IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH 'G': NEW DELHI)

BEFORE SHRI R.V. EASWAR, VICE PRESIDENT AND

SHRI K.D. RANJAN, ACCOUNTANT MEMBER

ITA No.1736/Del./2003

ASSESSMENT YEAR: 1995-96

ITA No.1458/Del.l2003

ASSESSMENT YEAR: 1995-96

CO No.27/Del/2006 (in ITA N o.1736/Del.l2003)

ASSESSMENT YEAR: 1995-96

Assessee by : S/Shri S.B. Garg & Sachin Kumar, CAs

Department by : Shri Devender Singh, Senior DR

The assessment made, without issue and service of notice under section 143(2) of the Income-tax Act, 1961, is without jurisdiction and therefore the same is null and void ab initio and deserves to be annulled

O   R   D   E   R

PER R.V. EASWAR, VICE PRESIDENT:

1. These two cross appeals and the cross objection by the assessee relate to the assessment year 1995-96. The assessee in these cases is an individual - resident. The appeals and the cross objection arise out of the assessment order passed under section 147 read with 143(3) of the Income-tax Act (date note mentioned in the order).

2. We may take up the cross objection filed by the assessee first since it goes to the root of the matter. The first ground therein is as under:

"The assessment made, without issue and service of notice under section 143(2) of the Income-tax Act, 1961, is without jurisdiction and therefore the same is null and void ab initio and deserves to be annulled."

3. The brief facts in relation to the aforesaid ground may be recorded. An assessment was originally made on the assessee under section 143(3) of the Income-tax Act by order passed on 26.3.1998. In this order, the total income of the assessee was determined at Rs.2,64,815/-. On 22.3.2000, a notice was served on the assessee under section 148 of the Act, reopening the assessment. On 23.3.2000, the assessee wrote a letter (page 3 of the paper book filed on 24.2.2006, containing 42 pages) to the Assessing Officer in which he stated in paragraph 3 that the return of income already filed at the time of the original assessment may be deemed to be the return filed in compliance to the notice under section 148 as there were no reasons to make any change therein and as all the income and the particulars were fully disclosed in the return at the time of framing the original assessment. On 24.2.2002, the assessee wrote another letter to the Assessing Officer (page 9 of the above paper book) in which the assessee asked for issue of a notice under section 143(2) of the Act (the reference to section 143(3) in the letter is obviously a mistake). On 14.3.2002, the assessee wrote another letter to the Assessing Officer (pages 10 & 11 of the above paper book) in which at two places in page 2 of the letter the assessee pointed out that till date no notice under section 143(2) was served on him and that such a notice cannot be issued now as the same has become barred by limitation. Reference was also invited to certain judgments and the circular issued by the CBDT explaining the amendment made by the Direct Tax Laws (Amendment) Act, 1987. A request was accordingly made in the letter that the proceedings for reassessment may be closed. The Assessing Officer however went ahead with the reassessment proceedings and completed the same on a taxable income of Rs.l,88,84,428/-, excluding the long term capital gains of Rs.2,65,063/- assessed earlier by order dated 25.3.1998. The major addition made in the reassessment order was that of Rs.1,86,49,613/- representing the alleged undisclosed income on account of difference between the valuation of six items of immovable properties constructed by the assessee.

4. The assessee filed an appeal against the reassessment and inter alia contended that since no notice was served on him under section 143(2) of the Act the reassessment made upon him was null and void. The contention was supported by an affidavit filed by the assessee, a copy of which is at pages 12 and 13 of the paper book referred to above. In this affidavit, the assessee averred that the statement of the Assessing Officer that a notice under section 143(2) was served upon the assessee was incorrect and that it was also incorrect in stating that the assessee attended the income-tax office in response to the notice. Reference was made to the assessee's letter dated 23.2.2000 and to various other letters written by the assessee bringing to the notice of the Assessing Officer the factual and legal position with regard to the issue of notice under section 143(2).

5. The CIT (Appeals) dismissed the assessee's contention in the following words:

"4. As per ground of appeal no.5 and 6, which are also inter related, the appellant has submitted that he has not been served notice u/s 143(2) and he has filed an affidavit in this regard also. However, the same was forwarded to the A.O., who has submitted vide his letter department.3.1.03 that the appellant has not raised this objection during the course of assessment proceedings. The A.R. has regularly attended the proceedings as sufficient opportunities were afforded to him to furnished his replies and it is jut an after though of the appellant to raise this objection in order to stall the proceedings and to get undue benefit in appellate proceedings. It has further been submitted that perusal of assessment records reveals that notice u/s 143(2) was issued. However, the copy of the same is not on record at present. Other notices such as notice u/s 142(1) department. 31.2.02 and notice u/s 142(1) department. 10.12.01 were issued and duly served upon the appellant.

