Whether Notice & Assessment order u/s 143(2) are void for non-application of mind by AO if that case is selected for scrutiny under CASS (Computer assisted Scrutiny Selection) ?

IN THE INCOME TAX APPELLATE TRIBUNAL

LUCKNOW BENCH “A”, LUCKNOW

ITA No.448/LKW/2012

Assessment year:2007-08

U.P. State Industrial Development Corporation Ltd. (UPSIDC)

(Appellant)

Versus.

Dy.C.I.T.-6,

Kanpur.

(Respondent)

Appellant by Shri S. K. Garg, Advocate

Respondent by Shri Manoj Kumar Gupta, CIT, D.R.

BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER

AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER

Date of hearing 11/07/2014

Date of pronouncement 05/09/2014

O R D E R

PER A. K. GARODIA, A.M.

This is an assessee’s appeal directed against the order passed by learned CIT(A)-I, Kanpur dated 27/03/2012 for the assessment year 2007-2008.

2. Ground No. 1 & 2 are inter connected, which read as under:

“1. BECAUSE the "CIT(A)" has erred in law and on facts in holding that "there is no legal requirement that before issuing notice under Clause (ii) of section 143(2), it was incumbent upon the Assessing Officer to form reason to believe" or to record such reasons in writing and in upholding the validity of notice issued under section143(2) and thereby that of the assessment order dated31,12.2009 (passed in pursuance of the said notice).

2. BECAUSE the view taken by the "CIT(A)" in the matter of issuance and service of notice under section 143(2), is based on misconception /non-appreciation of the provisions of law as came to be interpreted in large number of case laws and on a due consideration of correct position of law, it deserves to be held that notice under section 143(2) not being issued in accordance with the provisions of law, the assessment order dated 31.12.2009captioned as order under section 143(3) is wholly without jurisdiction.”

3. It was submitted by Learned A.R. of the assessee that in the present case, the case was selected for scrutiny as per computer selection and there was no application of mind by the Assessing Officer as required u/s 143(2)(i)of the Act and hence, the notice issued by the Assessing Officer u/s 143(2) is wholly without jurisdiction. In support of this contention, reliance was placed on the following judicial pronouncements:

(i) Commissioner of Income-tax Vs Rajeev Sharma [2011] 336ITR 678 (All)

(ii) Commissioner of Income-tax VsSunderlal (Late) [1974] 96ITR 310 (All)

(iii) Sirpur Paper Mill Ltd. Vs Commissioner of Wealth-tax [1970]77 ITR 6 (SC)

(iv) Income-tax Officer Vs Eastern Scales (Pvt.) Ltd. [1978] 115ITR 323 (Cal)

(v) Gordhandas Desai P. Ltd. Vs V.B. Kulkarni, ITO [1981] 129ITR 495 (Bom)

(vi) Gujarat Gas Co. Ltd. Vs Joint Commissioner of Income-tax(Assessment) [2000] 245 ITR 84 (Guj)

(vii) Orient Paper Mills Ltd. vs. Union of India [1969] AIR 48.

(viii) Union of India VsSheoShankerSitaram [1974] 95 ITR 523

(All)

4. As against this, Learned D.R. of the Revenue supported the orders of the authorities below.

5. We have considered the rival submissions. We do not find any force in this contention of Learned A.R. of the assessee that if the case is selected for scrutiny with the aid of computer then there is no application of mind by the Assessing Officer as required u/s 143(2)(i) of the Act. Now we examine the applicability of various judgments cited by Learned A.R. of the assessee.

5.1 The first judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Allahabad High Court rendered in the case of Rajeev Sharma (supra). In this case, the questions of law before Hon’ble High Courtare available in Para 13 of this judgment and the same are reproduced below for the sake of ready reference:

"(a) Whether notice under section 143(2) of the Act issued after the assessee proclaimed his original return 'as true and correct 'is not a valid notice just because it was not issued with reference to a pending return ?

(c) Whether on the facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified inholding that non-issuance of notice under section 143(2) of the Act has vitiated the assessment order and ignoring that issuance of such notice is a machinery provision and does not go to the root of the assessment, more so when the assesse was afforded and he availed of full opportunity ?

(d) Whether notice under section 143(2) of the Act is a machinery provision and as per the wording of section 148(1)'so far as may be' provisions of section 143(2) with reference to reassessment proceedings under section 148 need not be applied into but only to the extent possible?

