Hyderabad ITAT: Re-assessment Without Notice Under I-T Section 143(2) is Invalid

The re-assessment without the issuance of notice under Section 143(2) of the Income Tax Act 1961 was void, Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) ruled.

Gonuguntla Nirmala Devi, an individual taxpayer, submitted her tax return for the 2012-13 assessment year on March 30, 2014, disclosing her income. The tax authorities initially processed her return under Section 143(1) of the Income Tax Act. Later, due to certain information received, they decided to reopen her case under Section 147 of the Income Tax Act, and a notice was issued to her under Section 148.

The Assessing Officer noted that despite issuing a notice on March 28, 2019, which was properly served to the taxpayer, she did not respond. Another notice requesting additional details was sent on April 12, 2019, and it was served to the taxpayer on June 13, 2019. However, she still did not provide the required information. A hearing was scheduled for November 6, 2019, and the notice was delivered to the taxpayer on October 25, 2019, but she did not attend.

Finally, the taxpayer responded to a notice dated November 29, 2019, which set the hearing date for December 5, 2019. The Assessing Officer (AO) concluded the assessment and, through an order dated December 24, 2019, made under Section 143(3) with Section 147 of the Income Tax Act, determined the taxpayer’s income.

R. Venkataraman, representing the taxpayer, argued that the issuance of a notice under Section 143(2) of the Income Tax Act was required when the taxpayer responded to the notice issued under Section 148 of the Income Tax Act. The response indicated that the original tax return should be considered as having been filed in reply to the notice under Section 148 of the Income Tax Act.

He further contended that the taxpayer had indeed submitted the income tax return in response to the notice under Section 148 of the Income Tax Act. Therefore, due to the absence of a notice issued under Section 143(2) of the Act, the assessment was legally flawed.

He also mentioned that the Supreme courts decision for the case of ACIT vs. Hotel Blue Moon and the decisions of the various High Courts distinguished from the other decisions was to be the effect that in case the start of the proceedings in section 143(3) read with section 147 of the Act, needing to provide the notice under Section 143(2) of the Income Tax Act was obligatory and Section 292BB of the Income Tax Act can not cure the same flaw.

On the other hand, Sheetal Sarin, representing the tax authorities, argued that the taxpayer had not initially filed any income tax return or requested that the original return of income be treated as a response to the notice under Section 148 of the Income Tax Act. Instead, the taxpayer had later submitted the income tax return online and sent a letter, indicating that the return filed on the previous day should be considered as the response to the notice under Section 148 of the IT Act.

The taxpayer’s appeal was dismissed by the two-member bench of Ramakanta Panda, (Vice President) and K.Narasimha Chary, (Judicial Member) which ruled that “In this case, it’s not the case of the taxpayer that there was any assessment under section 143(3) or section 147 of the Act earlier. Therefore the taxpayer’s case counted not under section 151(1), but it falls under section 151(2) of the Act, in which case the satisfaction of the Joint Commissioner is adequate. The taxpayer does not have a good case on this point.”