4.1 From the assessment order, I find that the A.O. has mentioned that notice u/s 143(2) has been issued and Shri Jacob Phillips and Shri S.K. Aggarwal, CAs have attended the proceedings from time to time and they were apprised of the valuation reports against which objections have been filed by the appellant and they have been discussed. However, the copy of notice was not produced by the A.O. as the same was not on record but it appears that the appellant has been given opportunity of being heard as Shri Jacob Phillips and Shri S.K. Aggarwal, CAs have attended the proceedings and have given their objections for the additions. Hence, it appears that notice u/s 143(2) has been issued and accordingly ground of appeal no.5 is also hereby dismissed."

6. The first ground in the cross objection is directed against the aforesaid decision of the CIT (Appeals). The learned DR has produced the record before us and we have perused the same. We find that only two notices were issued by the Assessing Officer and both were under section 142(1), the first one dated 10.12.2001 and the second one is dated 31. 1.2001, copies of these notices have also been placed at pages 5 & 8 of the paper book referred to above. These are notices calling for certain information from the assessee and not notices calling for the return of income. The submission of the learned representative for the assessee was that in the absence of any notice having been served on the assessee under section 143(2), the reassessment IS invalid and should be quashed. In support of this submission, he cited the following authorities:

(i) CIT vs. Lunar Diamonds Limited (2005) 281 ITR 1 (Del.);

(ii) Vardhman Estate 208 CTR 251 (Del.);

(iii) Raj Kumar Chawla 94 ITD 1 (SB)(Del.); and

(iv) Sat Narain vs. ITO 94 TTJ 499.

It was also submitted before us that when the assessee filed the letter dated 23.3.2000 in which he stated that the return originally filed may be taken as the return filed in response to the notice under section 148, he must be taken to have filed the return under section 14R and, therefore, the notice under section 143(2) ought to have been issued on or before 22.3.2001. This submission was sought to be supported by the judgment of the Rajasthan High Court in Tiwari Kanhiya Lal vs. CIT (1985) 154 ITR 109, which according to the learned representative for the assessee is the only judgment directly on the issue whether a letter filed in response to the notice under section 148 stating that the return originally filed may be taken as a return filed in response to the aforesaid notice, was considered and decided. He further submitted that this is what the assessee pointed out to the Assessing Officer in the letter dated 14.3.2002 in which he stated that any issue of notice now has become barred by limitation. It may be noted that according to the proviso to section 143(2), no notice thereunder can be issued after a period of 12 months from the end of the month in which the assessee filed the return. If the assessee is taken to have filed the return on 23.3.2000 on the strength of the above judgment, then the notice under section 143(2) cannot be issued beyond 31.3.2001. The learned representative for the assessee further submitted that section 292B of the Act can come to the rescue of the Assessing Officer only if a notice had been actually issued but it contained some inconsequential mistakes or omissions and cannot come to the rescue of the Assessing Officer if no notice was issued at all. He further clarified that the Assessing Officer was not correct in saying that the assessee appeared before him in response to the notice issued under section 143(2). It was stated that the assessee appeared before the Assessing Officer only in response to the notices issued on 10.12.2001 and 31.1.2002 under section 142(1) of the Act. It was submitted that in any case, if factually it is found from the record that no notice was issued to the assessee under section 143(2) of the Act then the Assessing Officer's statement would stand disproved. On these facts, it was contended that the assessment should be quashed as null and void.

7. The learned Senior DR, on the other hand, strongly relied on the judgment of the Madras High Court in Areva T and D India Ltd. 294 ITR 233 and submitted that the non-issue of the notice under section 143(2) was only a procedural irregularity and cannot nullity or invalidate the assessment. It was pointed out that the assessee was given full opportunity to participate in the assessment proceedings and thus the purpose of the notice under section 143(2) was fulfilled, and therefore, the assessee cannot have any grievance in this behalf and should not be allowed to contend that the assessment itself is invalid. It was further pointed out that technically the assessee did not file a return in response to the notice under section 148 and, therefore, it is not possible to compute the period of limitation for issue of the notice under section 143(2) and this itself indicates that in a case where no return is filed under section 148, there was no requirement to issue a notice under section 143(2). As regards the issue of notice under section 143(2), the learned Senior DR, as already noticed, has fairly produced the record before us but was unable to point out therefrom any thing to show that a notice under section 143(2) was in fact issued.

