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2018 (12) TMI 1754 - AT - Income TaxValidity of re-assessment passed under section 143(3) read with section 147 without issuing notice under section 143(2) - HELD THAT - Requirement of notice u/s143(2) of the Act is a mandatory condition and cannot be dispensed with. It was also held that the omission on the part of the AO to issue notice under section 143(2) cannot be a procedural irregularity and same is not curable. D/R has contended that the assessee has participated in the assessment proceedings and did not raise any objection. Therefore, once the assessee has submitted to the jurisdiction of the AO, then it cannot raise objection at this stage. We do not agree with this contention of the ld. D/R because in the case in hand what is absent is the issuance of notice under section 143(2) and not the service of the notice issued by the AO is disputed by the assessee. Only in the case where the notice issued under section 143(2) was disputed by the assessee on the point of service of the said notice but the fact of issuance of notice is already available on record, in such a case if the assessee has participated in the assessment proceedings in response to the notice u/s143(2), then subsequently the assessee cannot take the objection of notice issued u/s 143(2) was not properly served on the assessee. Since it is a case of non-issuance of notice under section 143(2), therefore, the initiation of scrutiny proceedings itself was without jurisdiction conferred by the provisions of section 143 - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act, 1961. 2. Disallowance of the claim of depreciation on Plant and Machinery. 3. Additional ground regarding the completion of assessment under section 147 without issuing notice under section 143(2). Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147: The assessee challenged the reassessment proceedings initiated by the Assessing Officer (AO) under section 147, claiming it was illegal, unjustified, arbitrary, and against the facts of the case. The assessee sought relief by quashing the reassessment proceedings. 2. Disallowance of Depreciation on Plant and Machinery: The assessee contested the disallowance of ?8,04,524/- claimed as depreciation on Plant and Machinery. The assessee argued that the action of the CIT (A) in confirming the AO’s decision was illegal, unjustified, and contrary to the facts of the case. The assessee requested the quashing of this disallowance. 3. Additional Ground Regarding Notice under Section 143(2): The assessee raised an additional ground, arguing that the AO erred in completing the assessment under section 147 without issuing a notice under section 143(2). The assessee contended that this action was illegal, unjustified, arbitrary, and against the facts of the case, and sought the quashing of the entire reassessment proceedings. Decision on Additional Ground: The Tribunal first addressed the additional ground, as it was legal in nature and went to the root of the matter. The Tribunal admitted the additional ground for adjudication, citing the Supreme Court decision in NTPC vs. CIT, which allows legal issues to be raised before the Tribunal if all relevant facts are on record. Validity of Reassessment for Want of Jurisdiction under Section 143(2): The Tribunal examined whether the AO issued a notice under section 143(2) before completing the reassessment. The assessee argued that the reassessment was invalid due to the lack of such a notice, citing the Supreme Court decision in ACIT vs. Hotel Blue Moon, which held that the issuance of a notice under section 143(2) is mandatory and not a procedural irregularity. The Department's Representative (D/R) contended that since the assessee did not file a fresh return in response to the notice under section 148 but requested that the original return be treated as such, there was no need for a notice under section 143(2). The D/R also argued that the assessee, having participated in the reassessment proceedings, could not raise this objection at a later stage. The Tribunal found that no notice under section 143(2) was issued by the AO during the reassessment proceedings. The Tribunal emphasized that the issuance of such a notice is a jurisdictional condition, and its absence renders the reassessment order invalid. The Tribunal referenced the Supreme Court decision in Hotel Blue Moon and the Kerala High Court decision in Travancore Diagnostics Pvt. Ltd. vs. ACIT, which reinforced the mandatory nature of the notice under section 143(2). Conclusion: The Tribunal quashed the reassessment order due to the AO's failure to issue a notice under section 143(2), rendering the reassessment proceedings invalid. Consequently, the other grounds raised by the assessee became infructuous and were not addressed. Result: The appeal of the assessee was allowed, and the reassessment order was quashed. The decision was pronounced in the open court on 19/12/2018.
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