JITENDRA NAVNITLAL UPADHYAY,M/S AVANTIKA ENTERPRISES vs. INCOME TAX OFFICER, WARD 1, DWARKA, DWARKA

Since these two appeals filed by the same assessee, and identical and common issues are involved, therefore, these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.

The grounds of appeal raised by the assessee, in quantum appeal, in ITA No. 76/Rjt/2026 are as follows: 1. Hon'ble CIT(A) erred in law by confirming re-opening of the assessment by Ld. AO without providing reasons recorded along with satisfaction u/s 151 after filing of return of income against notice u/s 148. Hence, the re-opening of the assessment is invalid in terms of SC's decision in case of GKN Driveshaft Limited. 2. Hon'ble CIT(A) erred in law by confirming re-opening of assessment u/s 147 based on "Reason to Suspect" & not "Reason to believe" by Ld. AO. 3. Hon'ble CIT(A) erred in law by confirming re-opening of assessment u/s 147 by Ld. AO as the case is reopened only for conducting roving inquiry and verification and without considering the facts submitted by the appellant during investigation proceedings and shown in ITR. 4. Hon'ble CIT(A) erred in law by confirming the assessment u/s. 144 r.w.s. 147 & 144B without issuing notice u/s 143(2) by Ld. AO which is sine qua non for assessment. 5. Hon'ble CIT(A) erred in law by confirming addition only on the basis of surmises and suspicions by Ld. AO without considering the reply filed by appellant with respect to his business. 6. Hon'ble CIT(A) has erred in law in confirming the addition made by ld. AO by not following procedure in terms of allowing of video-conferencing laid down u/s 144B of the Act for Faceless Assessment Scheme in despite specifically requested in show cause notice reply. 7. Hon'ble CIT(A) has erred in law in enhancing Short Term Capital Gain for Rs. 56,43,358/-,where appellant has provided explanation regarding that with documentary evidence.

Succinctly, the factual panorama of the case is that assessee before me is an Individual. The assessing officer, as per information available, noticed that the assessee and Shri Jitesh Mepabhai Manek, sold immovable property (non-agricultural land), on 09/05/2012, in the year under consideration, in which the assessee share was at Rs.32,50,000/-, on which no capital gain was offered for taxation. On perusal of return of income and details in ITD portal as well as e-filing portal, it was noted by the assessing officer that the assessee has filed return of income for the year under consideration i.e. assessment year (A. Y.) 2013-14, in which, no capital gain was shown for taxation on sale of non-agricultural land. Further, it was noticed by the assessing officer that the said land was purchased on 25/05/2011 of Rs.4,90,000/-, and sold on 09.05.2012 of Rs.5,00,000/-, therefore, the sale of the property is less than one year therefore, the assessee was liable to pay Short Term Capital Gain, however, the assessee failed to do so, therefore, the assessee’s case was reopened u/s 147 of I.T. Act by recording the reasons of reopening. The notice u/s 148 of I.T. Act 1961 was issued to assessee after taking prior approval of the Pr. Commissioner of Income tax, Jamnagar, vide letter dated 31.03.2021. In response to the notice u/s 148 of I.T. Act, the assessee has submitted the copy of return of income. Thereafter, the assessee was issued various notices u/s. 142(1) of the Act, during the course of assessment proceedings, the same were served to assessee via registered email, however in response of the said notice the assessee has submitted request for adjournment from time to time. Since the assessee has not submitted documentary evidences before the assessing officer, therefore, the assessing officer made addition on account of Short Term Capital Gain of Rs.30,05,000 (3250000-245000).

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal, before learned CIT(A), who has enhanced the assessment and confirmed the addition made by the assessing officer. Therefore, the assessee is in appeal before this Tribunal.

Shri Dushyant Maharshi, Ld. Counsel for the assessee, argued that notice u/s 143(2) of the Act, has not been issued to the assessee, by the Assessing Officer, during the reassessment proceedings, therefore the reassessment order framed by the Assessing Officer is bad in law and may be quashed and for that Ld. Counsel relied on the judgment of the Hon’ble Supreme Court in the case of Hotel Blue Moon [2010] 188 Taxman 113 (SC).

