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Khaitan Winding Wire Pvt. Ltd. Vs. Assistant Commissioner of Income-tax - (Income Tax Appellate Tribunal) (04 Mar 2022)

Issuance of notice under Section 143(2) of IT Act is mandatory in reassessment cases also


Direct Taxation

In present case, the original assessment of the assessee was made after scrutiny under Section 143(3) of the Income-tax Act, 1961 (IT Act) and assessed at a total income of Rs.30,54,650 as against the assessee's returned income of Rs.25,38,380 filed under Section 139(1) of the IT Act. The AO passed the reassessment order making addition of Rs.25 lakh. Aggrieved, the assessee preferred an appeal before the Learned CIT(A), who confirmed the action of the AO. Aggrieved, assessee is in appeal before present Tribunal.

As per Section 143(2) of the IT Act, where a return has been furnished under Section 139 of IT Act or in response to notice under sub-section(1) of Section 142 of IT Act, the AO considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner, shall serve on the assessee a notice requiring him on a date to be specified therein either to attend the office of the AO or caused to be produced before the AO any evidence on which the assessee may rely in support of the return. The proviso to Section 143(2) of IT Act states that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.

Admittedly, the notice has not been issued before framing reassessment order and, therefore, the action of the AO to frame the assessment under Section 144 of the IT Act is without jurisdiction. The Supreme Court in the case of Hotel Blue Moon held that, issuance of notice under Section 143(2) is mandatory for scrutiny assessment even in cases of assessments after search under Section 132 of the IT Act [Block Assessment].

Since issuance of notice under Section 143(2) of IT Act is mandatory before scrutiny assessment, even Section 292BB of the IT Act cannot come to the rescue of the AO. And the Madras High Court in the case of CIT vs. C. Palaniapan held that, issuance of notice under Section 143(2) of IT Act is mandatory in reassessment cases also. Since no notice under Section 143(2) of the IT Act had been issued by the AO before framing reassessment order, it is bad in law because the A.O had no jurisdiction to frame the reassessment order without issuing the mandatory notice and therefore, all subsequent action is null in the eyes of the law and therefore, there is merit in the appeal of the assessee and the order of the AO passed under Section 144/147 of the IT Act is quashed. Appeal of assessee is allowed.


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