# U.P. State Industrial Development Corporation Ltd. (UPSIDC) v. Commissioner of Income Tax-II, Kanpur

- **Citation:** (2016) 7 ILRA 266
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-07-11
- **Bench:** Sudhir Agarwal, Kaushal Jayendra Thaker
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/u-p-state-industrial-development-corporation-ltd-upsidc-v-commissioner-of-44034
- **Pages:** 8

## Text

266 INDIAN LAW REPORTS ALLAHABAD SERIES

Court is of the opinion that a news report without any further proof of what had actually happened through
witnesses is of no value. It is at best a second hand secondary evidence as held by the Supreme Court in
Samant N. Balakrishna Vs. George Fernandez and others, AIR 1969 SC 1201. The Supreme Court held
that it is well known that reporters collect information and pass it on to the editor who edits the news item
and then publishes it. In this process the truth gets perverted or garbled. The Supreme Court held that such
news items cannot by itself prove itself and can only be considered provided there is other evidence. This
Court finds that the said decision is clearly applicable, inasmuch as, no proof has been submitted by the
petitioner with regard to the source of information. Such news channel reports cannot be taken into
consideration unless it is accompanied by the statement of the reporter who voiced the news report in the
T.V. channels. In the absence of such statement and in the absence of any evidence being brought on
record, the Court finds that necessary material was lacking in the election petition. In K.M. Mani Vs. P.J.
Antony, 1979 (2) SCC 221 the Supreme Court held that the speech made by a police officer exhorting the
elections in an election meeting to support a candidate was not enough to constitute corrupt practice. The
Supreme Court held that the transcripts of the alleged speech should have been made available.

73. In the light of the aforesaid, in order to constitute corrupt practice, it must be shown that the
act was done during the election campaign between the date when the respondent became a candidate and
the date of poll and that it was the act of the respondent or her agent or any other person with her consent
to appeal to vote on the ground of her religion. Such ingredients are essential and are required to be
pleaded in order to constitute a cause of action raising a triable issue. In the instant case, such ingredients
are missing in the election petition. Material facts are lacking and, consequently, the Court finds that no
cause of action arises on this issue.

74. In these circumstances, the Court finds that the pleadings in the election petition does not set
out the material facts and, therefore, constitutes an incomplete cause of action. The application under
Order 7, Rule 11 of the Code of Civil Procedure is allowed as a result of which the election petition is
dismissed with costs. Since the application under Order 7, Rule 11 of the Code of Civil Procedure has
been allowed it is not necessary for the Court to decide the application under Order 6, Rule 16 of the Code
of Civil Procedure.
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APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.07.2016

BEFORE

THE HON'BLE SUDHIR AGARWAL, J.
THE HON'BLE KAUSHAL JAYENDRA THAKER, J.

Income Tax Appeal No.- 11 Of 2015

U.P. State Industrial Development Corporation Ltd. (UPSIDC) ...Appellant
Versus
Commissioner of Income Tax-II, Kanpur ...Respondent
7 All. U.P. State Industrial Development Corporation Ltd. (UPSIDC) Vs Commissioner Of
 Income Tax-II, Kanpur

267
Counsel for Appellant:
Sri S.K. Garg, Sri Ashish Bansal

Counsel for Respondent:
C.S.C.

