2020 (10) TMI 1359 - AT - Income Tax

Reopening of assessment u/s 147 - legal necessity to issue notice u/s 143(2) - DR submitted that where the return of income has not been filed and the best judgment order has been U/s 144 of the Act, there is no legal necessity to issue notice U/s 143(2) - HELD THAT - In the instant case, the Assessing officer has not taken cognizance of the return of income so filed by the assessee on 12.12.2018 stating that such a return of income has been filed beyond the stipulated time frame of thirty days as specified in the notice u/s 148 for filing such return of income. In our view, such a return of income even though filed belatedly would still qualify as return furnished under section 139 of the Act and should therefore be taken cognizance of by the Assessing officer. Even where it is held that no return of income has been filed in response to notice u/s 148, the return of income so filed on 12.12.2018 shall be taken as return filed in response to notice u/s 142(1) dated 11.12.2018 and therefore, in either case, the return of income has to be taken cognizance of by the Assessing officer. Where the return of income has been filed u/s 139 or in response to notice u/s 142(1), where the Assessing officer finds that there are certain matters which require explanation by the assessee, then in such cases, he has to comply with the provisions of section 143(2). The assessee by filing the return of income and not claiming the carry forward of losses pertaining to A.Y 2005-06 has admitted to the wrong claim made and assessed earlier. Thereafter, there assessment has been completed u/s 147 where the only finding of the A.O is that only losses for A.Y 2013-14, and not of any earlier years, can be carried forward accepting the very position taken by the assessee in the return so filed on 12.12.2018. Therefore, in the facts of the present case, where the return filed by the assessee has been accepted and the reassessment order has been passed u/s 147accepting the returned income and there is no variation or addition made by the Assessing officer to the returned income, we do not see any necessity for the Assessing Officer to call for the explanation from the assessee and for the purposes, issue notice u/s 143(2) of the Act. Thus where the reassessment order has been passed u/s 147 accepting the returned income, we don t see any infirmity in the order so passed in absence of notice u/s 143(2) of the Act as there is no legal necessity as so envisaged as applicable in the facts of the present case and the same is hereby affirmed. In the result, sole ground of appeal is dismissed.

Summary

Issues involved:
1. Validity of assessment completed under sections 147/148 without considering return filed and notice u/s 143(2).
2. Legality of initiating proceedings under sections 147/148 without new tangible material.
3. Necessity of issuing notice u/s 143(2) for completing reassessment under sections 144/147/143(3).

Analysis:
1. The appeal was filed against the CIT(A)'s order pertaining to the assessment year 2013-14. The AO completed the assessment under sections 148/143(3) without considering the return filed and notice u/s 143(2) within the specified period. The appellant contended that the notice u/s 148 was based on a change of opinion, which is impermissible. The AO passed a best judgment assessment under sections 144 r.w.s. 143(3)/147, allowing only the current year loss to be carried forward. The CIT(A) found no substantive grievance as the appellant's claim aligned with the assessment. The issue of notice u/s 143(2) was raised during the hearing, arguing that the reassessment was invalid without its issuance.

2. The appellant argued that the reassessment under sections 144/147/143(3) was completed without the issuance of notice u/s 143(2), rendering it invalid and bad in law. The dispute centered on whether the failure to issue notice u/s 143(2) affected the validity of the reassessment. The contention was supported by a decision of the Rajasthan High Court.

3. The Tribunal analyzed the legal necessity of issuing notice u/s 143(2) in the context of the return filed by the assessee. It was established that the return claimed losses only for the relevant assessment year and not for any earlier years. The Tribunal concluded that since the assessment was completed accepting the returned income without any variation or addition, there was no requirement for the AO to issue notice u/s 143(2). A precedent case was cited to distinguish the necessity of issuing notice u/s 143(2) based on the circumstances of the case.

In conclusion, the Tribunal dismissed the appeal, affirming the validity of the reassessment order under sections 147/148 without the issuance of notice u/s 143(2) due to the acceptance of the returned income without any additions or variations.