2023 (4) TMI 635 - HC - Income Tax

Assessment u/s 153C - assessment order was set aside by the CIT-A on the ground that no incriminating material had been found against the respondent/assessee - assessment order in the second round was passed under Section 147 read with Section 144 - Non issue of notice under Section 143(2) - As argued based on the material found in the first round reassessment proceedings could have been triggered by the AO for the reason that the scheme of Section 153C and Section 147/148 are materially different - HELD THAT - The assessment order in the second round was passed under Section 147 read with Section 144 of the Act. Section 144 of the Act concededly deals with the situation where inter alia the assessee fails to file a return or fails to comply with all the terms of the notice issued under Section 142 or fails to comply with the direction issued under sub-section (2A) of Section 142 or fails to comply with the terms of the notice issued under Section 143(2) of the Act. As noted above the record shows that the respondent/assessee s return was in place. The respondent/assessee had taken the plea that the earlier return should be treated as a return in response to notice under Section 148 of the Act. AO to take recourse to Section 144 of the Act was completely uncalled. In our opinion Section 144 of the Act was taken recourse to under a mistaken belief or otherwise that there was no return on record. Since a response was on record undoubtedly the AO was required to issue a notice under Section 143(2) of the Act and then proceed further in the matter and perhaps thereafter frame an assessment u/s 147 read with Section 144 of the Act. This was not done. We are of the view that order passed by the Tribunal does not call for any interference. No substantial question of law arises.

Summary

Issues:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act.
2. Jurisdiction of the Assessing Officer in reassessment based on existing facts.
3. Compliance with procedural requirements under Sections 143(2) and 144 of the Act.

Analysis:
Issue 1: The appeal challenged the reassessment proceedings under Section 147/148 of the Income Tax Act. The appellant argued that since the earlier assessment order was quashed, the AO had the right to initiate reassessment. However, it was acknowledged that no fresh material was found during the reassessment. The Tribunal upheld the CIT(A)'s decision, emphasizing that no fresh tangible material justified the reassessment.

Issue 2: The reassessment made the same additions as the initial assessment, without any new incriminating material. The AO proceeded under Section 144 of the Act, which deals with situations where the assessee fails to comply with specified notices. However, the respondent had already filed a return, requesting it to be considered in response to the notice under Section 148. The AO's reliance on Section 144 was deemed unwarranted as the respondent's return was on record, necessitating compliance with Section 143(2) before proceeding with reassessment.

Issue 3: The failure to issue a notice under Section 143(2) before reassessment was a procedural flaw. The Tribunal found that the AO did not follow the required steps before passing the reassessment order. The absence of a valid notice under Section 143(2) rendered the reassessment order legally flawed. The Tribunal concluded that the order did not warrant interference, dismissing the appeal as no substantial question of law arose from the case.