2015 (1) TMI 1288 - AT - Income Tax

Validity of assessment - non issue of notice - Held that - Very foundation of the jurisdiction of the Assessing Officer is issuance of notice u/s 143(2) of the Act. Thus, in view of the factual matrix that no notice u/s 143(2) of the Act was issued/served upon the assessee, after filing of return, therefore, the basic mandatory requirement of the Act, is not fulfilled,consequently, the defect is not curable, therefore, the assessment is not valid.- Decided in favour of assessee

Summary

Issues Involved:
1. Addition of Rs. 11,12,85,695/- under Section 69A for alleged unexplained money.
2. Addition of Rs. 2,77,51,909/- for alleged differential surplus/income based on seized documents.
3. Validity of assessment due to the non-issuance of notice under Section 143(2) after filing the return of income.

Issue-wise Detailed Analysis:

1. Addition of Rs. 11,12,85,695/- under Section 69A for alleged unexplained money:
The assessee contested the addition of Rs. 11,12,85,695/- made by the Assessing Officer (AO) under Section 69A of the Income Tax Act, 1961. The AO added this amount as unexplained money for diamonds found and inventorized, which allegedly did not belong to the appellant firm. The assessee argued that the AO failed to consider and appreciate the facts and circumstances surrounding the case.

2. Addition of Rs. 2,77,51,909/- for alleged differential surplus/income based on seized documents:
The AO also added Rs. 2,77,51,909/- as differential surplus/income based on certain papers found and seized during the search/survey action. The assessee contended that this addition was made without proper consideration and appreciation of the case's facts and circumstances.

3. Validity of assessment due to the non-issuance of notice under Section 143(2) after filing the return of income:
The primary legal ground raised by the assessee was the non-issuance of a valid notice under Section 143(2) of the Income Tax Act, 1961, after the filing of the return of income. The assessee argued that the assessment was void ab initio because the notice under Section 143(2) was issued before the return was filed, which is against the statutory requirement. The Tribunal considered various judicial pronouncements, including the decisions from the Supreme Court and High Courts, which emphasized the mandatory nature of issuing a notice under Section 143(2) after the return is filed.

The Tribunal noted that the AO issued the notice under Section 143(2) on 17/09/2010, before the return was filed on 26/09/2010. The Tribunal highlighted that the issuance of a notice under Section 143(2) is a mandatory requirement, and failure to do so renders the assessment invalid. The Tribunal referred to the Supreme Court's decision in ACIT vs. Hotel Blue Moon, which held that the issuance of a notice under Section 143(2) is the foundation of jurisdiction for the AO.

The Tribunal also considered the argument from the Revenue that the defect could be cured under Section 292BB of the Act. However, the Tribunal disagreed, citing judicial precedents that mandatory requirements under Section 143(2) cannot be validated by Section 292BB.

Conclusion:
The Tribunal annulled the assessment on the grounds that no valid notice under Section 143(2) was issued/served upon the assessee after filing the return of income. Consequently, the assessment was deemed invalid, and the appeal of the assessee was allowed. The Tribunal refrained from addressing the merits of the case due to the annulment of the assessment.