2014 (8) TMI 1019 - AT - Income Tax

Re-opening of assessment u/s. 148 - assessee has raised the contention that no notice u/s.143(2) was issued to the assessee under the reopened assessment proceedings u/s.147 r.w.s. 143(3) - DR submitted that vide Finance Act 2008, w.e.f. 1.4.2008 section 292-BB has been inserted and any right which has been accruing to the assessee for non-service of notice u/s. 143(2) of the Income Tax Act has been taken away with the insertion of section 292BB - Held that - Since the assessment year involved in this case is 2001-02, hence, the newly inserted provision of section 292BB is not applicable to this year. In view of the said legal position as discussed the assessment proceedings in consequence of reopening u/s.147 were bad in law and cannot be sustained and are accordingly set aside. - Decided in favour of assessee

Summary

Issues:
1. Validity of assessment proceedings under section 147 without issuance of notice under section 143(2).
2. Legality of reopening assessment under section 148 of the Income-tax Act.
3. Tax treatment of amount received from a developer under capital gains.
4. Treatment of capital gains as sale of Transferable Development Rights (TDR).

Analysis:

1. The appellant challenged the assessment under section 147 without the issuance of a notice under section 143(2). The appellant argued that the failure to issue such a notice was fatal to the assessment proceedings. Citing the case of "CIT & Another Vs. Hotel Blue Moon," the appellant contended that the absence of a notice under section 143(2) was not a procedural irregularity and could not be cured. However, the respondent relied on section 292BB inserted in the Income Tax Act, postulating that any right accruing to the assessee due to non-service of notice under section 143(2) had been negated by this provision.

2. The Tribunal considered the legal position concerning the introduction of section 292BB in the Income Tax Act. Referring to the case of "Kuber Tobacco Products (P) Ltd. vs. DCIT," the Tribunal highlighted that section 292BB, even though procedural, created a new disability for the assessee and applied prospectively from 1.4.2008. The Tribunal also noted the decisions of the Bombay High Court in cases like "CIT Vs. Mr. Salman Khan," emphasizing the prospective application of sections 292-BB and 292-B from 1.4.2008 onwards. Since the assessment year in question was 2001-02, the Tribunal concluded that section 292BB did not apply, rendering the assessment proceedings under section 147 invalid.

3. As the assessment proceedings were set aside due to the absence of a notice under section 143(2), the Tribunal deemed the remaining grounds of appeal concerning tax treatment of the amount received from the developer and the treatment of capital gains as sale of TDR as infructuous. Consequently, the additions made by the lower authorities were set aside based on the findings related to the procedural irregularity in the assessment proceedings.

4. Ultimately, the Tribunal allowed the appeal of the assessee, pronouncing the order in open court on August 27, 2014. The decision was based on the invalidity of the assessment proceedings under section 147 without the requisite notice under section 143(2), leading to the setting aside of the additions made by the lower authorities.