2020 (1) TMI 40 - AT - Income Tax

Reopening of assessment u/s 147 - no notice issued by the AO u/s 143(2) in the case of the assessee - HELD THAT - The provisions of section 292BB can be invoked only in case where notice is duly issued by the AO under section 143(2) but the service of the said notice is disputed by the assessee after completion of the assessment and after participation in the assessment proceedings. Therefore, in such cases where the assessee has participated in the assessment proceedings in response to notice under section 143(2), the assessee is not allowed to take objection of service of the notice issued under section 143(2) after completion of assessment. It is a case of non issuance of notice under section 143(2), therefore, the initiation of proceedings itself was without jurisdiction conferred by the provisions of section 143 Reassessment was completed without issuing a notice under section 143(2), then the reassessment order is not sustainable in law and the same is invalid. Hence we quash the impugned reassessment order passed by the AO. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act.
2. Initiation of reassessment proceedings based on information from the Investigation Wing without independent application of mind.
3. Issuance of notice under Section 143(2) of the Income Tax Act.
4. Opportunity for cross-examination of witnesses.
5. Addition under Section 68 of the Income Tax Act based on assumptions and presumptions.
6. Consideration of retracted statements.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee argued that the Assessing Officer (AO) erred in reopening the assessment without any material forming the belief of income escapement. The reassessment was initiated based on information from the Investigation Wing, Mumbai, without independent application of mind. The Tribunal noted that the AO's actions were mechanical and lacked the necessary independent evaluation required under the law.

2. Initiation of Reassessment Proceedings:
The AO initiated reassessment proceedings based on information received from the Investigation Wing, Mumbai, without independently verifying the facts. The Tribunal observed that the AO did not have the statements or details at the time of recording reasons, which is a critical lapse. Additionally, the notice under Section 148 was issued after the expiry of four years, without any allegation that the assessee had not disclosed material facts fully and truly, rendering the initiation of proceedings invalid.

3. Issuance of Notice under Section 143(2):
The Tribunal found that the AO did not issue a notice under Section 143(2) of the Income Tax Act, which is a mandatory requirement for completing the scrutiny assessment. The absence of such notice invalidated the reassessment order. The Tribunal emphasized that the issuance of a notice under Section 143(2) is not a procedural formality but a jurisdictional requirement. The lack of this notice rendered the AO's order null and void.

4. Opportunity for Cross-Examination:
The assessee contended that the AO did not provide an opportunity to cross-examine Praveen Kumar Jain, whose statements were crucial for the reassessment. The Tribunal noted that since the reopening was based on Jain's statements, the AO was duty-bound to provide an opportunity for cross-examination. The failure to do so violated principles of natural justice.

5. Addition under Section 68:
The AO made an addition of ?45,00,000 under Section 68 of the Income Tax Act based on assumptions and presumptions. The Tribunal found that the AO ignored the fact that the assessee had proved the identity, genuineness of the transaction, and creditworthiness of the creditors. The Tribunal highlighted that the AO did not consider the detailed replies filed by the assessee and relied solely on alleged statements without any corroborative evidence.

6. Consideration of Retracted Statements:
The assessee argued that the retraction of statements by Praveen Kumar Jain through an affidavit was not considered by the AO. The Tribunal observed that reliance on retracted statements without cross-examination and corroborative evidence is unlawful. The AO's failure to consider the retraction and provide an opportunity for cross-examination rendered the reliance on such statements invalid.

Conclusion:
The Tribunal quashed the reassessment orders due to the non-issuance of notice under Section 143(2), which is a jurisdictional requirement. The reassessment proceedings were found to be initiated without independent application of mind and based on insufficient material. The Tribunal did not delve into other legal issues or the merits of the addition, as the reassessment orders were invalidated on the primary ground of non-issuance of the mandatory notice. Both appeals of the assessee were allowed.