Delhi High Court
Shaily Juneja vs Assistant Commissioner Of Income Tax … on 27 August, 2024
Author: Yashwant Varma
Bench: Yashwant Varma
$~40 & 41
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 27.08.2024
+ W.P.(C) 10298/2022
SHAILY JUNEJA .....Petitioner
Through: Mr. Sandeep Goel, Adv.
versus
ASSISTANT COMMISSIONER OF INCOME
TAX CIRCLE 34 -1 AND ANR. .....Respondents
Through: Mr. Vipul Agrawal, SSC with
Mr. Gibran Naushad and Ms.
Sakshi Shairwal, JSCs.
+ W.P.(C) 9705/2023
PRIMARY REAL ESTATE INVESTMENTS .....Petitioner
Through: Mr. Prakash Kumar, Adv.
versus
DEPUTY COMMISSIONER OF INCOME TAX,
CIRCLE, INTERNATIONAL TAX 2(2)(2),
DELHI & ANR. .....Respondents
Through: Mr. Vipul Agrawal, SSC with
Mr. Gibran Naushad and Ms.
Sakshi Shairwal, JSCs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
YASHWANT VARMA, J. (Oral)
1. These two writ petitions impugn the reassessment action as
initiated by the respondents in terms of the notices dated 27 March
2022 and 26 July 2022 under Section 147/148 of the Income Tax Act,
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19611.
2. The writ petitioners also assail the final and draft orders of
assessment drawn pursuant thereto. The principal ground of challenge
to the reassessment action was based upon a conceded failure on the
part of the respondents to comply with the requirements of Section
143(2) of the Act. It was thus contended that a failure to issue a notice
referable to that provision would be fatal and render the entire
proceedings invalid.
3. While considering these two writ petitions, we had in W.P.(C)
10298/2022 taken note of a contention addressed on behalf of the
respondents who had sought to canvass the contention that the
challenge would not sustain bearing in mind the decision rendered by
the Court in Ashok Chaddha vs. Income-tax Officer2.
4. It becomes pertinent to note that Ashok Chaddha was
principally concerned with the issue of whether a Section 143 notice
and the procedure prescribed therein was liable to be followed while
undertaking an assessment under Section 153A. While dealing with
the aforesaid, the Court had come to hold as follows:-
“11. It is also to be noted that section 153A provides for the
procedure for assessment in case of search or requisition. Sub-
section (1) starts with a non obstante clause stating that it was
“notwithstanding” anything contained in sections 147, 148 and 149,
etc. Clause (a) thereof provides for issuance of notice to the person
searched under section 132 or where documents, etc., are
requisitioned under section 132A, to furnish a return of income. This
clause nowhere prescribes for issuance of notice under section
143(2). Learned counsel for the assessee/appellant sought to contend
that the words, “so far as may be applicable” made it mandatory for1
Act
2
2011 SCC Online Del 3108
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issuance of notice under section 143(2) since the return filed in
response to a notice under section 153A was to be treated as one
under section 139. Learned counsel relies upon R. Dalmia v. CIT
(1999) 236 ITR 480 (SC) wherein the question of issue of notice
under section 143(2) was examined with reference to section 148 by
the Supreme Court in the context of section 147. The apex court held
as under (page 488):
“As to the argument based upon sections 144A, 246 and 263,
we do not doubt that assessments under section 143 and
assessments and reassessments under section 147 are different,
but in making assessment and reassessments under section 147
the procedure laid down in sections subsequent to section 139,
including that laid down by section 144B, has to be followed.”
12. The case of R. Dalmia v. CIT (1999) 236 ITR 480 (SC)
primarily was with regard to the applicability of section 144B and
section 153 (since omitted with effect from April 1, 1989) to the
assessment made under sections 147 and 148 and thus cannot be said
to be the decision laying down the law regarding the mandatory
issue of notice under section 143(2).
