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2015 (9) TMI 1601 - AT - Income TaxReopening of assessment u/s 147 - notice under Section 143(2) mandatory - Held that - Assessment completed u/s. 147 of the Act without issuing a notice u/s. 143(2)is not a valid assessment and that provisions of section 292BB cannot cure the basic defect non issuance of 143(2)notice. In the case before us, there in evidence of service of notice issued, u/s. 143(2)of the Act, by the AO. Therefore, we are of the opinion that the FAA was not justified in holding that the order passed by the AO u/s. 147 was a valid order. Reversing his order, we decide the effective ground of appeal in favour of the assessee. As a result, appeal filed by the assessee stands allowed.
Issues Involved:
1. Jurisdiction of CIT(A) in concurring with AO's view on additional grounds. 2. Adjudication of jurisdiction by CIT(A) based on remand report. 3. Reopening of assessment without additional evidence or tangible material. 4. Requirement of notice under section 143(2) for reassessment. 5. Reopening proceedings to circumvent section 143(2) and extend the limitation period. 6. Applicability of judicial pronouncements cited by the appellant. 7. Applicability of section 292BB to proceedings relevant to A.Y. 2002-03. Detailed Analysis: 1. Jurisdiction of CIT(A) in Concurring with AO's View on Additional Grounds: The appellant contended that the CIT(A) exceeded his jurisdiction by concurring with the AO's view that the additional grounds raised before the tribunal were not legally sustainable as they did not emanate from the assessment or CIT(A)'s order. The tribunal noted that the FAA (First Appellate Authority) had held that the additional ground was not legally tenable and that the issue of notice under section 143(2) was incidental to reassessment proceedings. 2. Adjudication of Jurisdiction by CIT(A) Based on Remand Report: The appellant argued that the CIT(A) erred in adjudicating the issue of jurisdiction merely by following the remand report of the AO without referring to the case record or the reasons recorded under section 147. The tribunal observed that the FAA had considered the submissions of both the assessee and the AO and concluded that there was no violation of principles of natural justice and that the assessee had participated in the assessment proceedings. 3. Reopening of Assessment Without Additional Evidence or Tangible Material: The appellant claimed that the reopening of the assessment was without any additional evidence or tangible material. The tribunal referred to the legal requirement that the AO must have "reason to believe" that income chargeable to tax had escaped assessment, and found that the FAA had upheld the AO's jurisdiction to reopen the assessment under section 147. 4. Requirement of Notice Under Section 143(2) for Reassessment: The appellant contended that the AO was required to serve a notice under section 143(2) to proceed with reassessment. The tribunal examined various judicial precedents, including the case of Bedrock Limited, which established that the issuance of notice under section 143(2) within the stipulated time was mandatory. The tribunal concluded that the non-issuance of such notice rendered the reassessment invalid. 5. Reopening Proceedings to Circumvent Section 143(2) and Extend Limitation Period: The appellant argued that the reopening proceedings were initiated to circumvent section 143(2) and extend the limitation period. The tribunal found that the AO's failure to issue a notice under section 143(2) within the prescribed time limit could not be cured by section 292BB, which was applicable prospectively from A.Y. 2008-09. 6. Applicability of Judicial Pronouncements Cited by the Appellant: The appellant cited several judicial pronouncements, including GK Drive Shaft, Hotel Blue Moon, and CWT vs. HUF of late J M Scindia, to support their case. The tribunal noted that the FAA had held these decisions inapplicable and had relied on the decision of CIT vs. Salman Khan. The tribunal, however, found that the broad parameters laid down by the Apex Court in Hotel Blue Moon were binding and applicable to the present case. 7. Applicability of Section 292BB to Proceedings Relevant to A.Y. 2002-03: The appellant argued that section 292BB, inserted by the Finance Act 2008, was not applicable to the assessment year 2002-03. The tribunal agreed, citing the decision in Kuber Tobacco Products Private Ltd., which held that section 292BB could not be applied retrospectively and was only applicable from A.Y. 2008-09 onwards. Conclusion: The tribunal concluded that the reassessment proceedings were invalid due to the non-issuance of notice under section 143(2) within the prescribed time limit. The provisions of section 292BB could not cure this defect for the assessment year in question. Consequently, the tribunal allowed the appeal filed by the assessee, reversing the FAA's order and holding the reassessment proceedings as invalid. The order was pronounced in the open court on 23rd September 2015.
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