2022 (10) TMI 843 - AT - Income Tax

Reopening of assessment u/s 147 - absence of issuance of notice by the A.O. u/s 143(2) - Whether curable defect u/s 292BB? - HELD THAT - From the careful perusal of the orders of the authorities below and the order sheet entries placed on record, as noticed that no notice under section 143(2) has been issued/served upon the assessee. Therefore, find force in the arguments of the assessee that in absence of statutory notice u/s 143(2) the consequent assessment framed under section 143(3)/147 cannot be sustained in the eye of law. As noticed on identical facts in the case of Flovel Energy Pvt. Ltd. 2020 (1) TMI 1046 - ITAT DELHI has annulled the assessment order by following the Judgment of Alpine Electronics Asia Pvt. Ltd., 2012 (1) TMI 100 - DELHI HIGH COURT wherein the Judgment of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT has been referred. I find even provision of Section 292BB of the I.T. Act, 1961 does not cure non-issuance of notice as held by Hon ble jurisdictional Delhi High Court in the case of PCIT vs., Jai Shiv Shankar Traders 2015 (10) TMI 1765 - DELHI HIGH COURT Assessment order passed by the A.O. is not sustainable in law and, therefore, the assessment order is quashed. - Decided in favour of assessee.

Issues Involved:
1. Validity of assessment under section 143(3)/147 without issuance of notice under section 143(2).
2. Enhancement of income by CIT(A) and classification of capital gains.
3. Compliance with conditions prescribed under section 147 for reopening assessment.
4. Non-acceptance of additional evidence under Rule 46A.
5. Addition of interest income.
6. Levy of interest under section 234A and 234B.
7. Initiation of penalty proceedings under section 271(1)(c).
8. Adequate opportunity for the appellant to furnish submissions.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 143(3)/147 Without Issuance of Notice under Section 143(2):
The primary contention raised by the assessee was the absence of a statutory notice under section 143(2) of the I.T. Act, 1961. The assessee argued that the assessment framed by the A.O. without issuing this notice cannot be sustained in law. The Tribunal noted that the A.O. failed to issue or serve the notice under section 143(2), which is mandatory for the validity of the assessment. Citing the Delhi Tribunal's decision in Flovel Energy Pvt. Ltd. and the Delhi High Court's judgment in Alpine Electronics Asia Pvt. Ltd., the Tribunal held that the omission to issue the notice is not curable and invalidates the assessment. Consequently, the assessment order was quashed.

2. Enhancement of Income by CIT(A) and Classification of Capital Gains:
The CIT(A) enhanced the income of the assessee by treating the addition made by the A.O. on account of long-term capital gains as short-term capital gains and increased the amount to Rs.46,55,000/-. The Tribunal, however, did not delve into this issue further as the assessment itself was annulled due to the lack of a valid notice under section 143(2).

3. Compliance with Conditions Prescribed under Section 147 for Reopening Assessment:
The assessee contended that the reopening of the assessment lacked mandatory conditions prescribed under section 147, leading to invalid jurisdiction and illegal reassessment. However, this issue became academic due to the quashing of the assessment on the primary ground of non-issuance of notice under section 143(2).

4. Non-Acceptance of Additional Evidence under Rule 46A:
The assessee argued that the CIT(A) erred in not accepting documents submitted as additional evidence under Rule 46A during the appellate proceedings. This issue also became academic following the annulment of the assessment.

5. Addition of Interest Income:
The assessee challenged the addition of Rs.1,56,935/- on account of interest income. This issue was not specifically addressed due to the primary ground of annulment of the assessment.

6. Levy of Interest under Section 234A and 234B:
The assessee disputed the levy of interest under sections 234A and 234B. This issue was not adjudicated separately as the assessment was quashed.

7. Initiation of Penalty Proceedings under Section 271(1)(c):
The A.O. had initiated penalty proceedings under section 271(1)(c) for concealing long-term capital gains income. This issue was not further addressed due to the annulment of the assessment.

8. Adequate Opportunity for the Appellant to Furnish Submissions:
The assessee argued that the A.O. and CIT(A) did not provide appropriate opportunities to furnish submissions against the additions. This argument was not separately addressed as the primary ground for annulment was upheld.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order due to the A.O.'s failure to issue the mandatory notice under section 143(2). Consequently, other grounds raised by the assessee became academic and were not adjudicated. The order pronounced on 19.10.2022 emphasized the necessity of adhering to statutory requirements for a valid assessment.

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