13. The words “so far as may be” in clause (a) of sub-section (1) of
section 153A could not be interpreted that the issue of notice under
section 143(2) was mandatory in case of assessment under section
153A. The use of the words “so far as may be” cannot be stretched to
the extent of mandatory issue of notice under section 143(2). As is
noted, a specific notice was required to be issued under clause (a) of
sub-section (1) of section 153A calling upon the persons searched or
requisitioned to file return. That being so, no further notice under
section 143(2) could be contemplated for assessment under section
153A.
14. No specific notice was required under section 143(2) of the Act
when the notice in the present case as required under section
153A(1)(a) of the Act was already given. In addition, the two
questionnaires issued to the assessee were sufficient so as to give
notice to the assessee, asking him to attend the office of the
Assessing Officer in person or through a representative duly
authorized in writing or produce or cause to be produced at the given
time any documents, accounts, and any other evidence on which he
may rely in support of the return filed by him.”
5. Mr. Vipul Agrawal, learned counsel appearing for the
respondents, had submitted that bearing in mind the similarity in the
language of the two provisions, the decision in Ashok Chaddha is
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clearly an authority for the proposition that a failure to issue a notice
under Section 143(2) would not render the proceedings a nullity. It
was Mr. Agrawal‟s submission that the decision in Ashok Chaddha
clearly appears to have escaped the attention of the various subsequent
decisions handed down by this Court in the context of Section 143(2)
and its mandatory application to proceedings pertaining to
reassessment.
6. We find ourselves unable to sustain that contention for the
following reasons.
7. It must at the outset be borne in mind that Ashok Chaddha was
principally concerned with an assessment which was predicated upon
a search and thus the same being regulated by Section 153A of the
Act. It was in the aforesaid context that the Court noted that the
Assessing Officer3 while undertaking a search assessment was
obliged to comply with the assessment procedure otherwise codified
only and insofar as they may be applicable. It was in the aforesaid
backdrop that the Court in Ashok Chaddha came to the conclusion that
it would not be mandatory to issue a notice under Section 143(2)
while undertaking a search assessment.
8. Quite apart from the aforesaid distinguishing feature, we note
that even prior to the judgment rendered by the Court in Ashok
Chaddha, the mandatory imperatives of Section 143(2) and its
applicability to reassessment action was one which had been duly
considered by this Court in a host of judgments and those consistently
taking the position that Section 143(2) was to be mandatorily
3
AO
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complied with.
9. In order to avoid a replication of the consistent view taken by
the Court in this respect, we deem it apposite to extract the following
passage from a recent decision rendered by the Division Bench in Pr.
Commissioner of Income Tax-Central-1 vs. Grant Express
developers Pvt Ltd4:-
“20. The argument advanced on behalf of the appellant/revenue that
the absence of notice under Section 143(2) would not render the
assessment order under Section 143(3) defective does not impress us
as the import of Section 292BB is to remedy infirmities that arise in
the service of notice under the Act. However, this is a case, where no
notice under Section 143(2) was issued, as noted by the CIT(A) and
affirmed by the Tribunal; which is different from saying that a notice
was issued which was deficient. This issue is no longer res integra,
as is demonstratable by the decision of the Supreme Court in
Commissioner of Income-tax v. Laxman Das Khandelwal, (2019)
108 taxmann.com 183 (SC). For convenience, the relevant reasoning
made in this behalf is set forth hereafter:
“7. A closer look at Section 292BB shows that if the assessee
has participated in the proceedings it shall be deemed that any
notice which is required to be served upon was duly served and
the assessee would be precluded from taking any objections
that the notice was (a) not served upon him; or (b) not served
upon him in time; or (c) served upon him in an improper
manner. According to Mr. Mahabir Singh, learned Senior
Advocate, since the Respondent had participated in the
proceedings, the provisions of Section 292BB would be a
complete answer. On the other hand, Mr. Ankit Vijaywargia,
learned Advocate, appearing for the Respondent submitted that
the notice under Section 143(2) of the Act was never issued
which was evident from the orders passed on record as well as
the stand taken by the Appellant in the memo of appeal. It was
further submitted that issuance of notice under Section 143(2)
of the Act being prerequisite, in the absence of such notice, the
entire proceedings would be invalid.
