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2020 (4) TMI 85 - AT - Income TaxReopening of assessment u/s 147- non-issue of notice u/s. 143(2) - resort to Best Judgment Assessment - HELD THAT - Taking into consideration the ratio decidendi laid by the Hon ble Supreme Court in Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT the Hon ble jurisdictional High Court and various other Hon ble High Courts that non-issue of notice u/s. 143(2) vitiates the very usurpation of jurisdiction to frame assessment order u/s. 143(3) of the Act, the Ld. CIT(A) taking note of the fact that AO has not issued notice u/s. 143(2) of the Act despite assessee filing the Return of income dated 20.11.2017 has found the usurpation of jurisdiction by AO to be bad in law and consequently quashed the same after taking note of the remand report filed by the AO which is reproduced for easy reference. Main reason the AO states regarding non-issue of notice u/s. 143(2) of the Act was the omission on the part of the assessee to file return of income within thirty days after issue of notice u/s. 148 - Clause (a) and (b) of sub-section (1) of section 144 is not applicable to the f acts of the case as discussed after going through the remand report of the AO. So coming to clause (c), we note that if the assessee has filed the return, and thereafter assessee fails to comply with all the terms of a notice issued under sub-section (2) of section 143, then AO can resort to Best Judgment Assessment. Here in this case the assessee had filed return of income before the AO on 21.09.2017 and 20.11.2017, therefore, as per clause (c) the AO was duty bound to give the mandatory notice u/s. 143(2) and in case if the assessee failed to comply with all the terms of the notice issued u/s. 143(2) then only he could have resorted to Best Judgment Assessment u/s. 144 of the Act. When the assessee receives a notice u/s. 148, he is required to file a return of income within the time specified by the AO in that notice; and once the assessee files the return of income pursuant to notice u/s. 148, the return will be treated as a return u/s. 139 and the provision of section 139 so far as may be applicable would apply. In the present case though the assessee did not file the return of income within the specified time given by AO, the assessee had filed the return of income on 21.09.2017 and on 20.11.2017 before the reassessment was framed on 22.12.2017. So, on a con-joint reading of section 148(1) with sec. 139(4) and section 144 makes it abundantly clear that pursuant to a notice u/s. 148 of the Act, if an assessee files belatedly a return or a letter reiterating his earlier return then the AO is bound to issue notice u/s. 143(2) of the Act, if he has to frame re-assessment order u/s 143(3)/144 of the Act. Therefore, the contention raised by the Ld. CIT, DR and reasoning given by AO cannot be countenanced. Since, it is not the case of the AO/Ld. CIT, DR, that assessee has not filed return of income pursuant to notice u/s. 148 of the Act, and when the fact was that assessee had filed return of income, the AO in order to successfully usurp the jurisdiction to frame assessment had to issue notice u/s. 143(2) which was a jurisdictional notice and mandatory for framing of assessment order u/s. 143(3) or u/s. 144 of the Act as discussed. - Decided against revenue.
Issues Involved:
1. Condonation of delay in filing the appeal by the revenue. 2. Validity of reassessment order due to non-issuance of notice under section 143(2) of the Income-tax Act, 1961. 3. Applicability of section 292BB in the context of non-issuance of notice under section 143(2). Detailed Analysis: 1. Condonation of Delay: The appeal by the revenue was time-barred by 11 days. A condonation petition was filed, and there was no objection from the respondent. The delay was condoned, and the appeal was admitted for hearing. 2. Validity of Reassessment Order: The primary issue was whether the reassessment order dated 22.12.2017 was valid given that no notice under section 143(2) was issued to the assessee after reopening the assessment. - Facts and Arguments: - The assessee is engaged in commodity broking, trading in shares and securities, and trading in derivatives. - The case was reopened for reassessment due to information about a bogus loss of ?334.36 lakhs. - The AO issued a notice under section 148 on 31.03.2017, but the assessee did not file a return within the specified 30 days. - The AO proceeded to disallow the loss and passed the reassessment order ex parte under section 144. - The CIT(A) quashed the reassessment order due to the non-issuance of a mandatory notice under section 143(2). - Legal Precedents and CIT(A) Decision: - The CIT(A) relied on various judicial precedents, including the Supreme Court's decision in Hotel Blue Moon, which mandates the issuance of notice under section 143(2) in reassessment proceedings. - The CIT(A) concluded that the reassessment order was invalid due to the non-issuance of the mandatory notice under section 143(2). - Revenue's Contention: - The revenue argued that since the assessee did not file a return within the time specified in the notice under section 148, the AO was justified in passing the reassessment order under section 144 without issuing a notice under section 143(2). - The revenue cited the Jammu & Kashmir High Court's decision in PCIT Vs. M/s. Broadway Shoe Co., which held that a return filed after the prescribed time limit is non-est. - Assessee's Argument: - The assessee argued that the notice under section 143(2) is mandatory and that the reassessment order without such notice is invalid. - The assessee relied on the Allahabad High Court's decision in U.P. State Industrial Development Corporation Ltd. Vs. CIT and other judicial precedents supporting the mandatory nature of notice under section 143(2). - Tribunal's Findings: - The Tribunal noted that the assessee had filed a return on 21.09.2017 and 20.11.2017, albeit belatedly. - The Tribunal emphasized that once a return is filed, even if belatedly, the AO is required to issue a notice under section 143(2) before proceeding with the assessment. - The Tribunal upheld the CIT(A)'s decision, quashing the reassessment order due to the non-issuance of the mandatory notice under section 143(2). 3. Applicability of Section 292BB: The revenue argued that under section 292BB, the failure to issue a notice under section 143(2) is a procedural irregularity and does not invalidate the assessment. - Tribunal's Analysis: - The Tribunal referred to the Allahabad High Court's decision in Mukesh Kumar Agrawal, which clarified that section 292BB does not cure the jurisdictional defect of non-issuance of notice under section 143(2). - The Tribunal concluded that section 292BB applies to the service of notice and not to the issuance of notice. Therefore, the non-issuance of a notice under section 143(2) cannot be cured by section 292BB. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to quash the reassessment order due to the non-issuance of the mandatory notice under section 143(2). The Tribunal emphasized the mandatory nature of the notice under section 143(2) in reassessment proceedings and clarified that section 292BB does not apply to the non-issuance of such notice.
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