2015 (1) TMI 1387 - AT - Income Tax

Validity of notice - legality of notice - legality of AO wants us to treat us the assessment completed u/s.148 as assessment finalized u/s.153A - mistake/defect or omission - Held that - Both the sections deal with different situations and notice issued under one section cannot be treated notice under another section nor can be assessment made under a particular section can be treated as finalised under another section. Section 147-148 deal with re-assessing of income for a particular AY. that escapes taxation because of the failure of the assessee or othrerwise. Section 153A deals with the matters where action has been taken u/s.132 or 132A of the Act. Each and every section of the Act has been included in the statue with a specific intention and purpose. Legislature in its wisdom has introduced various section to regulate the tax collection. So to assume that one section is re-placable by another is not a logical or legal conclusion. Each section each phrase and each word of the Act has its own place and importance. If an AO commits a mistake while passing assessment orders it cannot be cured by relying upon any other section because such a mistake is not a clerical mistake-it relates to jurisdiction. The mistake/defect or omission in notices issued by the AO u/s.148 instead of section 153A is not in conformity with /according to the intent and purpose of the Act. Jurisdictional issues cannot fall in the category of clerical mistakes-they go the roots of the assessment. Orders passed by the AO for the AY.1999-2000, 2001-01, 2001-02 are not valid. As far as the assessment of AY.2004-05 it is found that the AO had issued notice u/s.143(2) and before completing the original assessment had issue a notice u/s.148 of the Act. We cannot comprehend as how can an AO issue a notice for reassessing escaped income during the pendency of the assessment itself. The chronological events discussed in earlier clearly show that the AO had issued notice u/s.148 for that year on 20.02.2006 and the assessment was completed on 29.12.2006.Besides he has issued notice u/s.143(2)on 17.2.2005. The assessment order for the AY.2004-05 was invalid.

Issues Involved:
1. Opportunity of being heard.
2. Proper service of notices under Sections 148 and 142(1).
3. Status of the appellant as a Resident or Non-Resident.
4. Allowance of expenses.
5. Addition of unexplained investments.
6. Verification of Fixed Deposits (FDs) in the name of the appellant's daughter.
7. Validity of reopening the assessment under Section 148 without proper sanction.
8. Validity of assessment proceedings under Section 147 during the pendency of assessment under Section 143(3).
9. Applicability of Section 292B to cure jurisdictional defects.

Detailed Analysis:

1. Opportunity of Being Heard:
The appellant contended that the assessment was passed without giving an opportunity to be heard. The tribunal noted that the CIT(A) erred in rejecting this ground by ignoring the facts stated in the statement of facts. The tribunal emphasized the importance of providing a fair hearing to the assessee before passing any assessment order.

2. Proper Service of Notices:
The appellant argued that notices under Sections 148 and 142(1) were not properly served. The tribunal found that the CIT(A) erred in holding that the notices were properly served and confirmed the additions without giving the appellant a proper opportunity to be heard. The tribunal highlighted the necessity of proper service of notices to ensure the legality of the assessment proceedings.

3. Status of the Appellant as Resident or Non-Resident:
The appellant claimed the status of Non-Resident, while the CIT(A) confirmed the status as Resident without sufficient evidence. The tribunal found that the CIT(A) erred in confirming the appellant's status as Resident for the relevant assessment years without adequate proof from the Assessing Officer (AO).

4. Allowance of Expenses:
The CIT(A) allowed only 10% of the expenses claimed by the appellant, which included significant depreciation expenses. The tribunal found that the CIT(A) erred in not allowing the full expenses claimed by the appellant, thus affecting the assessed income.

5. Addition of Unexplained Investments:
The appellant contested the addition of certain amounts as unexplained investments, arguing that these were renewals of old FDs. The tribunal found that the CIT(A) erred in confirming these additions without considering the appellant's explanation and evidence regarding the renewals.

6. Verification of FDs in the Name of Appellant's Daughter:
The CIT(A) directed the AO to verify the FDs in the name of the appellant's daughter. The tribunal noted that the appellant had already provided proof that the FDs stood in the name of the daughter, which was ignored by both the AO and the CIT(A).

7. Validity of Reopening the Assessment under Section 148:
The appellant argued that the reopening of the assessment by issuing notice under Section 148 was invalid as it was done without the sanction of the CIT/CCIT, especially since the notice was issued beyond four years. The tribunal found that the AO did not obtain the necessary sanction, making the reopening invalid. The tribunal emphasized that jurisdictional defects cannot be cured under Section 292B.

8. Validity of Assessment Proceedings under Section 147 During Pendency of Assessment under Section 143(3):
For the assessment year 2004-05, the AO issued a notice under Section 147 during the pendency of the assessment proceedings under Section 143(3). The tribunal found this action incomprehensible and invalidated the assessment order for that year.

9. Applicability of Section 292B to Cure Jurisdictional Defects:
The tribunal discussed the scope of Section 292B, which allows for the curing of technical defects but not jurisdictional defects. The tribunal concluded that the provisions of Section 292B could not be invoked to treat assessments completed under Section 148 as those under Section 153A. The tribunal emphasized that each section of the Income Tax Act has a specific purpose, and jurisdictional errors cannot be rectified under Section 292B.

Conclusion:
The tribunal allowed the appeals filed by the assessee, invalidated the assessment orders for the relevant years, and dismissed the cross-objections raised by the AO. The tribunal highlighted the importance of following proper legal procedures, providing opportunities for being heard, and obtaining necessary sanctions to ensure the validity of assessment proceedings.

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