8. The law on the point as regards applicability of the
requirement of notice under Section 143(2) of the Act is quite
clear from the decision in Hotel Blue Moon’s case (supra). The4
2023 SCC Online Del 7316
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issue that however needs to be considered is the impact of
Section 292BB of the Act.
9. According to Section 292BB of the Act, if the assessee
had participated in the proceedings, by way of legal fiction,
notice would be deemed to be valid even if there be
infractions as detailed in said Section. The scope of the
provision is to make service of notice having certain
infirmities to be proper and valid if there was requisite
participation on part of the assessee. It is, however, to be
noted that the Section does not save complete absence of
notice. For Section 292BB to apply, the notice must have
emanated from the department. It is only the infirmities in
the manner of service of notice that the Section seeks to
cure. The Section is not intended to cure complete absence
of notice itself.
10. Since the facts on record are clear that no notice under
Section 143(2) of the Act was ever issued by the
Department, the findings rendered. by the High Court and
the Tribunal and the conclusion arrived at were correct.
We, therefore, see no reason to take a different view in the
matter.
11. These Appeals are, therefore, dismissed. No costs.””
10. The aforesaid view came to be reiterated by the Court in
Principal Commissioner of Income-Tax vs. Dart Infrabuild Pvt
Ltd5, as would be evident from the following observations which
appear in that decision:-
“15.2 The absence of notice, under section 143(2), impregnates the
proceedings with a jurisdictional defect and, hence, renders it invalid
in the eyes of the law. This position is no longer res integra, as
demonstrated by the observations made in Principal CIT v. Shri Jai
Shiv Shankar Traders Pot. Ltd.1 (page 452 of 383 ITR):
“12. The narration of facts as noted above by the court makes it
clear that no notice under section 143(2) of the Act was issued
to the assessee after December 16, 2010, the date on which the
assessee informed the Assessing Officer that the return
originally filed should be treated as the return filed pursuant to
the notice under section 148 of the Act.
13. In DIT v. Society for Worldwide Inter Bank Financial, Tele-
5
2023 SCC OnLine Del 7382
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communications’, this court invalidated a reassessment
proceeding after noting that the notice under section 143(2) of
the Act was not issued to the assessee pursuant to the filing of
the return. In other words, it was held mandatory to serve the
notice under section 143(2) of the Act only after the return filed
by the assessee is actually scrutinised by the Assessing Officer.
14. The interplay of sections 143(2) and 148 of the Act formed
the subject matter of at least two decisions of the Allahabad
High Court in CIT v. Rajeev Sharma2 it was held that a plain
reading of section 148 of the Act reveals that within the
statutory period specified therein, it shall be incumbent to send a
notice under section 143(2) of the Act. It was observed (page
687):
„The provisions contained in sub-section (2) of section 143
of the Act is mandatory and the Legislature in its wisdom
by using the word “reason to believe” had cast a duty on
the Assessing Officer to apply mind to the material on
record and after being satisfied with regard to escaped
liability, shall serve notice specifying particulars of such
claim.
In view of the above, after receipt of return in response to
notice under section 148, it shall be mandatory for the
Assessing Officer to serve a 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 the
assessee in response to notice under section 148, the entire
procedure adopted for escaped assessment, shall not be
valid.’
