2021 (2) TMI 1127 - AT - Income Tax

Tribunal quashes reassessment order due to invalid notice timing

The Tribunal allowed the appeal, quashing the reassessment order as the notice issued under Section 148 was deemed invalid for being issued before the ... Reopening of assessment u/s 147 - notice issued u/s.148 before expiry of time limit for issue of notice u/s.143(2) - HELD THAT:- Respectfully following decisions of CIT Vs M/s.Qatalys Software Technologies Ltd. [2008 (7) TMI 240 - MADRAS HIGH COURT] and in the case of CIT vs. K.M Pachayappan [2007 (7) TMI 229 - MADRAS HIGH COURT], we are of the considered view that notice issued u/s.148 dated 23.09.2016, before the expiry of time limit for notice u/s.143(2) for the impugned assessment year is invalid and thus, consequent reassessment order passed u/s.143(3) r.w.s. 147 is null and void. Hence, we quash reassessment order passed by the Assessing Officer. - Decided in favour of assessee. Issues involved:1. Validity of notice issued under Section 148 before the expiry of the time limit for notice under Section 143(2).2. Non-issue of notice under Section 143(2) after filing a return in response to notice under Section 148.3. Validity of reassessment proceedings.4. Additions made under Section 68 for unexplained cash credits from the sale of shares.Issue-wise detailed analysis:1. Validity of notice issued under Section 148 before the expiry of the time limit for notice under Section 143(2):The assessee argued that the notice issued under Section 148 was invalid because it was issued before the expiry of the time limit for issuing a notice under Section 143(2). The return of income for the assessment year 2015-16 was filed on 30.09.2015, and the due date for issuing a notice under Section 143(2) was 30.09.2016. However, the Assessing Officer issued a notice under Section 148 on 23.09.2016. The Tribunal agreed with the assessee, citing the Hon’ble Madras High Court's decisions in CIT Vs. Qatalys Software Technologies Ltd. and CIT vs. K.M Pachayappan, which held that reassessment proceedings cannot be initiated when a valid return is pending and the time limit for issuing a notice under Section 143(2) has not expired. The Tribunal concluded that the notice issued under Section 148 was invalid, and thus, the reassessment order was null and void.2. Non-issue of notice under Section 143(2) after filing a return in response to notice under Section 148:The assessee contended that the Assessing Officer did not issue a notice under Section 143(2) after the assessee filed a return in response to the notice under Section 148. The Tribunal did not delve deeply into this issue, as it had already quashed the reassessment order on the grounds of the invalidity of the notice under Section 148. Therefore, this issue became academic in nature and was dismissed as infructuous.3. Validity of reassessment proceedings:The Tribunal examined whether the reassessment proceedings were valid in light of the notice issued under Section 148. Given that the notice under Section 148 was issued before the expiry of the time limit for issuing a notice under Section 143(2), the Tribunal found the reassessment proceedings to be invalid. The Tribunal emphasized that the Assessing Officer should have issued a notice under Section 143(2) within the permissible time frame instead of resorting to Section 148.4. Additions made under Section 68 for unexplained cash credits from the sale of shares:The assessee challenged the additions made by the Assessing Officer under Section 68, arguing that the transactions were genuine and supported by evidence. The Assessing Officer had concluded that the shares sold by the assessee were penny stocks and that the transactions were rigged. However, since the Tribunal quashed the reassessment order on legal grounds, it did not address the merits of the additions under Section 68. Consequently, this issue was also dismissed as infructuous.Conclusion:In conclusion, the Tribunal allowed the appeal filed by the assessee, quashing the reassessment order on the grounds that the notice issued under Section 148 was invalid due to being issued before the expiry of the time limit for issuing a notice under Section 143(2). The other issues raised by the assessee, including the non-issue of notice under Section 143(2) and the additions under Section 68, were dismissed as academic and infructuous.