2014 (1) TMI 1738 - AT - Income Tax

Reopening of assessment - non issue of notice u/s.143(2) - Held that - Admittedly no notice u/s.143(2) has been issued to the assessee in the instant case. Therefore,we hold that the assessment order passed by the Assessing Officer is void ab-initio due to non-issue of notice u/s.143(2). - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of proceedings initiated under section 148.
2. Validity of assessment order passed without issuing notice under section 143(2).
3. Applicability of section 50C to the transaction.
4. Requirement for referring the property for valuation to the DVO.
5. Applicability of section 234B regarding interest on advance tax.

Detailed Analysis:

1. Validity of proceedings initiated under section 148:
The assessee argued that the proceedings initiated under section 148 dated 06-11-2009 were invalid as they were based on the same reasons as the earlier proceedings initiated on 12-03-2009, which were dropped. The assessee contended that there was no new information available to the Assessing Officer (AO) to justify the initiation of fresh proceedings. However, this issue was not the primary focus of the judgment.

2. Validity of assessment order passed without issuing notice under section 143(2):
The core issue was the non-issuance of notice under section 143(2) after the issuance of notice under section 148. The assessee argued that the absence of such notice rendered the assessment order void ab initio. The CIT(A) had rejected this argument, citing section 292BB, which deems notice to have been served if the assessee cooperates in the assessment proceedings. However, the Tribunal disagreed with the CIT(A) and relied on the judgments of the Hon'ble Gujarat High Court in CIT Vs. K.M. Ravji and the Hon'ble Punjab & Haryana High Court in CIT Vs. Cebon India Ltd., which held that the absence of a notice under section 143(2) within the statutory period invalidates the assessment proceedings. The Tribunal concluded that the assessment order was void ab initio due to the non-issuance of the notice under section 143(2).

3. Applicability of section 50C to the transaction:
The assessee contended that the provisions of section 50C, which pertain to the valuation of the property for capital gains purposes, were not applicable as the transaction was a business transaction and not a capital asset. The CIT(A) upheld the AO's view that the plot was a capital asset and not stock in trade, thereby justifying the application of section 50C. However, this issue became academic as the Tribunal annulled the assessment order on the preliminary issue of the non-issuance of notice under section 143(2).

4. Requirement for referring the property for valuation to the DVO:
The assessee argued that the AO should have referred the property for valuation to the District Valuation Officer (DVO) under section 50(2) of the I.T. Act. The CIT(A) rejected this argument, noting that the assessee had not raised this issue during the assessment proceedings or before the CIT(A). This issue was not further adjudicated due to the annulment of the assessment order on procedural grounds.

5. Applicability of section 234B regarding interest on advance tax:
The assessee disputed the applicability of section 234B, arguing that the income was below the threshold for advance tax liability. The CIT(A) held that section 234B was mandatory. However, this issue was not adjudicated by the Tribunal due to the annulment of the assessment order on the primary issue.

Conclusion:
The Tribunal annulled the assessment order due to the non-issuance of notice under section 143(2), rendering other grounds academic. The appeal filed by the assessee was allowed, and the judgment emphasized the importance of issuing notice under section 143(2) within the statutory period to validate assessment proceedings.