2021 (12) TMI 1179 - AT - Income Tax

Validity of assessment u/s 153A - Non issuance of notice U/s 143(2) - Protective assessment - HELD THAT - AO has not issued a notice u/s 143(2) and even the ld. D.R. also could not bring on record any copy of the notice issued by the assessing officer or any proof of service of notice u/s 143(2) of the Income Tax Act, 1961 as mentioned above. The provisions of section 292BB also do not support the revenue because in the impugned case there is no documentary evidence to show that there was a notice issued U/s 143(2) - Even in the assessment order, the AO has mentioned the notice has been issued before filling of the return of income. We observe from the assessment order the assessment has been made on a protective basis, but, it is not clear whether any assessment has been framed in substantive basis in case of other/s - when the assessments in other/s assessee s cases are not framed on substantive basis, how the protective assessment can be framed in the case of the assessee on hand. Therefore, in our considered opinion, the assessment framed on protective basis in the case of the assessee does not stand in the eyes of law.

Issues Involved:
1. Legality of the issuance of notice under Section 143(2) of the Income Tax Act, 1961.
2. Addition of ?176.11 crores towards unexplained investments.
3. Addition of ?6.50 crores towards undisclosed income based on a statement under Section 132(4) of the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of the Issuance of Notice under Section 143(2):

The primary legal issue raised by the assessee was the challenge to the issuance of notice under Section 143(2) of the Income Tax Act, 1961. The assessee argued that the notice was issued before the filing of the return of income, which is legally untenable. The assessment order mentioned that the notice under Section 143(2) was issued on 20/07/2011, whereas the return of income was filed on 08/12/2011. This discrepancy was highlighted by the assessee, asserting that the notice should be issued after the return is filed. The Tribunal noted that the issuance of a valid notice under Section 143(2) is mandatory for the assessment to be valid. The Tribunal referred to the judgment of the Hon’ble Supreme Court in the case of ACIT & Anr. Vs. M/s Hotel Blue Moon, which emphasized that omission to issue a notice under Section 143(2) is not a procedural irregularity and cannot be cured. Consequently, the Tribunal held that the entire assessment framed by the AO is void-ab-initio for non-issuance of a valid notice under Section 143(2).

2. Addition of ?176.11 Crores Towards Unexplained Investments:

The assessee challenged the addition of ?176.11 crores made by the AO towards unexplained investments for the purchase of lands. The assessee contended that the addition was based on "dumb material" with no evidentiary value. The AO had relied on image copies taken from a hard disk seized during a search operation, which the assessee argued lacked evidentiary value. The Tribunal noted that the assessment was made on a protective basis, but it was not clear whether any assessment had been framed on a substantive basis in other cases. The Tribunal observed that without a substantive assessment in other cases, a protective assessment in the assessee's case does not stand in the eyes of law. Therefore, the Tribunal quashed the protective assessment made by the AO.

3. Addition of ?6.50 Crores Towards Undisclosed Income:

The assessee also contested the addition of ?6.50 crores towards undisclosed income based on a statement made under Section 132(4) of the Income Tax Act, 1961. The assessee argued that the statement was made under coercion and undue influence and had been subsequently withdrawn. The Tribunal noted that any statement obtained under coercion or undue influence cannot be enforced unless supported by corroborative evidence. The Tribunal observed that the AO failed to provide corroborative evidence to support the addition based on the retracted statement. Consequently, the Tribunal found the addition towards undisclosed income to be unsustainable.

Conclusion:

The Tribunal allowed the appeal of the assessee by quashing the entire assessment order on the grounds of non-issuance of a valid notice under Section 143(2) and the unsustainability of the protective assessment and the addition towards undisclosed income. The Tribunal did not adjudicate the grounds raised on merits due to the quashing of the assessment order on legal grounds.

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