The order of the Bench was delivered by
Ashwani Taneja (Accountant Member)- The present appeal has been filed by the assessee against the order dated June 30, 2011, passed by the learned Commissioner of Income-tax (Appeals)-17, Mumbai, passed for the assessment year 2003-04. The assessee has raised the following grounds of appeal :
"1. The Commissioner of Income-tax (Appeals) erred in upholding the assumption of jurisdiction by the Assessing Officer (AO) under section 147 of the Act. He failed to appreciate that the jurisdictional pre-conditions necessary for assuming the jurisdiction under the said section had not been fulfilled in the present one.
2. The Commissioner of Income-tax (Appeals) ought to have held that no reasons were recorded by the Assessing Officer before issuing the notice under section 148 of the Act, as, till now the reasons have not been provided to the appellant. Communication of the alleged reasons by a letter which may not be the actual reasons does not fulfil this requirement.
3. On the alternative and without prejudice to the above, the Commissioner of Income-tax (Appeals), ought to have held that no belief was forward by the Assessing Officer as required by section 147 of the Act and the Assessing Officer had only relied on the findings given by the Commissioner of Customs without any independent application of mind which is not permissible in law.
4. In the alternative and without prejudice to the above, the Commissioner of Income-tax (Appeals), ought to have held that there was no material before the Assessing Officer which could lead to the formative of belief that the appellant's income chargeable to tax has escaped assessment by way of grant of excess deduction under section 10A of the Act. The material, if any, has no nexus with the belief formed by the Assessing Officer.
5. The Commissioner of Income-tax (Appeals) ought to have held that the jurisdictional pre-conditions necessary to be fulfilled under section 143(2) of the Act had not been fulfilled in the present case and, therefore, the reassessment order was illegal and bad in law.
6. The Commissioner of Income-tax (Appeals) failed to appreciate that Fair Trading Co. and Twinklediam Hongkong Ltd. are not closely connected to the appellant.
7. The Commissioner of Income-tax (Appeals) failed to appreciate that the conditions necessary for involving the position of section 80- IA(10) had not been fulfilled in the case.
8. The Commissioner of Income-tax (Appeals) failed to appreciate that the sale proceeds received on account of export is Rs. 7,02,10,134, i.e., the sale price agreed between the appellant and the purchaser of goods, such amount cannot be substituted by the estimate of alleged fair value of the goods of Rs. 5,83,97,338.
9. The Commissioner of Income-tax (Appeals) erred in upholding the denial of deduction under section 10A of the Act in respect of the amount of Rs. 1,18,12,796 (being Rs. 7,02,10,134 less Rs. 5,83,97,338)."
2. During the course of hearing the learned counsel stated that Grounds Nos. 1 to 4 are not pressed. Therefore, these grounds are dismissed.
3. Ground No. 5 deal with the grievance of the assessee that the jurisdictional notice under section 143(2) of the Act had not been served upon the assessee-company in this case. The learned counsel made detailed submissions with regard to this ground. The learned Departmental representative refuted arguments of the learned counsel. After hearing the learned counsel and the learned Departmental representative, it was felt necessary by us that the perusal of the assessment records was required to examine the aspects of issuance and service of notice under section 143(2). In compliance with our direction, the learned Departmental representative produced the file containing assessment records before the Bench and the same was examined.
4. The learned counsel for the assessee submitted that no notice has been issued and served under section 143(2), as a result of which the Assessing Officer did not get the jurisdiction to make assessment of the return filed by the assessee in response to the notice issued under section 148. It was further submitted that the issuance of notice under section 143(2) is the sine qua non for valid assumption of jurisdiction by the Assessing Officer to make any variation in the return filed by the assessee. It was submitted that the issue is covered with the judgment of the hon'ble Supreme Court in the case of Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC). It was submitted that there are many other judgments of various High Courts and various judgments of the Income-tax Appellate Tribunal on this issue. It was submitted that when this issue was raised before the learned Commissioner of Income-tax (Appeals), it has been accepted in the appellate order by the learned Commissioner of Income-tax (Appeals) that there is no evidence of service of the mandatory notice. But the learned Commissioner of Income-tax (Appeals) did not accept the submissions of the assessee on the ground that the assessee is debarred by the provisions of section 292BB to raise any objections with regard to the services of notice in the course of appellate proceedings as no such objections were raised before the Assessing Officer. It was submitted that the order of the learned Commissioner of Income-tax (Appeals) is contrary to law and is against the judgment of the hon'ble Supreme Court and the High Courts. It was also submitted that the provisions of section 292BB are not applicable on the facts of thiscase because the provisions of section 292BB cannot be applied, retrospectively, as the same came into effect from April 1, 2008, whereas the impugned proceedings were initiated before the said date.