15. In a subsequent judgment in CIT v. Salarpur Cold Storage
(P.) Ltd.3, it was held as under:
„10. Section 292BB of the Act was inserted by the Finance
Act, 2008 with effect from April 1, 2008. Section 292BB
of the Act provides a deeming fiction. The deeming fiction
is to the effect that once the assessee has appeared in any
proceeding or co-operated in any enquiry relating to an
assessment or reassessment, it shall be deemed that any
notice under the provisions of the Act, which is required to
be served on the assessee, has been duly served upon him
in time in accordance with the provisions of the Act. The
assessee is precluded from taking any objection in any
proceeding or enquiry that the notice was (i) not served
upon him; or (ii) not served upon him in time; or (iii)
served upon him in an improper manner. In other words,
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once the deeming fiction comes into operation, the
assessee is precluded from raising a challenge about the
service of a notice, service within time or service in an
improper manner. The proviso to section 292BB of the
Act, however, carves out an exception to the effect that the
section shall not apply where the assessee has raised an
objection before the completion of the assessment or
reassessment. Section 292BB of the Act cannot obviate
the requirement or complying with a jurisdictional
condition. For the Assessing Officer to make an order of
assessment under section 143(3) of the Act, it is necessary
to issue a notice under section 143(2) of the Act and in the
absence of a notice under section 143(2) of the Act, the
assumption of jurisdiction itself would be invalid.’
16. In the same decision in Salarpur Cold Storage (P.) Ltd.
(supra), the Allahabad High Court noticed that the decision of
the Supreme Court in Asst. CIT v. Hotel Blue Moon’ where in
relation to block assessment, the Supreme Court held that the
requirement to issue notice under section 143(2) was mandatory.
It was not ‘a procedural irregularity and the same is not curable
and, therefore, the requirement of notice under section 143(2)
cannot be dispensed with’.
17. The Madras High Court held likewise in Sapthagiri Finance
and Investments v. ITO2. The facts of that case were that a notice
under section 148 of the Act was issued to the assessee seeking
to reopen the assessment for the assessment year 2000-01.
However, the assessee did not file a return and therefore a notice
was issued to it under section 142(1) of the Act. Pursuant
thereto, the assessee appeared before the Assessing Officer and
stated that the original return filed should be treated as a return
filed in response to the notice under section 148 of the Act. The
High Court observed that if thereafter, the Assessing Officer
found that there were problems with the return which required
explanation by the assessee then the Assessing Officer ought to
have followed up with a notice under section 143(2) of the Act.
It was observed that:
„Merely because the matter was discussed with the
assessee and the signature is affixed it does not mean the
rest of the procedure of notice under section 143(2) of the
Act was complied with or that on placing the objection the
assessee had waived the notice for further processing of
the reassessment proceedings. The fact that on the notice
issued under section 143(2) of the Act, the assessee had
placed its objection and reiterated its earlier return filed as
one filed in response to the notice issued under section 148
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of the Act and the Officer had also noted that the same
would be considered for completing of assessment, would
show that the Assessing Officer has the duty of issuing the
notice under section 143(3) to lead on to the passing of the
assessment. In the circumstances, with no notice issued
under section 143(3) and there being no waiver, there is no
justifiable ground to accept the view of the Tribunal that
there was a waiver of right of notice to be issued under
section 143(2) of the Act‟
18. As already noticed, the decision of this court in CIT v. Vision
Inc.1 proceeded on a different set of facts. In that case, there was
a clear finding of the court that service of the notice had been
effected on the assessee under section 143(2) of the Act. As
already further noticed, the legal position regarding section
292BB has already been made explicit in the aforementioned
decisions of the Allahabad High Court. That provision would
apply in so far as failure of ‘service‟ of notice was concerned
and not with regard to failure to „issue‟ notice.
In other words, the failure of the Assessing Officer, in
reassessment proceedings, to issue notice under section 143(2)
of the Act, prior to finalising the reassessment order, cannot be
condoned by referring to section 292BB of the Act.
