2016 (7) TMI 3 - AT - Income Tax

Reopening of assessment - Held that - We quash the entire reassessment proceedings by holding that the non-issuance of the statutory notice u/s 143(2) in the instant case is an incurable defect and therefore the entire reassessment proceedings were bad in law and void ab initio. - Decided in favour of assessee

Summary

Issues Involved:
1. Non-issuance of notice under Section 143(2) of the Income Tax Act, 1961.
2. Validity of reassessment proceedings.

Issue-wise Detailed Analysis:

1. Non-issuance of Notice under Section 143(2):
The primary issue in this appeal is the non-issuance of notice under Section 143(2) of the Income Tax Act, 1961, after the issuance of notice under Section 148. The assessee contended that the omission to issue this notice is not a mere procedural irregularity but a jurisdictional defect, rendering the assessment order void ab initio. The First Appellate Authority, relying on the Delhi High Court's judgment in Madhya Bharat Corporation Ltd., held that the non-issuance did not invalidate the assessment.

However, the assessee argued that this judgment had been reversed in a review petition and cited the Delhi High Court's decision in Pr. CIT vs Shri Jay Shankar Traders (P) Ltd., which mandates the issuance of notice under Section 143(2) for reassessment proceedings to be valid. The Tribunal noted that the Department did not dispute the non-issuance of the notice. The Tribunal referred to the Delhi High Court's detailed analysis in Pr. CIT vs Shri Jai Shiv Shankar Traders Pvt. Ltd., which emphasized that the failure to issue a notice under Section 143(2) post the filing of a return in response to a Section 148 notice is a fatal flaw, rendering the reassessment invalid.

2. Validity of Reassessment Proceedings:
The Tribunal examined the interplay between Sections 143(2) and 148, noting that various High Courts, including the Allahabad High Court in CIT v. Rajeev Sharma and CIT v. Salarpur Cold Storage (P.) Ltd., have held that the issuance of notice under Section 143(2) is mandatory and not a procedural formality. The Tribunal also cited the Supreme Court's decision in ACIT v. Hotel Blue Moon, which underscored that non-issuance of this notice is not curable and invalidates the reassessment.

The Tribunal concluded that the non-issuance of the statutory notice under Section 143(2) in this case was an incurable defect, rendering the entire reassessment proceedings bad in law and void ab initio. Consequently, the Tribunal quashed the reassessment proceedings and allowed ground no. 5 of the assessee's appeal, rendering the other grounds infructuous.

Conclusion:
The Tribunal, following the binding precedent of the Delhi High Court, quashed the reassessment proceedings due to the non-issuance of notice under Section 143(2), thus allowing the assessee's appeal in part. The order was pronounced on 29th April 2016.