D.b. Income Tax Appeal v. Bijay Shankar Gupta

D.B. Income Tax Appeal No. 109/2012C.I.T. Bikaner vs Bijay Shankar Gupta DATE OF ORDER: 25[th ] April 2014 HON’BLE MR. JUSTICE DINESH MAHESHWARIHON’BLE MR. JUSTICE BANWARI LAL SHARMA Mr.K.K.Bissa for the appellant <><><> BY THE COURT:(Per Dinesh Maheshwari,J.) By way of this appeal under Section 260A of the Income TaxAct, 1961 [‘the Act’], the revenue seeks to question the judgment andorder dated 11.07.2012 passed by the Income Tax AppellateTribunal, Jodhpur Bench, Jodhpur [‘the ITAT’] in IT(SS)ANo.11/Jodh/2010 and C.O. No.03/Jodh/2011 for the block period01.04.1991 to 10.05.2001. By the impugned judgment and order dated 11.07.2012, theITAT has dismissed the appeal filed by the revenue against the orderdated 30.08.2010 passed by the Commissioner of Income Tax(Appeals), Bikaner [‘the CIT(A)’] whereby, the CIT(A) had allowedthe appeal of the assessee against the block assessment orderdated 29.06.2005, as passed by the Assistant Commissioner ofIncome Tax, Circle Sriganganagar [‘the AO’] under Section 158BCread with Section 158BD of the Act. While allowing the appeal of the assessee, the CIT(A)referred to the record and found that the AO had failed to establishissuance of notice under Section 143(2) of the Act within the timeprescribed and held, with reference to the dictum of the Hon'bleSupreme Court in the case of ACIT & Anr. Vs. Hotel Blue Moon: 321 ITR 362, that completion of assessment under Section 158BC ofthe Act without issuance of notice under Section 143(2) of the Actwithin prescribed time was wholly without jurisdiction andunsustainable. In brief, the relevant background aspects of the matter are thatthe assessee is an HUF, engaged in the business of financing,controlled by its karta and carried out through a finance broker ofMumbai. A search under Section 132 of the Act was carried out atthe office premises of the broker at Mumbai and simultaneously, theresidential premises of karta were also searched. With reference tothe documents said to have been found during the search, it wasallegedly found that there were names of different parties to whomloans had been advanced and, questioning the source of investmentof such loans and correctness of interest income, a notice underSection 158BD of the Act dated 29.06.2003 was issued and servedupon the assessee. In response to this notice, the assessee hadfiled its return of income for the block period 01.04.1991 to10.05.2001 on 28.07.2003 declaring the undisclosed income as Nil.It had been the case of the revenue that after receipt of the return ofincome for the said block period, notices under Sections 143(2) and142(1) alongwith questionnaire were issued; and in responsethereof, proceedings were attended on behalf of the assessee andinformation/explanation/reply/documents were filed on its behalf.The books of accounts were also impounded. The issue in the present case being only related to the validityof the proceedings for want of requisite notice within the prescribedtime, the other details of the assessment proceedings are not required to be dilated upon. Suffice it to notice for the presentpurpose that ultimately, the AO proceeded to determine theundisclosed income for the block period at Rs.39,08,180/- in theassessment order dated 29.06.2005. The issue in the present case being only related to the validityof the proceedings for want of requisite notice within the prescribedtime, the other details of the assessment proceedings are not required to be dilated upon. Suffice it to notice for the presentpurpose that ultimately, the AO proceeded to determine theundisclosed income for the block period at Rs.39,08,180/- in theassessment order dated 29.06.2005. The said assessment order was challenged by the assessee inAppeal No.391/BKN/2008-09, inter alia, with the contentions that theAO had failed to issue the statutory notice under Section 143(2) ofthe Act within one year of the last date of the month in which thereturn was filed in compliance of the notice issued under Section158BD; and hence, the block assessment made in furtherancethereto was invalid. It is noticed that in the first place, the CIT(A)passed the order in appeal on 30.09.2005 which was set aside bythe ITAT on 22.09.2008 and the matter was restored to the file ofCIT(A). Thereafter, the CIT(A), in his order dated 30.08.2010,accepted this contention of the assessee and annulled the blockassessment by his order dated 30.08.2010. With reference to the record, the CIT(A) noticed the positionas regards alleged notices as follows:- In further appeal by the revenue, the ITAT referred to theaforesaid factual position and proceeded to dismiss the appeal by itsjudgment and order dated 11.07.2012 while observing, inter alia, as under:- “8.We have heard the ld. Representatives of theparties and records perused. We notice that per record, there isno proof of service available on record in support of the fact thatnotice under Section 143(2) of the Act was issued on 26.08.2004.Although the CIT(A) recorded the fact that the contention of theassessee that this notice was issued on 28.04.2005, the CIT(A)provided opportunity of hearing to the A.O. The A.O. furnishedthe details of issuance of notices which is reproduced as abovefrom the order of the CIT(A) at page no.6. The CIT(A) found thateven before him