2023 (10) TMI 614 - AT - Income Tax

Validity of reopening of assessment - no notice u/s 143(2) was issued and served on the assessee after the assumption of jurisdiction by the Ld. A.O. in the reassessment proceedings - addition u/s 68 - Curable defect u/s 292BB or not? - HELD THAT - As notice u/s 143(2) of the Act was never issued to the company in the reassessment proceedings. CIT(A) is only trying to take shelter of the proviso to section 292BB of the Act that the assessee had cooperated during the course of assessment proceedings and had not raised this objection before the Ld. A.O. This goes to prove categorically that no notice u/s 143(2) of the Act was issued to the assessee company after issuance of notice u/s 148 of the Act. As decided in LAXMAN DAS KHANDELWAL 2019 (8) TMI 660 - SUPREME COURT non- issuance of notices u/s 143(2) of the Act is jurisdictional defect not curable u/s 292BB of the Act. The entire reassessment proceedings are to be declared as void ab-initio. Decided in favour of assessee.

Issues Involved:
1. Applicability of Section 68 and its proviso.
2. Jurisdiction of the Assessing Officer (AO) in initiating proceedings under Section 147/148.
3. Validity of reopening assessment beyond four years.
4. Validity of legal approval under Section 151.
5. Failure to dispose of objections by a speaking order.
6. Non-issuance of mandatory notice under Section 143(2).
7. Addition under Section 68 in the first year of incorporation.
8. Consideration of documentary evidence.

Summary of Judgment:

Issue 1: Applicability of Section 68 and its Proviso
The assessee argued that the CIT(A) erred in confirming the addition of Rs. 1,00,00,000/- under Section 68, asserting that the proviso to Section 68 was not applicable for the AY 2010-11 and that the burden of proof under Section 68 was duly discharged.

Issue 2: Jurisdiction of AO in Initiating Proceedings under Section 147/148
The assessee contended that the assessment proceedings initiated under Section 147/148 were beyond the jurisdiction of the DCIT, Circle 8(1), New Delhi, making the entire proceedings illegal and liable to be quashed.

Issue 3: Validity of Reopening Assessment Beyond Four Years
The assessee claimed that the reopening of the assessment beyond four years was done without fulfilling mandatory jurisdictional conditions, relying on borrowed satisfaction without independent inquiry or tangible material linking the transaction.

Issue 4: Validity of Legal Approval under Section 151
It was argued that the reasons for reopening were recorded without valid legal approval under Section 151, and the approval was given mechanically without independent application of mind.

Issue 5: Failure to Dispose of Objections by a Speaking Order
The assessee contended that the AO failed to dispose of the objections filed in response to the reasons recorded by a speaking order, as mandated by the judgment in GKN Driveshafts (India) Ltd.

Issue 6: Non-Issuance of Mandatory Notice under Section 143(2)
The assessee argued that the AO did not issue the mandatory notice under Section 143(2) before completing the assessment proceedings under Section 147/148, rendering the proceedings void ab initio.

Issue 7: Addition under Section 68 in the First Year of Incorporation
The assessee stated that no addition could be made under Section 68 in the first year of incorporation (FY 2009-10), as the company had no business in its first year.

Issue 8: Consideration of Documentary Evidence
The assessee argued that the CIT(A) confirmed the addition without considering the documentary evidence filed under Section 68, violating principles of natural justice by not confronting any adverse material.

Tribunal's Findings:

Non-Issuance of Notice under Section 143(2)
The Tribunal found that no notice under Section 143(2) was issued to the assessee after the issuance of notice under Section 148, which is a jurisdictional defect not curable under Section 292BB. The Tribunal relied on the Supreme Court's decision in CIT vs. Laxman Das Khandelwal, which held that the absence of notice under Section 143(2) cannot be cured by Section 292BB.

Quashing of Reassessment Proceedings
Due to the non-issuance of the mandatory notice under Section 143(2), the Tribunal quashed the entire reassessment proceedings as void ab initio. Consequently, the other grounds raised by the assessee were not adjudicated, as they became academic in nature.

Conclusion:
The appeal filed by the assessee was allowed, and the reassessment proceedings were declared void ab initio due to the non-issuance of notice under Section 143(2). The Tribunal did not express any opinion on the other grounds raised by the assessee.

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