2015 (7) TMI 283 - AT - Income Tax

Reopening of assessment - absence of notice u/s 143(2) issued while making the impugned assessment under section 143(3) r.w.s 147 - Held that - The entire material on record does not establish that any notice u/s 143(2) of the Act was issued while completing the impugned assessment. In fact, leave alone any proof of issuance of notice u/s 143(2), Revenue has not even asserted that the requisite notice u/s 143(2) was issued while making the impugned assessment. Therefore, factually speaking, one has to proceed on the basis that no notice u/s 143(2) had been issued while making assessment u/s 143(3), r.w.s 147 of the Act. Thus, in the above factual background, considering the ratio of the judgment of the Hon ble Bombay High Court in the case of Geno Pharmaceuticals Ltd. (2013 (10) TMI 218 - BOMBAY HIGH COURT) the impugned assessment order is non-maintainable in law. We hold so. - Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment proceedings due to lack of notice u/s 143(2) before completion of assessment.
2. Challenge to addition of income based on retracted statement during survey.
3. Dismissal of additional grounds raised by assessee challenging notice u/s 148.
4. Cross objection on the validity of assessment proceedings under section 143(3) r.w.s 147 of the Income Tax Act, 1961.

Analysis:

Issue 1: Validity of assessment proceedings due to lack of notice u/s 143(2):
The appeal involved the question of the mandatory issuance of notice u/s 143(2) before completing an assessment under section 143(3) r.w.s 147 of the Income Tax Act. The Tribunal emphasized that the absence of such a notice renders the assessment order bad-in-law and non est. Citing various legal precedents, including the judgment of the Hon'ble Bombay High Court in ACIT Vs. Geno Pharmaceuticals Ltd, it was established that the notice u/s 143(2) is a prerequisite for conducting an assessment. The Revenue failed to provide evidence of issuing such a notice, leading to the conclusion that the assessment was non-maintainable in law.

Issue 2: Challenge to addition of income based on retracted statement during survey:
The case revolved around the addition of income amounting to Rs. 21,90,750 based on a statement made during a survey, which the assessee later retracted. The Assessing Officer contended that the retraction lacked supporting evidence and proceeded to add the amount to the returned income. However, the CIT(A) ruled in favor of the assessee, stating that the addition could not be sustained solely on the basis of the statement without corroborative material. The Tribunal upheld this decision, emphasizing the importance of supporting evidence in such cases.

Issue 3: Dismissal of additional grounds challenging notice u/s 148:
The assessee had raised additional grounds challenging the notice issued under section 148, contending that the action of the Assessing Officer was improper. However, the CIT(A) dismissed these grounds as not pressed. The Tribunal noted that while these grounds were not pursued before the CIT(A), their dismissal did not impact the ultimate decision to delete the addition made during the assessment, resulting in the restoration of the income as per the return.

Issue 4: Cross objection on the validity of assessment proceedings:
The Cross Objection filed by the assessee, though belated, raised concerns about the validity of the assessment proceedings under section 143(3) r.w.s 147 of the Act. The Tribunal, after considering the delay in filing the objection and the legal principles involved, admitted the objection for adjudication. The Tribunal found merit in the objection, leading to the allowance of the Cross Objection. This decision rendered the Revenue's appeal on the addition to the returned income moot and resulted in the dismissal of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the Cross Objection filed by the assessee, primarily due to the non-maintainability of the assessment order without the issuance of notice u/s 143(2) and the validity concerns raised by the assessee. The judgment highlighted the significance of procedural adherence and supporting evidence in income tax assessments.