the revenue has failed to furnish the details thatthe notice under section 143(2) of the Act was issued by the A.O.Thus, the admitted facts in this case was that notice underSection 143(2) of the Act was not issued. Therefore, we find thatthe issue is squarely covered in favour of the assessee by thejudgment of the Apex Court in the case of ACIT vs. Hotel BlueMoon (supra). The CIT(A) has also followed the same judgment.In the light of the above facts, we do not find any infirmity in theorder of the CIT(A). We, therefore, confirm the order of the CIT(A)on this issue.” Seeking to question the order aforesaid, the learned counselfor the appellant would argue that the ITAT has erred in confirmingthe findings of CIT(A) to the effect that notice under Section 143(2)had not been issued and served within the prescribed time limit whileignoring the fact that assessee and his authorized representativehad appeared before the AO in all the proceedings and participatedin the entire enquiry relating to the assessment; and no objectionwas raised with regard to service of notice at the time of originalproceedings before the AO. On these submissions, the learnedcounsel would argue that a substantial question of law does arise forconsideration in this matter. Having given thoughtful consideration to the submissions made, we are clearly of the view that no substantial question of lawis involved in the appeal against the order dated 11.07.2012 and thisappeal does not merit admission. Having given thoughtful consideration to the submissions made, we are clearly of the view that no substantial question of lawis involved in the appeal against the order dated 11.07.2012 and thisappeal does not merit admission. On the factual aspects, it remains rather a positionindisputable that the AO has failed to show that notice under Section143(2) of the Act was issued within the time prescribed. As per thethen applicable requirements of the proviso to Section 143(2) of theAct, such a notice was to be issued within one year from the lastdate of the month in which return was filed by the assessee. The AOhaving failed to show that notice had been issued within theprescribed time, the proceedings as adopted and the orders aspassed on 29.06.2005 could have only been considered withoutjurisdiction, more particularly when the law in this regard has beendeclared by the Hon'ble Supreme Court in no uncertain terms inHotel Blue Moon’s case (surpa) that if the AO repudiates the returnfiled under Section 158BC(a), a notice, within prescribed time, underSection 143(2) must be issued; and omission to do so is not a mereprocedural irregularity. In Hotel Blue Moon, the Hon'ble Supreme Court has, inter alia, held as under:- “……….However, if an assessment is to be completedunder section 143(3) read with section 158BC, notice undersection 143(2) should be issued within one year from the date offiling of block return. Omission on the part of the assessingauthority to issue notice under section 143(2) cannot be aprocedural irregularity and the same is not curable and, therefore,the requirement of notice under section 143(2) cannot bedispensed with……………… under section 143(3) read with section 158BC, notice undersection 143(2) should be issued within one year from the date offiling of block return. Omission on the part of the assessingauthority to issue notice under section 143(2) cannot be aprocedural irregularity and the same is not curable and, therefore,the requirement of notice under section 143(2) cannot bedispensed with……………… ............ A reading of the provision would clearly indicate, inour opinion, if the Assessing Officer, if for any reason, repudiatesthe return filed by the assessee in response to notice undersection 158BC(a), the Assessing Officer must necessarily issuenotice under section 143(2) of the Act within the time prescribed inthe proviso to section 143(2) of the Act.”our opinion, if the Assessing Officer, if for any reason, repudiatesthe return filed by the assessee in response to notice undersection 158BC(a), the Assessing Officer must necessarily issuenotice under section 143(2) of the Act within the time prescribed inthe proviso to section 143(2) of the Act.” (underlining supplied for emphasis) The defect/omission on the part of AO to issue notice underSection 143(2) within the time prescribed being an incurable illegalityand not a mere procedural irregularity, the entire of the proceedingsadopted by the AO were rendered unsustainable. In such a matter,mere appearance of the assessee or alleged non-raising of the issuebefore the AO could not have invested the AO with the jurisdiction toproceed with the matter and to frame the assessment under Section158BC read with Section 158BD of the Act. Where non-issuance ofnotice within prescribed time strikes at the very jurisdiction of the AOfor being not a matter of mere procedural irregularity, the principlesof waiver or acquiescence, as sought to be suggested on behalf ofthe revenue, cannot apply. The CIT(A) and the ITAT having rightly ruled against therevenue with reference to the authoritative pronouncement of theHon'ble Supreme Court in Hotel Blue Moon’s case (supra), we aresatisfied that this appeal remains totally bereft of substance. The appeal fails and is, therefore, dismissed. (BANWARI LAL SHARMA),J. (DINESH MAHESHWARI),J.