2022 (4) TMI 711 - AT - Income Tax

Issuance of a valid 143(2) a condition precedent for framing Section 143(3) assessment in the year of search - DR vehemently reiterated the Revenue's foregoing pleadings that the issuance of Section 143(2) notice is nowhere mandatory in Section 153A proceedings initiated in furtherance to a search in light of the various case law cited therein - HELD THAT - We find no merit in the Revenue's instant grievance since it has come on record that this is AY. 2010-11 before us where the search itself was conducted on 11-03-2010. This is the year of search in other words not covered under the specified period of six assessment years u/s. 153(1)(a) of the Act. Coupled with this, the hon'ble apex court's decision in CIT Vs. Laxman Das Khandelwal 2019 (8) TMI 660 - SUPREME COURT holds that issuance of a valid 143(2) notice is very much a condition precedent for framing Section 143(3) assessment in the year of search. We thus find no infirmity in the Ld. CIT(A)'s order under challenge quashing the impugned assessment.

Summary

Issues involved:
Validity of assessment under Section 143(3) without a valid Section 143(2) notice.

Analysis:
The appeal before the Appellate Tribunal ITAT Hyderabad pertained to the validity of an assessment under Section 143(3) of the Income Tax Act, 1961 without a valid Section 143(2) notice for the Assessment Year 2010-11. The Revenue contended that the CIT(A) erred in quashing the assessment due to the absence of a valid notice under Section 143(2). The CIT(A) had noted that the notice under Section 143(2) was issued beyond the prescribed time limit, rendering the assessment invalid. The Revenue raised several substantive pleadings challenging the CIT(A)'s decision, citing provisions of the Act and relevant case law.

The Revenue's arguments included contentions that the CIT(A) erred in allowing relief to the assessee, deleting the addition made without a Section 143(2) notice, and failing to understand the distinction between scrutiny assessments in regular cases and search cases falling under Section 153A. The Revenue also referred to case law such as CIT vs. Pavan Gupta and Ashok Chaddha vs. ITO to support its position that a Section 143(2) notice may not be mandatory in certain assessment scenarios. The Revenue further argued that there is no specific provision in the Act requiring Section 143(2) notices for assessments under Section 153A.

However, the Tribunal found no merit in the Revenue's contentions. It noted that the assessment year in question was the year of search, falling outside the specified period under Section 153(1)(a) of the Act. Citing the Supreme Court's decision in CIT Vs. Laxman Das Khandelwal, the Tribunal emphasized that a valid Section 143(2) notice is a prerequisite for framing a Section 143(3) assessment in the year of search. Therefore, the Tribunal upheld the CIT(A)'s decision to quash the assessment due to the absence of a valid Section 143(2) notice.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that the assessment under Section 143(3) was invalid without a valid Section 143(2) notice. The judgment highlighted the importance of complying with procedural requirements, such as issuing a Section 143(2) notice, especially in cases related to assessments in the year of search under the Income Tax Act, 1961.