2022 (1) TMI 293 - AT - Income Tax

Reopening of assessment u/s 147 - non issue of notice u/s 143 - validity of the reassessment for want of notice u/s 143(2) - currable defect u/s 292BB - HELD THAT - As decided in M/S. HOTEL BLUE MOON 2010 (2) TMI 1 - SUPREME COURT Section 292BB of the Act does not save complete absence of notice and it covers only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. The reassessment completed without issuing a notice U/s 143(2) of the Act is not sustainable in law and the same is invalid. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings initiated under section 147 of the Income Tax Act.
2. Delay in providing the copy of reasons recorded for reassessment.
3. Violation of principles of natural justice due to insufficient time after rejection of preliminary objections.
4. Independent application of mind in initiating reassessment proceedings.
5. Absence of notice under section 143(2) before passing the assessment order.
6. Restriction of deduction under section 10B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Initiated Under Section 147 of the Income Tax Act:
The assessee contended that the reassessment proceedings were initiated without an independent application of mind and based on an audit para. However, this ground was dismissed as not pressed by the assessee during the hearing.

2. Delay in Providing the Copy of Reasons Recorded for Reassessment:
The assessee argued that the reasons for reassessment were provided after a significant delay of 16 months, implying that no reasons were recorded at the time of issuing the notice under section 148. This issue was not specifically addressed in the judgment as the reassessment order was quashed on other grounds.

3. Violation of Principles of Natural Justice Due to Insufficient Time After Rejection of Preliminary Objections:
The assessee claimed that the assessment order was passed without allowing proper time after the rejection of preliminary objections, which contravened the principles of natural justice. This issue was rendered moot as the reassessment order was quashed on the ground of non-issuance of notice under section 143(2).

4. Independent Application of Mind in Initiating Reassessment Proceedings:
This ground was dismissed as not pressed by the assessee during the hearing, and thus, was not considered in the judgment.

5. Absence of Notice Under Section 143(2) Before Passing the Assessment Order:
The primary issue was the non-issuance of a notice under section 143(2) of the Income Tax Act before completing the reassessment. The Tribunal found that the original assessment was completed under section 143(3), and a notice under section 148 was issued for reassessment. However, no notice under section 143(2) was issued after the assessee filed the return in response to the notice under section 148. The Tribunal referred to the remand report and the assessment records, which confirmed the absence of such a notice. Citing precedents from the Supreme Court and High Courts, the Tribunal held that the issuance of a notice under section 143(2) is a mandatory requirement. The absence of this notice renders the reassessment order invalid and void ab initio. Consequently, the reassessment order was quashed.

6. Restriction of Deduction Under Section 10B of the Income Tax Act:
The assessee challenged the restriction of deduction under section 10B. However, since the reassessment order was quashed for want of notice under section 143(2), this ground became infructuous and was not addressed.

Conclusion:
The Tribunal quashed the reassessment order due to the absence of a mandatory notice under section 143(2) of the Income Tax Act. The other grounds raised by the assessee were rendered moot or dismissed as not pressed. The appeal was allowed in favor of the assessee.

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