$ * IN HIGH COURT OF DELHI AT NEW DELHI 14. + ITA 519/2015 PR. COMMISSIONER OF INCOME TAX-08 ..... Appellant Through: Ms. Suruchi Aggarwal, Senior Standing counsel with Ms. Lakshmi Gurung, Junior Standing counsel with Ms.Radhika Gupta and Mr. Abhishek Sharma, Advocates. versus SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. ..... Respondent Through: Dr. Rakesh Gupta, Ms Poonam Ahuja, Mr.Somil Agarwal and Mr. Rohit Kumar Gupta, Advocates. CORAM: DR. JUSTICE S.MURALIDHAR MR. JUSTICE VIBHU BAKHRU ORDER % 14.10.2015 1. This appeal by Revenue is against order dated 18th February, 2015 passed by Income Tax Appellate Tribunal ( ITAT ) in ITA No.1068/Del/2013 for Assessment Year ( AY ) 2008-09. 2. Assessee filed its return of income for AY in question on 16 th September, 2008. said return was accepted by Department and acknowledgement was issued under Section 143(1) of Act. ITA 519/2015 Page 1 of 9 3. It appears that subsequently return was picked up for scrutiny. After recording reasons, notice apparently was issued by Assessing Officer (AO) to Assessee on 30th March, 2010 under Section 148 of Act. It is not in dispute that this notice was never served on Assessee. 4. Subsequently, on 1st October, 2010, notice was issued under Section 143(2) of Act by AO stating that there were certain points in connection with return filed for AY in question on which AO "would like some further information". date for Assessee to attend AO's office was fixed for 25th October, 2010. Again, it is not in dispute that this notice under Section 143(2) of Act was also never served on Assessee. 5. On 21st October, 2010, notice was issued under Section 142 (1) of Act fixing returnable date as 29th October, 2010. further notice under Section 142 (1) of Act was issued on 10th December, 2010 with returnable date of 16th December, 2010. On 16th December, 2010, Authorized Representative (AR) of Assessee appeared and informed AO that return originally filed on 16th September, 2008 should be treated as return filed pursuant to notice under Section 148 of Act. 6. AO then proceeded to pass assessment order on 31 st December, 2010 whereby, inter alia, addition of Rs.1 crore was made to income of Assessee under Section 68 of Act as unexplained credits. In appeal before Commissioner of Income Tax (Appeals), Assessee, inter alia, raised issue that in absence of notice under Section ITA 519/2015 Page 2 of 9 143(2) of Act order of re-assessment was invalid. CIT (A) negatived above contention holding that no specific notice was required to be issued under Section 143(2) of Act and that questionnaires dated 11th November, 2003 and 21st January, 2004 issued by AO had provided Assessee s sufficient opportunity to support his return by documentary evidence. Secondly, it was held that non issue of notice under Section 143(2) did not render reassessment invalid. 7. Assessee s further appeal has been allowed by ITAT by impugned order. Relying, inter alia, on decision of Supreme Court in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 and plethora of judgments of High Courts, ITAT concluded that for completing assessment under Section 148 of Act compliance with procedure under Section 143 (2) was mandatory. It was held that if notice was not issued to Assessee before completion of re-assessment, then such reassessment was not sustainable in law. 8. When this appeal was first listed before this Court on 29 th July, 2015 reliance was placed by Ms Suruchi Aggarwal, learned Senior Standing counsel for Revenue on decision of this Court in Commissioner of Income Tax v. Madhya Bharat Energy Corporation Ltd. (2011) 337 ITR 389 ) Del which purported to hold that non-issue of notice under Section 143(2) of Act on Assessee prior to completion of reassessment would not be fatal to reassessment. She also sought to distinguish decision in ACIT v. Hotel Blue Moon (supra) on ground that it pertained to block assessment. ITA 519/2015 Page 3 of 9 9. Dr Rakesh Gupta, learned counsel appearing for Assessee, at outset drew attention of this Court to order passed by this Court on 17th August, 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 matter rendered on 11th July 2011 on ground that said appeal had not been admitted on question concerning mandatory compliance with requirement of issuance of notice under Section 143(2) of Act. In its review order, this Court noted that at time of admission of appeal on 17 th February, 2011 after noticing that in said case that no notice under Section 143(2) had ever been issued, Court held that no question of law arose on that aspect. upshot of above discussion is that decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to Revenue as far as issue in present case is concerned. 10. Ms Aggarwal nevertheless urged that notwithstanding above position, decision of this Court in CIT v. Vision Inc. (2012) 73 DTR 201 (Del) would apply. said judgment held that since on facts of that case Assessee had been properly served with notice under Section 143(2) of Act within statutory time limit prescribed under proviso thereto, ITAT should not have set aside re-assessment in toto. Ms Aggarwal placed reliance on Section 292BB of Act and urged that Assessee having not raised any objection about non service of notice under Section 143(2) of Act either at any time before AO or prior to, or during reassessment proceedings, Assessee was precluded from ITA 519/2015 Page 4 of 9 raising such objection in subsequent stages of proceedings. 11. Dr Rakesh Gupta for Assessee on other hand placed reliance on large number of decisions of High Courts apart from decision of Supreme Court in ACIT v. Hotel Blue Moon (supra). He submitted that failure to issue notice under Section 143(2) of Act subsequent to Assessee having informed AO that return originally filed should be treated as return filed pursuant to notice under Section 148 of Act, was fatal to order of re-assessment. 