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2024 (7) TMI 1331 - AT - Income TaxValidity of assessment proceedings - no notice u/s. 143(2) has been issued, after taking into account the return filed by the assessee - whether curable defect u/s. 292B - HELD THAT - AO had not issued any notice u/s. 143(2) of the Act before considering the return of income filed by the assessee and, therefore, the same is not in accordance with the law and the non issuance of the notice u/s. 143(2) is a fatal one and it cannot also be cured u/s. 292B of the Act. In view of the above discussion we come to the conclusion that the legal issue raised by the assessee is well founded. As no notice u/s. 143(2) has been issued, after taking into account the return filed by the assessee, and, therefore, the assessment order passed by the ld. AO is illegal and liable to be set aside. Further in our case the assessee had filed a letter dated 20.05.2019 and requested the AO to treat the return filed u/s. 139(1) of the Act as return filed in response to the notice issued u/s. 148 whereas in the orders and judgements relied upon by D.R., no return or reply was filed by the assessees and, therefore, the above said order and judgements are not similar to the facts of the present case. In the result we accepted the legal issue and held that the assessment order are not sustainable, hence allowed the appeal filed by the assessee.
Issues Involved:
1. Validity of the assessment order due to non-issuance of notice under Section 143(2). 2. Disallowance of exemption under Section 54B of the Income Tax Act. 3. Principles of natural justice and opportunity of being heard. Issue-wise Detailed Analysis: 1. Validity of the Assessment Order Due to Non-Issuance of Notice under Section 143(2): The primary contention of the assessee was that the assessment order was invalid as the Assessing Officer (AO) did not issue a notice under Section 143(2) before passing the assessment order under Section 144 read with Section 147. The tribunal noted that the assessee filed her return of income under Section 139(1) on 28.06.2014. Following a survey and discrepancies found in the capital gain computation, the AO issued a notice under Section 148. The assessee requested that the return filed under Section 139(1) be treated as the return filed in response to the notice under Section 148. However, the AO did not accept this request and proceeded without issuing a notice under Section 143(2). The tribunal emphasized that the issuance of a notice under Section 143(2) is mandatory when the AO considers the return and proposes to disallow any claims. The tribunal referenced Section 143(2) and concluded that the AO's failure to issue this notice was a fatal error, rendering the assessment order invalid. This conclusion was supported by the Supreme Court judgment in CIT(Asst) Vs Hotel Blue Moon and the Delhi High Court judgment, which clarified that the failure to issue a notice under Section 143(2) is fatal to the assessment order. 2. Disallowance of Exemption under Section 54B of the Income Tax Act: The assessee contended that the capital gains were reinvested in agricultural land, satisfying the conditions laid down in Section 54B. The AO disallowed the exemption claim under Section 54B without issuing a notice under Section 143(2). The tribunal did not delve into the merits of this issue, as it had already concluded that the assessment order was invalid due to the procedural lapse of not issuing a notice under Section 143(2). 3. Principles of Natural Justice and Opportunity of Being Heard: The assessee argued that the assessment order was passed in haste and without providing a sufficient and reasonable opportunity of being heard, violating the principles of natural justice. The tribunal agreed that the AO's failure to issue a notice under Section 143(2) before disallowing the claim was a procedural lapse that violated the principles of natural justice. The tribunal emphasized that the AO should have issued a notice under Section 143(2) to provide the assessee with an opportunity to present evidence supporting her claims. Conclusion: The tribunal concluded that the assessment order dated 30.08.2019 and the order of the CIT(A) dated 28.12.2023 were not sustainable due to the AO's failure to issue a notice under Section 143(2). The tribunal allowed the appeal filed by the assessee on this legal ground and did not provide findings on the merits of the other grounds raised by the assessee. The appeal was thus allowed, and the assessment order was set aside. Order Pronounced: The order was pronounced in the open court on 25th July, 2024.
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