2022 (12) TMI 26 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - failure to issue the statutory notice u/s 143(2) - HELD THAT - AR was able to produce the order sheet entry recorded by the AO during the assessment proceedings which also does not contain any information about the issuance of notice under the provisions of section 143(2) of the Act. The copy of the order sheet entry maintained by the AO during the assessment proceedings is available on record. At this juncture, it is also significant to note that the Department was able to maintain the order sheet entry of such old record thus it can be inferred that the records were not misplaced by the Department in the case of the assessee. However, such records were not containing the copy of the notice issued under section 143(2) of the Act. Thus we hold that the mandatory notice was not issued under section 143(2) of the Act by the Revenue and accordingly the proceedings against the assessee under the provisions of section 143(3) read with section 147 of the Act are not sustainable. Thus, we hold that the assessment framed under section 143(3) read with section 147 of the Act is void-ab-initio. Hence the ground of appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of assessment framed under section 147 read with section 143(3) without issuing notice under section 143(2).
2. Applicability of section 292BB in the context of non-issuance of notice under section 143(2).
3. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Validity of Assessment Under Section 147/143(3) Without Notice Under Section 143(2):

The primary issue revolves around whether an assessment made under section 147 read with section 143(3) of the Income Tax Act, 1961, is valid if the mandatory notice under section 143(2) was not issued. The Tribunal noted that the return filed in response to section 148 is deemed to be under section 139, thus necessitating compliance with all procedural requirements, including the issuance of notice under section 143(2). The Tribunal cited several judicial precedents to support this view, including the Supreme Court's decision in R. Dalmia Vs. CIT and the Special Bench's decision in Raj Kumar Chawla v/s ITO, which emphasized the mandatory nature of such notice.

The Tribunal concluded that the absence of a notice under section 143(2) renders the entire assessment proceedings null and void. This conclusion was further supported by the Hon'ble Gujarat High Court's judgments in ITO vs. Smt. Sukhini P. Modi and CIT vs. Panorama Builders Pvt. Ltd., which reiterated the necessity of issuing a notice under section 143(2) for the validity of the assessment.

2. Applicability of Section 292BB:

The Tribunal examined whether section 292BB, which deals with the deemed validity of notices in certain circumstances, could cure the defect of non-issuance of a notice under section 143(2). It was clarified that section 292BB applies to cases where a notice has been issued but served improperly or not in time, and not to cases where no notice was issued at all. The Tribunal referred to the Hon'ble Gujarat High Court's decision in PCIT v/s Marck Biosciences Ltd., which held that section 292BB does not apply to the non-issuance of a mandatory notice under section 143(2).

3. Condonation of Delay in Filing the Appeal:

The Tribunal addressed the delay of 2337 days in filing the appeal before the ITAT. The assessee attributed the delay to financial crises and family disputes. The Tribunal, referencing the principles laid down by the Supreme Court in Vedabai v. Shantaram Baburao Patil and the Hon'ble Madras High Court in Sreenivas Charitable Trust v. Dy. CIT, emphasized that the expression "sufficient cause" should be interpreted to advance substantial justice. The Tribunal found the reasons provided by the assessee to be reasonable and, in the absence of any counter-affidavit from the Revenue, decided to condone the delay in the interest of justice.

Conclusion:

The Tribunal allowed the appeal on the technical ground that the assessment framed without issuing a notice under section 143(2) is void-ab-initio. Consequently, the issue on merit was dismissed as infructuous. The findings for the assessment year 1992-93 were applied to the subsequent assessment years 1993-94, 1994-95, and 1995-96, resulting in the appeals for these years being partly allowed on similar grounds.

Final Order:
The appeals filed by the assessee for the assessment years 1992-93, 1993-94, 1994-95, and 1995-96 were partly allowed. The assessment orders were declared void due to the non-issuance of mandatory notices under section 143(2), and the issues on merit were dismissed as infructuous. The order was pronounced in the Court on 23/11/2022 at Ahmedabad.