2014 (11) TMI 934 - HC - Income Tax

Requirement to issue notice u/s 143(3) - Whether the proceedings of the department for the purpose of assessment u/s 143(3) would be justified without the issuance of the mandatory notice u/s 143(2) of the Income Tax Act Held that - Following the decision in Commissioner of Income Tax, Trichy v. M/s Fathima Thanga Maaligai, Karaikal 2014 (11) TMI 905 - MADRAS HIGH COURT wherein reliance upon Commissioner of Income Tax v. Hotel Bluemoon 2010 (2) TMI 1 - SUPREME COURT OF INDIA - the issuance of notice u/s 143(2) is mandatory thus, the order of the Tribunal is set aside Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment without notice under Section 143(2)
2. Mandatory issuance of notice under Section 143(2) for assessment under Section 143(3)
3. Upholding additions due to discrepancies in income and assets

Issue 1: Validity of assessment without notice under Section 143(2)
The case involved an appeal by the assessee challenging the validity of the assessment under Section 143(3) without the issuance of a notice under Section 143(2) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) initially ruled in favor of the assessee, but the Tribunal, citing precedent, set aside the order and remanded the matter to the assessing officer. The Tribunal's decision was challenged in a writ petition, where the Supreme Court's ruling in Commissioner of Income Tax v. Hotel Bluemoon (321 ITR 362) was cited to argue the mandatory nature of the notice under Section 143(2). Despite this, the Tribunal remanded the matter again, leading to the current appeal.

Issue 2: Mandatory issuance of notice under Section 143(2) for assessment under Section 143(3)
The High Court considered whether the assessment under Section 143(3) could be justified without the mandatory notice under Section 143(2) of the Income Tax Act. Citing previous judgments, including Commissioner of Income Tax v. Hotel Bluemoon (321 ITR 362) and Sapthagiri Finance & Investments v. Income Tax Officer, the Court held that the notice under Section 143(2) is indeed mandatory. Relying on these precedents, the Court set aside the Tribunal's order and ruled in favor of the assessee, allowing the tax case appeal.

Issue 3: Upholding additions due to discrepancies in income and assets
The Tribunal had upheld additions in the assessment due to discrepancies between the income and assets declared in the return of income and those in the books of accounts. However, the High Court's decision to set aside the Tribunal's order in light of the mandatory notice under Section 143(2) also impacted the issue of upholding these additions. The Court's ruling in favor of the assessee and against the Revenue resulted in the tax case appeal being allowed with no costs incurred.