2013 (1) TMI 678 - AT - Income Tax

Re opening of assessment - no notice under section 143(2) has been issued - DR argued that Section 292BB comes to the rescue of revenue whereby the requirement of issuing notice u/s 143(2) can be dispensed with - Held that - ITAT vide its order dated 11th Feb. 2011 had already given a finding that 143(2) notice was mandatory & CIT (A) has recorded a finding of fact that notice u/s 143(2) of the IT Act, was not issued. Rescue under Section 292BB is not allowed as the said ection was inserted by Finance Act 2008 w.e.f. 1.4.2008 and Hon ble Delhi High Court in the case of CIT Vs. Mani Kakar (2008 (10) TMI 565 - HIGH COURT OF DELHI) had held that provisions of Section 292BB are applicable from assessment year 2008-09 and the cases under consideration relates to assessment years 2005-06 and 2006-07. Similarly in the case of ITO Vs. Nasemen Farms P. Ltd. (2010 (9) TMI 903 - ITAT DELHI) has held that provisions of Section 292BB are applicable only from assessment year 2008-09 and also do not apply where there is failure to issue notice as jurisdiction to assess arises only after the notice has been issued. Moreover in the case of Alpine Electronics Asia P. Ltd. Vs. Director General of Income Tax 2012 (1) TMI 100 - DELHI HIGH COURT held that notice u/s 143(2) is mandatory in reassessment proceedings and it is not a procedural requirement. Thus reassessment proceedings completed in above cases without issuing of necessary notice u/s 143(2) were bad in law and hence were void ab initio - appeals filed by assessee are allowed.

Issues Involved:
1. Validity of reassessment under Section 143(3) without notice under Section 143(2).
2. Interpretation of judgments regarding notice requirements under Sections 147 and 143(2).
3. Validity of reopening of assessment under Section 147.
4. Legality of reasons recorded for reopening.
5. Non-disposal of objections against reopening.
6. Confirmation of addition on account of purchases and professional charges.
7. Reliance on statements without cross-examination.
8. Rejection of evidence submitted by the assessee.
9. Eligibility for deduction under Section 10B.

Detailed Analysis:

1. Validity of Reassessment under Section 143(3) without Notice under Section 143(2):
The primary issue in both assessment years was whether the reassessment framed under Section 143(3) was valid despite the non-issuance of a notice under Section 143(2). The Tribunal had earlier remanded the case to the CIT(A) to determine if such notice was issued. The CIT(A) confirmed that no notice under Section 143(2) was issued, yet upheld the reassessment based on the judgment in Madhya Bharat Energy Corp Ltd., which suggested that the absence of a Section 143(2) notice does not invalidate the reassessment.

2. Interpretation of Judgments Regarding Notice Requirements under Sections 147 and 143(2):
The Tribunal had previously emphasized that the issuance of notice under Section 143(2) is mandatory for reassessment proceedings. The CIT(A) relied on the Delhi High Court judgment in Madhya Bharat Energy Corp Ltd., which was later reviewed. The Tribunal reiterated that the requirement of a Section 143(2) notice is mandatory, referencing several judgments, including CIT Vs. Rajeev Sharma and DIT Vs. Society For Worldwide Inter Bank Financial Telecommunications.

3. Validity of Reopening of Assessment under Section 147:
The assessee contended that the reopening of the assessment was invalid due to the absence of a proper notice under Section 143(2). The Tribunal agreed, noting that the CIT(A) had overstepped by justifying the reassessment despite acknowledging the non-issuance of the required notice.

4. Legality of Reasons Recorded for Reopening:
The assessee argued that the reasons recorded for reopening were legally insufficient. The Tribunal did not delve deeply into this issue, focusing instead on the procedural lapse regarding the notice under Section 143(2).

5. Non-disposal of Objections Against Reopening:
The assessee claimed that the assessment order was invalid as the objections to the reopening were not disposed of. The Tribunal's decision to invalidate the reassessment on procedural grounds rendered this issue moot.

6. Confirmation of Addition on Account of Purchases and Professional Charges:
The CIT(A) had confirmed the addition of Rs.30,41,975/- for A.Y. 2006-07 on account of purchases and professional charges. The Tribunal did not address the merits of this addition, as the reassessment itself was deemed invalid.

7. Reliance on Statements Without Cross-examination:
The assessee contended that reliance on statements without providing the opportunity for cross-examination was improper. The Tribunal's focus on the procedural invalidity of the reassessment meant this issue was not specifically addressed.

8. Rejection of Evidence Submitted by the Assessee:
The CIT(A) had rejected the evidence submitted by the assessee. Again, the Tribunal did not address this issue in detail due to the overarching procedural flaw in the reassessment process.

9. Eligibility for Deduction under Section 10B:
The assessee argued for the recomputation of deduction under Section 10B based on the assessed income. The Tribunal's decision to invalidate the reassessment precluded the need to address this claim.

Conclusion:
The Tribunal concluded that the reassessment proceedings were invalid due to the non-issuance of the mandatory notice under Section 143(2). Consequently, the appeals filed by the assessee were allowed, and the reassessment orders were declared void ab initio. The Tribunal emphasized the mandatory nature of the notice under Section 143(2) in reassessment proceedings, aligning with various judicial pronouncements.

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