2024 (12) TMI 1257 - AT - Income Tax

Validity of reopening of assessment - notice u/s. 143(2) was not issued on the return of income filed by the assessee in response to the notice u/s. 148 - HELD THAT - Notices u/s. 143(2) was issued to the assessee, but is not based on examining the return of income filed by assessee that was picked up for scrutiny in the reassessment proceedings. Reassessment order can be passed without compliance with the mandatory requirement of a notice being issued by Ld.AO u/s. 143(2) of the act pursuant to filing of return of income, cannot be treated to be the correct procedure in the eyes of law as observed in case of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT . Issuance of notice u/s. 143(2) of the act after filing of return of income cannot be said to be mere procedural irregularity and the same is not curable. The basic requirement under the act for issuance of notice u/s. 143(2) cannot be dispensed as held in Shree Jay Shivshakar Pvt. Ltd 2015 (10) TMI 1765 - DELHI HIGH COURT Thus reassessment orders passed for the years under consideration deserves to be quashed as no notice u/s.143(2) was issued for both years under consideration to the assessee post response filed by the assessee to treat its original return in response to the notice u/s. 148 - Decided in favour of assesee.

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act for A.Y. 2009-10 and 2010-11 based on accommodation entries obtained from certain entities. Challenge against reopening, lack of notice u/s. 143(2) post filing return in response to notice u/s. 148, and subsequent assessment additions.

Analysis:
The appeals arose from the reopening of assessments for A.Y. 2009-10 and 2010-11 based on information obtained during a search and seizure action revealing accommodation entries by the assessee from specific entities. The assessee objected to the reopening, citing lack of cross-examination opportunity and non-disclosure of relied-upon materials. The CIT(A) upheld the reopening, relying on the AO's observations and legal precedents, leading to assessment additions.

The primary contention before the Tribunal was the non-issuance of notice u/s. 143(2) after filing the return in response to the notice u/s. 148. The assessee relied on judicial decisions emphasizing the mandatory nature of the notice. The Tribunal noted the distinction between the discretionary nature of issuing notices u/s. 143(2) and the mandatory requirement post-reassessment initiation. Citing legal precedents, the Tribunal held that the absence of notice u/s. 143(2) after filing the return was fatal to the reassessment orders.

Consequently, the Tribunal allowed the assessee's appeal, quashing the reassessment orders for both years due to the fatal procedural irregularity of non-issuance of notice u/s. 143(2). As a result, the Tribunal did not delve into the merits of the additions made during the assessment process, deeming them academic in light of the legal issue. The appeals for both years were allowed, leading to the quashing of the reassessment orders.

In conclusion, the Tribunal's decision focused on the procedural irregularity of not issuing notice u/s. 143(2) post filing the return in response to the notice u/s. 148, leading to the quashing of the reassessment orders for A.Y. 2009-10 and 2010-11. The legal issue was pivotal in the Tribunal's decision, rendering the assessment additions moot.