2019 (2) TMI 2058 - AT - Income Tax

Invalid reassessment order quashed for lack of Section 143(2) notice. Appellant's appeal allowed.

The Tribunal held that the reassessment order was invalid due to the failure to issue a mandatory notice under Section 143(2) after the assessee filed the ... Mandatory requirement of notice under Section 143(2) - reassessment jurisdiction - admission of additional ground raising a jurisdictional defect - proviso to Section 292BB and deeming fiction of serviceMandatory requirement of notice under Section 143(2) - reassessment jurisdiction - proviso to Section 292BB and deeming fiction of service - Validity of reassessment framed under Sections 147/143(3) in absence of issuance of notice under Section 143(2) after the return filed in response to notice under Section 148. - HELD THAT: - The Tribunal found as an admitted factual position that after notice under Section 148 was issued the assessee filed a return and specifically requested that the original return be treated as return in response to the Section 148 notice, and that no notice under Section 143(2) was issued thereafter. Relying on authoritative decisions of the Delhi High Court and other High Courts, the Tribunal held that issuance of a notice under Section 143(2) after receipt of the return in response to Section 148 is a mandatory, jurisdictional requirement for valid reassessment. The proviso to Section 292BB - which creates a deeming fiction of service where the assessee has appeared or cooperated in proceedings - cannot cure failure to 'issue' the notice; it is confined to defects in 'service'. Where the Assessing Officer did not issue a notice under Section 143(2) after the assessee indicated that the original return should be treated as the return pursuant to the Section 148 notice, the assumption of jurisdiction was invalid and the reassessment order was legally unsustainable. The Tribunal therefore accepted the legal ground and quashed the reassessment completed under Sections 143(3)/147 without considering other additions which became academic. [Paras 8, 12]Reassessment order under Sections 143(3)/147 quashed for non-issuance of notice under Section 143(2).Admission of additional ground raising a jurisdictional defect - reassessment jurisdiction - Admissibility of an additional ground first raised before the Tribunal challenging non-issuance of notice under Section 143(2). - HELD THAT: - The Tribunal held that the additional ground raised before it was a pure question of law going to the root of jurisdiction and did not require fresh facts or evidence. In view of settled precedents, a jurisdictional defect such as non-issuance of the mandatory Section 143(2) notice may be raised at the appellate stage and admitted, and the proviso to Section 292BB does not preclude raising such a challenge where no notice was issued. Consequently the Tribunal admitted and decided the additional ground in favour of the assessee. [Paras 9]Additional ground challenging non-issuance of Section 143(2) notice admitted and allowed.Final Conclusion: The appeal is allowed; the reassessment order for AY 2001-02 under Sections 143(3)/147 is quashed for failure to issue the mandatory notice under Section 143(2), and the additional ground raised before the Tribunal challenging that defect is admitted. Issues Involved:1. Validity of reassessment proceedings.2. Non-issuance of notice under Section 143(2) after filing of return in response to notice under Section 148.3. Admissibility of additional grounds challenging reassessment.Detailed Analysis:1. Validity of Reassessment Proceedings:The assessee challenged the reassessment proceedings on the grounds that the reassessment order framed under Sections 147/143(3) was invalid due to the non-issuance and non-service of notice under Section 143(2) after filing the return in response to notice under Section 148. The Tribunal noted that the reassessment order must comply with the mandatory requirement of issuing a notice under Section 143(2) to validate the reassessment.2. Non-Issuance of Notice Under Section 143(2):The Tribunal observed that no notice under Section 143(2) was issued to the assessee after the return was filed in response to the notice under Section 148. The Tribunal referred to several judicial precedents, including the decisions of the Hon'ble Delhi High Court in PCIT vs. Silverline and PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd., which held that the failure to issue a notice under Section 143(2) is fatal to the reassessment proceedings. The Tribunal emphasized that the issuance of notice under Section 143(2) is a jurisdictional requirement and cannot be dispensed with or cured by subsequent participation in the assessment proceedings.3. Admissibility of Additional Grounds:The Tribunal admitted the additional ground raised by the assessee, which challenged the reassessment order on the basis of non-issuance of notice under Section 143(2). The Tribunal relied on the decision of the Hon'ble Supreme Court in NTPC Ltd. vs. CIT, which allowed the raising of purely legal grounds at any stage of the proceedings. The Tribunal also noted that the issue of non-issuance of notice under Section 143(2) goes to the root of the matter and does not require fresh facts to be investigated.The Tribunal concluded that the reassessment order passed by the Assessing Officer was not sustainable in law due to the failure to issue a notice under Section 143(2) after the assessee filed the return in response to the notice under Section 148. Consequently, the Tribunal quashed the reassessment order and allowed the appeal filed by the assessee.Conclusion:The appeal filed by the assessee was allowed on the grounds that the reassessment order was invalid due to the non-issuance of a mandatory notice under Section 143(2). The Tribunal admitted the additional ground raised by the assessee and quashed the reassessment order, rendering other grounds of appeal academic in nature. The decision was pronounced in the open court on 18.02.2019.