5. On the other hand, the learned Departmental representative relied upon the order of the learned Commissioner of Income-tax (Appeals) and produced the assessment records. It was submitted that although the learned Commissioner of Income-tax (Appeals) has recorded a finding that evidence of service of the impugned notice was not available on record but the assessee was precluded from raising this issue before the Commissioner of Income-tax (Appeals) due to restriction upon the assessee created by section 292BB of the Act.
The learned Departmental representative has submitted that as per the provisions of section 292BB, the assessee cannot raise any objection in respect of non-service of notice under section 143(2), at a later stage, if no objection was raised during the course of assessment proceedings. The learned Departmental representative requested to uphold the order of the learned Commissioner of Income-tax (Appeals) on this issue.
6. We have heard both the parties carefully and have gone through case records. We have also gone through various case law cited before us. The brief facts as culled out from the assessment order in this case are that the assessee is a private limited company, filed its return of income for the assessment year 2003-04. The original assessment was done by the Assessing Officer under section 143(3) of the Act. Subsequently, the Assessing Officer reopened the case of the assessee and a notice under section 148 was issued on August 29, 2007. In response to the notice under section 148, the assessee filed its return of income on September 14, 2007. Subsequently, the Assessing Officer passed assessment order under section 143(3) read with section 147 of the Income-tax Act, 1961. Against the said assessment order, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals) and, inter alia, raised its grievance of non-service of the mandatory notice under section 143(2) of the Act. The assessee also filed an affidavit dated May 28, 2009, in support of its claim that no notice under section 143(2) has been served upon the assessee.
7. From the perusal of the assessment records, it was noted by us that one notice under section 143(2) dated August 11, 2008, was available in the assessment file. There was no evidence of its issuance and dispatch. There was no evidence of service of this notice in the file. Although, in the "order-sheet", it has been mentioned that notice was issued under section143(2) of the Act. But there was nothing to show that it was dispatched by the Assessing Officer to the assessee. There was nothing to show that it was handed over by the Assessing Officer to the notice server. There was nothing to show that the notice has been issued out of the bounds of the Assessing Officer meant to be delivered to the assessee. It is further noted by us that the learned Commissioner of Income-tax (Appeals) has also confirmed this fact in his order at paragraph 3.5.1 that apparently there is no evidence on record with regard to service of notice under section 143(2). During the hearing before us a specific query was raised by us to the learned Departmental representative to show us any evidence with regard to issuance and service and for this purpose sufficient time was also given to the learned Departmental representative. However, the learned Departmental representative expressed his inability to produce any such evidence from the assessment records or from anywhere else. Thus, taking into consideration all the facts and evidences placed before us, we find that there is no evidence of issuance or service of the impugned notice under section 143(2) dated August 11, 2008.
8. Having held so, let us now examine the legal effect of non-issuance and non-service of mandatory notice under section 143(2), in the reassessment proceedings initiated under section 147 read with section 148 of the Income-tax Act, 1961.
9. In this regard, we first refer to the requirement of law for service of notice under section 143(2). First of all, we refer to the provisions of section143(2) which prescribe that the Assessing Officer shall serve notice, within the prescribed time limit, for making assessment of the return filed by the assessee. In this case, the impugned assessment order has been passed under section 143(3) read with section 147 of the Act. With respect to assessments to be framed under section 147, requisite provisions with regard to issuance and service of notice, for reopening of assessment and framing of reassessment order, have been provided under section 148 of the Act, wherein it has been clarified by way of an Explanation to section 148(1) inserted by the Finance Act, 2006, with retrospective effect from October 1, 2005, that for making assessment of the returns filed after October 1, 2005 (in pursuance of notice under section 148), the Assessing Officer is obliged under the law to serve notice under section 143(2) upon the assessee as per law within 12 months from the end of the month in which return has been filed by the assessee in pursuance of notice issued under section 148 of the Act. It is worth noting that the amendment made by the Finance Act, 2006, with retrospective effect from October 1, 2005, clarified that prior to October 1, 2005, service of notice under section 143(2) was not mandatory within the stipulated time from the date of filing of return by the assessee in pursuance of notice issued by the Assessing Officer under section 148. But for the returns filed subsequent to this date, service of notice under section 143(2) was mandatory. Thus, it is clearly established that the Legislature is very much conscious of the requirement of law that service of notice under section 143(2) is mandatory for the Assessing Officer to assume jurisdiction to make assessment of the return filed by the assessee. Thus, in simple words and as per the plain reading of law, service of notice upon the assessee under section143(2) within the 12 months from the end of the month in which return is filed by the assessee in pursuance of the notice under section 148 issued by the Assessing Officer for reopening of the assessment, is mandatory to enable the Assessing Officer to assume jurisdiction to make assessment of the aforesaid return.
