Tribunal quashes reassessment order for lack of notice, stresses need for independent verification

The Tribunal allowed the appeal, quashing the reassessment order due to the non-issuance of notice under section 143(2) and deleting the addition made by the AO based on unverified estimates. The Tribunal emphasized the need for independent inquiry and proper verification in reassessment proceedings.

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Issues Involved:
1. Legality of the assessment order due to non-issuance of notice under section 143(2).
2. Validity of the reassessment notice based on borrowed satisfaction.
3. Estimation of income based on cable connections and subscription fees.
4. Calculation of income based on inaccurate assumptions and standard rates.

Summary:

1. Legality of the assessment order due to non-issuance of notice under section 143(2):
The Tribunal found that the Assessing Officer (AO) did not issue a notice under section 143(2) after the assessee filed a return in response to the notice under section 148. The AO's report admitted the absence of proof for the issuance and service of such notice. The Tribunal held that non-issuance of notice under section 143(2) is a jurisdictional defect that cannot be cured, referencing the Hon'ble Delhi High Court's decision in Pr.CIT vs Shri Jai Shiv Shankar travels (P.) Ltd. [2015] 64 Taxmann.com 220 (Delhi). Consequently, the reassessment order was quashed.

2. Validity of the reassessment notice based on borrowed satisfaction:
The assessee contended that the AO relied on the order of the Entertainment Officer without conducting an independent inquiry. The Tribunal noted that the AO acted on information received from the Investigation Wing and did not independently verify the number of cable connections. The Tribunal referenced the case of Pr.CIT vs Shodiman Investment P.Ltd. [2018] 93 Taxmann.com 163 (Bombay), emphasizing that reassessment should be based on the AO's own satisfaction, not borrowed satisfaction.

3. Estimation of income based on cable connections and subscription fees:
The AO estimated the assessee's income based on 28,000 cable connections with a subscription fee of INR 200 per connection, resulting in gross receipts of INR 6,72,00,000. The AO reduced 10% of the gross receipts for non-payment by customers and calculated an average profit of 8%, leading to an assessed income of INR 44,66,650. The Tribunal found that the AO did not verify the assessee's claim of having only 2000 cable connections and proceeded on an estimation basis without proper verification, which was not justified.

4. Calculation of income based on inaccurate assumptions and standard rates:
The assessee argued that the AO erred in calculating income based on inaccurate assumptions and a standard rate for all customers, which was impractical. The Tribunal agreed, noting that the AO did not consider the assessee's actual business conditions and relied on estimates without substantiating evidence. The Tribunal directed the AO to delete the impugned addition.

Conclusion:
The Tribunal allowed the appeal, quashing the reassessment order due to the non-issuance of notice under section 143(2) and deleting the addition made by the AO based on unverified estimates. The Tribunal emphasized the need for independent inquiry and proper verification in reassessment proceedings.

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