2012 (1) TMI 287 - HC - Income Tax

Summary

Issues involved:
The issues involved in this case are:
1. Whether the reassessment order passed u/s 143(3)/147 within two years of the service of notice could be annulled?
2. Whether the Tribunal was justified in annulling the reassessment order due to the absence of notice u/s 143(2) served on the assessee?
3. Whether the issuance of notice u/s 143(2) is mandatory and not procedural for passing a valid reassessment order?
4. Whether in the absence of notice u/s 143(2) prior to reassessments, assessments should have been set aside rather than annulled?

Judgment Details:

Issue 1:
The respondent, a partnership firm, filed its return of income for the assessment year 1993-94, declaring an income under the head "income from business and profession." The Assessing Officer initiated proceedings under Section 147 of the Act due to discrepancies in the treatment of lease rent income. The reassessment order was passed without issuing notice u/s 143(2) of the Act. The Commissioner of Income Tax (Appeals) annulled the assessment, which was upheld by the Tribunal. The Court held that the order annulling the assessment for want of notice u/s 143(2) did not suffer from any legal infirmity.

Issue 2:
The Counsel for the Revenue argued that the order of the Commissioner of Income Tax (Appeals) failed to consider the effect of Section 292 BB of the Act, inserted by the Finance Act, 2008. This section deems notice to be valid in certain circumstances. However, the Court held that the absence of notice u/s 143(2) before making the assessment under section 147 was a legal requirement, and the provisions of Section 292 BB did not cure this defect.

Issue 3:
The Court referred to the case law where the Supreme Court held that the issue of notice u/s 143(2) is mandatory for assessments. The Court also cited a previous decision where deeming provisions to validate notice would not apply if the jurisdiction of the Assessing Officer is based on the issuance of notice u/s 143(2). The Court upheld the view that the notice u/s 143(2) is essential for reassessment proceedings.

Issue 4:
The Counsel for the Revenue could not provide any distinguishing factor to deviate from the precedent set by the Court in a previous case. The Court reiterated that the absence of notice u/s 143(2) before reassessment renders the assessment invalid. Therefore, the Tribunal's decision to annul the assessment under sections 147/148 read with Section 143(3) was upheld, and the appeal was dismissed.

This judgment emphasizes the importance of following procedural requirements, specifically the issuance of notice u/s 143(2) before conducting reassessment under section 147 of the Income Tax Act, 1961.