2021 (10) TMI 604 - AT - Income Tax

Validity of reopening of assessment u/s 147 - failure on the part of the assessee to disclose truly and fully all material fact necessary for the assessment - As argued AO has not obtained sanction from Commissioner of Income Tax before issue of notice u/s 148 of the Act as required u/s 151 - HELD THAT - As abundantly clear that assessing officer has obtained sanction from Commissioner of Income Tax before issue of notice u/s 148 of the Act as required u/s 151 of the Act, therefore, ground raised by the assessee is hereby dismissed. Issue of jurisdiction - During the course of hearing the Bench asked ld Counsel to provide the copy of original assessment made under section 143(3) of the Act, however, ld Counsel failed to provide the copy of the original assessment framed under section 143(3) of the Act, therefore it is not possible for the Bench to examine whether all books of accounts, documents and evidences were submitted during the original assessment proceedings and assessing officer has examined these or not? Hence, plea of the ld Counsel that assessing officer cannot reopen the assessment beyond a period of four years is not tenable. Hence, according to us assessee has not disclosed all the facts necessary for making the assessment; therefore, we dismiss the ground raised by the assessee. Not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine/bogus and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. The contention of the ld Counsel that the report of the Director of Income Tax (Investigation) -II, Mumbai, cannot constitute a reason to believe within the meaning of section 147 is misplaced in law and facts. Notice u/s 143(2) issued or not? - AO did not issue the notice under section 143(2) of the Act. We note that notice under section 143(2) should be issued by the Assessing Officer to assume the jurisdiction as well as to complete the scrutiny assessment procedure. The proviso to section 143(2) puts an embarge on the Assessing Officer to exercise jurisdiction. It is the discretion of the Assessing Officer to accept the return of income of assessee as it is, or to proceed further with the assessment of income, once the Assessing Officer decided to proceeds he has to issue notice under section 143(2) to make the assessee aware that his return of income has been selected for scrutiny assessment. We note that omission on the part of the Assessing Officer to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and therefore the requirement of notice under section 143(2) cannot be dispensed with. This default of non-issue of notice u/s 143(2) of the Act is fatal to the order of re-assessment and have rendered the whole reassessment proceeding void-ab-initio being without jurisdiction - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act.
2. Validity of reassessment order without issuance of notice under Section 143(2).
3. Partial confirmation of addition on account of bogus purchases.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued Under Section 148 of the Income Tax Act:
The assessee argued that the Assessing Officer (AO) did not record a finding that there was a failure on the part of the assessee to disclose all material facts necessary for the assessment and did not obtain sanction from the Commissioner of Income Tax (CIT) before issuing the notice under Section 148, as required under Section 151 of the Act. The tribunal examined the records and found that the AO had indeed obtained the necessary sanction from the CIT before issuing the notice under Section 148. The tribunal also noted that the AO had received credible information from the Investigation Wing regarding the assessee's involvement in accommodation entries, which justified the reopening of the assessment. Therefore, the tribunal dismissed the assessee's ground and upheld the validity of the notice under Section 148.

2. Validity of Reassessment Order Without Issuance of Notice Under Section 143(2):
The assessee contended that the reassessment order was invalid as no notice under Section 143(2) was issued. The tribunal noted that the issuance of notice under Section 143(2) is mandatory for the AO to assume jurisdiction and complete the scrutiny assessment procedure. The tribunal referred to various judicial precedents, including the Supreme Court's decision in Hotel Blue Moon, which held that the omission to issue notice under Section 143(2) cannot be a procedural irregularity and is not curable. The tribunal also referred to the Delhi High Court's decision in Pr. CIT v/s Shri Jai Shiv Shankar Traders (P) Ltd., which clarified that failure to issue notice under Section 143(2) is fatal to the reassessment order. The tribunal concluded that the reassessment order was passed without jurisdiction and was bad in law due to the non-issuance of notice under Section 143(2). Consequently, the tribunal quashed the reassessment order.

3. Partial Confirmation of Addition on Account of Bogus Purchases:
The assessee challenged the partial confirmation of the addition of ?80,17,790 (being 12.50% of total alleged bogus purchases of ?6,41,42,308) made by the AO. The tribunal noted that since the reassessment order was quashed on the ground of non-issuance of notice under Section 143(2), the issue of addition on account of bogus purchases became infructuous. Therefore, the tribunal did not adjudicate this issue.

Conclusion:
The tribunal allowed the appeal of the assessee on the legal issue of non-issuance of notice under Section 143(2) and quashed the reassessment order. Consequently, the appeal filed by the Revenue became infructuous and was dismissed.