2019 (3) TMI 436 - AT - Income Tax

Reopening of assessment - non complying with the mandatory conditions of section 147 to 151 and without recording valid reasons as per law - HELD THAT - Assessee appeared on 12.8.2015 and stated that original return filed by the assessee may be treated the return of income filed in response to the notice u/s. 148 of the Act, but on the same date the AO given the notices to the assessee i.e. 12.8.2015 u/s. 143(2) which shows non-application of mind on the part of the of the AO. Therefore, notice under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. Accordingly, set aside the orders of the authorities below and quash the reassessment proceedings in the matter and allow appeal of assessee.

Issues Involved:
1. Validity of the reassessment order under sections 147 to 151 of the Income Tax Act, 1961.
2. Legality of reopening the assessment under section 143(3)/147.
3. Issuance and service of mandatory notice under section 143(2) within the statutory period.
4. Confirmation of addition of ?17,77,886/- on account of alleged bogus purchases.
5. Adequacy of the opportunity of being heard provided to the assessee.

Detailed Analysis:

1. Validity of the Reassessment Order:
The appellant contended that the reassessment order was invalid as it did not comply with the mandatory conditions of sections 147 to 151 of the Income Tax Act, 1961. The reassessment was initiated based on information from the Investigation Wing, leading to the issuance of a notice under section 148 on 26.03.2015. However, the assessee did not respond to this notice. The Tribunal found that the reassessment proceedings were initiated without proper application of mind, as evidenced by the issuance of notice under section 143(2) on the same day the return was treated as filed in response to the notice under section 148. Therefore, the reassessment order was quashed.

2. Legality of Reopening the Assessment:
The appellant argued that the reopening of the assessment was bad in law and contrary to the facts and circumstances of the case. The Tribunal noted that the reassessment proceedings were initiated without valid reasons and without obtaining proper approval as required by law. The Tribunal found that the reassessment was invalid due to the improper issuance of notice under section 143(2), which was issued on the same day the return was treated as filed in response to the notice under section 148.

3. Issuance and Service of Notice under Section 143(2):
The primary contention was that the mandatory notice under section 143(2) was not issued within the statutory period. The Tribunal observed that the notice under section 143(2) was issued on 12.08.2015, the same day the assessee’s representative appeared and requested to treat the original return as filed in response to the notice under section 148. This simultaneous issuance indicated non-application of mind by the Assessing Officer (AO), rendering the notice invalid. The Tribunal relied on several judicial precedents, including the Delhi High Court's decision in *Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications*, to conclude that the assessment made in pursuance of an invalid notice under section 143(2) is itself invalid.

4. Confirmation of Addition on Account of Alleged Bogus Purchases:
The appellant challenged the confirmation of the addition of ?17,77,886/- being 12.5% of the purchases claimed to have been made from M/s Maa Durga Trading Company. The Tribunal did not adjudicate this issue separately as the reassessment proceedings were already quashed on account of the invalid notice under section 143(2). Therefore, the addition was also set aside.

5. Adequacy of Opportunity of Being Heard:
The appellant claimed that adequate opportunity of being heard was not provided. The Tribunal did not specifically address this issue since the reassessment proceedings were quashed due to the invalid notice under section 143(2). However, the quashing of the reassessment implicitly addressed the concern about the adequacy of the opportunity provided.

Conclusion:
The Tribunal quashed the reassessment proceedings primarily on the ground that the notice under section 143(2) was invalid, as it was issued without proper application of mind and within the statutory period. Consequently, the reassessment order and the additions made therein were set aside. The appeal of the assessee was allowed in full.

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