2010 (5) TMI 600 - HC - Income Tax

Reassessment proceedings - addition on account of unexplained gift - Guinness of gift - requirement of issue of notice u/s 143(2) where return filed in pursuance of notice u/s 148 - held that - in absence of any notice issued under sub-section (2) of Section 143 after receipt of fresh return submitted by the assessee in response to notice under Section 148 the entire procedure adopted for escaped assessment shall not be valid. - the requirement of notice under s. 143 (2) cannot be dispensed with. - Decided in favor of assessee.

Summary

Issues Involved:
1. Validity of notice under Section 143(2) of the Income Tax Act.
2. Requirement and timing of notice under Section 143(2) after filing a return in response to notice under Section 148.
3. Whether the assessee discharged the onus of proving the genuineness of the gift received.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 143(2):
The Tribunal noted that after the assessee filed a return on 7.2.2002 in response to a notice under Section 148, a notice under Section 143(2) should have been issued. The Tribunal held that the absence of such a notice invalidated the assessment order. The court emphasized that the provisions of Section 143(2) are mandatory and must be followed strictly. The court reiterated that the Assessing Officer must apply their mind to the material on record and serve a notice specifying particulars of any inadmissible claims. The court cited several judgments, including the Supreme Court's ruling in *Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited*, which stated that reassessment must be based on tangible material and not merely on a change of opinion.

2. Requirement and Timing of Notice under Section 143(2):
The court discussed the procedural requirements under Section 148, which relates to escaped assessment. It clarified that after receiving a return in response to a notice under Section 148, it is mandatory for the Assessing Officer to issue a notice under Section 143(2) within the statutory period. The court highlighted that this notice must be served to specify the particulars of any claims that the Assessing Officer believes to be inadmissible. The court referred to several precedents, including *R. Dalmia Vs. CIT* and *Hotel Blue Moon*, to underline that the procedure laid down in Section 139, including the issuance of notice under Section 143(2), must be followed in cases of reassessment.

3. Onus of Proving Genuineness of the Gift:
The court examined whether the assessee discharged the onus of proving the genuineness of the gift received. The assessee had provided the name, confirmation letter, copy of the NRE bank account, and passport of the NRI donor. However, the identity of the donor could not be established, and the donor was not available for cross-examination. The court noted that the Commissioner of Income Tax (A) had rejected the assessee's contention regarding the non-issuance of notice under Section 143(2) and had deemed the gift as unexplained income under Section 69, assessable in the hands of the assessee under Section 64(1A). The Tribunal, however, found that the adverse inference drawn by the Assessing Authority was not justified given the transaction was through a bank account and the confirmatory letter was filed.

Conclusion:
The court upheld the Tribunal's decision, emphasizing the mandatory nature of issuing a notice under Section 143(2) after the filing of a return in response to a notice under Section 148. The court dismissed the appeals, ruling in favor of the assessee and against the Revenue, stating that the procedural requirements must be strictly followed, and the assessment order was invalid due to the lack of a proper notice under Section 143(2).