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2014 (10) TMI 141 - AT - Income TaxAdmission of additional ground - Reopening of assessment u/s 147 and 148 Non-issuance of notice u/s 143(2) of the Act as alleged by the assessee-firm had vitiated the conclusion of the assessments u/s 147 read with s. 143(3) of the Act Held that - Since the additional ground sought to be raised is legal in nature and goes to the root of the matter and as decided in National Thermal Power Company Limited Versus Commissioner of Income-Tax 1996 (12) TMI 7 - SUPREME Court the additional ground is taken up for consideration - in the absence of a notice u/s 143(2) of the Act, the assessment prevails or not is to be examined. Following the decision in B.R.Arora v. ACIT 2014 (6) TMI 473 - ITAT DELHI - the re-assessments made for the assessment years under consideration have become invalid for not having served the mandatory notices u/s 143(2) of the Act on the assessee since re-assessment proceedings concluded u/s 147 r.w.s. 143(3) of the Act were invalid for the AYs under dispute, the issues raised by the revenue in its appeals and also the Cross objections of the assessee firm based on the invalid assessment orders have not been addressed to - there is always a requirement of issuing of a notice u/s 143(2) of the Act in a case of an assessment u/s 147 of the Act - Relaxation has been given for issuance of such a notice where a notice u/s 148 was issued between 1.10.1991 to 30.9.2005 - notice issued u/s 148 of the Act on or after 1.10.2005; a notice u/s 143(2) has to be issued within the time stipulated in 143(2) of the Act where Asstt. Has been framed without issuance of notice u/s. 143(2), Asstt. is invalid, Sec 292BB is not attracted in such cases. - Decided in favour of assessee.
Issues Involved:
1. Whether the CIT (A) was justified in deleting the addition made by the AO on account of bogus purchases. 2. The non-maintainability of the Revenue's appeal due to low tax effect. 3. The legality of the initiation of proceedings under sections 147/148. 4. The validity of reassessment proceedings in the absence of a notice issued under section 143(2). Detailed Analysis: 1. Deletion of Addition on Account of Bogus Purchases: The Revenue's primary contention across all appeals was whether the CIT (A) was justified in deleting the addition made by the AO for bogus purchases. The AO had reopened the assessments based on information from the DIT (Investigation), Jaipur, alleging that the assessee firm made bogus purchases by issuing cheques and obtaining bogus bills without physical delivery of goods. The CIT (A), after considering the evidence provided by the assessee, deleted the additions made by the AO. The CIT (A) found no discrepancies in the evidence, noting that the purchases were supported by proper vouchers, paid through banking channels, and duly recorded in the books of accounts. The CIT (A) also referenced similar cases from previous years where additions for bogus purchases were deleted and upheld by higher authorities. 2. Non-Maintainability of Revenue's Appeal Due to Low Tax Effect: The assessee firm argued that the Revenue's appeal for AY 2005-06 was non-maintainable due to low tax effect, referencing CBDT Instruction No. 3/2011. However, this issue was not the primary focus of the Tribunal's decision. 3. Legality of Initiation of Proceedings under Sections 147/148: The assessee firm contended that the initiation of proceedings under sections 147/148 was illegal, mechanical, without jurisdiction, and unsustainable in law as well as on merits. The AO had reopened the assessments based on information received about alleged bogus purchases. The Tribunal did not specifically address this issue in detail, as the primary focus was on the validity of the reassessment proceedings. 4. Validity of Reassessment Proceedings in the Absence of Notice under Section 143(2): The Tribunal examined whether the non-issuance of a notice under section 143(2) vitiated the reassessment proceedings. The Tribunal found that no notice under section 143(2) was issued to the assessee during the reassessment proceedings, as evidenced by the order sheet and responses to RTI queries. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Hotel Blue Moon and the Delhi High Court's decision in Alpine Electronics Asia Pte Ltd, which held that the issuance of a notice under section 143(2) is mandatory for valid reassessment proceedings. The Tribunal concluded that the reassessment proceedings were invalid due to the absence of a notice under section 143(2). Conclusion: The Tribunal allowed the assessee's additional ground, holding that the reassessment proceedings were invalid due to the non-issuance of a notice under section 143(2). Consequently, the appeals by the Revenue were rejected, and the cross objections of the assessee firm were partly allowed. The Tribunal did not address the other issues raised by the Revenue and the assessee firm due to the invalidity of the reassessment orders.
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