2019 (12) TMI 365 - AT - Income Tax

Reopening of assessment u/s 147 - non-issuance of notice u/s 143(2) - HELD THAT - At this stage submitted that the section 292BB comes into play here wherein the AO s notice is deemed valid in certain circumstances when an assessee participates in the corresponding proceedings without raising any objection. We quote hon ble apex court s yet another decision in CIT vs. Laxman Das Khandelwal 2019 (8) TMI 660 - SUPREME COURT holds that this statutory provision does not correct the Assessing Officer s inaction in not issuing section 143(2) notice during the course of assessment. We therefore adopt the foregoing coordinate bench s detailed reasoning mutatis mutandis to quash the impugned reassessment dated 23.11.2010. That being the case, rectification proceedings are taken recourse by the Assessing Officer u/s 154 of the Act forming subject matter of the latter appeal have no legs to stand. The same are also quashed.

Summary

Issues Involved:
1. Delay in filing appeals.
2. Violation of principles of natural justice.
3. Validity of assessment/reassessment without issuance of notice under section 143(2).
4. Applicability of section 292BB in curing the defect of non-issuance of notice under section 143(2).

Detailed Analysis:

1. Delay in Filing Appeals:
The appeals faced a delay of 345 days in filing. The assessee attributed this delay to the departure of his accountant, who did not hand over the necessary documents. The Revenue did not rebut these claims. The tribunal referenced the case law "Collector, Land Acquisition vs. Mst. Katji & Ors [1987] 167 ITR 0471 (SC)" to prioritize substantial justice over technicalities, thereby condoning the delay and allowing the appeals to be adjudicated on merits.

2. Violation of Principles of Natural Justice:
The assessee raised grounds alleging violation of principles of natural justice, followed by disallowances/additions on merits. However, these grounds were rendered infructuous as the tribunal focused on the more fundamental issue of the validity of the assessment/reassessment due to the non-issuance of notice under section 143(2).

3. Validity of Assessment/Reassessment Without Issuance of Notice Under Section 143(2):
The assessee claimed that the assessment/reassessment was invalid due to the non-issuance of a notice under section 143(2). The tribunal admitted this additional ground, referencing the Supreme Court decision in "National Thermal Power Corporation Ltd. vs. CIT (1998) 29 ITR 383 (SC)" which allows raising additional grounds if all relevant facts are on record. The tribunal found that the Assessing Officer issued a section 143(2) notice before the assessee filed his return in response to the section 148 notice, which was not in compliance with the required procedure.

The tribunal cited the Supreme Court decision in "ACIT vs. Hotel Blue Moon (2010) 3 SCC 259(SC)" and other judicial precedents, emphasizing that the issuance of a section 143(2) notice after the filing of the return is mandatory. The failure to issue such a notice invalidates the assessment/reassessment. Consequently, the tribunal quashed the reassessment dated 23.11.2010.

4. Applicability of Section 292BB in Curing the Defect of Non-Issuance of Notice Under Section 143(2):
The Revenue argued that section 292BB could cure the defect of non-issuance of a section 143(2) notice if the assessee participated in the proceedings without objection. However, the tribunal referenced the Supreme Court decision in "CIT vs. Laxman Das Khandelwal (2019) 8 TMI 660" which clarified that section 292BB does not rectify the failure to issue a section 143(2) notice. Therefore, the tribunal rejected the Revenue's argument and upheld the quashing of the reassessment.

Conclusion:
The tribunal allowed the assessee's appeals, quashing the reassessment dated 23.11.2010 and the subsequent rectification proceedings under section 154. All other substantive grounds on merits were rendered infructuous. The order was pronounced in the open court on 27.11.2019.