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2018 (10) TMI 1187 - HC - Income TaxReopening of assessment u/s 147 - no notice under Section 143(2) of the Act was issued by the Assessing Officer - Return filed after prescribed time - Held that - Admittedly in the instant case the return was filed by the assessee after the time prescribed for filing return under Sections 139(1) and 139(4) had expired. Therefore the return filed by the assessee has to be treated as non-est. The proceedings under Section 147 of the Act were initiated on the ground that the return for the assessment year 2005-06 was the first ever return filed by the assessee and was filed on 13.02.2008. The Assessing Officer asked to explain the opening capital and source of advances through notices on various dates from December 2012 to February 2013. No response was made by the assessee. Subsequently AO vide draft letter dated 28.02.2013 asked to comply and give response to the draft assessment order on 11.03.2013. The assessee did not respond to the draft assessment order where certain additions were proposed on account of unexplained opening capital balances of partner unexplained loan extended to Mr. and Mrs. Shah and disallowance of interest. In absence of any explanation the AO made the additions. Notice under Section 143(2) is required to be given only when return is furnished. Furnishing of the return is a sine qua non for issuance of notice under Section 143(2) of the Act. If no return is furnished by the assessee there can be no reason for issuance of notice under Section 143(2) of the Act - Decided in favour of revenue.
Issues:
1) Appeal under Section 260-A of the Income Tax Act, 1961 against ITAT order. 2) Substantial question of law regarding the necessity of notice under Section 143(2) when no return is filed. 3) Assessment proceedings based on non-filing of return and subsequent additions. 4) Dismissal of appeal by Commissioner of Income Tax (Appeals) and appeal before ITAT. 5) Applicability of judgments in similar cases. 6) Interpretation of Section 148 and Section 143 of the Income Tax Act. 7) Supreme Court ruling on the mandatory nature of notice under Section 143(2). 8) Treatment of late-filed return as non-est and consequences. 9) Division Bench ruling on the necessity of return for issuance of notice under Section 143(2). Analysis: 1) The appeal was filed against an ITAT order regarding the necessity of issuing a notice under Section 143(2) of the Income Tax Act when no return was filed by the assessee in response to a notice under Section 148. The substantial question of law focused on this issue, and the appeal was admitted by the High Court based on this question. 2) The assessment proceedings were initiated due to the non-filing of the return by the assessee within the prescribed time. The Assessing Officer made additions to the income based on various discrepancies identified, including unexplained capital balances and loans. The appeal against the assessment order was dismissed by the Commissioner of Income Tax (Appeals), leading to the appeal before the ITAT. 3) The learned counsel argued that previous judgments cited by the Tribunal were not applicable to the current case as they involved situations where the assessee had filed returns. The High Court analyzed the provisions of Section 148 and Section 143 of the Act to determine the procedural requirements for issuing notices and conducting assessments. 4) The Supreme Court's ruling emphasized the mandatory nature of issuing a notice under Section 143(2) when the return filed by the assessee is not accepted and variations are expected in the assessment order. However, this ruling was deemed inapplicable to cases where no return was filed, as in the present scenario. 5) The High Court considered the late-filed return as non-est due to being submitted after the prescribed deadline. The failure of the assessee to respond to various notices and the draft assessment order led to the additions made by the Assessing Officer. 6) The High Court concluded that the notice under Section 143(2) is contingent upon the furnishing of a return by the assessee. If no return is filed, there is no basis for issuing such a notice. This interpretation was supported by a previous ruling of a Division Bench of the Court. 7) Based on the above analysis, the High Court answered the substantial question of law in the negative, favoring the revenue. Consequently, the ITAT order was quashed, and the appeal was allowed.
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