2014 (8) TMI 1020 - 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. Reopening of assessment u/s.147 without notice u/s.143(2)
2. Non-disposal of objections by Assessing Officer (A.O.)
3. Reopening made after four years with full disclosure by assessee
4. Quantum addition of compensation received by assessee

Detailed Analysis:
1. The first issue raised by the assessee was the reopening of the assessment u/s.147 without the issuance of notice u/s.143(2) of the Income Tax Act, 1961. The Authorized Representative argued that the notice before reopening was mandatory, citing a Supreme Court decision in the case of "CIT & Another Vs. Hotel Blue Moon." On the other hand, the Departmental Representative contended that section 292BB inserted in the Income Tax Act by the Finance Act 2008 takes away any right accruing to the assessee for non-service of notice u/s.143(2). The Tribunal referred to the legal position established by the Special Bench of the Delhi Tribunal in the case of "Kuber Tobacco Products (P) Ltd. vs. DCIT," which clarified that section 292BB is applicable from 1.4.2008 and not retrospectively. Since the assessment year in question was 2001-02, the newly inserted provision of section 292BB was deemed inapplicable. Consequently, the assessment proceedings were held to be bad in law and set aside, leading to the allowance of the assessee's appeal.

2. The second issue pertained to the non-disposal of objections filed by the assessee against the section 147 proceedings by the Assessing Officer (A.O.). However, this issue became inconsequential as the assessment proceedings were set aside on the grounds discussed in the first issue, rendering further adjudication unnecessary.

3. The third issue raised by the assessee was that the reopening of the assessment after a period of four years, despite full disclosure by the assessee, was unwarranted. The assessee argued that there was no fault on their part resulting in any income escapement. However, since the assessment proceedings were deemed bad in law due to the absence of notice u/s.143(2), this issue also became irrelevant and did not require separate consideration.

4. The final issue raised by the assessee was the quantum addition of compensation amounting to Rs. 27.26 lacs received by them. The background of the case involved the assessee receiving compensation for land acquisition, which was not offered for taxation as it was received on interim court directions with a bank guarantee. The Assessing Officer contended that the enhanced compensation was taxable income, leading to the reopening of the assessment. The Tribunal, after setting aside the assessment proceedings on the first issue, also nullified the quantum addition of compensation, as the additions made by the lower authorities were no longer sustainable in light of the decision to set aside the assessment.

In conclusion, the Appellate Tribunal ITAT Mumbai allowed the assessee's appeal, primarily due to the assessment proceedings being deemed bad in law for lack of notice u/s.143(2). As a result, the issues related to non-disposal of objections, reopening after four years with full disclosure, and quantum addition of compensation became moot, and the additions made by the lower authorities were set aside.