2021 (8) TMI 1430 - AT - Income Tax

Validity of assessment order passed without issuing notice u/s 143(2) - HELD THAT - No notice u/s 143(2) was issued before finalizing the assessment order u/s 147. We find that the assessee is hesitated this issue before CIT(A) as well that in absence of notice u/s 143(2) the assessment is invalid. It is an admitted position under the law that assessment order passed without issuing notice u/s 143(2) is invalid. Therefore subsequent assessment proceedings and the subsequent addition made therein is void ab-initio. We have accepted the preliminary contention of the submission of assessee. The assessment order is passed without issuing notice u/s 143(2) therefore discussion on other grounds of appeal have academic. Appeal of the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions presented and considered in this judgment are:

Whether the assessment order passed without issuing a notice under section 143(2) of the Income Tax Act is valid.
Whether the additions made by the Assessing Officer (AO) in the reassessment proceedings are justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Assessment Order Without Notice Under Section 143(2)

Relevant Legal Framework and Precedents: Section 143(2) of the Income Tax Act mandates that a notice must be served to the assessee if the Assessing Officer intends to scrutinize the return filed. The absence of such a notice is considered a jurisdictional defect, rendering the assessment order invalid.
Court's Interpretation and Reasoning: The Tribunal emphasized that the issuance of a notice under section 143(2) is a mandatory requirement for the validity of an assessment order. The failure to issue this notice constitutes a jurisdictional error that cannot be rectified subsequently.
Key Evidence and Findings: It was conceded by the Departmental Representative that there was no evidence in the assessment record of a notice under section 143(2) being issued. This admission was pivotal in the Tribunal's decision.
Application of Law to Facts: Given the absence of the notice, the Tribunal concluded that the assessment order was void ab initio, as it was fundamentally flawed due to the lack of jurisdiction.
Treatment of Competing Arguments: The assessee argued that the non-issuance of the notice rendered the assessment order invalid, while the Department contended that the assessee was aware of the proceedings. However, the Tribunal held that awareness does not substitute the legal requirement of serving a notice under section 143(2).
Conclusions: The Tribunal concluded that the assessment order was invalid due to the non-issuance of the mandatory notice under section 143(2).

Issue 2: Justification of Additions Made in Reassessment

Relevant Legal Framework and Precedents: The reassessment proceedings are governed by section 147 of the Income Tax Act, which allows the AO to reassess income if there is reason to believe that income has escaped assessment.
Court's Interpretation and Reasoning: The Tribunal did not delve into the merits of the additions made by the AO, as the primary ground of the invalidity of the assessment order was upheld.
Key Evidence and Findings: The Tribunal noted that since the assessment order itself was invalid, any subsequent additions made therein were also void.
Application of Law to Facts: The Tribunal applied the principle that an invalid assessment order cannot sustain any additions, irrespective of their merits.
Treatment of Competing Arguments: The Tribunal did not address the arguments regarding the additions, as the invalidity of the assessment order rendered these discussions academic.
Conclusions: The Tribunal did not make a determination on the validity of the additions due to the primary issue of the invalid assessment order.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "It is an admitted position under the law that assessment order passed without issuing notice under section 143(2) is invalid."
Core Principles Established: The issuance of a notice under section 143(2) is a jurisdictional requirement for the validity of an assessment order. An assessment order passed without such notice is void ab initio.
Final Determinations on Each Issue: The Tribunal allowed the appeal of the assessee, holding that the assessment order was invalid due to the non-issuance of notice under section 143(2), rendering any discussion on the merits of the additions academic.

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