1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 24TH DAY OF JUNE 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE M.NAGAPRASANNA I.T.A. NO.192 OF 2012 BETWEEN: 1. COMMISSIONER OF INCOME TAX (CENTRAL) CENTRAL REVENUE BUILDINGS QUEENS ROAD, BANGALORE-560001. 2. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7(1), C.R. BUILDING, BANGALORE. ... APPELLANTS (By Sri. E I SANMATHI ADV.,) AND: M/S. C. RAMAIAH REDDY RAMAIAH REDDY COLONY SECTOR-D, BASAVANAGAR BANGALORE-37. ... RESPONDENT (By Sri. SHANKAR, SR. ADV. A/W Sri. M LAVA, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 27/01/2012 PASSED IN ITA NO.121/BANG/2011, FOR ASSESSMENT YEAR 2005-06, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORUMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. 2 (II) SET ASIDE COMMON APPELLATE ORDER PASSED BY ITAT, B BENCH, BANGALORE IN ITA NO.121/BANG/2011, AS SOUGHT FOR IN THIS APPEAL, IN INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 2005-06. appeal was admitted by bench of this Court vide order dated 26.09.2012 on following substantial questions of law: (i) Whether on facts and circumstances of case tribunal was right in law in annulling reassessment made under Section147 of Act on ground of non-issuance of notice under Section 143(2) of Act would invalidate assessment, which is not prerequisite as per scheme of 3 provisions of Section 147 and 148 of Act? (ii) Whether on facts and circumstances of case tribunal was right in law in annulling reassessment made under Section 147 especially when provisions of Section 292B of Act introduced w.e.f. 01.10.1975, would govern that such reassessment and makes it valid in law when assessment made was in substance and effect, in conformity with or according to intent and purpose of Act? 2. Facts leading to filing of appeal briefly stated are that assessee is individual engaged in real estate business. assessee filed return of income for Assessment year 2005-06 declaring loss of Rs.65,49,770/- and subsequently filed audit report. assessing officer completed reassessment under Section 143(3) read with Section 147 of Act and by order dated 31.12.2008 determined taxable 4 income at Rs.12,10,51,209/- after making addition of Rs.12,14,68,180/- as long term capital gains and sum of Rs.61,32,800/- as short term capital gains by invoking Section 45(2) of Act. 3. assessee preferred appeal before Commissioner of Income Tax (Appeals) on ground that reopening of assessment is invalid since, no notice under Section 143(2) of Act was issued. Commissioner of Income Tax (Appeals) vide order dated 26.11.2010 inter alia held that assessee has not raised any objection with regard to non service of notice under Section 143(2) before assessing officer and therefore, objection raised in appeal is not maintainable in light of provisions contained in Section 292B of Act. It was further held that on family partition if assets are allotted to assessee, character of assets in hands of assessee is only capital asset. It was further held that assessee had treated lands received by him in partition as 5 stock in trade in his books and had offered business income on sale of lands. Thus, no infirmity was found with order passed by assessing officer and appeal was dismissed. 4. assessee thereafter approached Income Tax Appellate Tribunal. Income Tax Appellate Tribunal by order dated 27.01.2012 inter alia held that for reassessment to be completed under Section 143(3) read with Section 147, notice under Section 143(2) has to be issued within prescribed limit. It was further held that no notice under Section 143(2) of Act was issued, therefore, proceedings are vitiated in law. However, revenue was granted liberty to take appropriate curative steps. In result, appeal was partly allowed. In aforesaid factual background, revenue is in appeal before us. 5. Learned counsel for revenue submitted that in response to notice under Section 147 of 6 Act, assessee appeared. However, it was fairly submitted that notice under Section 143(2) of Act was not issued. It is argued that non issuance of notice under Section 143(2) of Act is procedural irregularity and would not vitiate proceeding of assessment under Section 143(3) read with Section 147 of Act. It is contended that substantial compliance has been made even though in notice issued under Section 147 there is no reference to Section 143(2) of Act. It is submitted that defect is curable defect and in this connection, our attention has been invited to provisions contained in Section 292B and 292BB of Act. It was also pointed out that tribunal ought to have appreciated that Supreme Court in ACIT VS. HOTEL BLUE MOON , (2010) 321 ITR 362 (SC) was dealing with case of search and re assessment. 