2016 (3) TMI 58 - AT - Income Tax

Tribunal Invalidates Assessments for Lack of Notice, Land Classification & Capital Gains Unaddressed

The Tribunal allowed all appeals, holding the assessments to be without jurisdiction and bad in law due to the non-service of notices under section 143(2) ... Validity of assessment order passed u/s 143(3) - non serving the statutory notice u/s 143(2) - Held that:-Punjab & Haryana High Court in CIT Vs. Cebon India Ltd. (2009 (7) TMI 26 - PUNJAB AND HARYANA HIGH COURT ) has laid down similar proposition in respect of regular assessment completed under section 143(3) of the Act, without service of notice under section 143(2) of the Act. Relying on the aforesaid propositions, we hold that there is no merit in the assessment order passed in the present case and hence, the same is held to be without jurisdiction and bad in law and the same is set-aside. - Decided in favour of assessee. Issues involved:Appeals against orders of CIT(A)-III, Pune for assessment year 2006-07 under section 143(3) of the Income Tax Act, 1961. Challenge to the classification of land as agricultural, valuation of long term capital gains, and non-service of notice under section 143(2) of the Act.Issue 1: Classification of Land as AgriculturalThe appellant contested the decision that the land was not agricultural despite being shown as such in revenue records and under actual cultivation. The contention was that the land was in a rural area not notified for the purpose of s.2(14)(iii) of the Act. The CIT(A) upheld the AO's decision, leading to a dispute over the adoption of market value for computing long term capital gains. The appellant argued for the consideration of actual sale instances for valuation. The CIT(A) directed the AO to treat agricultural income as income from other sources, enhancing the income without granting a specific opportunity for a hearing as required by the IT Act.Issue 2: Non-Service of Notice under Section 143(2)The appellant raised additional grounds challenging the assessment order under section 143(3) of the Act due to the absence of a statutory notice under section 143(2). The contention was that the assessment was invalid and should be set aside. The absence of the notice was confirmed by the Assessing Officer's report. The Tribunal admitted this jurisdictional issue, citing precedents where assessments without proper notice were deemed invalid. The Supreme Court and High Court decisions supported the view that failure to serve notice under section 143(2) rendered the assessment without jurisdiction and bad in law.Conclusion:The Tribunal allowed all appeals, holding the assessments to be without jurisdiction and bad in law due to the non-service of notices under section 143(2) of the Act. The additional grounds challenging the assessments were upheld based on legal precedents. The issues related to land classification and valuation of capital gains were not adjudicated upon due to the primary finding of the assessments being invalid. The decision applied mutatis mutandis to all similar appeals, setting aside the assessments in those cases as well.