Income Tax -- Section 143(2) and Section 148 of the Income Tax Act, 1961 -- Notice Under
Section 143(2) -- Mandatory Requirement -- Late Filing of Return -- Assessment Year 2003-2004
-- Appellant-Assessee (UPSIDC) filed return for Assessment Year 2003-2004 on 2.5.2005 showing income of
Rs. 12,64,32,143/- -- since return was filed after the period prescribed under Section 139, the Assessing
Authority treated the return as nonest and issued notice under Section 148 on 25.5.2007 -- before making
assessment, no notice under Section 143(2) was issued -- Assessment Order was passed on 31.12.2008 -- the
Income Tax Appellate Tribunal, Lucknow Bench 'A' in ITA No. 382/LKW/2011 vide judgment dated 24.7.2014
partly allowed the Assessee's appeal but negated the challenge to non-issue of notice under Section 143(2),
holding that since the return was filed after expiry of the prescribed period, absence of such notice would not
vitiate the assessment -- on appeal under Section 260-A, the substantial question of law pressed is: Whether
the Tribunal was justified in holding that non-issue of notice under Section 143(2) would not vitiate
assessment made by the Assessing Authority since the Assessee filed return under Section 148 after expiry of
the period prescribed -- Held: the view of the Tribunal is erroneous -- Section 143(2) authorizes the Assessing
Officer to complete assessment under Section 143(3) and the same applies to block assessment also under
Section 158BC -- an omission on the part of the Assessing Officer to issue notice under Section 143(2) is not a
mere procedural irregularity -- it is a jurisdictional error -- the notice under Section 143(2) is mandatory and
an Assessing Officer cannot proceed to make assessment under Section 143(3) without issuing such notice,
irrespective of whether the return was filed within time or beyond time or in response to notice under Section
148 -- the question whether return was filed within or beyond time prescribed under Section 139 or has been
filed in response to notice under Section 148, is not relevant to determine whether the Assessing Officer can
proceed to make assessment without issuing notice under Section 143(2). (Paras 4-21)

Income Tax -- Section 143(2) -- Jurisdictional Requirement -- Return Filed After Expiry of Time
Under Section 139 -- Non-Issue of Section 143(2) Notice Cannot Be Condoned -- Held: even if an
Assessing Authority treats the return filed as nonest on account of being filed after the expiry of the period
prescribed under Section 139, and then proceeds under Section 148, after the return is filed in response to or
acknowledged as response to notice under Section 148, the Assessing Officer is required to apply his mind to
the contents of such return and issue a fresh notice under Section 143(2) before proceeding to make
assessment -- the provision being mandatory, whatever may be the reason available to the Assessing Officer
to repudiate the return filed by the Assessee, if it proceeds to make assessment, a notice under Section
143(2) is mandatory -- the Legislature has cast a duty on the Assessing Officer to apply his mind to the
material on record and after being satisfied with regard to escaped liability, issue a notice specifying
particulars of such claim. (Paras 15-21)

Income Tax Appeal Allowed -- Assessment Order Quashed -- Liberty to Reassess After Issuing
Notice Under Section 143(2) -- Substantial question of law answered in favour of the Assessee-Appellant
and against the Revenue -- Income Tax Appeal No. 11 of 2015 allowed -- impugned judgment and order
dated 24.7.2014 passed by the Tribunal in ITA No. 382/LKW/2011 and the Assessment Order in respect of
Assessment Year 2003-2004 hereby quashed -- however, this judgment shall not preclude the Assessing
Authority from proceeding further in accordance with law with respect to assessment of the Assessee under
Section 143(3)/148 for Assessment Year 2003-2004 after giving notice under Section 143(2) of the Income
Tax Act, 1961. (Paras 22-23)

Case Law Discussed:
268 INDIAN LAW REPORTS ALLAHABAD SERIES

1. ACIT & Another v. Hotel Blue Moon, (2010) 321 ITR 362 (SC); (2010) 229 CTR 219
2. Commissioner of Income Tax v. Rajeev Sharma, (2011) 336 ITR 678 (Allahabad, Lucknow Bench)
3. Chand Bihari Agrawal v. ACIT, IT(SS)A No.05/PAT/2010 (Patna Bench Tribunal) - Distinguished
4. Hindalco Industries Ltd. v. Commissioner of Income Tax, Lucknow; ITA No.69 of 2006 (Allahabad), decided
25.7.2011
5. Director of Income-Tax v. Society for Worldwide Interbank Financial Telecommunication, (2010) 40 DTR
(Del) 17
6. Allana Cold Storage Ltd. v. Income-Tax Officer and others, (2006) 287 ITR (Bom.)

(Delivered by Hon'ble Sudhir Agarwal, J.
&
Hon'ble Kaushal Jayendra Thaker, J.)

