2020 (12) TMI 930 - AT - Income Tax

Reopening of assessment u/s 147 - no notice u/s 143(2) issued - HELD THAT - AO has not stated either in the assessment order or in the order-sheets of the assessment proceedings that any notice u/s 143(2) was issued to the assessee. It is clear that there is no notice u/s 143(2) and reassessment proceedings in the case of assessee were completed without issuance of a notice U/s 143(2) - Hon ble Supreme Court in the case of ACIT Vs Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT has held that failure on the part of the assessing authority to issue notice U/s 143(2) of the Act cannot be a mere procedural irregularity and the same is not curable. It is not a mere formality but it given the jurisdiction to the A.O. to complete the assessment U/s 143(3) of the Act, therefore, non-issuance of notice U/s 143(2) of the Act vitiates the assessment proceedings. In view of decision of Hon ble Supreme Court in the case of ACIT Vs Hotel Blue Moon (supra) as well as other decisions in this regard cited above, the assessment proceedings completed without issuance of notice u/s 143(2) of the act and void ab-initio and liable to be quashed. The judicial pronouncements referred and relied upon by the ld. DR are not applicable in the facts of the present case. In view of the above facts and circumstances, we quash the proceedings U/s 147/148 of the Act as invalid. Appeal of the assessee is allowed.

Issues Involved:
1. Validity of the order under sections 147/144 of the Income Tax Act, 1961.
2. Jurisdiction and limitation of the action under section 147.
3. Adequacy of opportunity for being heard.
4. Addition on account of Long Term Capital Gain.
5. Addition on account of alleged excess sale consideration.
6. Disallowance of deduction under section 54F.
7. Disallowance of brokerage paid and enhancement without notice.
8. Charging of interest under section 234A, B & C.
9. Additional grounds regarding deduction under section 54F and brokerage.

Detailed Analysis:

1. Validity of the Order under Sections 147/144:
The assessee argued that the notice and assessment order passed by the AO were barred by limitation and lacked jurisdiction. The notice under section 148 was issued on 01.05.2014 and received by the assessee on 16.09.2015. The assessment was completed on 16.03.2016, which the assessee claimed was beyond the permissible time limit. The Tribunal found that the assessment order was indeed barred by limitation and liable to be quashed.

2. Jurisdiction and Limitation of Action under Section 147:
The assessee contended that the action taken under section 147 was bad in law due to lack of jurisdiction and other reasons. The Tribunal noted that the reasons recorded for reopening the assessment were not clear, and there was no evidence of satisfaction by the higher authorities. The Tribunal held that the proceedings were invalid due to the absence of proper reasons and satisfaction.

3. Adequacy of Opportunity for Being Heard:
The assessee claimed that the ex parte assessment order was passed without providing adequate opportunity to be heard. The Tribunal observed that the AO did not provide sufficient opportunity and the CIT(A) also did not provide adequate hearing. The Tribunal emphasized the importance of natural justice and quashed the order on this ground.

4. Addition on Account of Long Term Capital Gain:
The AO disallowed the land development expenses claimed by the assessee due to lack of evidence. The Tribunal noted that the expenses were incurred 12-13 years ago and the assessee could not produce evidence. The Tribunal suggested that the AO could have estimated the expenses or verified them through other means. The Tribunal directed the AO to reconsider the claim and provide an opportunity to the assessee to produce evidence.

5. Addition on Account of Alleged Excess Sale Consideration:
The AO added ?2,00,000 to the total income, claiming it was excess sale consideration. The assessee explained that this amount was received for standing crops. The Tribunal found the AO's reasoning unsatisfactory and directed the deletion of the addition.

6. Disallowance of Deduction under Section 54F:
The AO disallowed the deduction of ?10,97,040 under section 54F, stating that the assessee did not provide evidence. The Tribunal noted that the assessee incurred expenses on the construction of a house and provided a registered valuer's report. The Tribunal directed the AO to verify the claim and allow the deduction if found valid.

7. Disallowance of Brokerage Paid and Enhancement without Notice:
The AO disallowed ?52,000 out of ?1,02,000 claimed as brokerage. The CIT(A) enhanced the disallowance without issuing a show cause notice. The Tribunal held that the enhancement without notice was contrary to the provisions of law and directed the deletion of the enhanced amount.

8. Charging of Interest under Section 234A, B & C:
The assessee denied liability for interest charged under sections 234A, B & C. The Tribunal did not specifically address this issue as the main grounds for quashing the proceedings were already established.

9. Additional Grounds Regarding Deduction under Section 54F and Brokerage:
The assessee raised additional grounds for deduction under section 54F and brokerage. The Tribunal admitted these grounds, emphasizing that legal issues can be raised at any stage. The Tribunal directed the AO to verify the claims and allow the deductions if valid.

Conclusion:
The Tribunal quashed the proceedings under sections 147/148 due to non-issuance of notice under section 143(2), lack of jurisdiction, and failure to provide adequate opportunity for being heard. The Tribunal directed the AO to reconsider the claims for land development expenses, deduction under section 54F, and brokerage, providing the assessee an opportunity to produce evidence.

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