2023 (9) TMI 910 - AT - Income Tax

Validity of reopening of assessment - allegation of issuing of statutory notice under Section 142(1) - whether curable defect u/s 292BB? - HELD THAT - In absence of notice u/s 143(2) of the Act, the assessment framed u/s 143(2) r.w.s 147 of the Act is liable to be held as invalid and thus no addition on the foundation of such invalid assessment can be sustained. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is 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. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, this is not curable defect u/s 292BB. Thus reassessment order passed u/s147 r.w.s 143(3) was bad in law since the required notice under Section 143(2) of the Act not issued by the Assessing Officer which is prerequisite and mandatory under the provisions of Income Tax Act, however the assessment have been completed without issuing of the impugned notice. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the reassessment order under Section 147 r.w.s 143(3) without issuance of notice under Section 143(2).
2. Deletion of addition of Rs. 1,51,46,200 by CIT(A).
3. General grounds and procedural aspects raised by both parties.

Summary:

1. Validity of the reassessment order under Section 147 r.w.s 143(3) without issuance of notice under Section 143(2):

The primary legal issue raised by the assessee was the validity of the reassessment order under Section 147 r.w.s 143(3) of the Income-tax Act, 1961, due to the non-issuance of the mandatory notice under Section 143(2). The assessee contended that the absence of this notice rendered the entire reassessment proceedings invalid. The Tribunal referenced the Supreme Court's decision in CIT vs. Laxman Das Khandelwal, which held that the issuance of notice under Section 143(2) is a prerequisite for a valid assessment. The Tribunal verified that no such notice was issued, as confirmed by the Assessing Officer (AO) in a letter dated 22.08.2023. Consequently, the Tribunal concluded that the reassessment order was invalid due to the lack of this mandatory notice, thereby quashing the assessment order and the additions made thereunder.

2. Deletion of addition of Rs. 1,51,46,200 by CIT(A):

The Revenue challenged the CIT(A)'s decision to delete the addition of Rs. 1,51,46,200, which was based on documents/evidence seized during search proceedings. The Tribunal, however, did not delve into the merits of this issue, as the fundamental reassessment order itself was declared invalid due to the procedural lapse (non-issuance of notice under Section 143(2)). As a result, the deletion of the addition by CIT(A) stood confirmed by default.

3. General grounds and procedural aspects raised by both parties:

The Tribunal also noted other procedural aspects and general grounds raised by both parties but deemed them academic and not adjudicated upon, given the primary issue of the invalid reassessment order. The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's Cross Objection, primarily on the legal ground of non-issuance of notice under Section 143(2).

Conclusion:

In conclusion, the Tribunal held that the reassessment order under Section 147 r.w.s 143(3) was invalid due to the non-issuance of the mandatory notice under Section 143(2), thereby quashing the assessment and the additions made. The Revenue's appeal was dismissed, and the assessee's Cross Objection was partly allowed.