1. Heard Shri Ashish Bansal learned counsel for appellant and learned Standing Counsel
for respondent.

2. This is an appeal at the instance of Assessee preferred under section 260-A of Income
Tax Act, 1961 (hereinafter referred to as ''Act 1961"). Dispute relates to Assessment Year 20032004. Appeal has arisen from judgment and order dated 24.7.2014, passed by Income Tax
Appellate Tribunal, Lucknow Bench ''A' Lucknow (hereinafter referred to as 'Tribunal') in ITA
No.382/LKW/2011 whereby the aforesaid appeal of Assessee has been partly allowed. Though, in
the memo of this appeal, several substantial questions of law have been formulated by appellant but
learned counsel for appellant at the outset stated that he propose to press only one substantial
question of law relating to notice under section 143(2) of Act, 1961 since, if that question is
decided in his favour, entire matter will be open to appellant to be raised before Assessing
Authority.

3. With consent of learned counsel for parties, we proceed to hear this appeal finally on the
following substantial question of law:

" Whether Tribunal was justified in holding that non issue of notice under section
143(2) would not vitiate assessment, made by Assessing Authority, since Assessee filed return
under section 148 after expiry of the period prescribed in law. "

4. It is not a disputed fact that before making assessment in question, no notice under
section 143(2) was issued to the appellant by Assessing Authority.

5. Brief facts necessary to understand the dispute in question and for effective adjudication
of the issues raised in this appeal are stated as under.

6. Appellant filed return for Assessment Year 2003-2004 on 2.5.2005 showing an income
of Rs.12,64,32,143/-.
7 All. U.P. State Industrial Development Corporation Ltd. (UPSIDC) Vs Commissioner Of
 Income Tax-II, Kanpur

269
7. Since return was filed after period prescribed for filing return under section 139 of Act
1961, Assessing Authority treated return as nonest and proceeded under section 148 by issuing
notice under the said provision on 25.5.2007. However, before so proceeding, no notice under
section 143(2) was issued to appellant.

8. Assessing Officer passed Assessment Order on 31.12.2008 whereagainst appellant
preferred appeal under section 246-A of Act 1961 which was decided on 31.3.2011, where against
Assessee and Revenue both preferred appeal before Tribunal, Assessee's appeal for Assessment
Year 2003-2004 has been partly allowed but issue raised by appellant with regard to patent
illegality in the entire assessment proceedings for want of notice under section 143(2) has been
negated by Tribunal observing that absence of notice would not vitiate assessment since assessee
filed return after expiry of the period prescribed. Tribunal following Patna Bench Tribunal's
decision in Chand Bihari Agrawal versus ACIT in IT(SS)A No.05/PAT/2010 held, return of
income must be filed within the statutory time limit. If Assessee file return after expiry of time, the
return would be treated as not filed in conformity with law and therefore, absence of notice under
section 143(2) would be of no consequence. This is clear from paragraph-10 of impugned judgment
of Tribunal, up for consideration before us.

9. Tribunal has further held that notice under section 148 was issued to appellant on
25.5.2007. Assessee did not file any return as per aforesaid notice and instead submitted reply that
he has already filed return on 2.5.2005 and the same should be accepted as return filed in
compliance to the notice under section 148. Thereafter, a notice under section 142(1) was issued on
14.11.2008. Another notice under section 142(1) was issued on 4.12.2008. Earlier notice dated
4.11.2008 remained un- complied but pursuant to notice dated 4.12.2008, Shri Rajesh Kanodia
appeared before Assessing Authority on 11.12.2008. Neither, Assessee nor Revenue could give the
date on which Assessee submitted reply to notice dated 25.5.2007 requesting Assessing Authority
to treat return filed on 2.5.2005 as return in compliance to notice under section 148. In these
circumstances, Tribunal treated the date of filing of said letter on 11.12.2008.

