ORDER
M.L. Gusia, AM
These three appeals of the assessee are directed against the order passed by Commissioner (Appeals) for assessment year 1989-90 on 4-10-1996, for assessment year 1990-91 on 28-12-2001 and for assessment year 1995-96 on 29-10-1998. For the sake of convenience, we first discuss the appeal for the assessment year 1989-90.
2. (ITA No. 6608/Del/1996 for assessment year 1989-90) :
During the course of hearing, the learned counsel for the assessee has not pressed various grounds of appeal taken in the appeal memo except ground Nos. 4 and 5. However, at the time of hearing, the learned counsel moved an application and requested to allow to take an additional ground of appeal, which is as under:
“Because in the absence of issuance/service’ of notice under section 143(2), the assessment as framed under section 144 of the Income Tax Act is a nullity in law and is liable to be quashed.”
3. The learned Departmental Representative objected the same on the plea that this ground was not taken before the Commissioner (Appeals). However, we felt that this is purely a legal issue, which can be taken at any stage. Hence, we allow to take the aforementioned additional ground of appeal.
4. The facts of the issue are that the assessee is being assessed to tax since the assessment year 1970-71. On Diwali of 1987, i.e., 23-10-1987, the firm was dissolved and the entire business was taken up by one of the erstwhile partners Smt. Kanchan Devi while other two partners, Shri Radhey Shyam Agarwal became manager of the proprietary concern of Smt. Kanchan Devi and another partner Shri Nand Kishore Agarwal became the cashier of the proprietary concern. The formal dissolution deed was executed on 15-1-1988. Smt. Kanchan Devi filed return of income of her proprietary concern for the accounting period for 17 months for the period 24-10-1987 to 31-3-1989. The return was filed on 25-10-1989, by Smt. Kanchan Devi in her individual capacity, for which regular assessment order was originally passed on 28-3-1990, under section 143(3) of the Income Tax Act, 1961. However, the Commissioner cancelled the said assessment order by passing the order under section 263 of the Income Tax Act on 30-3-1992, wherein the Commissioner did not accept the dissolution of the firm and the assessment order passed as proprietary concern of Smt. Kanchan Devi was treated as prejudicial to the interest of revenue. As no return of income in the case of the firm M/s Ram Kishore Nand Kishore was furnished, therefore, the assessing officer issued notice under section 148 of the Income Tax Act, 1961. However, no compliance of notice issued under section 148 was made. In the assessment order, it is mentioned as under :
“Since the assessee-firm has not filed any return of income nor any books of account have been produced the assessment is completed under section 144 on the basis of information/documents attached with the return of income filed by Smt. Kanchan Devi for the assessment year 1989-90 on 25-10-1989.”
5. The learned counsel for the assessee pleaded that from the above, it is apparent that the return of income filed by Smt. Kanchan Devi was treated as return filed in compliance to notice under section 148 of the Income Tax Act, 1961. Therefore, according to the learned counsel, once the return of income was treated to be filed in compliance to notice under section 148 of the Income Tax Act, 1961, it is mandatory to issue notice under section 143(2) of the Income Tax Act. However, no such notice was ever issued by the assessing officer and. the assessment order was passed ex parte under section 144 of the Income Tax Act, 1961.
6. So far as the inference drawn by the learned counsel that the assessing officer has treated the individual return of income of Smt. Kanchan Devi as return of assessee-firm is concerned, it is not correct, as the assessing officer has simply gathered the information from the return filed by Srnt. Kanchan Devi in her individual capacity and such gathering of information is permissible in the eye of law. However, we have to see whether an opportunity of being heard is necessary before passing the ex parte order.
7. The learned, counsel for the assessee pleaded that without issuing any notice under section 143(2), the assessment under section 144 cannot be made. The notice under section 143(2) is mandatory, being the machinery section. In support of his contention he has relied upon the decision of Tribunal, Chennai, in the case of Mrs. C. Malthy v. ITO (2004) 88 177) 37 (Chennai), wherein it is held that for framing in assessment order under section 143(3) or under section 144, notice under section 143(2) is compulsory and mandatory prerogative to be complied by ensuring that the notice is issued within twelve months from the end of the month in which the return is furnished.
8. After hearing the rival contentions, we noted that in the amended provisions in sub-section (1) of section 144 of the Income Tax Act, it is mentioned that
“……..the assessing officer, after taking into account all relevant material, which the assessing officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment ………”
9. From the above, it is seen that with effect from 1-4-1989, it is mandatory to give the assessee an opportunity of being heard. Before the above amendment, there was no provision for giving any opportunity to the assessee before passing ex parte assessment order under section 144. Prior to the above amendment, there were the words “shall make the assessment”. In this case, the assessment year under consideration is 1989-90, which starts from 1-4-1989. It is held by Hon’ble Madras High Court in the case of CIT v. Craigmore Plantation India Ltd. (2002) 173 CTR (Mad) 526 : (2002) 253 ITR 447 (Mad) that the law applicable to any assessment is the law that prevails on the 1st of April of the relevant assessment year. The assessing officer was statutorily bound to give an opportunity of being heard to the assessee, which could not be given to the assessee. Therefore, we hold that the impugned order passed under section 144 was illegal and bad in law. Hence, this additional ground of appeal is allowed.
10. Since we have allowed the additional ground and held that the order passed under section 144 is illegal and bad in law, therefore, we need not to adjudicate ground Nos. 4 and 5 taken in the appeal memo.
11. In the result, the appeal is treated as allowed.
12. ITA Nos. 58/Agr/2002 & 131/Agr/1999 for assessment years 1990-91 & 1995-96
These two appeals are taken up simultaneously. For both the years, the learned counsel for the assessee has taken up additional ground of appeal, which is allowed to be taken for the reasons mentioned in, the para No. 3 of this order. The additional ground 1 of appeal is as under:
“Because in absence of issuance/service of notice under section 143(2), the assessment as framed under section 143(3)/148 of the Income Tax Act is a nullity in law and is liable to be quashed.”
13. The facts of the issue in both the appeals are identical to ITA No. 6608/Del/1996 discussed in foregoing paras. The only difference in the facts of the issue is that in these two assessment years, the return of income was filed in compliance to notice under section 148 of the Income Tax Act, 1961. However, no notice under section 143(2) or no opportunity was provided before completion, of ex parte order. As the assessing officer again failed to give an opportunity of being heard before passing the ex parte order under section 144 of the Income Tax Act, 1961, and this, 1 issue has already been decided in favour of the assessee while dealing with the Appeal No. 6608/Del/1996 in foregoing paras, therefore, for the reasons mentioned therein, we hold that both the assessment orders are illegal and bad in law. Hence, this ground for both the assessment years is allowed. Since, welave held that the assessment orders are illegal and bad in law, we need not to discuss other grounds of appeals, filed with the appeal memos and the same are treated to be allowed.
14. In the result, all the three appeals of the assessee are allowed.