2015 (4) TMI 764 - AT - Income Tax

Assessee's Cross Objection upheld, Revenue's appeal dismissed, reassessment order void due to lack of notice.

ITO & Others Versus Naseman Farms Pvt. Ltd. & Othres

ITO & Others Versus Naseman Farms Pvt. Ltd. & Othres - TMI Issues Involved:1. Deletion of additions made under Section 68 of the Income Tax Act.2. Validity of reopening of assessment under Sections 147/148.3. Non-service of mandatory notice under Section 143(2).Detailed Analysis:1. Deletion of Additions Made Under Section 68:The Revenue raised multiple grounds regarding the deletion of additions made under Section 68 by the CIT(A). The key points of contention were:- Addition of Rs. 50,00,000: The Revenue argued that CIT(A) erred in deleting the addition on account of income from undisclosed sources, shown as received from M/s Aayushi Stock Brokers Pvt. Ltd., an identified entry operator.- Addition of Rs. 10,00,000: Similarly, the deletion of another addition of Rs. 10,00,000 shown as a refund of share application money from the same entity was contested.- Addition of Rs. 12,50,000: The Revenue also contested the deletion of Rs. 12,50,000 shown as share application money from the same entry operator.The Revenue contended that CIT(A) relied on the paper book filed by the assessee without verifying the facts and failed to appreciate the entire facts discussed in the assessment order about the modus operandi of M/s Aayushi Stock Brokers Pvt. Ltd. The CIT(A) was also criticized for relying on the decision in the case of Lovely Exports (P) Ltd 216 CTR 199 (SC) without proper verification.2. Validity of Reopening of Assessment Under Sections 147/148:The Assessee raised several grounds in its Cross Objection regarding the validity of the reopening of the assessment:- Invoking Provisions of Section 147: The Assessee argued that the CIT(A) erred in holding that the AO was justified in invoking Section 147, as the provisions were not applicable to the facts of the case.- Service of Notice Under Section 148: The Assessee contended that the service of notice under Section 148 was improper as it was issued to a different address and through affixture without proper justification.- Reopening Based on Incorrect Reasons: The Assessee argued that the reopening was not based on proper and correct reasons, lacked application of mind, and was without any material on record to conclude that certain income had escaped assessment.3. Non-Service of Mandatory Notice Under Section 143(2):The Assessee raised an additional ground during the hearing regarding the non-service of mandatory notice under Section 143(2):- Non-Issuance of Notice: The Assessee argued that the reassessment order was invalid as the AO did not issue the mandatory notice under Section 143(2) before completing the reassessment.- Legal Precedents: The Assessee cited several judgments supporting the contention that non-service of notice under Section 143(2) vitiates the reassessment. Notable cases included CIT Vs. Cebon India Ltd. (2012) 347 ITR 583 (P&H) and ACIT Vs. Hotel Blue Moon (2014) 321 ITR 362 (SC).The Tribunal found that the AO did not issue the mandatory notice under Section 143(2) before completing the reassessment. The Tribunal held that the non-issuance of this notice is a substantive defect that cannot be cured under Section 292BB. Consequently, the reassessment order was declared invalid and void ab initio.Conclusion:- Cross Objection by Assessee: The Tribunal allowed the Cross Objection filed by the Assessee, holding that the reassessment order was invalid due to the non-issuance of the mandatory notice under Section 143(2).- Revenue's Appeal: As the reassessment order was declared void, the Revenue's appeal became infructuous and was dismissed.Order:The Cross Objection filed by the Assessee was allowed, and the Appeal filed by the Revenue was dismissed. The order was pronounced in the open court on 08.04.2015.