2018 (11) TMI 874 - HC - Income Tax

Tribunal Quashes Reassessment: Notice Under Section 143(2) Mandatory

Pr Commissioner Of Income Tax, Jaipur-III, Jaipur Versus Kamla Devi Sharma W/o Shri Kailash Chand Sharma

The tribunal quashed the reassessment proceedings under Sections 147/144 due to the non-issuance of notice under Section 143(2) before finalizing the ... Validity of reopening of assessment - non issuing notice u/s 143(2) - Held that:- As decided in PR. COMMISSIONER OF INCOME TAX-08 VERSUS SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. [2015 (10) TMI 1765 - DELHI HIGH COURT] as no notice under Section 143(2) of the Act was issued to the Assessee the date on which the Assessee informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act. Thus failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re-assessment. - Decided in favour of assessee. Issues Involved:1. Quashing of reassessment proceedings due to non-issuance of notice under Section 143(2).2. Validity of reassessment proceedings when the return was filed beyond the stipulated period.3. Statutory obligation of the AO to issue notice under Section 143(2) before completing assessment under Section 144.4. Reliance on the Delhi High Court decision in PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd.5. Mistake in mentioning the completion of the order under Section 147/143(3) instead of Section 144 and its curability under Section 292BB.Detailed Analysis:Issue 1: Quashing of Reassessment Proceedings Due to Non-Issuance of Notice Under Section 143(2)The tribunal quashed the reassessment proceedings under Sections 147/144 due to the non-issuance of notice under Section 143(2) before finalizing the reassessment. The tribunal emphasized that issuing a notice under Section 143(2) is mandatory once the assessee files a return of income in response to a notice under Section 148. This requirement is not discretionary but obligatory for the Assessing Officer (AO). The tribunal relied on several judicial pronouncements, including the Supreme Court's decision in Assistant Commissioner of Income Tax v. Hotel Blue Moon, which held that the omission to issue notice under Section 143(2) is not a procedural irregularity and is not curable.Issue 2: Validity of Reassessment Proceedings When the Return Was Filed Beyond the Stipulated PeriodThe tribunal considered the fact that the assessee filed her return of income 10 months and 17 days beyond the 30 days stipulated by the notice issued under Section 148. Despite the delayed filing, the tribunal maintained that the AO was still required to issue a notice under Section 143(2). The tribunal referred to the proviso to Section 148, which allows the issuance of notice under Section 143(2) at any time before the completion of the assessment. The tribunal concluded that the AO's failure to issue this notice rendered the reassessment proceedings void ab initio.Issue 3: Statutory Obligation of the AO to Issue Notice Under Section 143(2) Before Completing Assessment Under Section 144The tribunal reiterated that the AO was under a statutory obligation to issue a notice under Section 143(2) before completing the assessment under Section 144. The tribunal noted that the AO did not issue such a notice despite the assessee filing her return of income, making the reassessment proceedings invalid. The tribunal dismissed the argument that the late filing of the return absolved the AO of this requirement.Issue 4: Reliance on the Delhi High Court Decision in PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd.The tribunal relied on the Delhi High Court's decision in PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd., which held that the failure to issue a notice under Section 143(2) in reassessment proceedings is fatal to the reassessment order. The tribunal noted that this decision was binding and applicable to the present case, as the facts were similar. The tribunal observed that the AO's failure to issue the notice under Section 143(2) could not be condoned by referring to Section 292BB, which deals with the service of notice, not the issuance.Issue 5: Mistake in Mentioning the Completion of the Order Under Section 147/143(3) Instead of Section 144 and Its Curability Under Section 292BBThe tribunal addressed the issue of whether mentioning the completion of the order under Sections 147/143(3) instead of Section 144 was a mistake curable under Section 292BB. The tribunal concluded that Section 292BB does not cure the defect of non-issuance of a notice. Section 292BB provides that a notice shall be deemed to be served if the assessee has cooperated in the proceedings, but it does not imply that a notice required to be issued shall be deemed to be issued. The tribunal emphasized that the failure to issue a notice under Section 143(2) is a jurisdictional defect that cannot be cured by Section 292BB.Conclusion:The tribunal quashed the reassessment proceedings due to the AO's failure to issue a notice under Section 143(2), which is a mandatory requirement. The tribunal's decision was based on binding judicial precedents, including the Delhi High Court's decision in PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd. The tribunal held that the non-issuance of the notice rendered the reassessment proceedings void ab initio and could not be cured by Section 292BB. Consequently, the appeal was dismissed, and no substantial question of law arose.