The assessee has filed this appeal against the order of the Commissioner (Appeals) passed in Appeal No. 34/RKE/Commissioner (Appeals)-11/2003-04, dated 19-2-2004, on as many as six grounds, but mainly projecting the grievance that the assessment order passed by the assessing officer after issuing notice under section 148 of the Income Tax Act, is illegal because the notice under section 143(2) was issued beyond the period of limitation and secondly, that the authorised representative of the assessee were not within the jurisdiction to surrender the explained income of Rs. 3,00,000.
The relevant and material facts for the disposal of this ground of appeal are that the assessee had made an investment of Rs. 3,00,000 in FDRs, which were not shown in the balance sheet filed along with the original return of income. The assessing officer conducted enquiries in the case of the assessee and found that during the period relevant to assessment year 1995-96 the assessee had made investment of Rs. 3,00,000 in FDRs. The assessing officer issued notice dated 23-4-2001 to the assessee under section 148 to assess the escaped income in the form of unexplained investment into FDRs at Rs. 3,00,000. In response to that notice the assessee filed a return on 8-5-2001. Thereafter the assessing officer issued notices under sections 143(2), 142(i) on 16-9-2002. Before the assessing officer, during the assessment proceedings, the authorised representative of the assessee and his son, Shri Sanjay Verma, voluntarily surrendered this amount of Rs. 3,00,000 and so the assessing officer made an addition of Rs. 3,00,000.
Aggrieved with the order of the assessing officer, the assessee filed an appeal before the Commissioner (Appeals). The first objection of the assessee that the notice under section 143(2) issued by the assessing officer was barred by period of limitation was rejected by the CIT (Appeals) on the reasoning that this objection pertaining to the legality of proceedings was neither factually correct nor legally justified. Thereafter the Commissioner (Appeals) upheld the addition of Rs. 3,00,000 made by the assessing officer on the reasoning that this addition of Rs. 3,00,000 was made and agreed to by the assessee's counsel and son after proper application of mind and there was no evidence to indicate even a friction of cohesion exercised by the assessing officer.
Before me, the learned authorised representative for the assessee, submitted that in the instant case of the assessee his appeal may be disposed of while passing an order on the legal issue as to whether notice under section 143(2) is served upon the assessee after the expiry of-% 12 months from the end of the month in which the return is filed. The proceedings conducted or the order passed in pursuance of such notice is null and void. He further contended that in the instant case in response to notice under section 148 he filed the return of his income on 8-5-2001. On 16-9-2002 the notice under sections 143(2), 142(1) was issued against the assessee. Since this notice under section 143(2) is issued by the assessing officer after the statutory period of limitation of 12 months so the notice issued under section 143(2) is invalid and hence, the assessment framed in pursuance of this notice by the assessing officer is also invalid and the same is required to be quashed. In support of his contention he has relied upon the decision in the case of Whirlpool India Holdings Ltd. v. Dy. DIT, International Taxation, Circle: 2(2), New Delhi in I.T.A. No. 330 (Delhi) of 2004 (decided on 21-7-2004) for assessment year 2000-01; and of the Hon'ble Kerala High Court in the case of P. Abdulkadar Hamza v. CIT (2000) 246 ITR 14 (Ker).
On the other hand, the learned departmental Representative for the revenue, submitted that in the instant case the impugned addition of Rs. 3,00,000 was made by the assessing officer because the authorised representative of the assessee and his son agreed to surrender this amount before the assessing officer voluntarily and as the assessee has surrendered this amount voluntarily so he is not competent to challenge this addition in appeal and as the appeal filed by the assessee is incompetent so the appeal filed by the assessee is liable to be dismissed. He further contended that before the appellate authority now the assessee is precluded from challenging the validity of the assessment order on the reasoning that the notice under section 143(2) was not served upon the assessee within a statutory period of limitation of 12 months. Thus, according to him, the appeal filed by the assessee is liable to be dismissed on this very ground alone. In support of his contention, he has relied upon the decision of jurisdictional High Court of Allahabad in the case of Gauri Sahai Ghisa Ram v. CIT(1979) 120 ITR 338 (All). In this case their Lordships at page 339 held as under : "The contention for the revenue that no appeal lay to the Appellate Assistant Commissioner against the Income Tax Officer's assessment order because it was based on the concession made by the assessee's counsel could not be accepted. No such objection was taken before the Appellate Assistant Commissioner or the Tribunal. Further, the assessee was an aggrieved person because the assessment was framed by the Income Tax Officer on a concession wrongly made on a question of law.
