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Facts
The assessee, M/s. Sri Lakshmi Finance, appealed against the order of the CIT(A) for AY 2017-18. The core of the dispute involved additions made by the AO based on cash received during the demonetization period, which the assessee claimed were normal business transactions.
Held
The Tribunal held that the assessment order passed by the AO was invalid because a mandatory notice u/s 143(2) of the Income Tax Act was not issued. This procedural defect vitiated the entire assessment proceedings.
Key Issues
Whether the assessment order is invalid due to the non-issuance of notice u/s 143(2) of the Income Tax Act, which is a mandatory procedural requirement.
Sections Cited
250, 147, 148, 143(2), 68, 115BBE
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Income Tax Appellate Tribunal, Hyderabad ‘SM-A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2017-18) M/s. Sri Lakshmi Finance, Income Tax Officer, Vs. Ward-1, Suryapet. Nalgonda. PAN:AAGFS2763N (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri Y V Bhanu Narayan Rao, C.A. रधजस् व द्वधरध/Revenue by:: Shri K N Suresh Babu, SR-DR सुिवधई की तधरीख/Date of hearing: 10/03/2025 घोर्णध की तधरीख/Pronouncement: 20/03/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Sri Lakshmi Finance (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 24.09.2024 for the A.Y. 2017-18.
The assessee has raised the following grounds :
2.1 The assessee has raised the additional grounds as under :
Learned AR submitted that additional ground so filed are admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). The prayer for admission of additional ground noted above which are not in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional ground are legal in nature for which relevant facts are stated to be emanating from the existing records.
In the additional grounds, the assessee has raised legal issue challenging the validity of order passed by the Ld. AO without issue of notice u/s.143(2) of the Income Tax Act, 1961 ('the Act'). Therefore, we first take up this legal issue for adjudication.
The Learned Authorised Representative ("Ld. AR") submitted that, the Learned Assessing Officer ("Ld. AO") has issued original notice u/s.148 of the Act for A.Y. 2017-18 on 08.04.2021. In response to the notice, the assessee filed Return of Income (“ROI”) on 20.04.2021. In support of their submission, the Ld. AR invited our attention to the copy of acknowledgement of filing of ROI placed at page no.17 of the paper book no.2. The Ld. AR further submitted that, pursuant to the judgment of Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal (2022) 444 ITR 01 (SC), the Ld. AO issued a fresh notice u/s.148 of the Act on 29.07.2022. In response to the notice, the assessee again filed the ROI on 26.04.2023 and in support of their submission, the Ld. AR invited our attention to the coy of acknowledgement of filing of ROI placed at page no.71 of paper book no.2. The Ld. AR further submitted that, the Ld. AO completed the assessment on 16.05.2023 without issuing any notice u/s.143(2) of the Act, which is a jurisdictional defect. The Ld. AR further submitted that, the Ld. CIT(A) has dismissed the appeal of the assessee without adequate consideration of their submission. It was also submitted that, the issuance of notice u/s.143(2) is mandatory and forms the foundation of a valid assessment. The Ld. AR placed reliance on the decision of Hon'ble Supreme Court in the case of ACIT Vs. Hotel Bluemoon (2010) 321 ITR 362 (SC), wherein it was held that the service of notice u/s.143(2) is mandatory, and non- issuance of such notice is fatal to the assessment proceedings. Finally, the Ld. AR submitted that, the assessment order passed by the Ld. AO without issuing any notice u/s.143(2) render the assessment null and void.
The Learned Department Representative ("Ld. DR") relied on the order of revenue authority.
We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the order of Ld. CIT(A), wherein at para no.5.1.4 of his order, the Ld. CIT(A) has held as under :
7.1 On perusal of above, it is found that no notice u/s.143(2) of the Act has been issued by the Ld. AO before completion of assessment. We also observe that the legal position regarding the mandatory nature of notice u/s.143(2) of the Act is well settled. The Hon'ble Supreme Court in the case of Hotel Bluemoon (supra) held that service of notice u/s.143(2) is mandatory and failure to issue such a notice render the assessment proceedings void and abinitio. In the present case before us, the Ld. AO proceeded to complete the assessment based on the ROI filed by the assessee in response to notice u/s.148 of the Act. However, once the Ld. AO chose to process the return and proceed with the assessment, the issuance of notice u/s.143(2) of the Act is mandatory. The failure to adhere to this procedural requirement has vitiated the entire assessment proceedings. Accordingly, in the facts and circumstances of the case and binding the precedence, the assessment order passed by the Ld. AO on 16.05.2023 without issuance of mandatory notice u/s.143(2) of the Act is invalid and liable to be quashed. Accordingly, order of the Ld. AO is quashed.