19. The resultant position is that as far as the present case is
concerned the failure by the Assessing Officer to issue a notice
to the assessee under section 143(2) of the Act subsequent to
December 26, 2010 when the assessee made a statement before
the Assessing Officer to the effect that the original return filed
should be treated as a return pursuant to a notice under section
148 of the Act, is fatal to the order of reassessment.” (emphasis
is ours)”
11. It is also pertinent to note that the decision in Ashok Chaddha
was also pressed into aid by the Revenue in Commissioner of
Income-Tax vs. Delhi Kalyan Samiti6. This becomes evident from a
reading of Para 4.8 of that decision and where the submissions of the
respondents therein came to be recorded as follows:-
“4.8 Mr. Dileep Shivpuri, learned Senior Standing counsel submitted
that since the Assessee had failed to file its returns for the relevant
AYs within the time prescribed in the notices issued under Section
148 of the Act, the said returns were invalid and were rightly ignored6
ITA 696/2015
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by the AO. He submitted that in the circumstances no notice under
Section 143(2) of the Act was required to be issued to the Assessee.
He further submitted that the present assessments were framed under
Section 144(1)(b) of the Act – on account of failure on the part of an
Assessee to comply with all terms of a notice issued under Section
142(1) of the Act or failure to comply with directions issued under
Section 142(A) of the Act – and issuance of notice under Section
143(2) of the Act is not a necessary precondition for the same. He
contended that the position would be no different even if the returns
were filed in the regular course. Mr Dileep Shivpuri relied on the
decision of this Court in Ashok Chaddha v. ITO: (2011) 337 ITR
399 (Delhi) in support of its contention that no notice under Section
143(2) was required to be issued.”
12. Having noticed the aforesaid contention, the Division Bench
proceeded to hold as under:-
“9. It is now well established that if the AO does not accept the
return filed by the Assessee on its face and he is required to issue a
notice under Section 143(2) of the Act and provide an opportunity to
the Assessee to produce the necessary material in support of his
return. Mr Shivpuri had argued that a notice under Section 143(2)
was required to be issued only in cases where the AO considers it
necessary or expedient to do so and in cases where the Assessee had
not filed its response to the notice under Section 142(1) it was not
necessary for the AO to issue such notice under Section 143(2). In
our view, this contention is bereft of any merits and completely
ignores the scheme of the machinery provisions for assessment
under the Act. It is now well settled by a number of decisions (See:
Pr. CIT v. Silver Line and Anr.: 283 CTR 148 (Del), ACIT v. Hotel
Blue Moon: 321 ITR 362 (SC) and CIT v. Pawan Gupta: 318 ITR
322 (Del)) that whenever the return filed by an Assessee is not
accepted at its face, it is mandatory for the AO has to issue a notice
under Section 143(2) of the Act for proceeding further. It is thus not
open for the AO to not issue a notice under Section 143(2) of the Act
and proceed directly under Section 144 of the Act by rejecting the
return filed by the Assessee.
10. The decision of this Court in Ashok Chaddha (supra) was
rendered in the context of Section 153A of the Act and in our view,
the same is not applicable in the present case. This Court in several
cases pertaining to proceedings under Section 147 has held that a
notice under Section 143(2) is mandatory. [See: Alpine Electronics
Asia (P.) Ltd. v. DGIT: 341 ITR 247 (Del), DIT v. Society for
Worldwide Interbank Financial Telecommunication: 323 ITR 249
(Del), Pr. CIT v Shri Jai Shiv Shankar Traders Pvt. Ltd.: 282 CTR
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435 (Del) and CIT v. Rajeev Verma: 336 ITR (All)]. It is also
relevant to note that clause (b) of the proviso to Section 148(1) of the
Act also specifically extends the period for issuance of notice under
Section 143(2) of the Act.”
13. Consequently, and in light of the above, we find ourselves
unable to sustain the submissions addressed by Mr. Agrawal. In the
facts of our case, the failure to comply with Section 143(2) was
conceded. The reassessment action would thus be liable to be quashed
on this short ground alone.
14. We consequently allow the instant writ petitions and quash the
impugned notices under Section 147/148 dated 30.03.2021 and
30.05.2022 as well as the orders of assessment dated 27.03.2022 and
26.07.2022.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
AUGUST 27, 2024/RW
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