8. We have carefully considered the preliminary issue on the basis of the record produced before us. It is a fact that no notice was issued under section 143(2) of the Act. In addition to the absence of any evidence or even indication in the assessment record to show that such a notice was issued, there are also other circumstances to show that the notice was not issued. These are that (a) the assessee repeatedly drew the attention of the Assessing Officer to the fact that no notice under this sub-section was issued by the Assessing Officer and despite the same the Assessing Officer did not draw the attention of the assessee to any notice issued and served on him and (b) the fact that the assessee filed an affidavit before the CIT (Appeals) denying service of notice under section 143(2); even then, the Assessing Officer did not represent before the CIT(A) that the notice had been issued and served. All that he stated before the CIT(A) was that this objection was not taken during the assessment proceedings. When no notice under section 143(2) has been issued the reassessment order is invalid as has been held by the Special Bench Delhi in the case of Raj Kumar Chawla vs. ITO (2005) 94 ITD 1 (SB). In this order, it has been held that the proviso to section 143(2) which mandates service of notice within the period of 12 months from the end of the month in which the return is filed also applies to returns filed pursuant to notice under section 148. It has further been held that if the notice is not served within the said period the Assessing Officer loses his jurisdiction to make an assessment under section 143(3) read with section 147. This judgment squarely applies the facts of the present case. In fact, in the present case, no notice under section 143(2) was issued at all and thus it is a fortiori. The cases of Lunar Diamond Limited (supra) and Vardhman Estate (supra), both of the Hon'ble Delhi High Court, are not cases of reassessment under section 147 but that, in our opinion, should make no difference to the result because even where an assessment is reopened under section 147 read with section 148, the assessment order is ultimately passed only under the provisions of section 143(3). Therefore, the ratio of these judgments is applicable to cases of reassessments also. The judgment of the Rajasthan High Court in the case of Tiwari Kanhaiya Lal vs. CIT (supra) is authority for the proposition that if an assessee feels that it is not necessary to file a fresh return in response to notice under section 148 and that the earlier return filed by him under section 139 should be treated as sufficient compliance of the reassessment notice, he may inform the Assessing Officer of his decision to treat his previous return as the return filed under section 148 and in that event, the earlier return will have to be treated as a return under section 148 (pages 114 - 115 of the judgment). Therefore, the return filed by the assessee in the original assessment proceedings on 31.8.1995 must be taken as the return filed also in response to the notice under section 148, with the rider that the date of filing of such a return would be the date on which the assessee wrote the letter to the Assessing Officer requesting him to treat the original return as the return filed under section 148. In the present case, the letter was written on 23.3.2000 and it is not in dispute that such a letter was received by the Assessing Officer. Therefore, the date of tiling the return under section 148 was 23.3.2000 with the result that the last day for issue of the notice under section 143(2) was 31.3.2001 as per the proviso to the sub-section. As already noted, no notice under section 143(2) was issued to the assessee before this date or at any time thereafter. Even if we were to consider the notices issued under section 142( 1) as notices calling for the return of income, they having been issued after 31.3.2001 are beyond the time prescribed by the proviso to sub-section (2) of section 143 and would be barred by limitation. In point a fact however, these notices are not notices calling for the return of income; they have only called for certain information from the assessee. Section 292B has been rightly distinguished on behalf of the assessee and it cannot come to the rescue of the department since no notice was issued at all. The section does not have the effect of deeming that such a notice was issued when in fact it was not issued. It only says that if the notice issued contains some innocuous mistakes or omissions, the notice cannot be considered to be invalid for that reason. As far as the objection of the department that the assessee participated in the proceedings is concerned, the assessee did participate in the proceedings by virtue of the notices issued under section 142(1); in any case, the assessee's participation does not absolve the Assessing Officer of the statutory duty of issuing and serving the notice under section 143(2) within the stipulated time. The non-issue of the notice is a fetter on the Assessing Officer from completing the assessment under section 143(3). He can only accept the return as such. As regards the judgment of the Madras High Court (supra) cited by the learned Senior DR, in view of the judgments of the Hon'ble jurisdictional High Court, the former cannot be given effect to.

9. We are unable to agree with the CIT(A) that a notice "appears" to have been issued under section 143(2). He has examined the record and has found that "the copy of the same is not on record at present". He has used guarded words, such as "at present". Nevertheless, he has proceeded to hold that a notice "appears" to have been issued. We are unable to appreciate how in the absence of any evidence for issue or service of the notice, or even a copy of the notice on file, such a finding could have been recorded by the CIT(A).

10. We have also examined the proviso to section 148(1) inserted by the Finance Act, 2006 with retrospective effect from 1-10-1991 to find out its applicability to the present case. The first proviso saves the validity of a reassessment order where a notice under section 143(2) was not served within the prescribed period - 12 months from the end of the month in which the return was filed. But the saving is subject to certain limitations. Firstly, the assessee should have filed the return between 1-10-1991 and 309-2005 in response to a notice issued under section 148. In the present case the assessee has been held to have filed such a return on 23-3-2000 and thus this condition is satisfied. The other condition is that the notice under section 143(2) should have been served within the time-frame prescribed under clause (b) of the proviso. This condition is not satisfied in the present case because no notice has at all been served under section 143(2) as found by us. The clause applies only to save a notice served on the assessee, though Hut within the period of 12 months from the end of the month in which the return was filed. When no notice at all has been served, the clause does not apply to save the validity of the reassessment order. Therefore, the first proviso to section 148(1) does not save the situation.

11. For the above reasons, we accept ground no. 1 taken by the assessee in his cross objection and hold that the reassessment made under section 148 read with section 143(3) of the Act is invalid and is quashed. In the view we have taken, it is not necessary to adjudicate upon the other grounds taken in the cross objection or to deal with the appeals filed by the assessee and the department.

12. In the result, the assessee's cross objection is allowed and the appeals filed by the assessee and the department are dismissed as infructuous.

Order pronounced in open court on the 18^th day of January 2008.