12. narration of facts as noted above by Court makes it clear that no notice under Section 143(2) of Act was issued to Assessee after 16th December 2010, date on which Assessee informed AO that return originally filed should be treated as return filed pursuant to notice under Section 148 of Act. 13. In DIT v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del), this Court invalidated reassessment proceedings after noting that notice under Section 143(2) of Act was not issued to Assessee pursuant to filing of return. In other words, it was held mandatory to serve notice under Section 143(2) of Act only after return filed by Assessee is actually scrutinised by AO. 14. interplay of Sections 143 (2) and 148 of Act formed subject matter of at least two decisions of Allahabad High Court. In CIT v. ITA 519/2015 Page 5 of 9 Rajeev Sharma (2011) 336 ITR 678 (All.) it was held that plain reading of Section 148 of Act reveals that within statutory period specified therein, it shall be incumbent to send notice under Section 143(2) of Act. It was observed: provisions contained in sub-Section (2) of Section 143 is mandatory and legislature in their wisdom by using word 'reason to believe' had cast duty on Assessing Officer to apply mind to material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of above, after receipt of return in response to notice under Section 148, it shall be mandatory for AO to serve notice under sub-Section 2 of Section 143 assigning reason therein. In absence of any notice issued under sub-Section 2 of Section 143 after receipt of fresh return submitted by Assessee in response to notice under Section, entire procedure adopted for escaped assessment, shall not be valid. 15. In subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. (2014) 50 Taxmann.com 105 (All) it was held as under: 10. Section 292 BB of Act was inserted by Finance Act, 2008 with effect from 1 April 2008. Section 292 BB of Act provides deeming fiction. deeming fiction is to effect that once assessee has appeared in any proceeding or cooperated in any enquiry relating to assessment or reassessment, it shall be deemed that any notice under provisions of Act, which is required to be served on assessee, has been duly served upon him in time in accordance with provisions of Act. assessee is precluded from taking any objection in any proceeding or enquiry that notice was (i) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in improper manner. In other words, once deeming fiction comes into operation, assessee is precluded from raising challenge about service of notice, service within time or service in improper manner. proviso to Section 292 BB ITA 519/2015 Page 6 of 9 of Act, however, carves out exception to effect that Section shall not apply where assessee has raised objection before completion of assessment or reassessment. Section 292 BB of Act cannot obviate requirement of complying with jurisdictional condition. For Assessing Officer to make order of assessment under Section 143 (3) of Act, it is necessary to issue notice under Section 143 (2) of Act and in absence of notice under Section 143 (2) of Act, assumption of jurisdiction itself would be invalid. 16. In same decision in v. Salarpur Cold Storage (P.) Ltd.( supra), Allahabad High Court noticed that decision of Supreme Court in ACIT v. Hotel Blue Moon (supra) where in relation to block assessment, Supreme Court held that requirement to issue notice under Section 143(2) was mandatory. It was not "a procedural irregularity and same is not curable and, therefore, requirement of notice under Section 143(2) cannot be dispensed with. 17. Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2013) 90 DTR 289 (Mad). facts of that case were that notice under Section 148 of Act was issued to Assessee seeking to reopen assessment for AY 2000-01. However, Assessee did not file return and therefore notice was issued to it under Section 142 (1) of Act. Pursuant thereto, Assessee appeared before AO and stated that original return filed should be treated as return filed in response to notice under Section 148 of Act. High Court observed that if thereafter, AO found that there were problems with return which required explanation by Assessee then AO ought to ITA 519/2015 Page 7 of 9 have followed up with notice under Section 143(2) of Act. It was observed that: "Merely because matter was discussed with Assessee and signature is affixed it does not mean rest of procedure of notice under Section 143(2) of Act was complied with or that on placing objection Assessee had waived notice for further processing of reassessment proceedings. fact that on notice issued u/s 143(2) of Act, assessee had placed its objection and reiterated its earlier return filed as one filed in response to notice issued u/s 148 of Act and Officer had also noted that same would be considered for completing of assessment, would show that AO has duty of issuing notice under Section 143(3) to lead on to passing of assessment. In circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept view of Tribunal that there was waiver of right of notice to be issued u/s 143(2) of Act. 18. As already noticed, decision of this Court in CIT v. Vision Inc. proceeded on different set of facts. In that case, there was clear finding of Court that service of notice had been effected on Assessee under Section 143 (2) of Act. As already further noticed, legal position regarding Section 292BB has already been made explicit in aforementioned decisions of 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, failure of AO, in re-assessment proceedings, to issue notice under Section 143(2) of Act, prior to finalising re-assessment order, cannot be condoned by referring to Section 292BB of Act. 19. resultant position is that as far as present case is concerned ITA 519/2015 Page 8 of 9 failure by AO to issue notice to Assessee under Section 143(2) of Act subsequent to 16th December 2010 when Assessee made statement before AO to effect that original return filed should be treated as return pursuant to notice under Section 148 of Act, is fatal to order of re-assessment. 20. Consequently, there is no legal infirmity in impugned order of ITAT. No substantial question of law arises. appeal is dismissed. S.MURALIDHAR, J VIBHU BAKHRU, J OCTOBER 14, 2015 MK ITA 519/2015 Page 9 of 9 PR. COMMISSIONER OF INCOME TAX-08 v. SHRI JAI SHIV SHANKAR TRADERS PVT. LTD