Reassessment quashed where no fresh s.143(2) notice issued after return filed in response to s.148 notice

ITAT Mumbai (AT) held that reassessment orders must be quashed where no notice under s.143(2) was issued after the taxpayer filed a return in response to a notice under s.148. The Tribunal found the s.143(2) notice issued earlier was not based on examination of the post-148 return, and issuing s.143(2) only after that filing is not a curable procedural lapse. Because the mandatory requirement of a fresh s.143(2) notice was not met, the reassessments were set aside in favour of the assessee.

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Issues:
Reopening of assessment under section 147 of the Income Tax Act for A.Y. 2009-10 and 2010-11 based on accommodation entries obtained from certain entities. Challenge against reopening, lack of notice u/s. 143(2) post filing return in response to notice u/s. 148, and subsequent assessment additions.

Analysis:
The appeals arose from the reopening of assessments for A.Y. 2009-10 and 2010-11 based on information obtained during a search and seizure action revealing accommodation entries by the assessee from specific entities. The assessee objected to the reopening, citing lack of cross-examination opportunity and non-disclosure of relied-upon materials. The CIT(A) upheld the reopening, relying on the AO's observations and legal precedents, leading to assessment additions.

The primary contention before the Tribunal was the non-issuance of notice u/s. 143(2) after filing the return in response to the notice u/s. 148. The assessee relied on judicial decisions emphasizing the mandatory nature of the notice. The Tribunal noted the distinction between the discretionary nature of issuing notices u/s. 143(2) and the mandatory requirement post-reassessment initiation. Citing legal precedents, the Tribunal held that the absence of notice u/s. 143(2) after filing the return was fatal to the reassessment orders.

Consequently, the Tribunal allowed the assessee's appeal, quashing the reassessment orders for both years due to the fatal procedural irregularity of non-issuance of notice u/s. 143(2). As a result, the Tribunal did not delve into the merits of the additions made during the assessment process, deeming them academic in light of the legal issue. The appeals for both years were allowed, leading to the quashing of the reassessment orders.

In conclusion, the Tribunal's decision focused on the procedural irregularity of not issuing notice u/s. 143(2) post filing the return in response to the notice u/s. 148, leading to the quashing of the reassessment orders for A.Y. 2009-10 and 2010-11. The legal issue was pivotal in the Tribunal's decision, rendering the assessment additions moot.

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