2021 (3) TMI 1208 - AT - Income Tax

Validity of notice u/s.143(2) at this belated stage - notice beyond the statutory period of six months from the end of the financial year in view of the revised return dt.16.11.2015 - HELD THAT - There is no dispute between the parties about the assessee having filed the original return on 4.7.2014 followed by Section 143(2) notice, revised return dt.16.11.2015 and the subsequent section 143(2) notice dt.18.11.2016; respectively, in seriatum. Mr. Pandey fails to dispute that the Assessing Officer notice u/s. 143(2) dt.18.11.2016 turns out to be beyond the statutory period of six months from the end of the financial year in view of the revised return dt.16.11.2015. This period of six months has to be counted from 31.03.2016 therefore. We go by this analogy and find that this latter section 143(2) notice dt.18.11.2016 is not a valid notice since issued beyond the said period of six months. Whether the Assessing Officer must issue afresh section 143(2) notice; going by the assessee or by the earlier notice issued before the assessee's revised return dt.16.11.2015 shall continue to hold the field, we find that the same is no more res integra as per learned co-ordinate bench s decision 2017 (6) TMI 1344 - ITAT CHENNAI is no more res integra. Learned co-ordinate bench has held in other words that such an issuance of fresh section 143(2) notice is a condition precedent going by the honourable apex court land mark decision in Hotel Blue Moon case 2010 (2) TMI 1 - SUPREME COURT We adopt the very reasoning mutatis mutandis to accept the assessee's additional substantive grounds 20 to 25. The impugned assessment stands annulled therefore. Ordered accordingly. All other rival pleadings in assessee's and Revenue s cross appeals on merit are rendered infructuous as the necessary corollary.

Issues Involved:

1. Validity of the assessment order under Section 143(3) of the Income Tax Act, 1961.
2. Taxation of capital gains arising from the Joint Development Agreement (JDA).
3. Deduction under Section 54F of the Income Tax Act, 1961.
4. Issuance and validity of notice under Section 143(2) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 143(3) of the Income Tax Act, 1961:

The assessee challenged the validity of the assessment order on the grounds that the notice under Section 143(2) was not issued within the prescribed time. The Tribunal noted that the original return was filed on 04.07.2014, and a revised return was filed on 16.11.2015. The Assessing Officer (AO) issued a notice under Section 143(2) on 18.11.2016, which was beyond the statutory period of six months from the end of the financial year in which the revised return was filed. The Tribunal held that the issuance of a fresh Section 143(2) notice is a condition precedent for a valid assessment, following the Supreme Court's decision in the case of Hotel Blue Moon. Consequently, the Tribunal annulled the impugned assessment as the notice was not issued within the required timeframe.

2. Taxation of Capital Gains Arising from the Joint Development Agreement (JDA):

The assessee contended that the capital gains should not be taxed in the assessment year (AY) 2014-15 as the original asset (land) was transferred to M/s. Vasavi Holdings via a registered sale deed on 27.08.2014, based on an agreement of sale dated 09.05.2013. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision to tax the capital gains in AY 2014-15. The Tribunal, however, did not delve into the merits of this issue as the assessment was annulled due to the invalid Section 143(2) notice.

3. Deduction under Section 54F of the Income Tax Act, 1961:

The Revenue's cross appeal challenged the CIT(A)'s direction to allow the assessee's claim of deduction under Section 54F for property acquired in the USA. The Revenue argued that the deduction under Section 54F is applicable only for properties acquired or constructed in India. The Tribunal did not address this issue on merits due to the annulment of the assessment.

4. Issuance and Validity of Notice under Section 143(2) of the Income Tax Act, 1961:

The Tribunal emphasized that the issuance of a notice under Section 143(2) is mandatory and must be issued within six months from the end of the financial year in which the return is furnished. The Tribunal found that the notice issued on 18.11.2016 was beyond the prescribed period, rendering the assessment invalid. The Tribunal relied on the co-ordinate bench's decision in the case of M/s. Yes & Yes Hitech Premier Homes India Pvt. Ltd. vs. ITO, which held that a fresh Section 143(2) notice is necessary for a revised return.

Conclusion:

The Tribunal allowed the assessee's appeal and annulled the assessment due to the invalid notice under Section 143(2). Consequently, the Revenue's cross appeal was dismissed, and all other issues on merits were rendered infructuous. The order was pronounced in the open court on 26th March 2021.

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