2025 (3) TMI 456 - AT - Income Tax

Reopening of assessment - absence of issuance of notice u/s. 143(2) - HELD THAT - AO has not issued notice u/s. 143(2) of the Act and has not considered the return of income filed in response to notice u/s. 142(1) of the Act. The above provisions of section 143(2) clearly stipulate the legal necessity of issuance of notice u/s. 143(2) of the Act to complete the assessment. It is an accepted legal proposition that where the return of income has been filed in response to notice u/s. 148 the provisions of the Act shall apply as if such return was a return required to be furnished u/s.139 of the Act. In the instant case AO did not consider the return of income filed by the assessee on 23/09/2021 stating that the return filed by the assessee is beyond the stipulated time frame of 30 days as specified in the notice u/s. 148 for filing the return of income. In our opinion the return of income even though filed belatedly would still qualify as return furnished u/s.139 and should be taken on record by the Ld. AO. In the instant case AO in his order has stated that since the assessee did not furnish the return of income within the time limit specified in the notice u/s 148 no notice u/s. 143(2) of the Act was issued to the assessee. The failure of the AO to issue notice u/s. 143(2) of the Act prior to finalizing the re-assessment order cannot be curable by the provisions of section 292BB of the Act. Thus notice u/s.143(2) of the Act presupposes the assessment order we are of the considered view that the assessment order passed by the Ld. AO u/s. 147 r.w.s 144 r.w.s 144B in the case of the assessee is bad in the eyes of law and cannot be sustained. Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the return of income filed by the assessee in response to the notice under section 148 of the Income Tax Act, 1961, beyond the stipulated time, should be considered valid.

2. The validity of the assessment proceedings in the absence of a notice issued under section 143(2) of the Act.

3. Whether the addition of Rs. 93,37,000/- as unexplained investment under section 69 of the Act was justified.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the Return Filed Beyond the Stipulated Time

- Relevant Legal Framework and Precedents: The legal framework involves sections 139, 142(1), 143(2), and 148 of the Income Tax Act, 1961. The precedents cited include the decisions in Chirakkal Service Cooperative Bank Ltd. vs. Commissioner of Income Tax and Smt. Amina Ismil Rangari vs. ITO.

- Court's Interpretation and Reasoning: The Tribunal referred to the precedent set in Smt. Amina Ismil Rangari vs. ITO, which held that a return filed beyond the stipulated time in response to a notice under section 148 does not render it invalid or non-est.

- Key Evidence and Findings: The assessee filed the return of income after the stipulated 30 days. The Tribunal noted that the Assessing Officer did not take cognizance of this return due to the delay.

- Application of Law to Facts: The Tribunal applied the reasoning from previous cases, concluding that the return filed, although delayed, should still be considered valid.

- Treatment of Competing Arguments: The Department argued that the return was non-est due to the delay, while the assessee contended that the delay should not invalidate the return.

- Conclusions: The Tribunal concluded that the return should be considered valid despite the delay.

2. Validity of Assessment Proceedings Without Notice Under Section 143(2)

- Relevant Legal Framework and Precedents: The primary legal provisions are sections 143(2) and 292BB of the Income Tax Act, 1961. The case of CIT vs. Laxman Das Khandelwal was pivotal.

- Court's Interpretation and Reasoning: The Tribunal emphasized that the issuance of a notice under section 143(2) is a mandatory requirement for a valid assessment proceeding.

- Key Evidence and Findings: The Tribunal found that no notice under section 143(2) was issued to the assessee.

- Application of Law to Facts: The Tribunal applied the legal principle that the absence of a notice under section 143(2) renders the assessment proceedings invalid.

- Treatment of Competing Arguments: The Department argued that the absence of notice could be cured under section 292BB. However, the Tribunal noted that section 292BB does not apply to the complete absence of notice.

- Conclusions: The Tribunal concluded that the assessment proceedings were invalid due to the absence of a notice under section 143(2).

3. Addition of Rs. 93,37,000/- as Unexplained Investment

- Relevant Legal Framework and Precedents: The relevant section is 69 of the Income Tax Act, 1961.

- Court's Interpretation and Reasoning: The Tribunal did not delve into the merits of this issue due to the quashing of the assessment order.

- Key Evidence and Findings: The Tribunal did not consider the evidence related to this issue as the assessment order was quashed.

- Application of Law to Facts: The Tribunal did not apply the law to the facts concerning this issue due to the prior determination of the invalidity of the assessment proceedings.

- Treatment of Competing Arguments: The Tribunal did not address competing arguments on this issue.

- Conclusions: The issue became infructuous as the assessment order was quashed.

SIGNIFICANT HOLDINGS

- The Tribunal held that a return of income filed in response to a notice under section 148, even if filed beyond the stipulated time, should be considered valid.

- The Tribunal emphasized that the issuance of a notice under section 143(2) is mandatory for valid assessment proceedings, and its absence renders the proceedings void.

- The Tribunal quashed the assessment order due to the absence of a notice under section 143(2), rendering the addition of Rs. 93,37,000/- as unexplained investment under section 69 infructuous.

- Verbatim Quote: "The failure of the Ld. AO to issue notice u/s. 143(2) of the Act, prior to finalizing the re-assessment order, cannot be curable by the provisions of section 292BB of the Act."

- Core principles established include the necessity of notice under section 143(2) for valid assessment proceedings and the acceptance of delayed returns in response to section 148 notices as valid.

- The Tribunal allowed the appeal, quashing the assessment order and rendering the addition under section 69 infructuous.