2020 (5) TMI 54 - AT - Income Tax

Assessment quashed due to improper notice issuance; Revenue appeal dismissed; assessee cross-objection allowed.

The Income Tax Officer Ward 6 (2) (3) Bengaluru. Versus Sri. P.N. Krishnamurthy And (Vice-Versa)

The Income Tax Officer Ward 6 (2) (3) Bengaluru. Versus Sri. P.N. Krishnamurthy And (Vice-Versa) - TMI Issues Involved:1. Validity of the assessment due to non-issuance of notice under Section 143(2).2. Deletion of disallowance of expenses.3. Deletion of addition of suppressed value.4. Deletion of disallowance towards unsecured loan.5. Deletion of addition towards increase in capital.6. Maintainability of the Revenue's appeal.Detailed Analysis:1. Validity of the Assessment Due to Non-Issuance of Notice Under Section 143(2):The primary issue addressed was the validity of the assessment due to the alleged non-issuance of a notice under Section 143(2) by the Assessing Officer (AO) with proper jurisdiction. The Tribunal referenced the case of M/s. H.P. Singh & Ors. v. ITO, where it was held that the issuance of a notice under Section 143(2) within the prescribed time is mandatory for a valid assessment. The Tribunal noted that the original jurisdiction of the AO was with ITO Ward 6(2)(2), Bangalore, who issued the notice under Section 143(2). However, after the transfer of the case to ITO Ward 6(2)(3), Bangalore, no fresh notice under Section 143(2) was issued by the new AO. The Tribunal concluded that the assessment framed without issuing a valid notice under Section 143(2) by the AO with jurisdiction was invalid, as supported by the Supreme Court decision in ACIT v. Hotel Blue Moon. The Tribunal also held that Section 292BB, which deems notice valid if the assessee participates in the proceedings, does not apply to the complete absence of notice.2. Deletion of Disallowance of Expenses:The Revenue contended that the CIT(A) erred in deleting the disallowance of expenses amounting to Rs. 22,24,241. The Tribunal did not specifically address this issue in detail due to the quashing of the assessment on the grounds of invalid notice under Section 143(2).3. Deletion of Addition of Suppressed Value:The Revenue argued that the CIT(A) was unjustified in deleting the addition of suppressed value of Rs. 54,00,000. Similar to the disallowance of expenses, this issue was not separately adjudicated by the Tribunal due to the quashing of the assessment.4. Deletion of Disallowance Towards Unsecured Loan:The Revenue's appeal included an objection to the deletion of a disallowance of Rs. 8,75,000 towards an unsecured loan. This issue was also not specifically addressed due to the primary issue of invalid notice leading to the quashing of the assessment.5. Deletion of Addition Towards Increase in Capital:The Revenue questioned the deletion of an addition of Rs. 1,81,83,759 towards an increase in capital. The Tribunal did not provide a separate analysis for this issue, as the assessment itself was deemed invalid.6. Maintainability of the Revenue's Appeal:The assessee's cross-objection included a challenge to the maintainability of the Revenue's appeal, arguing that the appeal was devoid of merit. The Tribunal's decision to quash the assessment on the grounds of invalid notice effectively rendered the Revenue's appeal moot.Conclusion:The Tribunal allowed the assessee's cross-objection, quashing the assessment due to the invalid issuance of notice under Section 143(2) by the AO with proper jurisdiction. Consequently, the Tribunal did not adjudicate the individual grounds raised by the Revenue in its appeal, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's cross-objection. The order was pronounced on April 27, 2020.