2007 (1) TMI 72 - AT - Income Tax

Reassessment Assessee contended that reassessment order passed u/s 143(3) read with section 147 of the Act as bad in law on the ground that no notice u/s 143(2) which was to be issued within one year of filing of return of income had been issued Held the assessee contention was correct and allowed

Summary

Issues Involved:
1. Validity of reassessment without notice under section 143(2).
2. Nature of notice under section 143(2) - procedural or jurisdictional.
3. Effect of retrospective amendment by Finance Act, 2006.
4. Compliance with section 143(2) provisions.

Detailed Analysis:

1. Validity of Reassessment Without Notice Under Section 143(2):
The core issue in these appeals was whether reassessments completed without issuing a formal notice under section 143(2) are invalid, null and void, or merely irregular. The Tribunal noted that the Commissioner of Income-tax (Appeals) annulled the reassessment orders on the grounds that no notice under section 143(2) was issued within the prescribed period. The Tribunal upheld this decision, emphasizing that the issuance of a notice under section 143(2) is mandatory for the validity of the reassessment.

2. Nature of Notice Under Section 143(2) - Procedural or Jurisdictional:
The Tribunal discussed whether the notice under section 143(2) is procedural or jurisdictional. It concluded that the notice is jurisdictional, meaning that without it, the Assessing Officer loses the jurisdiction to make an assessment under section 143(3) read with section 147. The Tribunal cited various judicial precedents, including the Special Bench decision in Raj Kumar Chawla v. ITO, which held that failure to issue a notice under section 143(2) within the statutory period results in the loss of jurisdiction by the Assessing Officer to make the assessment.

3. Effect of Retrospective Amendment by Finance Act, 2006:
The Tribunal examined the retrospective amendment to section 148 by the Finance Act, 2006, which aimed to validate notices issued under section 143(2) beyond the prescribed period. The Tribunal clarified that the amendment only saves notices issued within the time limit specified under section 153(2) and does not dispense with the requirement of issuing a notice under section 143(2). The Tribunal concluded that the amendment does not affect the mandatory nature of the notice under section 143(2).

4. Compliance with Section 143(2) Provisions:
The Tribunal analyzed whether there was compliance with the provisions of section 143(2) in the present cases. It noted that the notices issued under section 142(1) and other communications did not fulfill the requirement of a notice under section 143(2). The Tribunal rejected the Revenue's contention that various letters and show-cause notices should be construed as compliance with section 143(2). The Tribunal emphasized that the specific statutory requirement of issuing a notice under section 143(2) must be met, and mere procedural compliance is insufficient.

Conclusion:
The Tribunal upheld the orders of the Commissioner of Income-tax (Appeals), annulling the reassessment orders due to the failure to issue notices under section 143(2) within the prescribed period. The Tribunal dismissed the appeals by the Revenue and the cross-objections by the assessees, affirming that the assessments were invalid due to non-compliance with the mandatory provisions of section 143(2).