2014 (2) TMI 221 - AT - Income Tax

Validity of reassessment u/s 143(3) r.w. Section 147 of the Act Assessment made without issuance of notice Held that - In a case of reopening of assessment u/s 147, the A.O. is bound to comply with the requirement of section 143(2) of the income Tax Act - the A.O. was bound by the mandate to issue notice and on failure to issue notice within the period stipulated in the said proviso, the order of reassessment would be without jurisdiction which is liable to be set aside - The decision in Commissioner of Wealth Tax vs. HUF of H.H. Late J.M. Scindia 2008 (2) TMI 53 - BOMBAY HIGH COURT followed - the reassessment completed by the A.O. u/s 143(3) r.w.s. 147 without issuing notice u/s 143(2) of the Act is void ab initio and the same is liable to be cancelled Decided against Revenue in favour of Assessee.

Summary

Issues:
Validity of reassessment without issuing notice u/s 143(2) - Whether reassessment made by the A.O. without issuing notice u/s 143(2) of the Act is valid.

Analysis:
The judgment involves two cross-appeals directed against the order of the ld. CIT(A). The assessee, a Co-Op. Housing Society, had initially filed a return declaring total income at "nil" for the relevant year. However, the Assessing Officer (A.O.) found that the assessee had not disclosed a transaction involving the transfer of development rights. Subsequently, the A.O. reopened the assessment and brought the profit from the transfer of development rights to tax under the head "capital gains." The ld. CIT(A) upheld the validity of the reassessment and the taxability of the profit as capital gains. However, considering that the entire consideration from the sale of development rights had been shared by the 12 members who were the actual owners, the ld. CIT(A) deleted the addition made by the A.O. on account of capital gain. Both the assessee and the Revenue appealed to the Tribunal.

In the appeal of the assessee, a preliminary issue was raised challenging the validity of the reassessment made by the A.O. without issuing notice u/s 143(2) of the Act. The Tribunal directed the ld. D.R. to produce assessment records, which revealed that no notice u/s 143(2) was issued. Citing relevant case laws, including decisions by various High Courts, the Tribunal held that the reassessment completed without issuing notice u/s 143(2) is void ab initio. Consequently, the reassessment made by the A.O. was canceled. As a result, the other issues raised in the appeals of both the assessee and the Revenue were deemed infructuous, and the Tribunal did not adjudicate on them.

Therefore, the Tribunal allowed the appeal of the assessee and dismissed the appeal of the Revenue, based on the finding that the reassessment without issuing notice u/s 143(2) was invalid. The judgment emphasizes the mandatory nature of issuing notice u/s 143(2) before completing reassessment under section 147 of the Income Tax Act, highlighting the importance of procedural compliance in such cases.