2017 (1) TMI 1649 - AT - Income Tax

Reopening of assessment u/s 147 - defects in issuance of notice u/s.143(2) - Addition received from Excellent 2 Publicities as undisclosed income - No return was filed even belatedly within the time limit provided u/s.139(4) - admission of additional ground - HELD THAT - Admittedly, there is no dispute that no notice u/s.143(2) was issued to the assessee and without issuing notice u/s.143(2) of the Act, the case was posted for hearing on various occasion mentioned in earlier para, assessment was completed. Admittedly, the issue relating to non issue of notice u/s.143(2) of the Act was first time raised before this Tribunal and the CIT(A) has no occasion to consider this ground. In our opinion, it is appropriate to remit this ground for the decision of CIT(A) and thereafter to decide the other issue raised by the assessee afresh, if required. Accordingly, placing reliance on the judgement of Supreme Court in the case of NATIONAL THERMAL POWER CO. LTD. Vs. CIT 1996 (12) TMI 7 - SUPREME COURT we admit the additional ground and remit the same to the file of CIT(A) for his consideration. AT this stage, we refrain from going into other grounds raised by the assessee before us at this level. Appeals of the assessee are partly allowed statistical purposes.

Summary

Issues Involved:
1. Sustenance of addition of ?5,00,000/- as undisclosed income.
2. Validity of the assessment order due to non-issuance of mandatory notice u/s.143(2).
3. Time-barred nature of the appeal and assessment.
4. Legitimacy of substantive additions amounting to ?9,09,81,425/-.

Detailed Analysis:

Issue 1: Sustenance of Addition of ?5,00,000/- as Undisclosed Income

The assessee contested the addition of ?5,00,000/- received from Excellent 2 Publicities as undisclosed income. The assessee claimed that the amount was received for advertisement services rendered, supported by a confirmatory letter from Excellent 2 Publicities. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] did not accept this explanation, citing a lack of documentary evidence and the non-traceability of the involved parties, M/s. Unique Communications and M/s. Tara Creations. The Tribunal noted the persistent non-compliance by the assessee and the absence of contemporaneous evidence. However, in the interest of justice, the Tribunal decided to allow the assessee another opportunity to provide necessary evidence to substantiate the claim. If the assessee can prove the receipt of the amount through Excellent 2 Publicities, the addition should be reconsidered.

Issue 2: Validity of the Assessment Order Due to Non-Issuance of Mandatory Notice u/s.143(2)

The assessee argued that the assessment was invalid due to the non-issuance of a mandatory notice u/s.143(2). The Tribunal acknowledged that this issue was raised for the first time and had not been considered by the CIT(A). The Tribunal admitted the additional ground and remitted the issue back to the CIT(A) for consideration. The Tribunal refrained from addressing other grounds until the CIT(A) had an opportunity to review this procedural aspect.

Issue 3: Time-Barred Nature of the Appeal and Assessment

The assessee contended that the appeal was not time-barred and that the assessment was barred by limitation. The CIT(A) had dismissed the appeal on grounds of limitation, but the Tribunal noted that the CIT(A) had not provided the assessee an opportunity to explain any delay. The Tribunal also considered the argument that the assessment was time-barred, as the CIT(A)'s order setting aside the assessment did not include a specific direction to redo the assessment. The Tribunal remitted this issue for reconsideration by the CIT(A), emphasizing the need for a thorough review of the procedural aspects and the timeline.

Issue 4: Legitimacy of Substantive Additions Amounting to ?9,09,81,425/-

The CIT(A) had set aside the original assessment and directed the AO to reconsider substantive additions totaling ?9,09,81,425/-. The Tribunal reviewed the procedural history, including the issuance of summons and the non-traceability of parties. The AO's reliance on seized documents and the lack of cooperation from the assessee were noted. The Tribunal found that the CIT(A) had provided an opportunity for the assessee to explain the additions, but the assessee failed to present satisfactory evidence. The Tribunal upheld the need for the assessee to substantiate its claims but remitted the issue to the CIT(A) for further consideration in light of the procedural irregularities raised.

Conclusion:

The Tribunal's judgment provided a balanced approach, allowing the assessee another opportunity to present evidence while emphasizing the importance of procedural compliance. The case was remitted to the CIT(A) for reconsideration of the additional ground regarding the non-issuance of notice u/s.143(2) and other related issues. The Tribunal's decision underscored the need for thorough procedural adherence and the fair opportunity for the assessee to substantiate its claims.