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Sandip Kumar Keshari Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) Kolkata addressed the appeal of Sandip Kumar Keshari against the order of the National Faceless Appeal Centre concerning Assessment Year 2017-18. The central issue raised by the assessee was the legality of the assessment order passed under Section 147 read with Section 144B of the Income Tax Act, arguing it was unlawful due to the Assessing Officer’s (AO) failure to issue a notice under Section 143(2). The case originated from the assesses non-filing of income tax returns, leading to the initiation of proceedings under Section 147 with a notice under Section 148 served on March 24, 2021. Despite subsequent notices under Section 142(1) and a late return filed by the assessee on March 1, 2022, the AO proceeded to make additions for unexplained money under Section 69A and other income, ultimately assessing a total income of 2,93,80,846/-. The Commissioner of Income Tax (Appeals) [CIT(A)] had earlier dismissed the assesses appeal due to a lack of submission of supporting documents.
During the ITAT hearing, the assesses counsel argued that since the return filed on March 1, 2022, was accepted by the AO for computation purposes, the non-issuance of a notice under Section 143(2) was a critical procedural flaw rendering the assessment void. The counsel also highlighted the Supreme Court’s order extending the limitation period due to the Covid-19 pandemic, making the late filing valid. The Departmental Representative (DR) contended that the return filed beyond the initial 30-day notice period was invalid, negating the requirement for a Section 143(2) notice. However, the ITAT, after considering the arguments and the fact that the AO had indeed used the late-filed return for assessment calculations, sided with the assessee. The Tribunal noted the Supreme Court’s extension of limitation, making the assesses return timely. Crucially, the ITAT observed the DR’s admission that no notice under Section 143(2) was issued. Citing the Calcutta High Court’s decision in PCIT Vs Oberoi Hotels (Pvt) Ltd., which held that an assessment without a Section 143(2) notice is unsustainable, the ITAT quashed the assessment order as being without jurisdiction. Consequently, the assesses appeal was allowed on this legal ground, leaving other grounds unaddressed for potential future adjudication.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 30.11.2023 for the AY 2017-18.
2. At the time of hearing, the ld. Counsel for the assessee pressed the issue raised in ground no.6, which is extracted as under:-
“6. For that, the Assessment Order u/s 147 read with section 144B is unlawful having been passed without the issue of Notice u/s 143(2) of the Act;”
3. The facts in brief are that the assessee did not file any return of income for the instant assessment year. The proceeding u/s 147 of the Act were initiated by issuing notice u/s 148 of the Act, which were duly served upon the assessee on 24.03.2021. The case of the assessee was reopened on the basis of information received on financial transactions/ activities relating to the assessee. According to the ld. AO, the assessee did not file any return of income in response to Section 148 of the Act. Subsequently, the notice u/s 142(1) of the Act, along with questionnaire was issued on 07.10.2021, fixing the date of hearing on 22.10.2021. When there was no compliance, another notice u/s 142(1) of the Act was issued fixing the date of hearing on 17.01.2022 and again there was no compliance. Finally, the case was adjourned to 14.02.2022, which again remained uncompiled with. The ld. AO finally added the sum of ₹2,89,97,000/-as unexplained money u/s 69A of the Act as the source of investment was not explained, which was deposited in the bank account besides making one more addition of ₹1,196. However, in the assessment order, the ld. AO noted that the assessee income as per return filed u/s 148 of the Act was ₹3,92,650/-, thereby assessing the total income of ₹2,93,80,846/- in the assessment framed u/s 147 read with section 144B of the Act dated 27.03.2022.
4. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee when the assessee failed to file any written submission/ documents in support of the grounds of appeal.
5. The ld. AR vehemently argued that the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 24.03.2021, directing the assessee to file the return of income within 30 days, which expired on 23.04.2021. The ld. AR submitted that this was a Covid Period and in view of the order of the Hon’ble Supreme Court in the case of Miscellaneous Application No.665 of 2021 in SMW(c) No. 3 of 2020, the period of limitation for filing the return of income stood extended. However, the assessee filed the return of income on 01.03.2022, which was never declared invalid by the ld. AO and in fact , while computing the income in the assessment order page no.6, the income was taken as per return filed u/s 148 of the Act of ₹3,92,650/- and thereafter, the addition was made and total income was assessed at ₹2,93,90,846/-. Therefore, the ld. AO has grossly erred in not issuing notice u/s 143(2) of the Act and framing the assessment u/s 147 read with section 144B of the Act vide order dated 27.03.2022, which is invalid and void ab initio. The ld. AR therefore prayed that the ground no.6 of the grounds of appeal may kindly be allowed by quashing the assessment framed by the ld. Assessing Officer.
6. The ld. DR, on the other hand, submitted that assessee has not filed any return of income within 30 days from the issuance of notice u/s 148 of the Act on 23.04.2021. The ld. DR further submitted that even the due date of filing the return was not extended by the ld. AO and therefore, any return filed beyond the period of 30 days from the issue of notice is invalid and so righty not considered by the ld. Assessing Officer. The ld. DR stated that once the assessee has not filed any return of income in response to notice u/s 148 of the Act then it is not necessary under the Act to issue notice u/s 143(2) of the Act. The ld. DR therefore prayed that the appeal of the assessee may kindly be dismissed on this ground.
7. After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 24.03.2021, directing the assessee to file the return within 30 days which expired on 23.04.2021. The assessee has filed the return of income on 01.03.2022, which has not been treated as invalid by the ld. AO. Further while framing the assessment, in the computation portion on page no.6, the income, while assessing the income as per return filed u/s 148 of the Act, was taken at ₹3,92,650/- and after making an addition of ₹2,89,97,000/- qua cash deposited in the current account and ₹1,196/- in respect of income appearing in firm 26AS, which was estimated by the ld. AO at the rate of 10% and added to the return of income of the assessee thereby assessing the total income at ₹2,93,90,846/-. We also note that the Hon’ble Supreme Court has extended all the limitation under the Income Tax Act and also under the other Acts in case of Miscellaneous Application No. 665 of 2021 in SMW(C) No. 3 of 2020, which excluded the period till 31st May, 2022, from the period of limitation. Therefore, the arguments of the ld. DR that return was filed on 01.03.2022, is devoid of any merit as the assessee has filed the return even during the period which was order to be excluded from the limitation period. Therefore, in our opinion, the issuance of notice u/s 143(2) of the Act was mandatory for the ld. AO to assume jurisdiction under the Act and framed the assessment accordingly. It was also pertinent to state that the ld. DR admitted during the course of hearing that no notice u/s 143(2) of the Act was issued by the ld. AO. Under these circumstances, we are inclined to quash the order of the ld. Assessing Officer as without jurisdiction. The case of the assessee is squarely covered by the decision of the Hon’ble Calcutta High Court in the case of Principal Commissioner of Income Tax Vs Oberoi Hotels (Pvt) Ltd. (2018) 96 taxmann.com 104(Cal) wherein it has been held that assessment framed without issuing notice u/s 143(2) was legally unstainable and same could not be justified by invoking the provisions of section 2912BB of the Act. The appeal of the assessee is accordingly allowed on legal issue.
8. Since, we have allowed the appeal of the assessee on legal and technical ground, the other grounds raised by the assessee on merit are not being adjudicated at this stage and being left open to be adjudicated at the later stage if need arises for the same.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11.03.2025.
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