TaxTMI 
TaxTMI 
2020 (12) TMI 221
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....) has erred in law in deleting the reopening assessment u/s. 147 of the I. T. Act without issuing a notice u/s. 143(2) as the assessee has not filed a Return in response to his notice u/s. 148 of the Act. The revenue has sought to rely on Madras High Court judgment reported at 294 ITR 233 (Areva T & D India Ltd. vs. ACIT where the view taken was that non-issuance of a notice under section 143(2) of the Act, will not make the reassessment null & void in law, which is validly initiated u/s. 148 of the Act. 3. The Ld. CIT(A) has erred in law in deleting the reopening assessment u/s. 147 of the I. T. Act as notice u/s. 148 was issued after taking necessary approval from ld. Pr. CIT-1, Kolkata. Since the assessee did not file return in response to notice u/s. 148, notice u/s. 143(2) was not issued although notices u/s. 142(1) were duly issued along with questionnaire. 4. The Ld. CIT(A) has erred in law in deleting the addition of Rs. 48,16,666/- as the disallowance of excess expenditure claim by the assessee. 5. The appellant craves the leave to make addition, alteration, or modification etc. of the grounds either before the appellate proceedings, or in the course of appellate pro....
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....r on the ground that the AO could not have validly framed the re-assessment u/s. 147/143(3) of the Act without issuing notice u/s. 143(2) of the Act and raised inter-alia other legal issues before the First Appellate Authority. The Ld. CIT(A) decided the legal issues in favour of the assessee by finding legal infirmity with the action of the AO on the following three counts, viz;-. i) That the AO has not disposed of the objection raised by the assessee against the reasons given for reopening the case by passing a speaking order for that refer to the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (2003) 259 ITR 19. ii) No notice was issued u/s. 143(2) of the Act before completing the assessment u/s. 143(3) of the Act. iii) Since original assessment was completed u/s. 143(3) of the Act and admittedly more than four years had elapsed, the assessment could have been opened only if the additional condition precedent as laid down in the first proviso to section 147 of the Act namely, that the assessee had failed to disclose fully and truly all material facts necessary for assessment of that assessment year. 5. From a perusal of the aforesaid acti....
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....bjection in such regard is not taken before the completion of the assessment or re-assessment." 7. In a similar case as that of the assessee before us, the Hon'ble Kerala High Court in the case of Travancore Diagnostics (P) Ltd. Vs. ACIT (2016) 74 taxmann.com 239 (Kerala HC) took note of the fact [like in the present assessee's case], that assessee (Travancore Diagnostics (P) Ltd.) informed the AO that the return originally filed could be treated as the return filed pursuant to the notice u/s. 148 of the Act and thereafter, no notice u/s. 143(2) of the Act was issued by the AO to the assessee [similar to what happened in this present assessee's case) wherein the Hon'ble High Court held that before framing the reassessment order u/s. 147/143(3) of the Act, the issuance of notice u/s. 143(2) of the Act is mandatory and an omission to do so is a defect which is not curable and an action of AO not to issue such a notice goes to the root of the jurisdiction of an AO to frame valid assessment order. The relevant observation of the Hon'ble High Court reads as under: "The issue that requires consideration is the contention of the assessee that before making an assessment under section ....
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.... on him, if he has participated in the proceedings. However, the said section does not in any manner grant any privilege to the Assessing Officer in dispensing with the issuance of a notice under section 143 (2) of the Act. Since the jurisdiction under section 143 is founded on the issuance of a notice under section 143(2), the Assessing Officer could have assumed jurisdiction only after issuing a notice under section 143(2). Even the participation of the assessee would not provide the benefit under section 292BB to the revenue. The requirement that a notice be issued is mandatory and the Assessing Officer has no other option but to issue the notice before commencing the jurisdiction. [Para 33] The only benefit that section 292BB obtains to the Assessing Officer is that after the issuance of such notice the assessee appears and participates in the proceedings, then he shall not he heard, subject to the proviso to the said section, that he had not been properly served with notice. There is no hesitation in holding that the Assessing Officer can claim and avail the benefit under section 292BB and the assessee will be burdened by the rigour of estoppel contained therein only after a....
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....(A) erred in deciding that since the original assessment was completed u/s. 143(3) of the Act and more than four years have elapsed after passing the order, the additional condition precedent as prescribed in first proviso to section 147 of the Act i.e. failure of the assessee to disclose fully and truly all material facts necessary for the assessment for the assessment year should have been spelled out by the AO in the reasons recorded and failure to do so, the AO would not get jurisdiction to reopen the assessment. For adjudication of this legal issue, we need to reproduce the reasons recorded by AO for reopening which is discernible from page 14 of paper book is as under: "Sub: Reason for reopen u/s 147 of the I.T. Act in the case of M/s Peerless General Finance & Investment Co. (P) Ltd. A.Y.2008-09. As per your requirement I am furnishing the reason for reopen u/s 147 of the I.T.Act of the above mentioned case as per below. "In Profit and Loss account for the F. Y.2007-08 relating to A. Y.2008-09 the assessee has shown an amount of Rs. 2255. 9 lacs under the head Miscellaneous income. The said Miscellaneous income comprises among other things services charges received fro....
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.... the assessee and M/s. MNYL and was duly explained/reconciled and according to him, the then AO accepted the reconciliation since no action was initiated against the assessee after receiving reply of 09.06.2011; and further it was pointed out to us by the Ld AR that thereafter 3 years and 9 months i.e. on 19.03.2015, only notice u/s. 148 of the Act was issued by the new incumbent AO on the very same issue, so according to Ld AR it can be seen that it was not a case where the assessee had failed to disclose truly and fully all material facts necessary for assessment on this issue for that year. 12. It is admitted in this case, the original assessment of the assessee for AY 2008-09 was framed u/s. 143(3) of the Act on 20.07.2010 and the AO by issuing notice u/s. 148 of the Act on 19.03.2015 was an event after four years from the end of the relevant assessment year, so the first proviso to section 147 of the Act will come into play and consequently no action can be taken by the AO under section 147, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of failure on the part of the assessee to disclose all material facts necessary for its asse....
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....proviso to Section 147 of the Act. The Ld. DR could not controvert the fact that the assessment was reopened after four years from the end of relevant assessment year and that the original assessment was framed u/s. 143(3) of the Act and, therefore, it was not his case that first proviso to section 147 was not applicable to this case. 13. Before we advert further, let us first look into the well settled principles regarding reopening of assessments completed u/s 143(3) of the Act, beyond four years. In this regard, it is first pertinent to examine the relevant provision of the Act i.e., Section 147 of the Act which reads as under: "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in ....
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.... the AO. No substitution or deletion is permissible. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons." Their Lordships further added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence....".The Hon'ble Court further held that, "He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced."Therefore, the reasons are to be examined only as they were recorded by the com....