This issue is no more res integra as there are umpteen numbers of judgments on this issue from various courts. We derive support from the judgment of the hon'ble Supreme Court in the case of Hotel Blue Moon (supra). We further derive support from the judgment of the hon'ble jurisdictional High Court in the case of Asst. CIT v. Geno Pharmaceuticals Ltd. [2013] 84 CCH 117 (Bom) holding that service of notice under section 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot make an inquiry on the return filed in compliance with the notice issued under section 148. Thus, as per law, issuance and service of jurisdictional notice under section 143(2) is mandatory, and in the absence of the same, the assessment framed would be fatal.
10. Having held so, let us now examine the objection raised by the learned Commissioner of Income-tax (Appeals) and the learned Departmental representative with respect to obstruction sought to have been created by section 292BB. It has been argued by the learned Departmental representative that in view of the provisions of section 292BB, the assessee is precluded from taking any objection about non-service of notice after closure of the assessment proceedings, therefore, the learned Commissioner of Income-tax (Appeals) rightly rejected the objection of the assessee with regard to service of notice.
11. We have carefully examined the arguments made by the learned Departmental representative. First of all, it is noted by us that section292BB has been brought on the statute with effect from April 1, 2008. On this issue, the following three questions arise for our consideration before section 292BB could be applied upon this case to reject the grievance of the assessee :
"(i) Whether section 292BB can be applied retrospectively and, if not, whether it would be applicable on the proceedings of the case before us.
(ii) Whether, with the help of the provisions of section 292BB, defect in 'issuance' of a notice can be cured by the Assessing Officer or disability sought to be created by section 292BB is meant to take care of aspects of 'service' of notice only.
(iii) Whether the provisions of section 292BB can be extended to the extent that service of notice can be deemed to have been done also within the stipulated time, as prescribed under the Act."
12. We have pondered over this issue and find that as far as the first question is concerned, it has already been answered in a few judgments. We note that the hon'ble Allahabad High Court in the case of CIT v. Mohammad Khaleeq, Commerical Taxes [2014] 44 taxmann.com 484 (All) held that the provisions of section 292BB of the Act has been inserted by the Finance Act, 2008, with effect from April 1, 2008, and thus, these provisions were applicable from the assessment year 2008-09 onwards and these are not applicable prior to that. The hon'ble Delhi High Court in the case of CIT v. Mani Kakar [2009] 178 Taxman 315 (Delhi) has observed that section 292BB is not applicable to the assessment year 2001-02. Similar view was taken by the Special Bench of the Income-tax Appellate Tribunal in the case of Kuber Tobacco Products P. Ltd. v. Deputy CIT [2009] 310 ITR (AT) 300 (Delhi) [SB] ; [2009] 117 ITD 273 (SB). It has been held by the hon'ble Kerala High Court in the case of Dr. K. M. Mehaboob v. Deputy CIT [2012] 76 DTR 90 (Ker) that section 292BB does not have retrospective effect. Further, the hon'ble Allahabad High Court in the case of Asst. CIT v. Greater Noida Industrial Development Authority [2015] 379 ITR 14 (All) (in Income-tax Appeal No. 142 of 2015 dated August 4, 2015) has held that section 292BB does not cure defect in issuance of notice, it does not have retrospective operation and it shall not be applicable to the assessment year 2008-09 and years prior to that.
The relevant extracts of this judgment are reproduced below (page 19) :
"The Supreme Court clearly held that omission on the part of the Assessing Officer is not a procedural irregularity and is incurable and, therefore, the requirement of notice under section 143(2) of the Act cannot be dispensed with.
Similar view was held by a Division Bench of this court in CIT v. Salarpur Cold Storage (P) Ltd. [2014] 50 taxmann.com 105 (All), CIT v. Adarsh Travel Bus Service [2012] 17 taxmann.com 140 (All) as well as in CIT v. Mukesh Kumar Agrawal [2012] 345 ITR 29 (All) and CIT v. Rajeev Sharma [2011] 336 ITR 678 (All) ; [2010] 192 Taxman 197 (All).
