The Chandigarh Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the reassessment proceedings against the assessee, on the grounds of non-issuance of the mandatory notice under Section 143(2) of the Income Tax Act,1961.
Anand Sawroop,appellant-assessee,sold immovable property in FY 2009-10, relevant to the 2010-11 assessment year. The Assessing Offier (AO) issued a notice under section 148 on 31/03/2017, alleging that Rs. 30,00,000 income had escaped assessment.
Know Practical Aspects of Tax Planning, Click Here
Since the assessee did not file a return or respond to notices, the AO completed the assessment under section 144 r.w.s 147, determining short-term capital gains of Rs. 1,25,81,068 under section 50C on the land sale to M/s Himachal Pradesh Power Corporation Ltd. (HPPCL). The Commissioner of Income Tax(Appeals)[CIT(A)] upheld the assessment, and the assessee has appealed the decision before the tribunal.
The assessee’s counsel explained that the assessee, an agriculturist, sold agricultural land to HPPCL on 11/02/2010 for Rs. 91,28,374, which was reflected in the bank statement. Since the sale was exempt from tax and the appellant had no taxable income, no return was filed. The assessment proceedings began with a notice under section 148 on 28/03/2017. The assessee complied with notices under section 142(1) and filed a manual return on 07/12/2017, declaring NIL income.
Know Practical Aspects of Tax Planning, Click Here
The counsel argued that the AO did not issue the required notice under section 143(2), making the assessment invalid, relying on the Supreme Court’s ruling in CIT Vs. Laxman Das Khandelwal (2019). The counsel requested the Bench to decide the issue, as all relevant facts were already on record.
The two member bench comprising Aakash Deep Jain (Vice President) and Vikram Singh Yadav (Accountant Member) reviewed the arguments and noted that the AO initiated proceedings by issuing a notice under section 148 on 28/03/2017, asking the assessee to file a return for the 2010-11 assessment year.
Know Practical Aspects of Tax Planning, Click Here
Following this, notices under section 142(1) were issued. On 07/12/2017, the AO contacted the assessee telephonically, informing him to file the return. The assessee, facing difficulties with electronic filing, submitted a manual return, which complied with Rule 12 of the Income Tax Rules.
However, the AO failed to issue the mandatory notice under section 143(2) after the return was filed. It is well-established that such a notice is required for a valid assessment under section 147, as confirmed by the Supreme Court in ACIT & Anr. Vs. Hotel Blue Moon (2010) and other High Court decisions.
Know Practical Aspects of Tax Planning, Click Here
The tribunal agreed that section 292BB did not apply, as it only addresses issues of notice service, not its absence. Since the notice under section 143(2) was not issued, the tribunal found the assessment proceedings invalid. The assessment order under section 144 r.w.s. 147 was set aside, and the assessee’s appeal on this ground was allowed.
As the reassessment proceedings were quashed, the other grounds of appeal were left open. The appeal was partly allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
