2019 (9) TMI 311 - AT - Income Tax

Validity of consolidated Notice issued u/s 153A r.w.s. 153C/143(2) - HELD THAT - From the perusal of the notice issued u/s 153A r.w.s. 153C/143(2) of the Act, it is a clear cut case of overlooking the procedure and provisions set out in the Income Tax Act, 1961. Under these sections, the Assessing Officer cannot issue consolidated notices for different Assessment Years. It is statutory requirement for each assessment year to issue statutory notice separately. The Assessing Officer failed to comply with the statute under which the prescribed procedure is mandatory for the Revenue to be followed. The reliance of the AR in case of Y Narayana Chetty vs. ITO 1958 (10) TMI 10 - SUPREME COURT is relevant in present case, therefore, the notice itself is bad in law and void ab-initio. Thus, the assessment order does not survive.

Summary

Issues:
1. Validity of notice issued under section 153A r.w.s 153C
2. Legality of Block Assessment order after 31.05.2003
3. Addition/disallowance without incriminating material
4. Non-issuance of notice under section 143(2)
5. Compliance with principles of natural justice
6. Upholding of addition of short term capital gain
7. Consideration of evidence and explanation
8. Justification of additions based on surmises and conjectures
9. Charging of interests under sections 234B and 234C
10. Non-quashing of penalty proceedings under section 271(1)(c)

Analysis:

Issue 1:
The assessee challenged the legality of the notice issued under section 153A r.w.s 153C, arguing that it was vague and invalid. The tribunal held that the notice was bad in law and void ab-initio as it failed to comply with the statutory requirement of issuing separate notices for each assessment year. Citing the case of Y Narayana Chetty vs. ITO, the tribunal concluded that the assessment order did not survive due to the procedural irregularity.

Issue 2:
The tribunal addressed the legality of the Block Assessment order after 31.05.2003, emphasizing that there was no power or authority to pass such an order beyond the specified date as per section 158BI. This issue was crucial in determining the validity of the assessment order for the relevant assessment years.

Issue 3:
Regarding additions/disallowances made without incriminating material, the tribunal found that the Assessing Officer erred in making such additions without any supporting evidence or incriminating material found during the proceedings. The tribunal highlighted the lack of justification for the additions and deemed them unlawful and beyond the scope of the provisions of section 153C.

Issue 4:
The tribunal acknowledged the non-issuance of notice under section 143(2) within the prescribed period, leading to the conclusion that the assessment order and the subsequent additions were illegal, bad in law, and without jurisdiction. This non-compliance with procedural requirements raised concerns about the validity of the assessment process.

Issue 5:
The tribunal considered the compliance with the principles of natural justice, emphasizing that the assessment order should afford the assessee a reasonable and adequate opportunity to be heard. Any violation of these principles could render the assessment order invalid, as fairness and due process are fundamental in such proceedings.

Issue 6:
The tribunal analyzed the addition of short term capital gain and the rejection of the appellant's submissions by the CIT(A). It was noted that the CIT(A) failed to consider relevant evidence and circumstances of the case, leading to an erroneous decision. The tribunal found the addition unjust, unlawful, and excessive, highlighting the importance of a thorough examination of evidence in such matters.

Issue 7:
In evaluating the consideration of evidence and explanation, the tribunal observed that the appellant's submissions and the material available on record were not properly interpreted. The tribunal emphasized the need for a judicious interpretation of evidence to ensure a fair and justified assessment process.

Issue 8:
The tribunal addressed the justification of additions based on mere surmises and conjectures, emphasizing that such additions must be supported by factual evidence and cannot be made solely on speculative grounds. The tribunal deemed the additions unjust, arbitrary, and unsupported by material on record.

Issue 9:
Regarding the charging of interests under sections 234B and 234C, the tribunal found that the interests were wrongly and illegally charged. The appellant's lack of default in payment of Advance tax due to unforeseen additions was considered, highlighting the need for a fair and accurate calculation of interests in such cases.

Issue 10:
The tribunal examined the non-quashing of penalty proceedings under section 271(1)(c), noting that the initiation of the penalty was wrongly done by the Assessing Officer. The tribunal emphasized the importance of a valid and justified initiation of penalty proceedings, which should be based on solid grounds and proper assessment of the facts.

In conclusion, the tribunal allowed both appeals filed by the assessee, highlighting various procedural and substantive irregularities in the assessment process and penalty proceedings. The detailed analysis of each issue underscored the importance of adherence to legal procedures, principles of natural justice, and the necessity of evidence-based decision-making in tax assessments.