2024 (1) TMI 999 - AT - Income Tax

Assessment orders quashed for non-issuance of notice under section 143(2) of Income Tax Act

ITAT Jabalpur quashed assessment orders for AY 2009-10 to 2012-13 due to non-issuance of notice u/s 143(2) of the Income Tax Act. The CIT(A) admitted that ... Mandatory issuance and service of notice under Section 143(2) - invalidity of reassessment for non-issuance of notice - reassessment under Sections 147/148 requiring compliance with Section 143(2) - non-applicability of Section 292BB to mere non-issuance of noticeMandatory issuance and service of notice under Section 143(2) - invalidity of reassessment for non-issuance of notice - Validity of assessment orders passed under section 147/143(3) where no notice under section 143(2) was issued to the assessee - HELD THAT: - The Tribunal found on the admitted record that no notice under section 143(2) was issued to the assessee before completion of the reassessments. Relying on binding and persuasive precedents reflected in the order, the Bench held that issuance and service of notice under section 143(2) is mandatory and not a merely procedural requirement; omission to issue such notice renders the reassessment orders void. In light of this principle and the absence of any evidence that the notice was issued, the Tribunal concluded that the impugned assessment orders for the stated years cannot be sustained and must be quashed. [Paras 4, 5, 6, 8]Assessment orders for AYs 2009-10 to 2012-13 quashed for non-issuance of notice under section 143(2).Non-applicability of Section 292BB to mere non-issuance of notice - Whether protection under section 292BB cures non-issuance of notice under section 143(2) - HELD THAT: - The Tribunal examined section 292BB and observed that it addresses defects in service or improper service of notices but does not operate to validate the mere non-issuance of a mandatory notice. As there was no evidence on record that a notice under section 143(2) had been issued, the Tribunal held that the Department could not invoke section 292BB to cure the defect and that the provision was therefore inapplicable in the present case. [Paras 7, 8]Section 292BB protection is not available where no notice under section 143(2) was issued; reliance on section 292BB rejected.Verification of issuance of notice under Section 143(2) - Liberty granted to Revenue to produce evidence of issuance of notice and move for recall - HELD THAT: - Although the Tribunal quashed the assessments for want of notice, it expressly granted the Revenue liberty to file an application to recall the order if it could produce evidence demonstrating that the notice under section 143(2) had in fact been issued to the assessee. This leaves the factual question of issuance open for fresh consideration upon production of such evidence and does not amount to an adjudication on the merits of that factual issue. [Paras 8]Revenue permitted to seek recall by producing evidence of issuance of the notice; factual issue left open for verification on such application.Final Conclusion: The Tribunal quashed the reassessment orders for AYs 2009-10 to 2012-13 for non-issuance of notice under section 143(2); section 292BB was held inapplicable to cure non-issuance, while the Revenue was granted liberty to produce evidence of issuance and apply for recall. Issues involved:The validity of assessment orders passed without issuance of notice u/s 143(2) of the Income Tax Act.Issue 1: Jurisdiction to reopen assessment without supplying reasons to assesseeThe appellant challenged the assessment orders for the years 2009-10 to 2012-13, arguing that the Assessing Officer's jurisdiction to reopen the assessment without supplying reasons violated the principles laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. DCIT. The Hon'ble CIT was criticized for confirming the order without justification.Issue 2: Non-compliance with mandatory notice u/s 143(2)The appellant contended that the assessment orders were erroneous due to the Assessing Officer's failure to issue and serve the notice u/s 143(2) of the Act. It was argued that this non-compliance rendered the assessment orders invalid and should be set aside.Issue 3: Estimation of net profit at a fixed rateThe appellant objected to the Hon'ble CIT's estimation and presumption of the assessee's net profit at a fixed rate of 3% of turnover.The Tribunal noted that the absence of notice u/s 143(2) was a jurisdictional issue apparent on record. The learned counsel for the assessee argued that the non-compliance with the issuance of notice u/s 143(2) rendered the assessment orders liable to be set aside.After careful consideration of the materials on record, it was established that the assessee had not been issued a notice u/s 143(2) of the Act. Citing various judgments, including ACIT vs. Hotel Blue Moon and DIT vs. Society For Worldwide Interbank Financial Telecommunications, the Tribunal emphasized that non-issuance of the notice u/s 143(2) rendered the assessment unsustainable in the eyes of the law.The Tribunal held that the mandatory requirement of issuing notice u/s 143(2) within the prescribed time limit was not fulfilled, making the assessment orders invalid. Despite the provision of section 292BB of the Act, the Tribunal found that the protection was not available to the Department due to the non-issuance of the notice itself.Consequently, the Tribunal quashed the assessment orders for the years 2009-10 to 2012-13, giving the Revenue the opportunity to produce evidence of the notice u/s 143(2) issuance. The appeals filed by the assessee were partly allowed based on the non-compliance with the mandatory notice requirement.(Order pronounced in the open court on 01/12/2023)