2015 (10) TMI 2317 - AT - Income Tax

Validity of reopening of assessment - non issue of notice - Held that - AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law and hence, we cancel the same by accepting the appeal filed by the Assessee. - Decided in favour of assessee.

Issues Involved:
1. Validity of the order passed by the CIT(A).
2. Proper service of statutory notice under Section 148 of the Act.
3. Compliance with statutory conditions under Section 147 read with Section 148 of the Act.
4. Validity of reasons recorded for reopening the assessment under Section 147.
5. Issuance of statutory notice under Section 143(2) of the Act.
6. Addition of Rs. 1,00,00,000/- on account of unexplained cash credit.
7. Consideration of material and evidence provided by the assessee.
8. Validity of addition made by CIT(A) based on the evidence submitted by the assessee.
9. Absence of adverse material or contradiction in evidence submitted by the assessee.
10. Violation of statutory provision of Section 142(3) of the Act by not giving the assessee an opportunity to rebut the material collected.
11. Violation of principles of natural justice by not allowing the assessee to cross-examine a person whose statement was used for addition.

Issue-wise Detailed Analysis:

1. Validity of the order passed by the CIT(A):
The assessee argued that the CIT(A)'s order is bad in law and on facts. The Tribunal found that the CIT(A) failed to address the issue of non-service of notice under Section 143(2) adequately, which is mandatory for reassessment proceedings. Consequently, the Tribunal declared the assessment order invalid.

2. Proper service of statutory notice under Section 148 of the Act:
The Tribunal noted that the notice issued under Section 148 on 30.03.2010 was returned unserved. The assessee contended that the reassessment proceedings were initiated without proper service of this notice. The Tribunal did not specifically address this issue in detail but focused on the subsequent non-issuance of notice under Section 143(2).

3. Compliance with statutory conditions under Section 147 read with Section 148 of the Act:
The assessee argued that the reassessment was conducted without complying with statutory conditions. The Tribunal found that the failure to issue a notice under Section 143(2) before completing the assessment rendered the reassessment proceedings invalid.

4. Validity of reasons recorded for reopening the assessment under Section 147:
The assessee contended that the reasons recorded for reopening the assessment did not meet the requirements of Section 147. The Tribunal did not delve into this issue in detail, as the non-issuance of notice under Section 143(2) was sufficient to invalidate the reassessment.

5. Issuance of statutory notice under Section 143(2) of the Act:
The Tribunal emphasized that the issuance of notice under Section 143(2) is mandatory for reassessment proceedings. The Tribunal cited several judgments, including ACIT vs. Hotel Blue Moon, to support the view that the failure to issue such notice renders the assessment invalid. The Tribunal found that no notice under Section 143(2) was issued, leading to the invalidation of the reassessment order.

6. Addition of Rs. 1,00,00,000/- on account of unexplained cash credit:
The assessee challenged the addition of Rs. 1,00,00,000/- made by the AO as unexplained cash credit under Section 68. The Tribunal did not specifically address the merits of this addition, as the reassessment order itself was declared invalid due to procedural lapses.

7. Consideration of material and evidence provided by the assessee:
The assessee argued that all relevant material and evidence were provided to support their case. The Tribunal noted that the AO failed to issue the mandatory notice under Section 143(2), which precluded a proper examination of the evidence. Thus, the reassessment order was invalidated.

8. Validity of addition made by CIT(A) based on the evidence submitted by the assessee:
The Tribunal found that the CIT(A) upheld the addition without addressing the procedural lapse of non-issuance of notice under Section 143(2). As a result, the Tribunal invalidated the reassessment order.

9. Absence of adverse material or contradiction in evidence submitted by the assessee:
The assessee contended that there was no adverse material or contradiction in the evidence submitted. The Tribunal did not specifically address this issue but invalidated the reassessment order due to procedural lapses.

10. Violation of statutory provision of Section 142(3) of the Act by not giving the assessee an opportunity to rebut the material collected:
The assessee argued that the reassessment was conducted based on material collected without providing an opportunity to rebut it. The Tribunal focused on the procedural lapse of non-issuance of notice under Section 143(2), rendering the reassessment invalid.

11. Violation of principles of natural justice by not allowing the assessee to cross-examine a person whose statement was used for addition:
The assessee contended that they were not allowed to cross-examine a person whose statement was used for the addition. The Tribunal did not address this issue in detail, as the reassessment order was invalidated due to the failure to issue notice under Section 143(2).

Conclusion:
The Tribunal declared the reassessment order dated 31.12.2010 invalid due to the failure to issue a mandatory notice under Section 143(2) of the I.T. Act. Consequently, the appeal of the assessee was allowed, and the reassessment order was canceled. The Tribunal's decision was based on the procedural lapse, citing various judgments to support its view.

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