2019 (4) TMI 825 - AT - Income Tax

Appeal Dismissed Over Procedural Errors; Assessee's Objection Upheld for Assessment Defects

The Tribunal dismissed the revenue's appeal due to procedural irregularities in issuing notices and framing the assessment. The assessee's cross-objection ... Reopening of assessment - unexplained bank deposits - CIT-A deleted addition admitting additional evidence - as alleged non satisfaction of conditions mentioned in Rule 46A of the IT Rules, 1962 - HELD THAT:- We found that after calling a remand report and the rejoinder from the assessee, the ld. CIT(A) has recorded a detailed finding to the effect that the sale deed dated 19/5/2007 was executed by the assessee alongwith his three brothers in favour of M/s Megha colonizers and payment was received through cheuqe No. 9685599 dated 14/3/2007 amount to ₹ 55.00 lacs. This amount was credited in the bank account of the assessee maintaining in Bank of Baroda on 15/3/2007. The confirmation from M/s Megha colonizers was also filed, which is placed on record. We do not find any contravention of Rule 46A of the IT Rules in so far as the ld. CIT(A) has already given opportunity to the A.O. by calling a remand report and after seeing all the documents filed before him to the A.O. for his remand report and after considering the same, the ld. CIT(A) has deleted the addition of ₹ 55.00 lacs. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A). Moreover, the tax effect in the appeal filed by the revenue is less than ₹ 20.00 lacs, therefore, in view of the CBDT Circular No. 3/2018 dated 11th July, 2018 (F No. 279/Misc. 142/2007-ITJ(Pt) instructing the authorities below that departmental appeal should not be filed before ITAT where the demand/tax effect does not exceed ₹ 20 lacs, therefore, in view of the above CBDT circular, the appeal of the revenue is not maintainable and deserves to be dismissed. Validity of reopening of assessment - no sanction by the JCIT of the Range U/s 151(2) - assessment without issue of notice U/s 143(2) - curable defect u/s 292BB - HELD THAT:- Specific query was raised by the Bench on 16/10/2017, 19/09/2018 and 15/11/2018 giving time to the department for producing the case record to substantiate proper sanction by the JCIT of the Range U/s 151(2) of the Act. However, even after expiry of more than seventeen months when the case was again fixed on 25/3/2019, the department could not produce the evidence of sanction having been issued U/s 151(2) of the Act. Accordingly, considering the judicial pronouncements referred above and applying to the facts of the case, we do not find any merit in the notice issued U/s 148 of the Act without obtaining sanction by the JCIT of the Range U/s 151(2) of the Act. No issue of notice U/s 143(2) - The assessee filed its return of income in response to the notice u/s 148 of the Act on 13.03.2015. The AO had concluded the assessment without issuing notice under section 143(2) of the Act after the return was filed by the assessee in response to notice under section 148 of the Act. The AO after receiving the return of the appellant filed in pursuance to notice u/s 148 of the Income Tax Act, 1961 did not issue notice u/s 143(2) of the Act which is sine qua non for assuming jurisdiction to assess the case. This is a grave error which is even not rectifiable u/s 292BB of the Act and hence order so passed lacks proper authority with the AO and hence the order so passed deserves to be declared void ab initio. No merit in the assessment so framed U/s 143(3) without issue of notice U/s 143(2) of the Act. Main ground of reassessment being null and void in absence of issue of notice U/s 143(2) of the Act and also issue of notice U/s 148 without proper sanction U/s 151(2) - Decided in favour of assessee. Issues:1. Validity of notice U/s 148 without proper sanction of JCIT.2. Assessment framed without issuing notice U/s 143(2).3. Treatment of lands sold by the assessee as capital assets.4. Allowance of deduction U/s 54B for agricultural land purchased.5. Allowance of deduction U/s 54F for purchase of residential house.6. Ignoring details filed by the assessee.Issue 1 - Validity of Notice U/s 148:The appeal involved a challenge to the notice issued under Section 148 without proper sanction of the JCIT. The Tribunal found that the department failed to produce evidence of the required sanction despite multiple opportunities. Citing judicial pronouncements, the Tribunal concluded that the notice issued without proper sanction was illegal, rendering the proceedings liable to be quashed.Issue 2 - Assessment without Notice U/s 143(2):The assessee contested the assessment conducted without issuing notice under Section 143(2). The Tribunal noted that the AO concluded the assessment without sending the mandatory notice after the return was filed in response to the notice under Section 148. Referring to legal precedents, the Tribunal held that the absence of the essential notice made the assessment void ab initio, as it lacked proper authority.Issue 3 - Treatment of Lands Sold:The contention included the treatment of lands sold by the assessee as capital assets instead of agricultural lands. The Tribunal did not address this issue explicitly as it focused on the procedural defects in the assessment process.Issue 4 - Deduction U/s 54B:The appeal raised concerns regarding the denial of deduction under Section 54B for the purchase of agricultural land. However, the Tribunal did not delve into this issue as the primary focus was on the legality of the assessment proceedings.Issue 5 - Deduction U/s 54F:Similar to the previous deduction issue, the denial of deduction under Section 54F for the purchase of a residential house was raised in the appeal. However, the Tribunal did not provide a specific analysis of this issue in the judgment.Issue 6 - Ignoring Details Filed by the Assessee:The assessee contended that crucial details filed were ignored, impacting the case. While this issue was mentioned in the appeal grounds, the Tribunal did not address it separately in the judgment, as the focus remained on the procedural flaws in the assessment process.In conclusion, the Tribunal dismissed the revenue's appeal due to the procedural irregularities in issuing notices and framing the assessment. The assessee's cross-objection was allowed based on the identified defects in the assessment process. The judgment highlighted the importance of adhering to procedural requirements for a valid assessment under the Income Tax Act, 1961.