2025 (3) TMI 653 - AT - Income Tax

Assessment Order Quashed: Tribunal Invalidates Order Under IT Act Sec 147 for Missing Sec 143(2) Notice, COVID-19 Extension Validates Return

The Tribunal invalidated the assessment order under Section 147 of the Income Tax Act due to the absence of a mandatory notice under Section 143(2), which ... Validity of Assessment Order u/s 147 without the issue of Notice u/s 143(2) - HELD THAT:- The issuance of notice u/s 143(2) of the Act was mandatory for the AO to assume jurisdiction under the Act and framed the assessment accordingly. It was also pertinent to state that the DR admitted during the course of hearing that no notice u/s 143(2) of the Act was issued by the AO. We are inclined to quash the order of the ld. Assessing Officer as without jurisdiction. The case of the assessee is squarely covered by the decision Oberoi Hotels (Pvt) Ltd. [2018 (6) TMI 1472 - CALCUTTA HIGH COURT] wherein it has been held that assessment framed without issuing notice u/s 143(2) was legally unstainable and same could not be justified by invoking the provisions of section 292BB of the Act. The appeal of the assessee is accordingly allowed on legal issue. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered in this judgment was whether the assessment order under Section 147 read with Section 144B of the Income Tax Act was valid, given that no notice under Section 143(2) was issued to the assessee. The Tribunal also considered whether the return of income filed by the assessee after the prescribed period, but within the extended period due to the Supreme Court's order on limitation during the COVID-19 pandemic, was valid.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework involves Section 147 of the Income Tax Act, which allows for the reopening of an assessment if the Assessing Officer (AO) has reason to believe that income has escaped assessment. Section 148 mandates the issuance of a notice to the assessee to file a return of income. Section 143(2) requires the issuance of a notice for the AO to assume jurisdiction and proceed with the assessment. The judgment also referenced the Supreme Court's order extending the limitation period during the COVID-19 pandemic.The Tribunal cited the decision of the Calcutta High Court in Principal Commissioner of Income Tax Vs Oberoi Hotels (Pvt) Ltd., which held that an assessment made without issuing a notice under Section 143(2) is legally unsustainable.Court's Interpretation and ReasoningThe Tribunal interpreted that the issuance of a notice under Section 143(2) is a mandatory requirement for the AO to assume jurisdiction and proceed with the assessment. The Tribunal reasoned that since the return of income was filed by the assessee within the extended period as per the Supreme Court's order, it could not be considered invalid. Consequently, the failure to issue a notice under Section 143(2) rendered the assessment order void ab initio.Key Evidence and FindingsThe Tribunal found that the assessee filed the return of income on 01.03.2022, which was within the period excluded from the limitation due to the Supreme Court's order. The AO did not treat this return as invalid and even considered it while computing the total income. The Tribunal noted the admission by the Departmental Representative that no notice under Section 143(2) was issued.Application of Law to FactsThe Tribunal applied the legal requirement of issuing a notice under Section 143(2) to the facts of the case, concluding that the absence of such a notice invalidated the assessment order. The Tribunal also applied the Supreme Court's extension of the limitation period to validate the timing of the assessee's return filing.Treatment of Competing ArgumentsThe assessee argued that the assessment order was invalid due to the lack of a Section 143(2) notice and the timing of the return filing within the extended period. The Department contended that the return was filed late and therefore invalid, negating the need for a Section 143(2) notice. The Tribunal favored the assessee's argument, emphasizing the mandatory nature of the Section 143(2) notice and the applicability of the Supreme Court's order on limitation.ConclusionsThe Tribunal concluded that the assessment order was invalid due to the absence of a Section 143(2) notice, which is a jurisdictional requirement. The Tribunal also concluded that the return filed by the assessee was valid due to the extension of the limitation period by the Supreme Court.SIGNIFICANT HOLDINGSThe Tribunal held that the issuance of a notice under Section 143(2) is a jurisdictional requirement for an assessment under Section 147. The absence of such a notice renders the assessment order void. The Tribunal also held that the return filed within the extended limitation period is valid.Preserve verbatim quotes of crucial legal reasoningThe Tribunal stated, 'The issuance of notice u/s 143(2) of the Act was mandatory for the ld. AO to assume jurisdiction under the Act and framed the assessment accordingly.'Core principles establishedThe core principle established is that compliance with procedural requirements, such as the issuance of a Section 143(2) notice, is essential for the validity of an assessment order. Additionally, the extension of limitation periods due to extraordinary circumstances, such as a pandemic, must be respected in determining the validity of actions taken within those periods.Final determinations on each issueThe Tribunal quashed the assessment order due to the lack of a Section 143(2) notice, thereby allowing the appeal on legal grounds. The Tribunal did not adjudicate the merits of other grounds raised by the assessee, leaving them open for future consideration if necessary.