10. We find that the above view of Tribunal is erroneous. In Chand Bihari Agarwal
(Supra), search and seizure operations were carried out by Department under section 132 of Act,
1961 at residential cum business premises of Assessee on 27.2.2003. A notice under 158BC of Act
1961 was issued on 9/10.12.2003 and served on Assessee on 10.12.2003 requiring him to file his
block return within a month of service of said notice. No such block return was filed within the
statutory period under section 158BC. Block return was filed on 22.11.2004 declaring undisclosed
income. Assessing Officer completed assessment under section 158BC of Act 1961 on 24.2.2005
adding income whereagainst Assessee preferred appeal which was partly allowed. To the extent
Assessee failed before Commissioner, he preferred further appeal before Tribunal. The questions
formulated by Tribunal are:

"1. CIT(Appeal) has erred in rejecting contention of appellant that Assessment
Order framed under section 158BC/158BB is wrong, illegal, without jurisdiction as well as void
ab-initio for want of Notice u/s 143(2) which is a mandatory requirement under I.T Act, 1961 to be
270 INDIAN LAW REPORTS ALLAHABAD SERIES

served on appellant before passing order, if the A.O proceeds to assess undisclosed income.
Reliance is placed on Hon'ble Supreme Court decision in case of Asstt.CIT & Anr.vs.Hotel Blue
Moon reported in (2010) 229 CTR 219.

2. For that, as a matter of fact and law Return u/s 158BC of Act 1961 was filed on
22.11.2004 and Assessment Order was passed on 24.02.2005. In between the period no Notice u/s
143(2) was issued and served upon appellant which was a mandatory requirement u/s 158BC(b) of
I.T Act, 1961. Hon'ble S.C in the above case has held that omission on part of Assessing Authority
to issue notice u/s 143(2) cannot be a mere procedural irregularity and the same is not curable.
The matter has taken at rest."

11. Under section 158BC, in respect to search carried out on or after 1.1.1995, statutory
time limit of filing block return was 45 days.

12. Tribunal in Chand Behari (Supra) read the judgment in ACIT & another versus Hotel
Blue Moon (2010) 321 ITR 362 (SC) in the manner that notice under section 143 if not issued, it
would not be fatal unless it is shown that block return was filed under section 158BC within
statutory period prescribed therein.

13. In our view, this way of reading of judgment of Supreme Court in ACIT versus Hotel
Blue Moon (Supra) by Tribunal is not correct. Therein, Court did not say, that a regular return
under section 139 if not filed within time, Assessing Officer shall have jurisdiction to proceed to
make assessment without issuing notice under section 143(2) of Act 1961. Once an assessment is
filed within time or thereafter, it is always open to Assessing Officer to accept the same or to reject
it for any valid reason. Assessment filed after expiry of time, can be rejected on the ground that it
has been filed after expiry of statutory period, and is not acceptable but that itself would not give
jurisdiction to Assessing Officer to proceed to make assessment either under section 143(3) or a
block assessment under section 158BC unless a notice is issued under section 143(2). Court said
that an omission on the part of Assessing Officer to issue notice under section 143(2) is not a mere
procedural irregularity and improper. It is a jurisdictional error. In other words, notice under section
143(2) authorizes Assessing Officer to complete assessment under section 143(3) and same would
apply in respect to block assessment also under section 158BC.

14. It is true that in Hotel Blue Moon(Supra), Court was considering applicability and
effect of Section 143(2) in the context of Chapter XIV B of Act 1961 which includes Section
158BC but it has very categorically held that it is mandatory and omission on the part of Assessing
Officer to issue notice under section 143(2) is incurable since it is not a mere procedural
irregularity but a jurisdictional error.

