2017 (12) TMI 249 - AT - Income Tax

Validity of assessment - non-issuance of notice u/s. 143(2) - Held that - Appellant could not get notice u/s. 143(2)/142(1) of the I.T. Act, because there was no compliance by the Assessee and addition were made in the order u/s. 144 of the Act meaning thereby that Ld. CIT(A) himself admitted that no notice u/s. 143(2)/142(1) of the I.T. Act has been served upon the assessee and the AO completed the assessment by making the addition in dispute in the case of the assessee and the Ld. CIT(A) has upheld the order of the AO without appreciating the non-service of notice to the Assessee u/s. 143(2) of the I.T. Act. Under the circumstances, the exparte assessment order is void ab initio for want of mandatory service of jurisdictional notice u/s. 143(2) of the I.T. Act, 1961 and hence, not sustainable in the eyes of law, in view of the decision of the Hon ble Supreme Court of India in the case of ACIT & Anr. Vs. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA wherein the Hon ble Supreme Court has held that the issue of notice u/s. 143(2) of the I.T. Act is mandatory and not procedural. - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-service of jurisdictional notice u/s. 143(2) before exparte assessment framed u/s. 144.
2. Addition of ?60,29,000/- sustained by CIT(A) on merits.

Analysis:

Issue 1: Non-service of jurisdictional notice u/s. 143(2) before exparte assessment framed u/s. 144:
The Assessee filed an appeal against an exparte assessment order under section 144 of the Income Tax Act, 1961, due to the non-service of the jurisdictional notice u/s. 143(2). The AO finalized the assessment exparte due to the Assessee's non-cooperation and lack of compliance. The Ld. CIT(A) partly allowed the appeal, but the Assessee further appealed to the Tribunal. The Assessee argued that the legal issue of non-service of the mandatory notice u/s. 143(2) is crucial, citing the decision in ACIT & Anr. Vs. Hotel Blue Moon, where the Supreme Court held such notice as mandatory. The Ld. CIT(A) admitted additional evidence under Rule 46A(1)(b) and (c) due to non-service of notices u/s. 143(2)/142(1). The Tribunal, following the legal precedent, canceled the assessment order and allowed the appeal, emphasizing the mandatory nature of the notice u/s. 143(2).

Issue 2: Addition of ?60,29,000/- sustained by CIT(A) on merits:
The Assessee challenged the addition of ?60,29,000/- made by the AO, which was sustained by the CIT(A). The Assessee argued that the addition was based on irrelevant grounds and without proper enquiry. The Assessee contended that the amount received from Sh. Har Prakash was adequately explained and supported by evidence, including bank statements and an agreement to sell. However, the AO finalized the assessment exparte, leading to the disputed addition. The Tribunal did not delve into the merits of this addition as the cancellation of the assessment order rendered this issue moot.

In conclusion, the Tribunal allowed the Assessee's appeal due to the non-service of the jurisdictional notice u/s. 143(2), following the legal precedent emphasizing the mandatory nature of such notice, thereby canceling the assessment order and the impugned order.