2018 (7) TMI 811 - AT - Income Tax

Tribunal quashes reassessment for 2004-05 & 2005-06 due to premature notice. Section 154 order also quashed.

The Tribunal quashed the reassessment for the assessment years 2004-05 and 2005-06 as the notice under Section 143(2) was issued before the return in ... Validity of the assessment framed u/s 143(3) - notices issued u/s 143(2) of the Act much before the service of notice u/s 148 - Held that:- Since the notice u/s 143(2) of the Act was issued prior to the furnishing of return by the assessee in response to the notice u/s 148. Therefore, the notice issued u/s 143(2) of the Act was not valid and the reassessment framed on the basis of said notice deserves to be quashed. We, therefore, quash the reassessment framed by the AO. Rectification order - Held that:- It is noticed that the same has been filed against the order passed by the AO u/s 154 of the Act on 28.09.2012 which was subsequent to the assessment completed u/s 143(3) of the Act on 15.10.2010. Since, we have already quashed the said assessment order dated 15.10.2010, therefore, the subsequent order for rectification u/s 154 of the Act passed on 28.09.2012 is also quashed. - Decided in favour of assessee. Issues Involved:1. Validity of notice issued under Section 148.2. Escapement of income and change of opinion.3. Validity of notice under Section 143(2).4. Directions issued by the Dispute Resolution Panel (DRP).5. Classification of contract receipts as Fee for Technical Services (FTS).6. Charging of interest under Sections 234A, 234B, and 234C.7. Consideration of evidence and material by the AO.8. Basis of additions and disallowances.Detailed Analysis:1. Validity of Notice Issued Under Section 148:The assessee contended that the notice issued under Section 148 was illegal, bad in law, and without jurisdiction. The reassessment order passed was also claimed to be illegal and liable to be quashed. The Tribunal noted that the original assessment was completed under Section 143(3) and the notice under Section 148 was issued based on the AO's belief that income chargeable to tax had escaped assessment. However, the Tribunal found that the notice under Section 143(2) was issued before the service of notice under Section 148, rendering the reassessment invalid.2. Escapement of Income and Change of Opinion:The assessee argued that there was no escapement of income as the original assessment was completed after considering all relevant material and facts. The notice under Section 148 was claimed to be issued based on a change of opinion. The Tribunal observed that the reopening of assessment was done within four years of the relevant assessment years, and the AO was empowered to reopen the assessment even without fresh information. However, since the notice under Section 143(2) was issued before the return was filed in response to the notice under Section 148, the reassessment was invalid.3. Validity of Notice Under Section 143(2):The assessee claimed that no notice under Section 143(2) was issued within 12 months from the end of the month in which the return was filed, making the reassessment illegal. The Tribunal noted that the notice under Section 143(2) was issued on 08.09.2009, before the return was filed on 19.11.2009, making the reassessment invalid. The Tribunal relied on various judicial precedents to support this conclusion.4. Directions Issued by the Dispute Resolution Panel (DRP):The assessee argued that the directions issued by the DRP were incorrect, bad in law, and against the principles of natural justice. The Tribunal did not specifically address this issue as the reassessment itself was found to be invalid.5. Classification of Contract Receipts as Fee for Technical Services (FTS):The assessee contended that the AO erred in treating the contract receipts as FTS and failed to appreciate that the receipts could not be taxed as FTS under Section 9 or the DTAA between India and the UK. The Tribunal did not specifically address this issue as the reassessment itself was found to be invalid.6. Charging of Interest Under Sections 234A, 234B, and 234C:The assessee argued that interest under Sections 234A, 234B, and 234C was wrongly and illegally charged as there was no delay in filing the return and no default in payment of advance tax. The Tribunal did not specifically address this issue as the reassessment itself was found to be invalid.7. Consideration of Evidence and Material by the AO:The assessee claimed that the explanations, evidence, and material provided were not properly considered by the AO. The Tribunal did not specifically address this issue as the reassessment itself was found to be invalid.8. Basis of Additions and Disallowances:The assessee argued that the additions and disallowances were based on mere surmises and conjectures. The Tribunal did not specifically address this issue as the reassessment itself was found to be invalid.Separate Judgments:The Tribunal delivered a consolidated order for the sake of convenience and brevity, covering all appeals together.Conclusion:The Tribunal quashed the reassessment framed by the AO for the assessment years 2004-05 and 2005-06, as the notice under Section 143(2) was issued before the return was filed in response to the notice under Section 148. Consequently, the subsequent order under Section 154 for the assessment year 2005-06 was also quashed. The appeals of the assessee were allowed.