2021 (12) TMI 1185 - AT - Income Tax

Assessment u/s 153A - Non issue of the notice u/s 143(2) - HELD THAT - There is no issuance of the 143(2) notice. Even, if we go through the assessment order, assessee filed his return of income on 7th December, 2011 in response to the notice u/s 142(1) dated 26/10/2010, whereas, notices u/s 143(2) 142(1) were issued on 18th November, 2011, the date of which is before filing of the return of income, how is it possible to issue a notices before filing of return of income. Even if we correlate the notice u/s 143(2) with the assessment order, the issue of notice is time barred. This is a search year, in which, assessment has been framed u/s 143(3) of the Act, but, the assessment has not been framed u/s 153A. Therefore, even if notice issued u/s 143(2) is time barred or not issued at all or notice u/s 143(2) is invalid in the eye of law, the assessment framed u/s 143(3) will not survive. As in the present case, assessment has been framed u/s 143(3), therefore, as per the statute notice u/s 143(2) is mandatory to be issued by the jurisdictional AO, which is absent in this case. Therefore, non-issuance of a valid notice u/s 143(2) of the Act, the entire assessment framed by the AO is void-ab-initio. - Decided in favour of assessee.

Summary

Issues:
Validity of assessment proceedings without issuance of notice u/s 143(2) of the Income Tax Act, 1961.

Analysis:
The appeal was against the CIT(A)'s order for AY 2010-11 under proceedings u/s 143(3) of the Income Tax Act, 1961. The assessee, an individual deriving income from salaries and other sources, was subject to a search and seizure operation in the group cases of a company where the assessee was a main promoter. The AO issued a notice u/s 142(1) for filing the return of income for the impugned AY 2010-11. The AO completed the scrutiny assessment u/s 143(3) by making additions towards undisclosed income from license fee and unexplained cash. The CIT(A) deleted the addition related to the license fee but confirmed the addition for unexplained cash. The assessee appealed, challenging the non-issuance of notice u/s 143(2) during the assessment proceedings.

The assessee contended that the assessment proceedings were invalid as no notice u/s 143(2) was issued, which is essential for scrutinizing any return of income. The absence of this notice was argued to vitiate the entire assessment process, as per the provisions of section 292BB of the Act. The AO's order sheet confirmed the non-issuance of the notice u/s 143(2), which was crucial for the scrutiny assessment. The ITAT analyzed the timeline of events and found discrepancies in the issuance of notices, indicating a lack of compliance with statutory requirements.

The ITAT observed that the assessee had filed the return of income before the issuance of notices u/s 143(2) and 142(1). Additionally, the assessment order did not align with the statutory timeline, raising concerns about the validity of the assessment process. Citing a judgment of the Hon’ble High Court of Madras, the ITAT emphasized the mandatory nature of issuing notice u/s 143(2) for assessments framed u/s 143(3), which was absent in this case. Consequently, the non-issuance of a valid notice u/s 143(2) rendered the entire assessment void-ab-initio. Therefore, the ITAT set aside the CIT(A)'s order and quashed the AO's assessment.

Given the invalidation of the assessment order, the ITAT did not delve into the other grounds raised by the assessee on merits. The appeal of the assessee was allowed based on the invalidity of the assessment proceedings due to the non-issuance of a notice u/s 143(2). The decision was pronounced in open court on 15th November 2021.