15. Whatever may be the reason available to Assessing Officer to repudiates return filed by
Assessee, but if it proceeds to make assessment, a notice under section 143(2) is mandatory. Some
relevant observations from judgment in ACIT & another versus Hotel Blue Moon (Supra) may be
reproduced as under:
7 All. U.P. State Industrial Development Corporation Ltd. (UPSIDC) Vs Commissioner Of
 Income Tax-II, Kanpur

271

"An analysis of this sub-section indicates that, after the return is filed, this clause
enables the Assessing Officer to complete the assessment by following the procedure like issue of
notice under section 143(2)/142 and complete the assessment under section 143(3). This section
does not provide for accepting the return as provided under section 143(1)(a). The Assessing
Officer has to complete the assessment under section 143(3) only. In case of default in not filing the
return or not complying with the notice under section 143(2)/142, the Assessing Officer is
authorized to complete the assessment ex parte under section 144. Clause (b) of section 158BC by
referring to section 143(2) and (3) would appear to imply that the provisions of section 143(1) are
excluded. But section 143(2) itself becomes necessary only where it becomes necessary to check the
return, so that where block return conforms to the undisclosed income inferred by the authorities,
there is no reason, why the authorities should issue notice under section 143(2). However, if an
assessment is to be completed under section 143(3) read with section 158BC, notice under section
143(2) should be issued within one year from the date of filing of block return. Omission on the
part of the assessing authority to issue notice under section 143(2) cannot be a procedural
irregularity and the same is not curable and, therefore, requirement of notice under section 143(2)
cannot be dispensed with."

(emphasis added)

16. The view we have taken above, is fortified from some other authoritative
pronouncements of this Court also. In Commissioner of Income Tax versus Rajeev Sharma (2011)
336 ITR 678 (Allahabad), Lucknow Bench, this Court has held that provision contained in sub
section (2) of Section 143 of Act 1961 is mandatory. It further says that Legislature in their wisdom
by using the words, "reason to believe" had cast a duty on Assessing Officer to apply his mind to
the material on record and after being satisfied with regard to escaped liability, shall serve notice
specifying particulars of such claim.

17. In view of above, in absence of any notice issued under sub-section(2) of section 143,
after receipt of fresh return, submitted by Assessee in response to notice under section 148, the
entire procedure adopted for escaped assessment, shall not be valid.

18. In CIT versus Rajeev Sharma (Supra), Court also held that even if an assessment is
treated to have been filed under section 148, in response to a notice issued there under, Assessing
Officer shall not proceed to make assessment without giving notice under section 143(2) and this is
evident from the observations made in Paragraph 30, 32 and 45 of judgment.

" 30. Notice under Section 148 of the Act for assessment year 1994-1995 was issued
on 29.3.2001 whereas for the assessment year 1995-96, it was issued on 26.12.2000. In response to
the notice, the assessee sent letter dated 7.5.2001 to drop the proceeding. Therefore, vide letter
dated 18.12.2001, the Deputy Commissioner informed that proceeding may not be dropped and
given last opportunity to file return. Along with letter dated 18.12.2001, notices under Section 143
(2) and 142 (1) were also sent. In consequence thereof, the assessee filed return on 7.2.2002 for
272 INDIAN LAW REPORTS ALLAHABAD SERIES

both the assessment years. After filing of return, the Assessing Officer should have applied mind
and after considering the material on record on "reason to believe", notice under Section 143 (2)
of the Act should have been issued afresh.

32. Since return was filed on 7.2.2002, in response to notice under Section 148 of
the Act, earlier notice dated 29.03.2001 may not be treated as valid for the purpose of escaped
assessment. The Legislature to their wisdom had categorically provided that after receipt of notice
under Section 148 of the Act a fresh return may be filed and in consequence thereof, the Assessing
Officer has to apply his mind to the contents of fresh return and then issue a notice under Section
143 (2) of the Act. The satisfaction under reason to believe, must be recorded by the Assessing
Officer after applying mind to the contents of fresh return before issuing a notice under Section 143
(2) of the Act.

It is a settled law that taxing statute should be construed strictly without subtraction
or addition of words, in the statutory provisions. Accordingly, the provisions contained in Section
148 of the Act with regard to escaped assessment, must be construed strictly with regard to
procedure prescribed for escaped assessment.

