Reassessment under section 147 invalid without mandatory section 143(2) notice, penalties under sections 271D and 271E quashed

ITAT Ahmedabad held that reassessment under section 147 without issuing mandatory notice under section 143(2) lacks jurisdiction and is invalid. The tribunal ruled that section 292BB cannot cure the defect of non-issuance of statutory notice, relying on Gujarat HC precedent. Consequently, penalties under sections 271D and 271E imposed during the invalid assessment proceedings were also quashed. The assessee's cross-objection was allowed while revenue's appeals were dismissed as non-maintainable due to the underlying assessment being held invalid.

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Issues Involved:
1. Condonation of delay in filing the Cross Objection (CO).
2. Validity of proceedings u/s 147 based on information from the Investigation Wing.
3. Requirement of notice u/s 143(2) for reassessment proceedings.
4. Validity of penalties u/s 271D and 271E when the assessment itself is invalid.

Summary:

Condonation of Delay in Filing CO:
The assessee filed the CO with a delay of 785 days, citing a bona fide mistake and the closure of company operations. The Tribunal, referencing various High Court and Supreme Court judgments, emphasized the principle of advancing substantial justice over technicalities. The Tribunal condoned the delay, noting no objection from the Revenue and proceeded to adjudicate the issue on merit.

Validity of Proceedings u/s 147:
The assessee initially challenged the initiation of proceedings u/s 147 based on information from the Investigation Wing but later did not press this ground. Consequently, the Tribunal dismissed this ground as not pressed.

Requirement of Notice u/s 143(2):
The assessee contended that the assessment framed u/s 143(3) r.w.s 147 was invalid due to the non-issuance of notice u/s 143(2). The Tribunal, referencing the Gujarat High Court judgment in PCIT vs. Marck Biosciences Ltd and other precedents, held that the issuance of notice u/s 143(2) is mandatory for reassessment proceedings. The absence of such notice renders the proceedings void ab initio and cannot be cured under section 292BB. The Tribunal quashed the assessment framed u/s 147 due to the non-issuance of notice u/s 143(2).

Validity of Penalties u/s 271D and 271E:
The Tribunal addressed whether penalties for contravention of sections 269SS and 269T could be levied when the assessment itself is invalid. Citing the Delhi High Court judgment in CIT vs. Standard Brands Limited, the Tribunal held that penalties cannot be sustained if the underlying assessment is invalid. Consequently, the appeals filed by the Revenue regarding penalties were dismissed.

Conclusion:
The CO of the assessee was partly allowed, and all appeals filed by the Revenue were dismissed. The Tribunal emphasized substantial justice over technical defects, quashing the reassessment due to the non-issuance of notice u/s 143(2) and invalidating the penalties arising from such assessment.

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