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2020 (2) TMI 1278 - AT - Income TaxReopening of assessment u/s 147 - assessment order not issued any notice u/s 143(2) with regard to the revised return filed by the assessee - service of Notice u/s 143(2) after the filing of the revised return of income u/s 139(5) - HELD THAT - Originally the assessee filed the return of income on 30.09.2012 declaring total income. Consequent to this, the A.O. issued notice u/s 143(2) of the Act on 14.08.2013. Later, the assessee filed revised return of income on 17.03.2014 by admitting the same income. AO computed the income by stating as follows - Income as per revised return of income ₹ 7,05,85,430. The revised return filed by the assessee is within the stipulated time provided u/s 139(5) of the Act. Though the A.O. considered the revised return of income, which is stated in the assessment order as above, he has not issued any notice u/s 143(2) of the Act with regard to the revised return filed by the assessee. In our opinion, it was the duty of the Assessing Officer to issue notice u/s 143(2) of the Act, when he has taken the consequence of the revised return and pass assessment order. His failure to issue notice u/s 143(2) of the Act while framing the assessment on the basis of revised return, is bad in law and it cannot be sustained. Accordingly, we quash the assessment order. Appeal filed by the assessee is allowed.
Issues Involved:
1. Validity of the assessment order due to non-issuance of notice under Section 143(2) on the revised return. 2. Applicability of Section 14A to strategic investments made in subsidiary companies. 3. Exclusion of exempted income under Section 10AA in computing MAT income under Section 115JB. Comprehensive, Issue-wise Detailed Analysis: 1. Validity of the Assessment Order Due to Non-Issuance of Notice Under Section 143(2) on the Revised Return: The primary issue raised by the assessee was the validity of the assessment order under Section 143(3), dated 30-03-2015, which was completed without issuing the mandatory notice under Section 143(2) based on the revised return filed on 17-03-2014. The assessee contended that the issuance/service of notice under Section 143(2) is a fundamental and mandatory requirement for a valid assessment order. The Tribunal acknowledged that the additional ground raised by the assessee goes to the root of the matter and admitted it for adjudication. The Tribunal referred to the Hon'ble Supreme Court's decision in the case of "National Thermal Power Co. Ltd. v. CIT" and other relevant judgments, including "M/s Hotel Blue Moon" and "G.N. Mohan Raju," which emphasized that the issuance of notice under Section 143(2) is mandatory for a valid assessment. The Tribunal observed that the Assessing Officer (AO) failed to issue a notice under Section 143(2) after the revised return was filed, which rendered the assessment order invalid. Consequently, the Tribunal quashed the assessment order, allowing the additional ground raised by the assessee. 2. Applicability of Section 14A to Strategic Investments Made in Subsidiary Companies: The assessee argued that Section 14A is not applicable to strategic investments made in subsidiary companies out of surplus funds. The AO had disallowed an amount of ?3,74,01,344 under Section 14A, in accordance with Rule 8D of the Income Tax Rules, 1962, considering the expenditure incurred in relation to income not includible in total income. The CIT(A) upheld the AO's view, stating that the assessee could not prove that the investments made were strategic in nature. The CIT(A) noted that the assessee, as a business strategy, made trade (business) investments in 100% subsidiaries in India and various countries, which should not be viewed as non-trade investments even though they might fetch some exempted income/dividends. The Tribunal did not delve into this issue further, as the assessment order itself was quashed based on the first issue. 3. Exclusion of Exempted Income Under Section 10AA in Computing MAT Income Under Section 115JB: The assessee contended that the AO erred in not excluding the exempted income under Section 10AA while computing the Minimum Alternate Tax (MAT) income under Section 115JB of the Act. The AO had reworked the book profits for the purpose of MAT liability, disallowing the appellant's contention. Since the Tribunal quashed the assessment order due to the non-issuance of notice under Section 143(2), it refrained from addressing this issue and other grounds of appeal raised by the assessee. Conclusion: The Tribunal allowed the appeal filed by the assessee, primarily on the ground that the assessment order was void-ab-initio due to the AO's failure to issue a notice under Section 143(2) on the revised return. The Tribunal quashed the assessment order, rendering the other issues raised by the assessee moot. The decision emphasized the mandatory nature of issuing a notice under Section 143(2) for a valid assessment, aligning with the principles laid down by the Hon'ble Supreme Court and other judicial precedents.
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