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2015 (11) TMI 809 - HC - Income TaxReopening of assessment - non issue of notice - Held that - With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143(2) of the Act, the ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable. - Decided in favour of assessee.
Issues Involved:
1. Whether the failure by the Assessing Officer (AO) to issue a notice under Section 143(2) of the Income Tax Act, 1961 is fatal to the reassessment proceedings under Sections 147/148 of the Act. 2. Whether the Assessee was precluded from raising the point concerning the non-issuance of notice under Section 143(2) of the Act at the stage of proceedings before the Income Tax Appellate Tribunal (ITAT) in terms of the proviso to Section 292BB of the Act. 3. Whether Section 292BB of the Act, introduced with effect from 1st April 2008, applies retrospectively to the Assessment Years (AYs) 2005-06, 2006-07, and 2007-08. 4. Whether the ITAT was correct in permitting the Assessee to raise the point concerning the non-issuance of notice under Section 143(2) of the Act for the first time in the appeal before the ITAT. 5. Whether the reassessment orders passed without issuing a notice under Section 143(2) of the Act are legally unsustainable. Issue-wise Detailed Analysis: 1. Failure to Issue Notice under Section 143(2): The central issue was whether the failure by the AO to issue a notice under Section 143(2) of the Act is fatal to the reassessment proceedings under Sections 147/148 of the Act. The court noted that the issuance of a notice under Section 143(2) is a jurisdictional requirement that cannot be dispensed with. The court held that the reassessment orders in question were legally unsustainable due to the AO's failure to issue the mandatory notice under Section 143(2). 2. Preclusion from Raising the Point under Section 292BB: The Revenue argued that the Assessee was precluded from raising the point concerning the non-issuance of notice under Section 143(2) due to the proviso to Section 292BB of the Act. The court clarified that Section 292BB is a rule of evidence that validates service of notice in certain circumstances and does not dispense with the mandatory requirement of issuance of notice under Section 143(2). The court held that the Assessee was not precluded from raising this jurisdictional issue at the ITAT stage. 3. Retrospective Application of Section 292BB: The court found merit in the Assessee's contention that Section 292BB, introduced with effect from 1st April 2008, does not apply retrospectively to AYs 2005-06 to 2007-08. The court cited precedents to support the view that Section 292BB is prospective in its application, thus not applicable to the AYs in question. 4. Permitting the Assessee to Raise the Point at ITAT: The court upheld the ITAT's decision to permit the Assessee to raise the point concerning the non-issuance of notice under Section 143(2) for the first time in the appeal. The court reasoned that the requirement of issuance of such notice is a jurisdictional one, and it goes to the root of the matter. The court cited Supreme Court and High Court precedents to support the view that such a point could be raised at the ITAT stage as it involves a pure question of law. 5. Legality of Reassessment Orders without Notice under Section 143(2): The court reiterated the legal position that a reassessment order cannot be passed without compliance with the mandatory requirement of issuing a notice under Section 143(2). The court cited various judgments to support this view and concluded that the reassessment orders in question were legally unsustainable due to the AO's failure to issue the mandatory notice. Conclusion: The court dismissed the appeals, holding that no substantial question of law arises for determination. The reassessment orders were deemed legally unsustainable due to the AO's failure to issue the mandatory notice under Section 143(2) of the Act. The court upheld the ITAT's decision, affirming the jurisdictional requirement of issuing a notice under Section 143(2) before finalizing reassessment orders.
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