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2023 (3) TMI 977 - AT - Income TaxValidity of assessment order - non-complying the mandatory legal requirement of provisions of Sec. 142 - notice issued on the very same date return was filled - HELD THAT - The first notice u/s 143(2) along with 142(1) was issued on 29.09.2015 requiring the assessee to file return of income. The second notice dated 26.10.2015 was issued u/s 143(2) when the return of income was submitted vide acknowledgement dated 26.10.2015. Thus, the AO has not applied the mind in issuing notice u/s 143(2) further assuming jurisdiction to frame assessment based on such notice is not tenable under law. As relying on the case of assessee s son Shri Santosh Mahalingam 2022 (8) TMI 1358 - ITAT DELHI considering the fact that issuing notice u/s 143(2) on 26.10.2015 and without having original or copy of the return of income filed by the assessee for the AY 2014-15 will vitiate the entire assessment proceedings. Also see Society for Worldwide Inter Bank Finance Telecommunication 2010 (4) TMI 43 - DELHI HIGH COURT thus impugned assessment order deserves to be held as invalid which was passed without complying the mandatory provisions of Sec. 143(2) - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order under Section 143(2) of the Income Tax Act. 2. Legality of additions made under Section 68 for unexplained cash credits. 3. Legality of additions made for excess stock found during the survey. 4. Legality of additions made for unsecured loans. 5. Legality of additions made for advances received against material. 6. Application of mind by the Assessing Officer while issuing notices. 7. Compliance with principles of natural justice and proper opportunity to the assessee. Summary: 1. Validity of the Assessment Order under Section 143(2): The Tribunal held that the assessment order is invalid and without jurisdiction since the notice under Section 143(2) was issued on the same day the return was filed, indicating non-application of mind. The Tribunal relied on the judgment of the Hon'ble Jurisdictional High Court in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications, which held that issuing a notice under Section 143(2) without examining the return of income vitiates the entire assessment proceedings. Consequently, the assessment order was quashed. 2. Legality of Additions under Section 68 for Unexplained Cash Credits: The Tribunal noted that the assessee had discharged the burden of proving the identity, creditworthiness, and genuineness of the cash credits by filing confirmations, ITR copies, and statements of accounts. The Assessing Officer did not exercise his power under Section 131 to verify the genuineness of the credits, leading to the conclusion that the additions were based on mere presumption and guesswork. 3. Legality of Additions for Excess Stock Found During the Survey: The Tribunal found that the addition of Rs.97,840/- for excess stock was incorrect as the stock in question pertained to samples supplied by various suppliers and could not be considered undisclosed income. 4. Legality of Additions for Unsecured Loans: The Tribunal observed that the outstanding loan of Rs.8 lakhs was returned in the next financial year through banking channels, along with the interest due, which was accepted by the Department. Hence, the addition was not justified. 5. Legality of Additions for Advances Received Against Material: The Tribunal noted that advances received from Sh. Satish and R. Mankandan were for materials supplied in the next financial year, which was accepted by the Department. Therefore, the addition was not warranted. 6. Application of Mind by the Assessing Officer: The Tribunal emphasized that the Assessing Officer did not apply his mind while issuing the notice under Section 143(2) on the same day the return was filed. This lack of application of mind invalidated the entire assessment process. 7. Compliance with Principles of Natural Justice: The Tribunal highlighted that the assessment order suffered from a lack of proper and reasonable opportunity to the assessee. The documents and information provided by the assessee were not lawfully adjudicated, leading to a breach of natural justice. Conclusion: The appeal filed by the assessee was allowed, and the assessment order was quashed due to non-compliance with mandatory provisions of Section 143(2) and other legal infirmities. The other grounds of appeal became infructuous and were not adjudicated.
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