2017 (8) TMI 724 - HC - Income Tax

Reopening of assessment - omission to mention Section 143(2) literally in any one of the notices issued to the assessee - invalidation of the assessment order - Held that - The procedure under Section 143(2) is intended to ensure that an adverse order is passed against the assessee only after affording the assessee a proper opportunity. Therefore, the question to be considered is whether the assessee in this case had such an opportunity. It is in this context, the notices that were issued to the assessee assumes importance. Reading of the reasons recorded and communicated to the assessee, Annexure E notice posting the case, and Annexure I notice, show that the assessee was put on notice the inadmissibility of the reduction from the total income made by it and the assessee by its Annexure C objections, F reply and the reply filed by it to Annexure I notice had justified the deduction made by it. Further before Annexure K assessment order was passed, the assessee was afforded an opportunity of hearing also. Evidently, therefore, the assessee had ample notice of the case it had to answer and the assessee availed of those opportunities by answering the case against it. In such a situation, we are not prepared to think that there was absence of notice under Section 143(2) or that any prejudice was caused to the assessee in defending the case against it. We are not, therefore, prepared to think that the assessment order is invalid on the ground contended by the assessee. - Decided in favour of the Revenue and against the assessee

Summary

Issues:
Assessment order validity without Section 143(2) notice.

Analysis:
The appeal challenges the Income Tax Appellate Tribunal's order for the assessment year 2005-2006, where the assessee's net profit was reduced by ?81,47,859 in the agricultural income, leading to the assessment being reopened under Section 148. The key issue revolved around whether the assessment completed without issuing notice under Section 143(2) is valid. The assessee relied on legal precedents like Assistant CIT v. Hotel Blue Moon and Travancore Diagnostics (P) Limited v. Assistant Commissioner of Income Tax to support their contention.

The facts revealed that the assessment under Section 143(1) was initially completed, then sought to be reopened due to the reduction in agricultural income from the net profit. The Assessing Officer communicated reasons for the reassessment, and the assessee filed objections justifying the deduction. Subsequently, notices were exchanged, objections were raised and replied to, and the Additional Commissioner issued directions under Section 144A, upholding the view of the Assessing Officer. The assessment was completed under Section 148 after due process.

The Tribunal rejected the argument of invalidity based on non-issuance of notice under Section 143(2), emphasizing that the prescribed rule or mode of proceedings not being adhered to wouldn't nullify the assessment orders. The court referred to Section 147 and the requirement of issuing a notice to the assessee before making an assessment under Section 147. The mandatory nature of a notice under Section 143(2) was highlighted, as clarified by legal precedents.

The court considered the Division Bench judgment in K.J.Thomas v. Commissioner of Income Tax, emphasizing that the procedure under Section 143(2) aims to ensure proper opportunity for the assessee before an adverse order is passed. In this case, the court found that the assessee had sufficient notice and opportunity to defend their case, as evidenced by the various communications and replies exchanged during the assessment process. Consequently, the court held that the assessment order was not invalid based on the absence of a notice under Section 143(2) and dismissed the appeal in favor of the Revenue.

In conclusion, the court's decision favored the Revenue, rejecting the argument of the assessment order's invalidity due to the absence of a notice under Section 143(2). The detailed analysis of the assessment process and the opportunities provided to the assessee during the proceedings supported the court's decision to uphold the validity of the assessment order under Section 148.