2018 (5) TMI 42 - AT - Income Tax

Validity of the reopening - Held that - The reassessment framed by the AO u/s 143(3)/147 of the Act, in the present case, on the basis of the notice issued u/s 143(2) of the Act dated 12.10.2011 i.e. prior to the furnishing of return of income on 27.10.2011 in response to notice u/s 148 of the Act, was not valid. Accordingly, the same is quashed. - Decided in favour of assessee.

Summary

Issues:
Validity of reopening assessment without notice u/s 143(2)
Admissibility of additional evidence
Calculation of deemed dividend under section 2(22)
Mandatory issuance of notice u/s 143(2)
Validity of assessment u/s 143(3) r.w.s. 147

Validity of Reopening Assessment Without Notice u/s 143(2):
The assessee challenged the validity of the reopening of assessment, arguing that the assessment made without issuing notice u/s 143(2) is void. The ld. CIT(A) upheld the assessment, stating that there is no legal requirement to send recorded reasons with the order. However, the assessee contended that the notice u/s 143(2) was not issued, but the ld. CIT(A) found evidence of such notice being sent, leading to the rejection of this ground. The Tribunal analyzed precedents and concluded that the absence of a valid return filed in response to the notice u/s 148 before the issuance of notice u/s 143(2) rendered the subsequent assessment invalid.

Admissibility of Additional Evidence:
The appellant argued that the ld. CIT(A) erred in ignoring additional evidence produced. However, the ld. CIT(A) did not find merit in these submissions. The Tribunal did not delve deeper into this issue in the judgment.

Calculation of Deemed Dividend under Section 2(22):
The appellant contested the addition of Rs. 18,50,000 as deemed dividend under section 2(22), claiming the AO did not adhere to the provision of section 2(22) while calculating accumulated profit. This issue was not extensively discussed in the judgment, but it was one of the grounds raised by the appellant.

Mandatory Issuance of Notice u/s 143(2):
The core issue revolved around the mandatory issuance of notice u/s 143(2) before completing an assessment under section 143(3)/147. The Tribunal referred to various case laws highlighting the necessity of serving notice u/s 143(2) and emphasized that failure to issue such notice invalidated the reassessment order. The Tribunal quashed the reassessment due to the absence of a valid notice u/s 143(2) before finalizing the order.

Validity of Assessment u/s 143(3) r.w.s. 147:
The Tribunal ultimately allowed the appeal, concluding that the reassessment framed by the AO u/s 143(3)/147 was not valid due to the absence of a proper return filed in response to the notice u/s 148 before the issuance of notice u/s 143(2). Citing precedents, the Tribunal emphasized the jurisdictional requirement of issuing notice u/s 143(2) before finalizing reassessment orders. Consequently, the reassessment was quashed, and the appeal of the assessee was allowed.