2019 (7) TMI 1952 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Bogus purchases - assessee s contention that no notice was issued u/s. 143(2) - HELD THAT - The assessee did not file fresh return of income in response to notice u/s. 148 of the Act and the assessment was completed without issuing notice u/s.143(2) of the Act. See MS. MALVIKA ARUN SOMAIYA 2008 (9) TMI 947 - BOMBAY HIGH COURT In view of the above discussion and the judicial pronouncements hold that in the absence of issue and service of notice u/s. 143(2) of the Act, the reassessment made by the Assessing Officer u/s. 143(3) r.w.s. 147 of the Act is void ab-initio and is a nullity. Thus, the reassessment order is quashed. - Decided in favour of assessee.

Summary

Issues Involved
1. Validity of the reassessment order under section 143(3) read with section 147 of the Income Tax Act.
2. Requirement of issuing notice under section 143(2) of the Income Tax Act.
3. Application of section 292BB of the Income Tax Act.

Detailed Analysis

1. Validity of the Reassessment Order
The assessee challenged the validity of the reassessment orders for the assessment years (A.Ys) 2009-10 and 2010-11, arguing that the reassessment orders made under section 147 of the Income Tax Act were invalid due to the absence of a notice issued under section 143(2). The assessee had filed returns originally, which were later processed under section 143(1). Subsequently, the assessments were reopened, and notices under section 148 were issued. The assessee responded by requesting that the original returns be treated as filed in response to the notices under section 148. The Learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)] upheld the validity of the reassessment orders, relying on the decision in Chawara Educational Trust v. ITO, stating that the returns filed were non-est in the eyes of the law since no fresh returns were filed in response to the notices under section 148.

2. Requirement of Issuing Notice Under Section 143(2)
The core issue was whether the absence of a notice under section 143(2) invalidated the reassessment proceedings. The assessee argued that the reassessment was bad in law without such a notice, citing several judicial precedents, including ACIT v. Hotel Blue Moon, ACIT v. Geno Pharmaceuticals Ltd., and CIT v. Panaroma Builders Pvt. Ltd. The Tribunal noted that the Ld.CIT(A) did not accept the assessee's contention because the assessee did not file fresh returns in response to the notices under section 148 and only submitted a letter requesting the original returns be treated as such. The Tribunal emphasized that no evidence was produced to show that a notice under section 143(2) was issued and served before the completion of the reassessment.

In ACIT v. Hotel Blue Moon, the Supreme Court held that the issuance of a notice under section 143(2) is mandatory, and its omission cannot be considered a procedural irregularity. The Bombay High Court in ACIT v. Geno Pharmaceuticals Ltd. affirmed this view, stating that the absence of such a notice renders the reassessment invalid. Similarly, the Delhi High Court in Pr.CIT v. Silver Line and the Calcutta High Court in Pr.CIT v. Oberoi Hotels Pvt. Ltd. held that the failure to issue a notice under section 143(2) invalidates the reassessment proceedings.

3. Application of Section 292BB
The Tribunal also examined the applicability of section 292BB, which deems that any notice required to be served upon the assessee is duly served if the assessee has appeared in any proceeding or cooperated in any inquiry. However, judicial precedents, including CIT v. Panaroma Builders Pvt. Ltd., clarified that section 292BB does not cure the defect of non-issuance of a mandatory notice under section 143(2). The Tribunal noted that section 292BB is a rule of evidence and does not dispense with the mandatory requirement of issuing such a notice, which is jurisdictional.

The Tribunal referred to various judgments, including CIT v. Salarpur Cold Storage Pvt. Ltd. and M/s. Tiny Girl Clothing Company Pvt. Ltd. v. DCIT, which reiterated that the issuance of a notice under section 143(2) within the prescribed period is essential for the validity of the reassessment. The Tribunal concluded that the failure to issue and serve a notice under section 143(2) before the reassessment renders the proceedings void ab initio and a nullity.

Conclusion
The Tribunal quashed the reassessment orders for the A.Ys 2009-10 and 2010-11, holding that the absence of a notice under section 143(2) invalidated the reassessment proceedings. The Tribunal did not adjudicate the merits of the additions made in the reassessment, as they became academic due to the invalidation of the reassessment orders. The appeal of the assessee was partly allowed.