Moreover, no reference had been made to the High Court on this point." In the case of Sterling Machine Tools v. CIT(1980) 123 ITR 181 (All.) their I ordships at page 182 held as under : "(ii) That the letter of S, a partner of the assessee-firm, being a voluntary one and the assessee having agreed to the cost of the machine being worked out on the basis of the experts'report, the Income Tax Officer was justified in working out the profit on the sales of these machines by deducting the cost price as worked out by the experts from the sale price. The Tribunal was right in holding that no appeal lay to the Appellate Assistant Commissioner under section 246(c)." In the case of Rameshchandra & Co. v. CIT(1987) 168 ITR 375 (Bom.) their Lordships observed as under : "Where an assessee has made a statement of facts, he can have no grievance if the taxing authority taxes him in accordance with that statement. If he can have no grievance, he can file no appeal.
therefore, it is imperative, if the assessee's case is that his statement has been wrongly recorded or that he made it under a mistaken belief of fact or law, that he should make an application for rectification to the authority which passed the order based upon that statement. Until rectification is made, an appeal is not competent." I have considered the rival submissions of both the parties, perused the records and carefully gone through the orders of the tax authorities below. It is not disputed that in the instant case the assessee has filed the return of income on 8-5-2001 in response to notice under section 148 of the Income Tax Act dated 23-4-2001, it is also not disputed that the notice under section 143(2) was issued on 16-9-2002. It means that this notice under section 143(2) has been issued by the assessing officer after the expiry of statutory period of limitation of 12 months. Since this notice has been issued by the assessing officer in violation of the statutory provision of section 143(2), the same is liable to be cancelled/ quashed and the assessment framed in pursuance thereof is also liable to be quashed along with the demand raised therein. In my above view I find support from the decision of the Special Bench of the Tribunal in the case of Raj Kumar Chawla v. Income Tax Officer (2005) 94 ITD I (Delhi) wherein the Tribunal held as under:- "4. Similar issue came up for consideration before the ITAT, Delhi Bench in the case of Whirlpool India Holdings Ltd., New Delhi v. Dy.
DIT, International Taxation, Circle : 2(2), New Delhi, reported in (2005) 26 IT Rep. 214 (ITAT - Delhi) (NOC) wherein the Tribunal decided this issue in favour of the assessee and against the revenue by holding that after amendment of section 143(2) the notice was required to be served within 12 months from the end of the month of the filing of the return and not only issued. The Tribunal quashed the assessment as well as the demand raised along with the levy of interest. Respectfully following these decisions it is held that the notice under section 143(2) has not been served upon the assessee within a period limitation as provided under section 143(2) and so the instant assessment framed by the assessing officer is quashed and the demand raised therein also stands quashed." The case of Gauri Sahai Ghisa Ram (supra) decided by the Hon'ble Allahabad High Court is in fact against the revenue and not in favour of the revenue because in that case their Lordships have negatived the contention of the revenue by observing that no appeal lay to the Appellate Assistant Commissioner against the Income Tax Officer's assessment order because it was based on the concession made by the assessee's counsel could not be accepted. They have also observed in this very order that the assessee was an aggrieved person because the assessment was framed by the Income Tax Officer on a concession wrongly made on a question of law and so the assessee's appeal before the Appellate Assistant Commissioner was competent. In the instant case of the assessee also he has challenged the surrender made by the authorised representative of the assessee before the assessing officer contending that the same was not voluntary and was against the evidence placed on record before the assessing authority. The other two citations are distinguish able on facts because in the instant case of the assessee since the assessing authority had failed to serve the notice under section 143(2) upon the assessee within the statutory period provided under section 143(2), hence the assessing officer had lost its jurisdiction to make assessment under section 143(3) read with section 147 which means that in this case the assessee has challenged even the assumption of jurisdiction by the assessing officer in framing the assessment under section 143(3) read with section 147 and so the surrender obtained by the assessing officer from the assessee during invalid assessment proceedings also becomes improper and invalid. In these circumstances, the assessee's appeal cannot be thrown out merely because he agreed for a surrender before the assessing officer during the course of assessment proceedings which is already held to be invalid and liable to be quashed.
Similar issue also came up for consideration before the Hon'ble Bombay High Court in the case of CIT v. Ramsukh Motilal (1955) 27 ITR 54 (Bom) wherein their Lordships held as under : "If a notice under section 34 of the Indian Income Tax Act, 1922, embodies any of the requirements under section 22(2) it must at the same time permit the assessee to comply with that requirement within a period which is not less than 30 days. if therefore a notice under section 34 gave only six days to the assessee to make a return under that section, the notice is clearly illegal and such illegality cannot be waived by the assessee.
Whereas it will be perfectly true to say that section 22(2) is a procedural section and the failure to give notice or a defect in a notice is a procedural defect, in the case of section 34 it is not a procedural defect but is a failure to comply with a condition precedent to the assumption of jurisdiction." The ratio of this decision is that if while issuing a notice there is a failure to comply with the condition precedent to the assumption of jurisdiction the notice is clearly illegal and such illegality cannot be waived by the assessee. Hence, respectfully following the ratio laid down in this decision (supra) by the Hon'ble Bombay High Court as the notice issued under section 143(2) by the assessing officer is invalid so assumption of jurisdiction by the assessing officer in completing the assessment under section 143(3) read with section 147 is also improver and so the assessee cannot be debarred from raising this legal issue before the Tribunal merely because a particular amount was surrendered by the representative of the assessee before the assessing officer and the same is also under challenge before the Tribunal.
Hence, I find no force in the contention of the learned Departmental Representative for the revenue and accordingly the same is rejected.
For the reasons stated above, the order of the CIT (Appeals) in sustaining the impugned addition is set aside.