2017 (12) TMI 517 - AT - Income Tax

Validity of assessment u/s 143(3) - no issue of notice - scope of the provisions of section 153A - curbale defect u/s 292BB - Held that - There was no notice issued u/s 143(2) prior to the completion of assessment under section 143(3) of the Act by the AO; that the year under consideration was beyond the scope of the provisions of section 153A of the Act, it being the search year and not covered in the six year to the year of search as per the assessment scheme/procedure defined u/s 153A; that the AO has passed regular assessment u/s 143(3) of the Act; although the ld CIT has mentioned the section as 143 r.w.s 153A and that the department had not controverted these facts at the stage of hearing. It is noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non-issuance thereof is not a curable defect. Even in case of block assessment u/s 158BC, it has been so held by the Apex court in the case of Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA). The assessment order is passes without issue of notice u/s 143(3) of the Act and this defect cannot be cured by taking recourse to the provisions of section 292BB of the Act. Thus AO had no valid jurisdiction to pass the assessment order and the very foundation of the assessment proceedings is bad in law. - Decided in favour of assessee.

Issues Involved:
1. Deletion of addition on account of unexplained jewellery.
2. Deletion of addition on account of unexplained cash receipts.
3. Validity of assessment order under section 143(3) without issuing notice under section 143(2).
4. Addition of cash found during search proceedings.
5. Addition on account of unexplained investment in gold coins, bullion, and silver coins.
6. Addition as unexplained investment in Hundi Loans.
7. Nature of business of the appellant as "Dalali".
8. Assessment of total transaction as income and adoption of peak income over declared income.

Issue-Wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Jewellery:
The Revenue challenged the deletion of ?7,48,473/- on account of unexplained jewellery by the Ld. CIT (A). However, the Tribunal's judgment does not provide a detailed analysis on this specific issue, as the primary focus was on the procedural validity of the assessment.

2. Deletion of Addition on Account of Unexplained Cash Receipts:
The Revenue also contested the deletion of ?29,23,98,117/- on account of unexplained cash receipts. Similar to the jewellery issue, the Tribunal's judgment does not delve into the specifics of this deletion, focusing instead on the jurisdictional validity of the assessment.

3. Validity of Assessment Order under Section 143(3) Without Issuing Notice under Section 143(2):
The primary and most significant issue discussed was the validity of the assessment order passed under section 143(3) without issuing a mandatory notice under section 143(2). The Tribunal emphasized that the issuance of notice under section 143(2) is a prerequisite for a valid assessment under section 143(3). The Tribunal cited the Supreme Court's decision in Hotel Blue Moon, which held that the omission to issue such notice is not a curable defect and renders the assessment void ab initio. The Tribunal also referred to various other judgments, including CIT v. Mukesh Kumar Agrawal and CIT v. Gitsons Engineering Co., which reinforced the necessity of issuing a notice under section 143(2). The Tribunal concluded that the assessment order was invalid due to the non-issuance of the mandatory notice, and this defect could not be cured by section 292BB.

4. Addition of Cash Found During Search Proceedings:
The assessee objected to the addition of ?9,09,110/- found during the search proceedings under section 132. The Tribunal did not specifically address this issue in detail, as the assessment order itself was quashed due to the procedural defect of non-issuance of notice under section 143(2).

5. Addition on Account of Unexplained Investment in Gold Coins, Bullion, and Silver Coins:
The assessee also contested the addition of ?7,61,199/- on account of unexplained investment in gold coins, gold bullion pieces, and silver coins. Similar to the other issues, the Tribunal did not provide a detailed analysis on this matter due to the overarching procedural invalidity of the assessment.

6. Addition as Unexplained Investment in Hundi Loans:
The assessee challenged the addition of ?45,00,000/- as unexplained investment in Hundi Loans. The Tribunal did not specifically address this issue in detail, as the primary focus was on the procedural defect in the assessment process.

7. Nature of Business of the Appellant as "Dalali":
The assessee argued that the authorities erred in not accepting the nature of their business as "Dalali" (brokerage). The Tribunal did not delve into this issue, given that the assessment order was quashed on procedural grounds.

8. Assessment of Total Transaction as Income and Adoption of Peak Income Over Declared Income:
The assessee objected to the assessment of total transactions amounting to ?29,53,52,631/- as income and the adoption of peak income over the declared income of ?5,30,312/- from brokerage. The Tribunal did not address this issue in detail due to the invalidity of the assessment order.

Conclusion:
The Tribunal quashed the assessment order due to the non-issuance of the mandatory notice under section 143(2), rendering the assessment proceedings invalid. Consequently, the appeal by the Revenue was dismissed, and the cross-objection by the assessee was allowed. The Tribunal emphasized that the procedural requirement of issuing a notice under section 143(2) is mandatory and not a mere procedural formality, and its omission cannot be cured by section 292BB.

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