ITAT Invalidates Reassessment as Notice u/s 143(2) Not Issued Within Time Limit”

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ITAT Invalidates Reassessment - Notice -Reassessment - taxscan

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently invalidated the reassessment proceedings as notice under Section 143(2) not issued within prescribed time limit.

The assessee M/s. Vansa Properties Pvt. Ltd is a company which is engaged in the business of trading of shares. The return of income for the year under consideration was filed by it by declaring loss of Rs. 61,66,215/-.

The return was duly processed under Section 143(1) of the Income Tax Act and subsequently information received from the Director of Income-tax (Inv.), Ahmedabad that misuses of CCM facility that is Client Code Modification for the tax evasion purpose through the broker M/s. Amrapali Aadya Trading & Investment Pvt. Ltd.

A show cause notice was issued upon the assessee stating that the factitious loss of Rs. 13,43,059/- shown by the assessee should be disallowed. After due consideration by the assessing officer, an amount of Rs. 13,43,059/- was added to the total income of the assessee.

The counsel for the assessee argued that the assessment conducted by the Assessing Officer is invalid because no notice under Section 143(2) was issued to the assessee. The counsel substantiates this argument by presenting the notice issued under Section 148 by the Assessing Officer, to which the assessee duly responded. However, no notice under Section 143(2) of Income Tax Act was issued by the Assessing Officer. Therefore, the counsel asserted that the entire assessment should be quashed.

Additionally, the counsel contended that the Assessing Officer initiated the proceedings under Section 147 without proper application of mind. The Assessing Officer allegedly accepted borrowed information without conducting further inquiry, resulting in a flawed assessment order that should be annulled.

The bench, consisting of two members, Judicial Member Sonjoy Sarma and Accountant Member Girish Agarwal, observed that in the case at hand, no notice under Section 143(2) of the Income Tax Act was issued during the proceedings pending under Section 148 of the Income Tax Act within the prescribed time from the date of filing the return.

 It squarely applies to the case, Hotel Blue Moon (supra), held as the reassessment framed without issuing notice under Section 143(2) of the Income Tax Act within the prescribed time limit from the date of filing of return is without jurisdiction.

Section 143(2) incorporates the rule of audi alterem partem i.e., no man should be condemned unheard. The words “shall serve on the assessee notice” occurring in section 143(2) imply a duty to be performed and the word “shall” connotes that the provisions are mandatory and non-compliance of the same goes to vitiate the order of assessment itself.

In result, the appeal filed by the assessee was allowed.To Read the full text of the Order CLICK HERE

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M/s. Vansa Properties Pvt. Ltd vs ITO


Counsel for Appellant:   Shri S.M. Surana

Counsel for Respondent:   Smt. Ranu Biswas

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