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2012 (9) TMI 504 - AT - Income TaxValidity of Best Judgement assessment framed u/s 144 on opinion that return filed pursuant to notice u/s 148 was belated - assessee contesting the order on ground that neither a notice u/s 142(1) nor a notice u/s 143(2) was issued before completing the best of judgment assessment - Held that - Admittedly, assessee had filed return u/s 139(1) and assessee was not issued a notice u/s 143(2) nor u/s 142(1). Hence, none of the three conditions which, would have given the AO power to make a best judgment assessment, was satisfied. Further, the assessee had filed a return pursuant to the notice u/s 148 though beyond the period mentioned in the said notice, and this was done before the date of assessment. AO having considered such return for finalizing the assessment, was duty bound to comply with the requirement of the Act for issuing notices. Requirement of Section 143(2) would apply even where re-assessment proceedings are initiated. Since no notice was issued either u/s 143(2) or 142(1), CIT(A) was justified in holding the re-assessment to be not valid and quashing such re-assessment - Decided in favor of assessee
Issues:
Validity of assessment due to lack of notice under Section 143(2) of Income-tax Act, 1961. Detailed Analysis: Issue 1: Validity of Assessment The Revenue appealed against the CIT(Appeals) decision, arguing that the assessment was invalid due to the absence of a notice under Section 143(2) of the Income-tax Act, 1961. The case involved the assessee, engaged in shoe manufacturing, whose return for the assessment year was filed on 31.10.2002, processed under Section 143(1) on 1.7.2003, and later reopened under Section 148 in 2007. The Assessing Officer completed the assessment under Section 144, adding an amount for overdraft write-back. The assessee contended that the best judgment assessment under Section 144 was invalid without notices under Sections 142(1) and 143(2). The CIT(Appeals) sought a remand report, which highlighted the belated return filing by the assessee. The CIT(Appeals) referred to legal precedents, including the Supreme Court's decision in Asstt. CIT v. Hotel Blue Moon, emphasizing the mandatory nature of notice under Section 143(2). The Revenue argued that the failure to issue Section 143(2) notice was not fatal to the assessment, citing a different interpretation of the law. The assessee supported the CIT(Appeals) decision, emphasizing compliance with legal requirements for assessment validity. Issue 2: Legal Interpretations The CIT(Appeals) relied on legal precedents, including the Supreme Court's ruling in Asstt. CIT v. Hotel Blue Moon and a judgment of the jurisdictional High Court, to support the necessity of a Section 143(2) notice for a valid assessment. The Revenue contested this, citing a different interpretation and distinguishing the applicability of legal decisions based on the type of assessment conducted. The assessee referenced a Delhi High Court decision to reinforce the importance of compliance with statutory provisions for assessment validity. Issue 3: Compliance with Statutory Requirements The Tribunal analyzed the facts, noting the original return filing, the reopening under Section 148, and the subsequent assessment under Section 144. It highlighted the absence of notices under Sections 142(1) and 143(2), crucial for a best judgment assessment. The Tribunal emphasized that none of the conditions allowing a best judgment assessment were met, as the return was filed before the assessment date, necessitating compliance with statutory notice requirements. The Tribunal reiterated the mandatory nature of Section 143(2) notices, even in reassessment proceedings, and distinguished cases where late notices were issued. Ultimately, the Tribunal upheld the CIT(Appeals) decision, dismissing the Revenue's appeal and affirming the quashing of the reassessment due to the lack of a Section 143(2) notice. In conclusion, the Tribunal's detailed analysis focused on the legal interpretations, compliance with statutory requirements, and the precedents supporting the necessity of a notice under Section 143(2) for a valid assessment, leading to the dismissal of the Revenue's appeal.
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