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2017 (10) TMI 635 - AT - Income TaxReopening of assessment - non compliance with the mandatory requirement of notice being issued by the AO to the assessee under section 143(2) - Held that - As notice under section 143(2) was never issued by the AO upon the assessee and he completed the assessment under section 143(3) r.w.s. 147 of the Act. In the absence of notice under section 143(2), the assessment framed is not a valid assessment and we have no hesitation in holding that the assessment is invalid and we accordingly quash the same. Since we have quashed the assessment, we find no justification to deal the issues on merit. - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment under section 143(3) read with section 147 of the Income-tax Act, 1961. 2. Taxability of fees from management and administrative support services as "Royalty" and "Fee for Technical Services." 3. Documentary support provided by the appellant. 4. Nature of services rendered under the Management and Administration Services Agreement. 5. Issuance and service of notice under section 143(2) of the Act. 6. Reopening of assessment under section 147 of the Act. Issue-wise Detailed Analysis: 1. Validity of the Assessment under Section 143(3) Read with Section 147: The appellant argued that the assessment was invalid as it was completed without issuing a notice under section 143(2) of the Income-tax Act, 1961. The Tribunal examined whether the assessment framed without serving notice under section 143(2) is valid. The Tribunal concluded that the assessment is invalid and void-ab-initio due to the non-issuance of the mandatory notice under section 143(2). 2. Taxability of Fees from Management and Administrative Support Services: The learned Assessing Officer (AO) held that the fees from management and administrative support services provided by the appellant were subject to tax in India as "Royalty" and "Fee for Technical Services." However, the Tribunal did not delve into the merits of this issue since the assessment itself was quashed due to the procedural lapse concerning the notice under section 143(2). 3. Documentary Support Provided by the Appellant: The AO concluded that the appellant did not provide documentary support for the services rendered. The appellant contended that the submissions made were not appreciated. This issue was not adjudicated upon by the Tribunal due to the quashing of the assessment on procedural grounds. 4. Nature of Services Rendered Under the Management and Administration Services Agreement: The AO erroneously concluded that some services provided under the Management and Administration Services Agreement were in the nature of "Know-how," characterizing part of the fee as "Royalty." The Tribunal did not address this issue on merits because the assessment was invalidated due to the lack of a notice under section 143(2). 5. Issuance and Service of Notice Under Section 143(2): The Tribunal found that the AO did not issue a notice under section 143(2) after the appellant filed the return in response to the notice under section 148. The Tribunal referenced multiple judicial pronouncements, including the Hon’ble Delhi High Court's judgment in Pr.CIT Vs. Silver Line, which emphasized the mandatory nature of issuing a notice under section 143(2) before finalizing a reassessment order. The Tribunal concluded that the absence of such a notice rendered the assessment invalid. 6. Reopening of Assessment Under Section 147: The appellant challenged the reopening of the assessment under section 147, arguing that it was bad in law. The Tribunal did not address this issue on merits due to the quashing of the assessment based on the procedural lapse related to the notice under section 143(2). Conclusion: The Tribunal quashed the reassessment order due to the AO's failure to issue a mandatory notice under section 143(2) of the Income-tax Act, 1961. Consequently, the Tribunal did not address the merits of the other issues raised by the appellant. The appeal of the assessee was allowed, and the order of the CIT(A) was set aside.
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