2021 (8) TMI 162 - AT - Income Tax

Validity of reassessment proceedings - absence of evidence of service of notice under section 143(2) - appellant has submitted that the Ld. AO has erred in commencing and subsequently completing the reassessment without issuing the mandatory notice u/s 143(2) - HELD THAT - Issuance and service of a valid notice assuming jurisdiction under section 147 is not a matter of inference or assumption, it is to be established by the evidence on record. Clearly, that evidence is missing. Quite to the contrary, the contradictions in the proceedings sheet show that no such valid notice was even issued. Even in the assessment order, there is a mention of notice under section 142(1), but there is not even a mention of issuance of notice under section 143(2). It is not really necessary to deal with the judicial precedents cited by DR which admittedly are on the basis of certain foundational facts which are missing in this case, i.e. evidence substantiating issuance of a lawful notice under section 143(2). We are, therefore, of the view that the issues raised by the learned Departmental Representative lack legally sustainable merits. We reject the plea of the revenue. Admission of additional ground of appeal before the learned CIT(A) - The issue raised was an important question of law and merely because a reference to some facts was required, admission of this ground by the CIT(A) could not have been declined. The proceedings before the CIT(A) are a mere continuation of the assessment proceedings and there is no bar is raising any issue, requiring further examination of facts, before the CIT(A). We, therefore find no substance in this plea of the learned Departmental Representative either. As regards participation in the reassessment proceedings by the assessee, nothing really turns on the same. When assumption of jurisdiction is illegal, as no valid notice under section 143(2) was issued and served on the assessee, mere participation by the assessee in the resultant proceedings cannot clothe it with legality. CIT(A) rightly notes in his impugned order, issuance and service of notice under section 143(2) is a foundational requirement for assessment under section 143(3) r.w.s. 147, and, in the absence of the same and notwithstanding the fact that the assessee may have participated in the related assessment proceedings, the reassessment order cannot have legal sanctity. - Decided against revenue.

Issues Involved:
1. Validity of reassessment proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, in the absence of evidence of service of notice under section 143(2).
2. Applicability of section 292BB regarding the non-service of notice under section 143(2).
3. Admission of additional ground of appeal before CIT(A).
4. Participation in reassessment proceedings by the assessee and its impact on the legality of the reassessment.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The primary issue revolves around the validity of reassessment proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, in the absence of evidence of service of notice under section 143(2). The assessee, a cooperative society, filed its return of income on 31st October 2007, and the assessment was completed on 30th December 2009. The assessment was reopened under section 147 on 29th March 2012 by issuance of notice under section 148. However, the assessee contended that no notice under section 143(2) was issued before completing the reassessment, rendering the proceedings invalid. The CIT(A) upheld this contention, noting that the absence of such a notice is a jurisdictional defect that cannot be cured under section 292BB.

2. Applicability of Section 292BB:
Section 292BB precludes an assessee from raising objections about the non-service of notice if the assessee has participated in the proceedings. However, the CIT(A) and subsequent judicial precedents clarified that section 292BB applies to the service of notice, not the issuance of notice. The reassessment proceedings require the issuance of a notice under section 143(2) to assume jurisdiction. The ITAT reiterated that the absence of issuance of such a notice is a jurisdictional defect that invalidates the reassessment proceedings, even if the assessee participated in the proceedings.

3. Admission of Additional Ground of Appeal:
The CIT(A) admitted an additional ground of appeal raised by the assessee regarding the non-issuance of notice under section 143(2). The ITAT supported this decision, stating that the proceedings before the CIT(A) are a continuation of the assessment proceedings, and there is no bar on raising any issue requiring further examination of facts. The ITAT emphasized that the issue raised was an important question of law and should be addressed to ensure the correct assessment of tax liability.

4. Participation in Reassessment Proceedings:
The ITAT addressed the argument that the assessee's participation in the reassessment proceedings should validate the proceedings despite the non-issuance of notice under section 143(2). The ITAT concluded that mere participation by the assessee does not legalize the reassessment proceedings if the foundational requirement of issuing a notice under section 143(2) is not met. The reassessment order, therefore, lacks legal sanctity due to this jurisdictional defect.

Conclusion:
The ITAT upheld the CIT(A)'s decision to annul the reassessment order due to the non-issuance of notice under section 143(2), rendering the reassessment proceedings invalid. The appeal by the Assessing Officer was dismissed, affirming that the issuance and service of notice under section 143(2) are mandatory for reassessment proceedings under section 143(3) r.w.s. 147. The ITAT also clarified the limited applicability of section 292BB and supported the admission of additional grounds of appeal before the CIT(A).

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