6. On other hand, learned Senior Counsel for assessee submitted that issue involved in this 7 appeal is no longer res integra and has been answered by decisions of Supreme Court in ACIT VS. HOTEL BLUE MOON supra and CIT VS. LAXMAN DAS KHANDELWAL , (2019) 417 ITR 325 (SC). It is also submitted that if notice would have been issued under Section 143(2) of Act, then any technical defect or omission would have been covered under Section 292B and 292BB of Act. In instant case, since, no notice under Section 143(2) of Act has been issued, therefore, aforesaid provisions are not attracted. It is also submitted that grievance with regard to non issuance of notice under Section 143(2) of Act was made before assessing officer as well as Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal. In support of aforesaid submissions, reference has been made to decisions in LAXMAN DAS KANDELWAL supra and decision of Punjab and Haryana High Court in COMMISSIONER OF INCOME TAX VS. NORTAN MOTORS , (2005) 275 8 ITR 595 (P&H), ACIT VS. HOTEL BLUE MOON , (2010) 321 ITR 362 (SC), PCIT VS. PARAMOUND BIOTECH INDUSTRIES LTD , (2017) 398 ITR 701 (DELHI), PCIT VS. OBEROI HOTELS PVT LTD , (2018) 409 ITR 132 (CAL), ALPINE ELECTRONICS ASIA PVT LTD VS. DGIT AND OTHERS , (2012) 341 ITR 247 (DELHI), PAL VINOD VS. DCIT (2013) 353 ITR 622 (KARNATAKA), CIT VS. RAJEEV SHARMA , (2011) 336 ITR 678 (ALLAHABAD) , ACITKL VS. GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY , (2015) 379 ITR 14 (ALLAHABAD), ACIT VS. GENO PHARMACEUTICALS LTD., , (2013) 214 TAXMAN 83 (BOMBAY), CIT VS. GITSONS ENGINEERING CO. , (2015) 370 ITR 87 (MADRAS), PCIT VS. RAVNET SOLUTIONS PVT. LTD., , (2017) 399 ITR 567 (DELHI), CIT VS. BIHARI LAL AGRAWAL , (2012) 346 ITR 67 (ALLAHABAD), NAWAL KISHORE AND SONS JEWELLERS VS. CIT , (2012) 79 DTR (ALL) 9 241 (ALLAHABAD), PCIT VS. SHRI JAI SHRI JAI SHIV SHANKAR TRADERS PVT LTD. , (2016) 129 DTR (DEL) 63, TRAVANCORE DIAGNOSTICS PVT LTD. VS. ACIT , (2017) 390 ITR 167 (KER), INDUS TOWERS LTD. VS. DCIT , (2017) 82 TAXMANN.COM 430 (DELHI), DCITK VS. CAMERON SIGNAPORE PVT LTD , (2019) 418 ITR 272 (RAJ.), NITTUR VASANTH KUMAR MAHESH VS. ACIT , (2019) 106 TAXMANN.COM 399 (GUJARAT), BIHAR POLICE BUILDING CONSTRUCTION CORPORATION PVT LTD. VS. PCIT , (2019) 108 TAXMNN.COM 48 (PATNA), PCIT VS. SILVER LINE , (2016) 383 ITR 455 (DELHI), CIT VS. SMT.MEENAKSHI DEVI , (2015) 229 TAXMAN 365 (ALLAHABAD). 7. We have considered submissions made on both sides and have perused record. short question which arises for consideration in this appeal is whether non issuance of notice under Section 143(2) of Act is prerequisite as per scheme of provisions 10 of Section 147 and Section 148 of Act and whether non issuance of notice under Section 143(2) of Act would invalidate assessment. Before proceeding further, it is apposite to take note of relevant extract of provisions of Section 148(1) and Section 143(2) of Act, which are reproduced below for facility of reference: 148. (1) Before making assessment, reassessment or recomputation under section 147, Assessing Officer shall serve on assessee notice requiring him to furnish within such period, as may be specified in notice, return of his income or income of any other person in respect of which he is assessable under this Act during previous year corresponding to relevant assessment year, in prescribed form and verified in prescribed manner and setting forth such other particulars as may be prescribed; and provisions of this Act shall, so far as