2017 (3) TMI 436 - AT - Income Tax

Validity of reopening of assessment - Held that - Notice u/s 143(2) of the I.T. was never issued. Thus since the AO did not issue notice u/s 143(2) of the IT Act,1961 which is a compulsory requirement of the statute, the impugned order u/s 147 deserves to be invalidated - Decided in favour of assessee

Summary

Issues Involved:
Appeal against order passed by Ld. CIT(A) annulling the order passed u/s. 147/143(3) of the Act due to non-issuance of notice u/s. 143(2) of the Act.

Analysis:
1. The Revenue's appeal challenged the Ld. CIT(A)'s decision annulling the order passed u/s. 147/143(3) of the Act. The appeal contended that the Ld. CIT(A) erred in deleting an addition of ?40,00,000 made by the AO due to unexplained entries u/s. 68 of the Act. The Revenue reserved the right to amend or modify the grounds of appeal during the hearing.
2. The Assessee's Cross Objection responded to the departmental appeal filed by the ITO for AY 2005-06. The Assessee argued that the Ld. CIT(A) only addressed the issue of non-issuance of notice u/s. 143(2) of the I.T. Act and failed to consider other grounds raised by the Assessee. The Assessee contended that the AO's order dated 20.3.2013 was illegal and unsustainable as notice u/s. 148 was not served, reasons were not recorded, and statutory requirements were not met. The Assessee further argued against the addition of ?40 lacs made by the AO, stating it was impermissible and rightly annulled by the CIT(A).
3. The factual background revealed that the assessee initially declared income of ?38,220 and later came under scrutiny for being a beneficiary of accommodation entries. The AO added unexplained amounts to the assessee's income, leading to an assessment of ?40,38,220 u/s. 147/143(3) of the I.T. Act, 1961. The Ld. CIT(A) allowed the Assessee's appeal against this assessment order.
4. During the hearing, the Revenue relied on the AO's order and requested the Tribunal to allow the Revenue's appeal. Conversely, the Assessee's counsel supported the Ld. CIT(A)'s order, arguing it was well-reasoned and should be upheld. The Tribunal heard both parties and examined the records, particularly the Ld. CIT(A)'s order.
5. The Tribunal noted that the Ld. CIT(A) based the appeal decision on the legal issue of non-service of notice u/s. 143(2) of the I.T. Act. The Tribunal referenced the Jurisdictional High Court's decision in a similar case to support the annulment of the order u/s. 147 due to non-compliance with the mandatory notice requirement. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the legal unsustainability of the impugned order u/s. 147.
6. Consequently, the Tribunal dismissed the Revenue's appeal and the Assessee's Cross Objection as the grounds raised by the Assessee became infructuous post the dismissal of the Revenue's appeal. The Tribunal upheld the Ld. CIT(A)'s decision annulling the order u/s. 147/143(3) of the Act, leading to the dismissal of both appeals.