(e) Whether the assessee has discharged his onus by furnishing the name, confirmation letter, copy of the NRE bank account and passport of the NRI donor even though the identity of thedonor could not be established what to talk about proving his creditworthiness and the genuineness of the transaction ?"

5.1.1 In this case, it was held that issuance of notice u/s 143(2) is mandatory and omission on the part of the Assessing Authority to issue notice u/s 143(2)cannot be a procedural irregularity and the same is not curable. In thepresent case, it is not the case of the assessee that the notice u/s 143(2) was not issued and served on the assessee. This judgment is not rendering any help to the assessee.

5.2 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Allahabad High Court rendered in the case of Sunderlal (Late) (supra). In this case, the dispute before Hon'ble Allahabad High Courtwas that as to whether CIT should give reasons for passing order of revision.

In that case, the facts were that the CIT had authorized for filing of appeal against the order of AAC for assessment year 1960-61 and thereafter, he initiated revision proceedings u/s 33B of Indian Income Tax Act, 1922 relying solely on the order of AAC. It was held in that case that having authorized to file the appeal against the order of AAC for the same assessment year, it cannot be accepted that the CIT was having reasons that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue because if that would have been the case, the CIT could not have authorized the Assessing Officer to file an appeal against the order of the AAC. Hence, it is noted in that case that the materials were on record to establish that the order of revision passed by CIT was without reasons whereas in the present case, the only objection is that since the selection for scrutiny was made by the Assessing Officer with the help of the computer and therefore, there is no application of mind. In fact in the present case, apart from applying his own mind, the Assessing Officer took the help of computer also and therefore, it cannot be said that in the present case, the case of the assessee was selected for scrutiny without application of mind. Therefore, this judgment is also not rendering any help to the assessee.

5.3 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Apex Court rendered in the case of Sirpur Paper Mill Ltd.(Supra). In that case, it was held that in exercise of power u/s 25 of the Act, the Commissioner must bring to bear an unbiased mind, consider impartially the objections raised by the aggrieved party and decide the dispute according to procedure consistent with the principles of natural justice. It was also held that the Commissioner cannot permit his judgment to be influenced by matters not disclosed to the assessee. In the present case, the facts are totally different. Nothing has been brought on record by the Learned A.R. of the assessee that any dispute was raised or could have been raised before the Assessing Officer justifying non selection of the assessee’s case for scrutiny and therefore, this judgment is not applicable.

5.4 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Calcutta High Court rendered in the case Eastern Scales(Pvt.) Ltd. (supra). In that case, the issue in dispute was the rectification order passed by the Assessing Officer u/s 154 of the Act according to the direction of the Addl. CIT and under these facts, it was held that the Income Tax Officer had to act judicially or quasi-judicially in the assessment proceedings and any direction by any higher authority as to the manner in which such proceedings are to be disposed of would be interference with the judicial or quasi-judicial functions of the Income Tax Officer. In the present case, it is not the case of the assessee that the Assessing Officer has acted in accordance with any such specific direction of the superior officer that the case of the assessee must be elected for scrutiny and therefore, this judgmentis also not applicable in the present case.

5.5 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Bombay High Court rendered in the case of Gordhan das Desai (supra). In this case, it was held that the Assessing Officer should passorder for rectification ignoring the decision of the Commissioner and the further letters of the CBDT and the Govt. of India which must not influence his determination. There is no quarrel on this aspect but in the present case,there is no such dispute that the decision of the Assessing Officer is on the direction of any other authority. This judgment is also not rendering any help to the assessee in the present case.

5.6 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Gujarat High Court rendered in the case of Gujarat Gas Co. Ltd. (supra). In this case, it was held that the proceedings before the Assessing Officer are judicial proceedings and therefore, all the incidents of such judicial proceedings have to be observed before the result is arrived at. In that case, the assessee asked to inspect the relevant records and documents before leading evidence in rebuttal which was denied and it was held that no such direction can be issued by Board u/s 139(1) which should interfere in the judicial function of the Assessing Officer. In the present case, this is not in dispute that any such direction was issued to Assessing Officer for selecting the case of the assessee for scrutiny. The decision of the Assessing Officer for selecting the case is his own decision although he took the help of computer in this regard. In our considered opinion, this judgments also not rendering any help to the assessee in the present case.

To read the full judgement, please find the attached file.

Attached File:

http://www.itatonline.in:8080/itat/upload/267295357432467404713$5%5E1REFNOITA_448_UPSIDC.pdf