45.In view of the above, the provision contained in Section 143 (2) of the Act is
mandatory in nature and it shall be obligatory for the Assessing Officer to apply mind to the
contents of the return filed in response to notice under Section 148 of the Act and record reasons
and thereafter, issue notice under Section 143 (2) of the Act before proceeding to decide the
controversy with regard to escaped assessment."

(emphasis added)

20. This decision in CIT versus Rajiv Sharma(Supra) has been followed in ITA No.69 of
2006 Hindalco Industries Ltd. Versus Commissioner of Income Tax, Lucknow decided on
25.7.2011 wherein Court has also relied on the decisions of Delhi Court in Director of Income-tax
versus Society for Worldwide Interbank Financial Telecommunication (2010) 40 DTR (Del) 17
and Bombay High Court in Allana Cold Storage Ltd.versus Income-tax Officer and other (2006)
287 ITR (Bom.)

21. Therefore, question that return filed was within or beyond time prescribed under
section 139 or has been filed after notice issued under section 148 or filed earlier after expiry of
period under section 139 is not relevant to determine the question whether Assessing Officer can
proceed to make assessment under section 143(3) without issuing notice under section 143(2). The
provision being mandatory, Assessing Officer cannot proceed to make assessment without issuing
notice under section 143(2) of Act, 1961.

22. In view of above, question formulated above is answered in favour of appellant and
against
Revenue.
7 All. U.P. State Industrial Development Corporation Ltd Vs Commissioner Of Income
 Tax, Kanpur

273

23. Appeal is allowed. Impugned order dated 24.7.2014 passed by Tribunal as also
assessment order in respect to Assessment Year 2003-2004 are hereby quashed.

23. This judgment shall not preclude Assessing Authority from proceeding further in
accordance with law with regard to assesssment of Assessee under section 143(3)/148 for
Assessment Year 2003-2004, after giving notice under section 143(2) of Act, 1961.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.07.2016

BEFORE

THE HON'BLE SUDHIR AGARWAL, J.
THE HON'BLE KAUSHAL JAYENDRA THAKER, J.

Income Tax Appeal No.- 12 Of 2015
&
Income Tax Appeal No.- 13 Of 2015

U.P. State Industrial Development Corporation Ltd ...Appellant
Versus
Commissioner of Income Tax, Kanpur ...Respondent

Counsel for Appellant:
Sri S.K. Garg, Sri Ashish Bansal

Counsel for Respondent:
C.S.C. It

Income Tax -- Section 36(1)(v) and Section 37 of Income Tax Act, 1961 -- Group Gratuity
Insurance Scheme -- Payment to LIC -- Deduction -- Approved Gratuity Fund -- Section 12AA(2)
-- Deemed Approval by Efflux of Time -- Assessment Years 2005-06 and 2006-07 -- Assessee
(UPSIDC) paid premiums to Life Insurance Corporation of India under a Group Gratuity Insurance Scheme for
the benefit of its employees -- Assessing Officer disallowed deduction of Rs. 39,57,629/- (A.Y. 2005-06) and
Rs. 46,16,743/- (A.Y. 2006-07) on the ground that the Group Gratuity Scheme was not approved by the
Commissioner of Income Tax -- CIT (Appeals) upheld the disallowance and also enhanced the assessed
income -- Income Tax Appellate Tribunal, Lucknow Bench partly allowed Assessee's appeal for A.Y. 2005-06
but dismissed for A.Y. 2006-07 -- on appeal under Section 260-A, substantial questions of law include:
whether ITAT was justified in disallowing deduction of actual payment made to LIC on the ground that the
scheme was not specifically approved by CIT though carried under general approval of the Central
Government; and whether the payment was liable to be treated as payment made to an approved fund by
reason of efflux of time -- Held: the Tribunal and authorities below committed manifest error in treating the
fund as non-approved -- Assessee submitted an application for registration on 16.6.2011 -- no order was
passed by the Commissioner within six months from the end of the month of receipt of the said application --
Section 12AA(2) of the Act automatically comes into operation and by operation of legal fiction, approval is
deemed to have been granted -- the Assessee was entitled to claim deduction under Section 36(1)(v) on the