2019 (10) TMI 1588 - AT - Income Tax

Validity of reopening of assessment u/s 147 - absence of issuance of notice u/s 143 - whether curable defect u/s 292BB - HELD THAT - The provision of section 292-BB of the Act nowhere talks about the issuance of notice. Thus, where the statutory notice has not been issued by the income tax authorities, then the question of acquiring the jurisdiction in the proceedings initiated u/s 147 does not arise. In this regard, we find support and guidance from the judgment in the case of Marck Bioscinces Ltd 2019 (4) TMI 215 - GUJARAT HIGH COURT . DR, appeared on behalf of the revenue, has not brought anything on record contrary to the arguments advanced by assessee. We hold that the assessment framed under section 147 of the Act without issuing notice u/s 143(2) of the Act is not sustainable. Accordingly, we quash the same. Hence, the ground raised by the assessee in the CO is allowed. Validity of penalties u/s 271D and 271E when the assessment itself is invalid - HELD THAT - The answer stands in favor of the assessee as there was no proceeding under the Act. The question of the penalty does not arise in the proceedings of the assessment which has been held invalid in the present case. In this regard we draw the support and the guidance from the judgment of Standard Brands Limited 2006 (7) TMI 126 - DELHI HIGH COURT We hold that as the assessment itself has been held as invalid and therefore the penalty arising in such assessment are not sustainable. Accordingly, we are of the view the appeals filed by the Revenue are not maintainable.

Summary

Issues Involved:
1. Condonation of delay in filing the Cross Objection (CO).
2. Validity of proceedings u/s 147 based on information from the Investigation Wing.
3. Requirement of notice u/s 143(2) for reassessment proceedings.
4. Validity of penalties u/s 271D and 271E when the assessment itself is invalid.

Summary:

Condonation of Delay in Filing CO:
The assessee filed the CO with a delay of 785 days, citing a bona fide mistake and the closure of company operations. The Tribunal, referencing various High Court and Supreme Court judgments, emphasized the principle of advancing substantial justice over technicalities. The Tribunal condoned the delay, noting no objection from the Revenue and proceeded to adjudicate the issue on merit.

Validity of Proceedings u/s 147:
The assessee initially challenged the initiation of proceedings u/s 147 based on information from the Investigation Wing but later did not press this ground. Consequently, the Tribunal dismissed this ground as not pressed.

Requirement of Notice u/s 143(2):
The assessee contended that the assessment framed u/s 143(3) r.w.s 147 was invalid due to the non-issuance of notice u/s 143(2). The Tribunal, referencing the Gujarat High Court judgment in PCIT vs. Marck Biosciences Ltd and other precedents, held that the issuance of notice u/s 143(2) is mandatory for reassessment proceedings. The absence of such notice renders the proceedings void ab initio and cannot be cured under section 292BB. The Tribunal quashed the assessment framed u/s 147 due to the non-issuance of notice u/s 143(2).

Validity of Penalties u/s 271D and 271E:
The Tribunal addressed whether penalties for contravention of sections 269SS and 269T could be levied when the assessment itself is invalid. Citing the Delhi High Court judgment in CIT vs. Standard Brands Limited, the Tribunal held that penalties cannot be sustained if the underlying assessment is invalid. Consequently, the appeals filed by the Revenue regarding penalties were dismissed.

Conclusion:
The CO of the assessee was partly allowed, and all appeals filed by the Revenue were dismissed. The Tribunal emphasized substantial justice over technical defects, quashing the reassessment due to the non-issuance of notice u/s 143(2) and invalidating the penalties arising from such assessment.