2018 (2) TMI 597 - AT - Income Tax

Reopening of assessment - failure by the AO to issue a notice to the Assessee under Section 143(2) - Held that - The issue of notice U/s 143(2) in reassessment proceedings, prior to finalizing re-assessment order, cannot be condoned by referring to Section 292BB and is fatal to the order of re-assessment. See Pr.CIT Vs Jai Shiv Shankar Traders Pvt. Ltd. 2015 (10) TMI 1765 - DELHI HIGH COURT - Decided in favour of assessee.

Issues Involved:
1. Validity of assessment under Section 143(3) without issuing notice under Section 143(2).
2. Applicability of Section 292BB to cure the non-issuance of notice under Section 143(2).
3. Confirmation of the addition of ?1,01,20,000 as unexplained investment.
4. Reliance on the statement of Shri Shankar Lai Gurjar without allowing cross-examination.
5. Requirement to explain the source of the amount received from Shri Ranjeet Jat.
6. Addition of amounts received from Shri Gopal Sharma and Ram Narayan Sharma due to their non-response to summons.

Detailed Analysis:

1. Validity of Assessment under Section 143(3) Without Issuing Notice under Section 143(2):
The assessee argued that the assessment was invalid as no notice under Section 143(2) was issued before completing the assessment under Section 143(3). The chronology of events showed that the notice under Section 143(2) was never issued. The assessee relied on various judicial pronouncements, including the Supreme Court's decision in Hotel Blue Moon and the Allahabad High Court's decision in CIT v. Salarpur Cold Storage (P.) Ltd., which held that the issuance of notice under Section 143(2) is mandatory and not a procedural irregularity. The Tribunal agreed with the assessee, citing the Delhi High Court's decision in Pr.CIT Vs Jai Shiv Shankar Traders Pvt. Ltd., which held that the failure to issue notice under Section 143(2) is fatal to the reassessment order.

2. Applicability of Section 292BB to Cure the Non-Issuance of Notice under Section 143(2):
The assessee contended that Section 292BB does not cure the defect of non-issuance of notice under Section 143(2). Section 292BB deems a notice to be served if the assessee has cooperated in the assessment proceedings, but it does not deem a notice to be issued. The Tribunal agreed, noting that Section 292BB applies to the service of notice, not the issuance, and cited the Allahabad High Court's decision in CIT v. Salarpur Cold Storage (P.) Ltd., which clarified that Section 292BB cannot cure the failure to issue a notice under Section 143(2).

3. Confirmation of the Addition of ?1,01,20,000 as Unexplained Investment:
Since the Tribunal quashed the reassessment proceedings due to the non-issuance of notice under Section 143(2), it did not need to adjudicate the issue of the addition of ?1,01,20,000 as unexplained investment.

4. Reliance on the Statement of Shri Shankar Lai Gurjar Without Allowing Cross-Examination:
The Tribunal did not address this issue separately as the reassessment proceedings were quashed.

5. Requirement to Explain the Source of the Amount Received from Shri Ranjeet Jat:
The Tribunal did not address this issue separately as the reassessment proceedings were quashed.

6. Addition of Amounts Received from Shri Gopal Sharma and Ram Narayan Sharma Due to Their Non-Response to Summons:
The Tribunal did not address this issue separately as the reassessment proceedings were quashed.

Conclusion:
The Tribunal quashed the reassessment proceedings due to the non-issuance of notice under Section 143(2), rendering the assessment order void ab initio. Consequently, the Tribunal did not adjudicate the other issues raised in the appeal. The appeal was allowed in favor of the assessee.

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