may be, apply accordingly as if such 11 return were return required to be furnished under section 139 : Provided that in case (a)xxxxxxxx (b)xxxxxxx Provided further that in case (a) where return has been furnished during period commencing on 1st day of October, 1991 and ending on 30th day of September, 2005, in response to notice served under this section, and (b) subsequently notice has been served under clause (ii) of sub-section (2) of section 143 after expiry of twelve months specified in proviso to clause (ii) of sub-section (2) of section 143, but before expiry of time limit for making assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be valid notice. Explanation. For removal of doubts, it is hereby declared that nothing contained in first proviso or second proviso shall apply to any return which has 12 been furnished on or after 1st day of October, 2005 in response to notice served under this section. Section 143(2) of Act: 143(2) Where return has been furnished under section 139, or in response to notice under sub-section (1) of section 142, Assessing Officer shall- (i) xxxxxxxx (ii) notwithstanding anything contained in clause (i) if he considers it necessary or expedient to ensure that assessee has not understated income or has not computed excessive loss or has not under paid tax in any manner, serve on assessee notice requiring him, on ate to be specified therein, either to attend has office or to produce, or cause to be produced, any evidence on which assessee may rely in support of return: Provided that no notice under clause (ii) shall be served on assessee after 13 expiry of twelve months from end of month in which return is furnished. 8. It is pertinent to note that first and second proviso to Section 148 of Act were inserted by Finance Act, 2006 with retrospective effect i.e., from 01.10.1991. aforesaid proviso were incorporated and created legal fiction to effect that notice issued under Section 143(2) after expiry of twelve months as specified in Section 143(2) but before completion of expiry of time limit for making assessment, reassessment or recomputation as specified in Section 153(2) in respect of return furnished between period 01.10.1991 to 30.09.2005 will be valid. legal fiction has been created in respect of issue of notice under Section 143(2) of Act only in respect of returns furnished upto 30.09.2005. Thus, by insertion of aforesaid provisos legislature has made its intention manifest that notice under Section 143(2) of Act has to be mandatorily issued for initiation of 14 assessment proceedings under Section 147 of Act. In instant case, assessee filed return of income on 19.09.2006. Therefore, amendment made to Section 148 of Act do not apply to fact situation of case and in absence of notice under Section 143(2) of Act, order of assessment under Section 143(3) read with Section 147 is ab initio void. 9. It is also noteworthy that Section 292B only covers situation where there is defect or omission in notice, which has already been issued by assessment officer. In instant case, assessing officer has not issued notice under Section 143(2) of Act, therefore, question of curing defect or omission, in notice which has not been issued does not arise. Similarly, Section 292BB of Act does not validate proceeding in absence of notice. In order to attract applicability of Section 292BB, notice must have been issued by assessing officer and 15 aforesaid provision also seeks to cure only procedural irregularities and does not cure complete absence of notice. 10. aforesaid legal position is even otherwise no longer res integra and is settled by Supreme Court in view of decisions rendered in HOTEL BLUE MOON supra and LAXMAN DAS KHANDELWAL supra as well as other decisions referred to supra. In view of preceding analysis, substantial question of law framed by this court is answered against revenue and in favour of assessee. In result, we do not find any merit in appeal. same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax (Central), Bangalore / Deputy Commissioner of Income-tax, Circle-7(1), Bangalore v. C. Ramaiah Reddy