2025 (3) TMI 21 - AT - Income Tax

Validity of assessment framed u/s.143(3) r.w.s. 147 in absence of notice u/s.143(2) - HELD THAT - As in the present case before us remained well within his right to assail the validity of the jurisdiction that was assumed by the AO for framing of assessment u/s. 143(3) r.w.s. 147 in absence of notice u/s. 143(2) of the Act. Apropos the maintainability of the aforesaid claim of the assessee we find that in the cases of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT and Laxman Das Khandelwal 2019 (8) TMI 660 - SUPREME COURT had held that pursuant to the return of income filed by the assessee the A.O remains under a statutory obligation to issue notice u/s. 143(2) of the Act for framing the assessment. Our aforesaid view is further fortified by Shri Jai Shiv Shankar Traders (P) Ltd. 2015 (10) TMI 1765 - DELHI HIGH COURT held that absence of notice u/s.143(2) of the Act impregnates the proceeding with a jurisdictional defect and hence renders it as invalid in the eyes of law. Thus order passed u/s. 143(3) r.w.s. 147 in absence of a notice u/s. 143(2) of the Act having been issued by him cannot be sustained and is liable to be quashed. Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the assessment order passed under Section 143(3) read with Section 147 of the Income-tax Act, 1961, is valid in the absence of a notice under Section 143(2) being issued after the return of income was filed in response to a notice under Section 148.
Whether the approval granted by the Joint Commissioner of Income Tax (JCIT) under Section 151(1) was valid, considering it was allegedly given without proper application of mind.
Whether the addition of Rs. 91,57,837/- as long-term capital gain was justified, given the claim that the land was agricultural and thus exempt from capital gains tax under Section 10(37) of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

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

Relevant Legal Framework and Precedents: The issuance of a notice under Section 143(2) is a statutory requirement for the validity of an assessment order under Section 147, as established by precedents such as ACIT & Anr. Vs. Hotel Blue Moon and CIT Vs. Laxman Das Khandelwal.
Court's Interpretation and Reasoning: The Tribunal emphasized that the absence of a notice under Section 143(2) constitutes a jurisdictional defect, rendering the assessment invalid. The court relied on the statutory obligation of the Assessing Officer (A.O) to issue such notice following the filing of a return in response to Section 148.
Key Evidence and Findings: The Tribunal found no evidence that the A.O issued a notice under Section 143(2) after the assessee filed a return in response to the notice under Section 148. The assessment record and order sheet notings did not indicate the issuance of such a notice.
Application of Law to Facts: Given the absence of a Section 143(2) notice, the Tribunal concluded that the assessment order was invalid and unsustainable.
Treatment of Competing Arguments: The A.O argued that the assessee did not object during the assessment proceedings and participated voluntarily, but the Tribunal held that the statutory requirement for notice issuance could not be waived by participation.
Conclusions: The Tribunal quashed the assessment order due to the jurisdictional defect of not issuing a notice under Section 143(2).

Issue 2: Validity of JCIT's Approval under Section 151(1)

Relevant Legal Framework and Precedents: Section 151(1) requires that the JCIT's approval for reopening assessments must be based on a thorough examination of the reasons recorded by the A.O.
Court's Interpretation and Reasoning: The Tribunal did not specifically address this issue in detail, as the primary focus was on the absence of the Section 143(2) notice.
Key Evidence and Findings: The appellant argued that the JCIT's approval was mechanical and lacked application of mind, but this was not the primary basis for the Tribunal's decision.
Application of Law to Facts: The Tribunal did not make a final determination on this issue due to the quashing of the assessment on other grounds.
Conclusions: The issue was left open as the assessment was quashed on other grounds.

Issue 3: Addition of Rs. 91,57,837/- as Long-Term Capital Gain

Relevant Legal Framework and Precedents: Section 2(14) defines a capital asset, and Section 10(37) provides an exemption for certain agricultural lands. The determination of whether the land qualifies as a capital asset is crucial.
Court's Interpretation and Reasoning: The Tribunal did not delve deeply into this issue due to the procedural defect in the assessment process.
Key Evidence and Findings: The A.O and CIT(A) concluded that the land was not used for agricultural purposes and was within municipal limits, thus qualifying as a capital asset. However, this finding was not the focus of the Tribunal's decision.
Application of Law to Facts: The Tribunal refrained from addressing this issue substantively due to the quashing of the assessment order.
Conclusions: The Tribunal left this issue open for future consideration, as the procedural defect was dispositive.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The absence of notice u/s. 143(2) of the Act impregnates the proceeding with a jurisdictional defect, and hence, renders it as invalid in the eyes of law."
Core Principles Established: The issuance of a notice under Section 143(2) is a mandatory requirement for the validity of an assessment order under Section 147, and its absence constitutes a jurisdictional defect.
Final Determinations on Each Issue: The assessment order was quashed due to the absence of a Section 143(2) notice, and other issues were left open for future consideration.

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