Shri Maharshi, further argued that reasons recorded by the assessing officer under section 147 of the Act is also bad in law. The confirming re- opening of the assessment by AO without providing reasons recorded along with satisfaction u/s 151 after filing of return of income against notice u/s 148 of the Act, is not acceptable in the eye of law. Hence, the re-opening of the assessment is invalid in terms of SC's decision in case of GKN Driveshaft Limited. Further, re-opening of assessment u/s 147 of the Act is based on "Reason to Suspect" and not "Reason to believe" by AO. Besides, the assessee’s case was reopened only for conducting roving inquiry and verification and without considering the facts submitted by the appellant during investigation proceedings and shown in income tax return (ITR). 8. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

I have heard, both the parties and after giving thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel, for the assessee, I find that the issue involved in the present appeal is no longer res integra. The question as to whether notice under section 143(2) is mandatory, to be issued, during the reassessment proceedings, was considered by various judicial forums across India. In the assessee’s case, I have verified the facts that only notices u/s 148 and 142(1) of the Act were issued, by the assessing officer, to the assessee, during the assessment proceedings. The assessing officer never issued notice to the assessee under section 143(2) of the Act. In order to acquire the jurisdiction, it is mandatory for the assessing officer to issue the notice under section 143(2) of the Act. To frame the assessment/reassessment order without issuing the notice u/s 143(2) of the Act, is null and void in the eye of law, for that reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Hotel Blue Moon [2010] 188 Taxman 113 (SC), wherein it was held as follows:

Therefore, I note that notice u/s 143(2) of the Act, is mandatory and section 292BB of the Act, does not cure the irregularity in issuing notice u/s 143(2) of the Act. In case of CIT vs. Rajeev Sharma [2011] 336 ITR 678/[2010] 192 Taxman 197 (All.) it was held that a plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act. The decision of Jurisdictional High Court in the case of Sukhini P. Modi [2014] 52 taxmann.com 50 (Gujarat)/[2014] 367 ITR 682 (Gujarat) wherein it was held following the decision of the Apex Court in Asstt. CIT v. Hotel Blue Moon [2010] 321 ITR 362 that in the absence of fulfillment of mandatory requirement of issuance of notice under section 143(2), the assumption of jurisdiction by issuance of notice of reopening itself would not be sustainable and thereby annulment of reassessment order by CIT(A)/ITAT was upheld. The Hon’ble jurisdictional High Court of Gujarat in the case of Devendranath G. Chaturvedi 83 taxmann.com 141 (Gujarat) held that “Where return for block period filed by assessee belatedly was not discarded as invalid, in such a case, if Assessing Officer wanted to frame assessment at higher income, he was bound to issue a notice under section 143(2)” I also relied on the judgment of Hon’ble High Court of Patna in the case of Chand Bihari Agrawal [2023] 154 taxmann.com 245 (Patna), wherein it was held that assessment completed u/s 158BC of the Act, was without a notice u/s 143(2) of the Act and therefore such assessment order cannot be sustained. Therefore, considering these facts and circumstances, I quash the reassessment order under section 147 of the Act, dated 28.03.2022, being void ab initio.

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous. 12. In the result, appeal filed by the assessee, in ITA No.76/RJT/26, is allowed.

Now, coming to the penalty appeal of the assessee in ITA No.75/Rjt/2026, for assessment year 2013-14, where the Assessing Officer has imposed the penalty u/s 271(1)(c) of the Act, at Rs.10,62,566/-. since I have quashed the reassessment order framed by the Assessing Officer u/s 147 of the Act dated 28.03.2022, therefore, the penalty does not have leg to stand and does not have any foundation. Once the foundation fails, the superstructure also fails i.e the penalty is to be deleted. In this regard, I place reliance on the legal maxim “Sublato fundamento cadit opus” (meaning thereby that foundation being removed, structure /work falls). Hence, the initial action of the revenue itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. 14. In the result, appeal filed by the assessee, in ITA No.75/Rjt/2026, is allowed.

In the combined result, both appeals filed by the assessee are allowed.