Source: https://thetaxtalk.com/2018/09/26/non-issuance-of-notice-under-section-1432/
Timestamp: 2019-04-21 02:07:57+00:00

Document:
Where AO had framed the reassessment under section 148 without issuing notice under section 143(2), the reassessment order was invalid because it is mandatory obligation of AO to serve notice by assigning reasons therein with regard to his belief of escaped tax liability before making assessment of any escaped income.
Assessee assailed reassessment order passed by AO on the ground that notice under section 143(2) was not issued to assessee. CIT(A) rejected assessee’s contention holding that mere non-issuance of notice under section 143(2) would not vitiate entire assessment proceedings. Held: The provisions contained in section 143(2) are mandatory even in the case of reassessment because the legislature by using the word ‘reason to believe’ had cast a duty on AO to apply mind to the material on record with regard to escaped liability and to serve a notice under section 143(2) by assigning reason therein. In the absence of any such notice the entire procedure adopted for escaped assessment shall not be valid.
H.S. SIDHU, J.M. & T.S. KAPOOR, A.M.
ACIT v. M/s. Dimension Promoters (P) Ltd.
This appeal has been filed by the Revenue against the order of learned Commissioner (Appeals) dated 2-11-2010. The assessee has also filed cross-objections, raising various legal issues.
3. The learned DR, on the other hand, submitted that due notice under section 142(1) was issued to the assessee and therefore, there was no need to issue notice under section 143(2) of the Act. Reliance was placed on the order of Delhi High Court in the case of Madhya Bharat Energy Corporation (2011) 337 ITR 389 (Del).
4. The learned AR, in his rejoinder, submitted that after considering the judgment of Madhya Bharat Energy Corpn. (supra), the Hon’ble Delhi High Court in the case of Alpine Electronics Asia Pvt. Ltd. v. DCIT (supra) and in V.R. Education Trust in Appeal No. 510 of 2011 has again held that service of notice under section 143(2) is a mandatory requirement even in the proceedings under section 148 of the Act.
“13. In response to the above submissions, Mr. Dileep Shivpuri, learned Senior Standing Counsel for the Department, submitted that as far as second submission is concerned, the facts speak for themselves. He had nothing further to add because there was no explanation for the failure to issue notice under section 143(2) of the Act pursuant to the notice under section 148 of the Act before 30-9-2013, the last date by which the notice ought to have been issued.
14. The law on this point is fairly well settled in the decisions in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) reiterated in CIT v. Madhya Bharat Energy Corporation (2011) 337 ITR 389 (Del) and Pr. CIT v. Jai Shiv Shankar Traders (P.) Ltd. (2016) 383 ITR 448 (Del). In the last mentioned judgment, this Court held that the delay in issuing a notice under section 143(2) of the Act would be fatal to the re-assessment proceedings.
Similar finding has been made by various courts in the decisions relied on by the learned AR.
Therefore, this judgment is also not relevant and in view of the facts discussed on the judgment relied on by the learned DR, this is distinguishable on the facts.
“9. Dr. Rakesh Gupta, learned counsel appearing for the assessee, at the outset drew the attention of this Court to an order passed by this Court on 17-8-2011 in Review Petition No. 441/2011 in ITA No. 950/2008 (CIT v. Madhya Bharat Energy Corporation) whereby this Court reviewed its main judgment in the matter rendered on 11-7-2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under section 143(2) of the Act. In its review order, this Court noted that at the time of admission of the appeal on 17-2-2011 after noticing that in the said case that no notice under section 143(2) had ever been issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned.
10. Ms. Aggarwal nevertheless urged that notwithstanding the above position, the decision of this Court in CIT v. Vision Inc. (2012) 73 DTR 201 (Del) would apply. The said judgment held that since on the facts of that case the assessee had been properly served with the notice under section 143(2) of the Act within the statutory time limit prescribed under the proviso thereto, the ITAT should not have set aside the re-assessment in toto. Ms. Aggarwal placed reliance on section 292BB of the Act and urged that the assessee having not raised any objection about non service of the notice under section 143(2) of the Act either at any time before the assessing officer or prior to, or during the reassessment proceedings, the assessee was precluded from raising such an objection in the subsequent of the proceedings.
11. Dr. Rakesh Gupta for the assessee on the other hand placed reliance on a large number of decisions of the High Courts apart from the decision of the Supreme Court in ACIT v. Hotel Blue Moon (supra). He submitted that the failure to issue a notice under section 143(2) of the Act subsequent to the assessee having informed the assessing officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Act, was fatal to the order of re-assessment.
12. The narration of facts as noted above by the Court makes it clear that no notice under section 143(2) of the Act was issued to the assessee after 16-12-2010, the date on which the assessee informed the assessing officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Act.
13. In DIT v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del), this Court invalidated an reassessment proceedings after noting that the notice under section 143(2) of the Act was not issued to the assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under section 143(2) of the Act only after the return filed by the assessee is actually scrutinized by the assessing officer.
“10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from 1-4-2008. Section 292BB 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 292BB 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 292BB 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.
18. As already noticed, the decision of this Court in CIT v. Vision Inc. proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the assessee under section 143(2) of the Act. As already further noticed, the legal position regarding section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of “service” of notice was concerned and not with regard to failure to “issue” notice. In other words, the failure of the assessing officer, in reassessment proceedings, to issue notice under section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to section 292BB of the Act.
8. In view of the above facts and circumstances, we decide the ground No. 3 of cross objections in favour of the assessee and we hold that the reassessment order passed in this case is bad, void ab initio. In view of our decision on ground No. 3, the rest of the grounds taken in the cross objections do not require any adjudication. Accordingly, the cross objections filed by the assessee are partly allowed. The appeal filed by the Revenue has become infructuous and, therefore, same is dismissed.
9. In nutshell, the cross objections filed by the assessee are partly allowed and the appeal filed by the Revenue is dismissed.

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