O/TAXAP/306/2017 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 306 of 2017 PR COMMISSIONER OF INCOME TAX 3, AHMEDABAD Appellant(s) Versus DEVENDRANATH G CHATURVEDI Opponent(s) Appearance: MR NITIN K MEHTA, ADVOCATE for Appellant(s) No. 1 MR B S SOPARKAR, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV Date : 12/06/2017 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue has filed this appeal against judgment of Income Tax Appellate Tribunal dated 29.1.2016 raising following questions for our consideration. [A] Whether ITAT has erred in facts and on law in overlooking that block return was filed on 12/7/2004, nearly 28 months after issue of notice u/s.158BC dated 11/2/2002, and much beyond statutory period of 45 days for filing such return? [B] Whether ITAT has erred in law and on facts in not holding that delayed return was thus to be treated as non-est return, as held by Patna Bench of ITAT in case of Chand Bihari Agarwal v/s ACIT, IT (SS) No.5/PAT/2010, and that that ratio of Hotel Blue Moon would not be applicable in this case? [C] Whether in facts and circumstances of case ITAT was right in dismissing appeal of Revenue Page 1 of 5 HC-NIC Page 1 of 5 Created On Wed Jun 21 09:46:04 IST 2017 O/TAXAP/306/2017 ORDER purely on basis of Circular No.21/2015 without considering fact that block assessment proceedings and proceedings of years falling within block are interconnected and without examining merits of issue of additions when tax effect involved in respect of other years (Block Period 1-4-1990 to 7-3-2001) was more than prescribed limit laid down in Circular No.21/2015 especially when all appeals are decided under common order. 2. Issues arise out of block assessement for period between 1990 to 2001. CIT (Appeals) and Tribunal set aside assessment made by Assessing Officer on ground that no notice under Section 143 (2) of Income Tax Act, 1961 (for short, Act ) was issued, though required. revenue does not dispute that no such formal notice was issued by Assessing Officer before rejecting assessee's returned income and assessing higher income than returned income. revenue, however, raises two-fold contentions. First is that letter was written to assessee for supplying certain details which may be treated as notice under Section 143 (2) of Act and since Act does not prescribe any format for issuing such notice, this should be seen as substantial compliance. Second and important limb of revenue's contention is that assessee filed return after long delay in response to notice under Section 158 BC of Act. This return should have been treated as invalid and non-est return and, in such case, there was no requirement for issuing notice under Section 143 (2) of Act for Assessing Officer to complete assessment. 3. Appearing for revenue, learned counsel submitted that Tribunal erred in relying on decision of Page 2 of 5 HC-NIC Page 2 of 5 Created On Wed Jun 21 09:46:04 IST 2017 O/TAXAP/306/2017 ORDER Supreme Court in case of Hotel Blue Moon reported in 321 ITR 362, when return itself was invalid. Requirement for issuing notice under Section 143 (2) would arise only when valid return is filed. On other hand, learned counsel Shri Soparkar for assessee submitted that Assessing Officer had accepted return, raised detailed queries and framed assessment, which was not in nature of best judgment assessment under Section 144 of Act. There is neither any provision under Act nor did Assessing Officer treat return as non-est. When Assessing Officer was rejecting returned income, in view of judgment of Supreme Court in case of Hotel Blue Moon (Supra) notice under Section 143 (2) was necessary. 4. With respect to revenue's first contention of notice having been issued under Section 143 (2) of Act, though not in proper format, we may record that before Tribunal it was pointed out that Assessing Officer had issued letter seeking information from assessee. This thus clearly was not notice in any format. Section 143 (2) requires notice by Assessing Officer, if he considers it necessary or expedient to ensure that assessee has not under-stated income or does not compute excessive loss or has not under-paid tax in any manner. Only after issuance of such notice, Assessing Officer can frame assessment under Section 143 (3) of Act. fact that such notice would be necessary even in case of block assessment is settled by Supreme Court in case of Hotel Blue Moon (supra). 5. Regarding second contention of revenue, we notice that Section 143 of Act pertains to assessment. Sub- Page 3 of 5 HC-NIC Page 3 of 5 Created On Wed Jun 21 09:46:04 IST 2017 O/TAXAP/306/2017 ORDER section (1) of Section 143 provides that where return has been filed by assessee under Section 139 or in response to notice under sub-section (1) of Section 142, same would be processed in manner provided therein. Sub-section (2) of Section 143, as noted, would require Assessing Officer to issue notice where return has been furnished and Assessing Officer considers it necessary or expedient to ensure that income is not under-stated. After issuing such notice, Assessing Officer would proceed to frame assessment under sub-section (3) of Section 143 of Act. This provision, therefore, envisages situation where return under Section 139 or in response to notice under Section 142 (1) of Act has been filed. Section 144 of Act, which pertains to best judgment assessment covers various situations, including Clause (a) of Sub-section (1), where person fails to make return required under sub-section (1) of Section 139 or under sub-section (4) or (5) of said Section, and in Clause (b), in case of assessee, who fails to comply with terms of notice issued under sub-section (1) of Section 142 or fails to comply with direction issued under sub-section (2A) of Section 142. clause (c) of sub-section (1) covers case where assessee fails to comply with terms of notice issued under sub-section (2) of Section 143. In such situations, Assessing Officer would have authority to frame assessment, which is popularly referred to as best judgment assessment. Had assessee in present case not filed return in response to notice issued by Assessing Officer or for some reasons such return was held to be invalid or non-est, revenue's contention that no notice under sub-section (2) of Section 143 of Act was necessary and Assessing Officer could have proceeded to frame Page 4 of 5 HC-NIC Page 4 of 5 Created On Wed Jun 21 09:46:04 IST 2017 O/TAXAP/306/2017 ORDER assessment under Sub-section (1) of Section 144 would merit further consideration. 6. In present case, however, assessee did file return, though belatedly. Assessing Officer did not discard such return but proceeded on basis of such return and framed assessment assessing income higher than returned income. Under circumstances, before rejecting such income, notice under Section 143 (2) of Act was necessary. Such notice not having been issued, Tribunal correctly upheld judgment of CIT (Appeals). Tax Appeal is dismissed. (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) *malek Page 5 of 5 HC-NIC Page 5 of 5 Created On Wed Jun 21 09:46:04 IST 2017 Pr Commissioner of Income-tax 3, Ahmedabad v. Devendranath G Chaturvedi