2021 (10) TMI 1145 - AT - Income Tax

Validity of reopening of assessment - non-service of notice u/s. 143(2) - as per AO Assessee did not comply with the notice u/s. 148 of the Act by filing the return of income, therefore he issued notice u/s. 142(1) of the Act calling for certain details which was also not responded by the assessee - HELD THAT - We agree that the AO had no other alternative but to proceed with framing assessment u/s. 144 of the Act since it is admitted that the assessee had not filed the return of income pursuant to the service of notice u/s. 148 of the Act. Therefore, the AO rightly did not issue notice u/s. 143(2) of the Act, because there was no statutory requirement of the AO to issue the same. Ergo this legal issue raised stands dismissed. Non participation from the side of the assessee - Addition as long term capital gain - According to assessee this amount was sale consideration of his Shaiel Dhan Bhumi/Shaiel Raice Land/Rural Agricultural Land which is exempted u/s. 10(37)(1) read with Section 2(14) - HELD THAT - First of all it is not in dispute that the assessment order has been passed after reopening u/s. 147 of the Act and thereafter by framing the assessment u/s. 144 of the Act because according to AO the assessee did not co-operate during the assessment proceedings. And it is the assessee's case that for reasons beyond his control being not well he was prevented from responding to the notice u/s. 142(1) and notice u/s. 144 of the Act. So, as held by the Hon'ble Supreme Court Tin Box Compan y 2001 (2) TMI 13 - SUPREME COURT if sufficient opportunity is not given by the AO while framing of assessment, then the assessee should be given opportunity before the AO. Since the assessee has to explain the amount deposited in his bank account supported by the documents and the AO had to examine the veracity of the same, we deem it fit to set aside the impugned order of Ld. CIT(A) for de novo assessment on the issue of addition made by the AO - Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
1. Non-service of notice u/s. 143(2) of the Income Tax Act, 1961.
2. Addition of ?17,40,000/- as long term capital gain without proper opportunity of hearing.

Issue 1: Non-service of notice u/s. 143(2)
The appeal was filed by the assessee against the order of Ld. CIT(A)-Shillong for the assessment year 2014-15, challenging the action of the AO for non-service of notice u/s. 143(2) of the Income Tax Act, 1961. The AO re-opened the assessment and issued notice u/s. 148 of the Act, which was served on the assessee. However, the assessee did not comply with the notice u/s. 148 and also did not respond to the notice u/s. 142(1) of the Act. Consequently, the AO proceeded to frame assessment u/s. 144 of the Act based on available information, as the assessee had not filed the return of income after the notice u/s. 148. The Tribunal held that the AO was justified in not issuing notice u/s. 143(2) as there was no statutory requirement to do so in this scenario. Therefore, this legal issue was dismissed.

Issue 2: Addition of ?17,40,000/- as long term capital gain
The other ground of appeal by the assessee was against the addition of ?17,40,000/- as long term capital gain without proper opportunity of hearing. The assessment order was passed after reopening u/s. 147 and framing the assessment u/s. 144 due to the assessee's alleged non-cooperation during the assessment proceedings. The assessee contended that due to health reasons, he could not respond to the notices u/s. 142(1) and u/s. 144. Citing the case of Tin Box Company vs. CIT, the Tribunal emphasized the importance of providing a reasonable opportunity to the assessee during assessment. As the AO framed the assessment without the assessee's participation and considering the need for the assessee to explain the deposited amount in his bank account, the Tribunal set aside the order of Ld. CIT(A) for a fresh assessment on the addition made by the AO. The assessee agreed to produce all necessary documents and submissions before the AO for the reassessment. Consequently, the appeal of the assessee was allowed for statistical purposes.

In conclusion, the Tribunal's judgment addressed the issues of non-service of notice u/s. 143(2) and the addition of long term capital gain without proper opportunity of hearing, ensuring that the principles of natural justice and fair assessment procedures were upheld throughout the legal proceedings.