In the light of the aforesaid decisions, it is apparently clear that the jurisdiction of the Assessing Officer to make an assessment under section 143(3)(ii) of the Act is based on the issuance of a notice under section 143(2)(ii) of the Act. The proviso to clause (ii) of sub- section(2) of section 143 clearly stipulates that a notice must be served on the assessee. . . .
In view of the aforesaid, we are of the opinion that section 292BB, which was inserted with effect from April 1, 2008, is not applicable to the proceedings for the assessment years 2006-07, 2007-08, 2008-09. We are also of the opinion that section 292BB of the Act is not appli cable also for the assessment years 2009-10, 2010-11 and 2011-12. The deeming fiction that once an assessee has appeared in any proceeding or participated in any query relating to assessment or reassessment, it shall be deemed that the notice under the provisions of the Act, which is required to be served has been duly served upon him in accordance with the provisions of the Act and, therefore, is precluded from contending that the notice was not served upon him or was not served upon him in time or was not served upon him in a proper manner, in our view, is not applicable for the following reason.. . .
From the aforesaid, it is clear that the essential requirement is 'issuance of notice' under section 143(2) of the Act. The deeming fiction under section 292BB of the Act is with regard to 'service of notice'. Since the initial requirement of issuance of notice was not made by the Assessing Officer, the deeming fiction of service of notice under section 292BB of the Act, consequently, does not arise and is not applicable.
In the light of the aforesaid, since the Assessing Officer failed to issue notice within the specified period under section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under section 143(2) of the Act and this defect cannot be cured by taking recourse to the deeming fiction provided under section 292BB of the Act. Consequently, the Tribunal was justified in setting aside the order of the Assessing Officer as well as the order of the appellate authority."
Thus, from these judgments, it is clear that section 292BB has no retrospective operation.
13. It is further seen by us that in the case before us, the proceedings were initiated by the Assessing Officer by issuing notice under section 148 dated August 29, 2007. In response to the same, return has been filed by the assessee on September 14, 2007. Thus, both the dates fell before April 1, 2008, being the date of coming into operation of section 292BB. It is well established principle of law that right to file an appeal is a substantive right. Thus, when the assessee filed its return of income on September 14, 2007, a valuable substantive right accrued to the assessee, i.e., right to be served with the mandatory notice, as per law prevailing on the date of filing of return and statutory right of filing of appeal against any action in the form of framing of the assessment upon the assessee, without being served with the mandatory jurisdictional notice, the deeming provisions of section 292BB could not have been applied retrospectively taking away this valuable right from the assessee. Any such curtailment of vested right cannot be construed to be retrospective especially when new law has been specifically stated to be effected from April 1, 2008. For framing assessment under section 143(3), service of notice under section 143(2) is a pre- condition. Therefore, service of notice under section 143(2) is "vested" as well as "substantive" right and not merely procedural in nature. Only after service of notice, the Assessing Officer assumes jurisdiction to frame assessment under section 143(3). In our considered view any amendment in law affecting vested right is always prospective in nature, unless provided otherwise by the statute itself. On this issue following the observations of the hon'ble Punjab and Haryana High Court in the case of CIT v. Raman Industries [1980] 121 ITR 405 (P&H) are relevant here (page 413):
"From the above observation it emerges that a statute dealing with procedure is always retrospective and its provisions also apply to the proceedings pending at the time of its enactment but where some provisions of a statute of procedure affect vested rights, these are prospective in operation unless there is an indication in the statute to the contrary. . . "
We further refer to the decision of the hon'ble Supreme Court in the case of Govinddas v. ITO [1976] 103 ITR 123 (SC) wherein it was observed at page 132 as under :
"Now, it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in volume 36 of the Laws of England (third edition) and reiterated in several decisions of this court as well as English courts is that 'all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective' and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospec tive only."
We further derive support from the judgment of the hon'ble Supreme Court in the case of Gem Granites v. CIT [2004] 271 ITR 322 (SC) holding that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation.
We also refer to the following judgments on this issue :
(i) R. Rajagopal Reddy v. Padmini Chandrasekharan [1995] 213 ITR 340 (SC) ; and
(ii) M. G. Pictures (Madras) Ltd. v. Asst. CIT [2003] 263 ITR 83 (Mad).
Thus, in our considered view, the provisions of section 292BB could not have been applied upon the facts of thiscase and thus this question can be answered in favour of the assessee.
