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2012 (8) TMI 664 - AT - Income TaxBlock assessment - addition on account of on-money received in sale of flats which was not reflected in books of accounts Held that - Assessment order that the assessee filed the return of income in response to the notice u/s.158BD on 24.07.2005 - block ending on 26.03.2003 the AO was bound to serve the notice u/s.143(2) on or before 31.07.2006. The AO issued the notice under sec. 143(2) of the Act dated 30.03.2007 which is admittedly not within the time limit fixed by the proviso to sec.143(2) of the Act - in favour of the assessee
Issues Involved:
1. Deletion of addition on account of on-money received in the sale of flats. 2. Summoning of persons for examination by the A.O. 3. Legality and validity of the assessment proceedings under Rule 27 of the ITAT Rules, 1962. 4. Service of notice under Section 143(2) within the prescribed time limit. Issue-Wise Detailed Analysis: 1. Deletion of Addition on Account of On-Money Received: The revenue challenged the deletion by the CIT (A) of an addition of Rs.12,33,000/- on account of on-money received in the sale of flats, which was not reflected in the books of accounts. The CIT (A) had found that the A.O. did not examine the necessary individuals who could substantiate the claims regarding the on-money transactions. The CIT (A) argued that if such examination was necessary, the A.O. should have called for a remand report or conducted the inquiries himself, as he has the power co-terminus with that of the A.O. The Tribunal upheld the CIT (A)'s decision, noting that the A.O. failed to summon the purchasers or alleged purchasers, which was crucial for substantiating the addition. 2. Summoning of Persons for Examination by the A.O.: The revenue contended that the CIT (A) erred by not summoning the individuals who should have been examined by the A.O. The Tribunal observed that the CIT (A) has the authority to summon individuals or call for remand reports if necessary. The failure of the A.O. to summon these individuals could not be used as a basis for deleting the additions. The Tribunal supported the CIT (A)'s decision, emphasizing that the A.O. should have conducted the necessary inquiries. 3. Legality and Validity of the Assessment Proceedings under Rule 27 of the ITAT Rules, 1962: The assessee filed an application under Rule 27, challenging the legality and validity of the assessment proceedings. The Tribunal decided to dispose of this application, focusing on the ground that the A.O. did not serve the notice under Section 143(2) within the permissible time limit. The Tribunal referred to the decision in the case of B.V. Bamasi vs. CIT, which allows the respondent to raise new grounds in defense of the order in their favor. The Tribunal concluded that the assessee could raise the issue of the validity of the assessment proceedings under Rule 27, supporting the CIT (A)'s order. 4. Service of Notice under Section 143(2) within the Prescribed Time Limit: The Tribunal examined whether the A.O. served the notice under Section 143(2) within the mandatory period. The assessee argued that the A.O. did not serve the notice within one year from the end of the month in which the return was filed, as required by the proviso to Section 143(2). The Tribunal referred to the Supreme Court's decision in ACIT vs. Hotel Blue Moon, which mandates the issuance of notice under Section 143(2) within the prescribed time limit. The Tribunal found that the A.O. issued the notice on 30.03.2007, which was beyond the permissible period. Consequently, the Tribunal upheld the CIT (A)'s order, deeming the assessment proceedings invalid due to the failure to serve the notice within the required timeframe. Conclusion: The Tribunal dismissed the revenue's appeal, sustaining the CIT (A)'s order. The decision emphasized the importance of following procedural requirements, such as the timely service of notices under Section 143(2), and upheld the respondent's right to raise new grounds in defense of the order in their favor. The revenue's appeal was dismissed, and the CIT (A)'s decision was maintained.
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