2020 (1) TMI 47 - AT - Income Tax

Assessment Appeal Dismissed: Notice under Section 143(2) Required for Valid Assessment

Asst. Commissioner of Income Tax Circle-2 (1) Guntur Versus Sri Ande Sri Rama Murthy And (Vice-Versa)

Asst. Commissioner of Income Tax Circle-2 (1) Guntur Versus Sri Ande Sri Rama Murthy And (Vice-Versa) - TMI Issues Involved:1. Validity of the issue of notice under Section 143(2) of the Income Tax Act, 1961.2. Validity of the assessment made under Section 143(3) read with Section 147 of the Income Tax Act, 1961.Detailed Analysis:1. Validity of the Issue of Notice under Section 143(2):The primary issue revolves around the validity of the notice issued under Section 143(2) of the Income Tax Act, 1961. The assessee did not file a return of income for the A.Y. 2016-17, leading the Assessing Officer (AO) to issue a notice under Section 148 on 15.02.2017, which was served on 16.02.2017. The assessee uploaded the return of income on 03.04.2017, admitting a total income of Rs. 3,91,230/-. Subsequently, the AO issued a notice under Section 143(2) on 10.04.2017. However, this return was not accepted by the Income Tax Department due to the failure of the assessee to furnish a signed ITR V or e-verify the return. The assessee then filed another return on 27.06.2017, admitting a total income of Rs. 34,45,890/-, which was accepted by the department.The assessee argued that since the return filed on 03.04.2017 was invalid, the notice issued under Section 143(2) on 10.04.2017 was also invalid. The AO did not issue a fresh notice under Section 143(2) after the valid return was filed on 27.06.2017, making the assessment proceedings infructuous. The CIT(A) upheld this argument, relying on the Supreme Court’s decision in Hotel Blue Moon, which mandates the issuance of a notice under Section 143(2) for a valid assessment.2. Validity of the Assessment Made under Section 143(3) read with Section 147:The AO completed the assessment under Section 143(3) on a total income of Rs. 3,93,00,159/-, considering both the assessee’s share of land and the right to receive 33 flats as consideration for the transfer of land to the builder. The assessee challenged this assessment before the CIT(A), arguing that the assessment was invalid due to the lack of a valid notice under Section 143(2). The CIT(A) agreed, stating that the assessment made under Section 143(3) was invalid without a valid notice under Section 143(2), and allowed the appeal of the assessee.During the appeal hearing before the Tribunal, the Department argued that the notice issued under Section 143(2) on 10.04.2017 was valid as the assessee had requested the AO to treat the original return filed in response to the notice under Section 148 as the return in response to the notice. However, the Tribunal found that since the return filed on 03.04.2017 was not accepted, the notice issued on 10.04.2017 was invalid. The Tribunal upheld the CIT(A)’s decision, stating that the assessment required a valid notice under Section 143(2) after the valid return was filed on 27.06.2017. The Tribunal concluded that the CIT(A) had rightly cancelled the assessment made under Section 143(3) due to the absence of a valid notice under Section 143(2).Conclusion:The Tribunal dismissed the appeal of the revenue and the cross objections filed by the assessee, upholding the CIT(A)’s decision that the assessment made under Section 143(3) was invalid due to the lack of a valid notice under Section 143(2). The Tribunal reiterated the necessity of issuing a notice under Section 143(2) for a valid assessment, as mandated by the Supreme Court in the case of Hotel Blue Moon.