2023 (8) TMI 1106 - AT - Income Tax

Reopening of assessment u/s 147 - non issue of notice issued u/s 143(2) - Whether defect curable u/s 292BB? - HELD THAT - As decided in Cebon India Ltd 2009 (7) TMI 26 - PUNJAB AND HARYANA HIGH COURT absence of a statutory notice cannot be held to be curable u/s 292BB of the Act. A plain reading of section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act. The provisions contained in sub-section (2) of section 143 is mandatory and the legislature in their wisdom by using the word 'reason to believe' had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve, notice specifying particulars of such claim. After receipt of return in response to notice under Section 148, it shall be mandatory for the assessing officer to serve a notice under sub-Section (2) of Section 143 assigning reason therein. In absence of any notice issued under sub-section (2) of section 143 after receipt of fresh return submitted by the assessee in response to notice under section 148, the entire procedure adopted for escaped assessment, shall not be valid. Reassessment order passed by AO u/s 143(3) r.w.s. 147 quashed - Appeal of the assessee allowed.

Issues involved:
1. Validity of the reassessment proceedings due to non-issuance of notice under section 143(2).
2. Addition of unexplained cash credits under section 68.
3. Agricultural income and gifts as sources of opening cash balance.
4. Creditworthiness of the donors.
5. Applicability of section 292BB.

Summary:

1. Validity of the reassessment proceedings due to non-issuance of notice under section 143(2):
The assessee raised an additional ground challenging the validity of the reassessment proceedings on the basis that the notice under section 143(2) was not issued. The Tribunal admitted this additional ground, emphasizing that an assessee can raise a legal ground at any stage of the proceedings. The Tribunal referred to the Hon'ble Supreme Court's decision in ACIT v. Hotel Blue Moon, which mandates the issuance of notice under section 143(2) for completing the assessment under section 148. The Tribunal found that the assessing officer did not issue the mandatory notice under section 143(2), which is essential for assuming jurisdiction. Consequently, the reassessment order was quashed.

2. Addition of unexplained cash credits under section 68:
The assessee contested the addition of Rs. 13,82,815/- as unexplained cash credits under section 68. The assessing officer had accepted Rs. 5,00,000/- as the opening cash balance but treated the remaining amount as unexplained. The Tribunal did not delve into the merits of this issue, as the reassessment proceedings were quashed on procedural grounds.

3. Agricultural income and gifts as sources of opening cash balance:
The assessee claimed that the opening cash balance was derived from agricultural income and gifts received from family members. The assessing officer and CIT(A) rejected these claims, citing insufficient evidence and lack of creditworthiness of the donors. The Tribunal did not adjudicate this issue due to the quashing of the reassessment proceedings.

4. Creditworthiness of the donors:
The assessing officer questioned the creditworthiness of the donors, noting discrepancies in the gift deeds and the absence of supporting documents like bank statements or income tax returns. The Tribunal did not address this issue in detail, as the reassessment proceedings were quashed.

5. Applicability of section 292BB:
The Revenue argued that the assessee's participation in the assessment proceedings invoked section 292BB, which deems proper service of notice. The Tribunal disagreed, stating that section 292BB does not cure the absence of a statutory notice required for assuming jurisdiction. The Tribunal relied on the P&H High Court's decision in CIT v. Cebon India Ltd, which held that the absence of a statutory notice cannot be cured under section 292BB.

Conclusion:
The Tribunal quashed the reassessment order due to the non-issuance of the mandatory notice under section 143(2), rendering other issues on merits academic and infructuous. The appeal of the assessee was allowed.

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