14. Second question arising here for our consideration is that whether section 292BB cures defect in "issuance" of notice also. In this regard, it has been seen by us, from the perusal of the assessment records, that there is no evidence of issuance of the notice, as has been discussed by us in earlier part of this order also. Under these circumstances, a question arises that whether the Revenue can take recourse to the provisions of section 292BB to cure the defect in issuance of the jurisdictional notice. The answer to this question has already been given by the hon'ble Gujarat High Court in the case of CIT v. Panorama Builders (P.) Ltd. [2014] 45 taxmann.com 159 (Guj) in which it has been held that section 292BB is confined to "service" of notice only and does not apply to issuance of notice. The relevant portions of the observations of the hon'ble High Court are reproduced hereunder (page) :
"Therefore, we are of the considered opinion that section 292BB does not apply to issuance of notice, neither it cures the defect or enlarges statutory period where a mandatory notice under section 143(2) of the Act is required to be issued within limitation fixed under the Act. In absence of issuance of the notice under the proviso to section 143(2) of the Act within a period of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to block assessment period April 1, 1997, to July 25, 2002, on the basis of notice issued on July 6, 2006, under section 143(2), after about 20 months, was time barred and the entire proceedings in pursuance of such notice is null and void."
Further, the Mumbai Bench of the Income-tax Appellate Tribunal in the case of Chandra R. Gandhi v. ITO [2009] 120 TTJ (Mum) 786 has held that reassessment made under section 147, in the absence of service of notice under section 143 is invalid. It has been further held by the hon'ble Bench that the amendment to section 148 retrospectively by the Finance Act, 2006, does not come to the rescue of the Revenue where notice under section 143 has not been "issued" at all. It was further held by the hon'ble Bench that section 292BB is prospective and does not have retrospective operation.
Similar view has been expressed by the hon'ble Punjab and Haryana High Court in the case of CIT v. Cebon India Ltd. [2012] 347 ITR 583 (P&H) holding that mere giving of dispatch number, cannot be taken as an evidence of issuance of notice and the contention of the Revenue that where the notice has been duly dispatched to the assessee, the irregularity or defect in issuing notice was curable under section 292BB of the Act was rejected by the hon'ble High Court. It was further held by the hon'ble High Court that in the absence of notice being served, the Assessing Officer has no jurisdiction to make assessment and the absence of service of notice could not be held to be curable under section 292BB of the Act. Thus, viewed from this angle also the provisions of section 292BB could not have been applied on the facts of this case.
Further, reliance has been placed by learned counsel on the judgment of the co-ordinate Bench of Mumbai in thecase of Sanjay Brothers v. Asst. CIT (I. T. A. No. 947/Mumbai/2013 dated January 9, 2015). It is seen by us that a similar view has been taken in the said judgment and we derive further support therefrom.
15. Third question that arises for our consideration is whether the Assessing Officer could take recourse to the provisions of section 292BB to extend the statutory period within which notice could have been served upon the assessee. We find that on this aspect also judgments have been given by the courts, as may be noted in the caseof CIT v. Panorama Builders (P.) Ltd. [2014] 45 taxmann.com 159 (Guj), it was held by the hon'ble Gujarat High Court that section 292BB does not enlarge the statutory period where mandatory notice section 143(2) of the Act is required to be issued within the limitation fixed under the Act. Similarly, the hon'ble Delhi High Court in the case of Alpine Electronics Asia Pte. Ltd. v. DGIT [2012] 341 ITR 247 (Delhi) held that the Assessing Officer cannot rely upon section 292BB to claim that notice under section 143(2) is deemed to be served within stipulated time. Thus, we find that the argument of the learned Departmental representative that because of section 292BB, service of notice should be deemed notwithstanding the clear finding of the learned Commissioner of Income-tax (Appeals) that there was no evidence of service of notice, is contrary to law and facts and the same is rejected.
16. We hold that in this case the mandatory notice under section 143(2) has neither been issued nor served upon the assessee and, therefore, the Assessing Officer cannot assume jurisdiction to frame assessment of the return filed by the assessee on September 14, 2007, in response to the notice issued under section 148 dated August 29, 2007. Thus, the impugned assessment order is held to be illegal and the same is hereby quashed. The appeal of the assessee is allowed on the jurisdictional ground. Since the assessment has been annulled, other grounds, i.e., grounds Nos. 6, 7, 8 and 9 are not being adjudicated.
17. In the result, the appeal of the assessee is partly allowed.