsel for the appellant and Sri Balbir Singh, the learned Senior Advocate assisted by Sri Abhinav Mehrotra for the assessee.
8. In order to settle the controversy, we directed the Department by our order dated 08.07.2015 to produce the original assessment records as well as the order sheet of the Tribunal.
9. A supplementary affidavit was filed by the Department to show that on the basis of the order sheet of the Tribunal, adequate opportunity was not given, inasmuch as the order sheet was silent on the question of production of the original records. In paragraph 16 of the Supplementary Affidavit, it was urged that a notice was issued by the Assessing Officer even though it was not specifically mentioned in the order sheet and that the notice and the questionnaire was available in the assessment record. For facility, paragraph 16 of the Supplementary Affidavit is quoted hereunder:
"That in fact while issuing the questionnaire on 10.12.2013 the Assessing Authority has issued the notice but in order sheet it has not been mentioned specifically. The notices and questionnaire are well available in the assessment record."
10. In order to understand the controversy as to whether a notice under Section 143(2) of the Act is essential to be issued and served upon the assessee in reassessment proceedings it would be appropriate to refer to the said section. For facility, the provisions of Section 143(2) of the Act is extracted hereunder:
"Section 143 (2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, -
(i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim:
Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;
(ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return:
Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished."
11. Under clause (ii) of sub-section (2) of Section 143, the Assessing Officer is required to serve, on the assessee, a notice requiring him to attend the office or to produce evidence on which the assessee may rely in support of the return, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner. Under the proviso to clause(ii), it has been specified that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Service on the assessee of a notice within the period prescribed by the proviso presupposes the issuance of a notice for, it is only when a notice is issued, that it can be served. Thereafter, the provisions of sub-section (3) of Section 143 of the Act stipulate that on the date specified in the notice issued under clause (ii) of sub-section (2) of Section 143 of the Act, the Assessing Officer shall, after hearing the evidence as the assessee may produce and considering such other evidence as he may require and upon taking into account all relevant material, by an order in writing make an assessment of the total income or loss of the assessee.
12. The jurisdiction of the Assessing Officer to make an assessment under Section 143(3) (ii) of the Act is premised on the issuance of a notice under clause (ii) of Section 143(2) of the Act. The proviso to clause (ii) of sub-section (2) of Section 143 of the Act stipulates that a notice must be served on the assessee not later than the expiry of six months from the end of the financial year in which the return has been furnished. If a notice is not even issued within the period of six months from the end of the financial year in which the return is furnished, there would be no occasion to serve it upon the assessee within the stipulated period.
13. The Supreme Court in Assistant Commissioner of Income Tax And Another Vs. Hotel Blue Moon, (2010) 321 ITR 362 (SC), while considering the provision of Chapter XIV-B of the Act in relation to block assessments considered the effect of Section 143(2) of the Act and held:
"..........But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. "
14. The Supreme Court clearly held that omission on the part of the Assessing Officer is not a procedural irregularity and is incurable and, therefore, the requirement of notice under Section 143(2) of the Act cannot be dispensed with.
15. Similar view was held by a Division Bench of this Court in Commissioner of Income Tax II Lucknow Vs. Salarpur Cold Storage (P) Ltd. , (2014) 50 Taxman.Com.105, Commissioner of Income-tax, Faizabad Vs. Adarsh Travel Bus Service, (2012) 17 taxmann. Co 140(All.) as well as in Commissioner of Income-tax Vs. Mukesh Kumar Agrawal, 345 ITR 29 and Commissioner of Income -tax Vs. Rajeev Sharma, (2010) 192 Taxman 197 (All.).
15. In the light of the aforesaid decisions, it is apparently clear that the jurisdiction of the Assessing Officer to make an assessment under Section 143(3) (ii) of the Act is based on the issuance of a notice under Section 143(2)(ii) of the Act. The proviso to clause (ii) of sub Section (2) of Section 143 clearly stipulates that a notice must be served on the assessee.
16. In the light of the aforesaid, we have to see as to whether the word "notice" specified in paragraph 16 of the Supplementary Affidavit is in fact a notice issued under Section 143 (2) of the Act. The learned counsel was directed to show the said notice from the original assessment records. The relevant notice was shown to the Court. The notice which has been mentioned in paragraph 16 of the Supplementary Affidavit is a notice dated 10.12.2013, which accompanies the questionnaire dated 10.12.2013. The last paragraph of the questionnaire indicates that the accompanying notice is being issued under Section 142(1) of the Act. From the said notice, it is clear that the notice which the appellant is asserting to be a notice under Section 143(2) is patently erroneous and mischievous. It is nothing else but a notice under Section 142(1) of the Act. The record does not indicate any other notice being issued, which could purport to be one under Section 143(2) of the Act. We are, therefore, of the opinion that from a perusal of the original assessment record, we find that no notice under Section 143(2) of the Act was ever issued.
17. The submission of the learned counsel for the appellant that the assessee had participated in the reassessment proceedings and, therefore, cannot assert that the notice was not served in view of Section 292BB is patently erroneous. For facility, Section 292BB of the Act is extracted hereunder:
"292 BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was-
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner:
Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.
18. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008. Section 292 BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. 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 improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act, however, carves out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292 BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For 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 jurisdiction itself would be invalid.
19. In view of the aforesaid, we are of the opinion that Section 292BB, which was inserted with effect from 01.04.3008 is not applicable to the proceedings for the assessment year 2006-07, 2007-08, 2008-09. We are also of the opinion that Section 292BB of the Act is not applicable also for the assessment years 2009-10, 2010-11 and 2011-12. The deeming fiction that once an assessee has appeared in any proceeding or participated in any query relating to assessment or reassessment, it shall be deemed that the notice under the provisions of the Act, which is required to be served has been duly served upon him in accordance with the provisions of the Act and, therefore, is precluded from contending that the notice was not served upon him or was not served upon him in time or was not served upon him in a proper manner, in our view, is not applicable for the following reason.
20. There is a clear distinction between "issue of notice" and "service of notice". In R.K.Upadhyaya Vs. Shanabhai P. Patel, 166 ITR 163, the controversy was that a notice under Section 148 was issued on 31.03.1970 i.e. the last date of limitation, which notice was served on the assessee on 03.04.1970, after the expiry of limitation. The High Court held that since the notice was served after the expiry of the period, the assessment order was invalid and had accordingly quashed the notice for reassessment issued under Section 147 of the Income Tax Act,1961. The Supreme Court held that the scheme of 1961 Act in so far as the notice for re-assessment was concerned was quite different than that contained under Section 34 of the Income Tax Act, 1922. The Supreme Court held that a clear distinction has been made between "issue of notice" and "service of notice" under the Act. The Supreme Court held that once a notice is issued within the period of limitation, the Income Tax Officer gets the jurisdiction to proceed to reassess and make the assessment order. The mandate of Section 148(1) of the Act is, that reassessment shall not be made until there has been a service of notice which is a condition precedent to making an order of assessment. The Supreme Court further held that the requirement of issue of notice is satisfied when a notice is actually issued and that service under the Act, 1961 is not a condition precedent to conferment of jurisdiction on the Income Tax Officer to deal with the matter but it is only a condition precedent to the making of the order of assessment. The Supreme Court held:
"Section 34, conferred jurisdiction on the Income-tax Officer to reopen an assessment subject to service of notice within the prescribed period. Therefore, service of notice within limitation was the foundation of jurisdiction. The same view has been taken by this Court in Janni v. Indu Prasad Bhat, 72 ITR 595 as also in C.I.T. v. Robert, 48 ITR 177. The High Court in our opinion went wrong in relying upon the ratio of 53 ITR 100 in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections, being sections 147, 148 and 149 in the 45 1961 Act. A clear distinction has been made out between 'issue of notice' and 'service of notice' under the 1961 Act. Section 149 prescribe the period of limitation. It categorically prescribes that no notice under section 149 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction in the Income-tax Officer to deal with the matter but it is a condition precedent to making of the order of assessment. The High Court in our opinion lost sight of the distinction and under a wrong basis felt bound by the judgment in 53 ITR 100. As the Income-tax Officer had issued notice within limitation, the appeal is allowed and the order of the High Court is vacated. The Income-tax Officer shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs."
21. From the aforesaid, it is clear that the essential requirement is "issuance of notice" under Section 143(2) of the Act. The deeming fiction under Section 292BB of the Act is with regard to "service of notice". Since the initial requirement of issuance of notice was not made by the Assesssing Officer, the deeming fiction of service of notice under Section 292BB of the Act, consequently, does not arise and is not applicable.
22. In the light of the aforesaid, since the Assessing Officer failed to issue notice within the specified period under Section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under Section 143(2) of the Act and this defect cannot be cured by taking recourse to the deeming fiction provided under Section 292BB of the Act. Consequently, the Tribunal was justified in setting aside the order of the Assessing Officer as well as the order of the Appellate Authority.
23. The contention that adequate opportunity was not given to the appellant before the Tribunal now becomes redundant in view of the specific finding given by us on the issuance of the notice under Section 143(2) of the Act. However, we must observe that the appellant was not fair to the Court in alleging that no proper opportunity was given or that the Tribunal gave no directions to the Department to produce the original records. We are constrained to observe that there is no affidavit of the departmental representative who had appeared before the Tribunal to state on oath that the observations made by the Tribunal with regard to the production of the original records at the stage of hearing of the stay application and thereafter was perverse. In the absence of any affidavit being filed, it was not open for the Department to allege that no proper opportunity was given. Further, we find that the assertion made in paragraph 16 of the Supplementary Affidavit that a notice was issued is patently erroneous and, an attempt was made by the Department to deceive the Court. The notice asserted in para 16 of the Supplementary Affidavit is not a notice under Section 143(2) of the Act but is only a notice issued under Section 142(1) of the Act. Such tactics adopted by the Department is totally deplorable.
24. In the light of the aforesaid, no substantial question of law arises for consideration. All the appeals fail and are dismissed.
Dated: 04.08.2015
MAA/-
(Surya Prakash Kesarwani,J.) (Tarun Agarwala,J.)
