Flovel Energy Pvt Ltd vs ACIT Circle-9(1), New Delhi | Assessment Year 2011-12 | Reassessment Invalid Due to Lack of Notice

Flovel Energy Pvt Ltd vs ACIT Circle-9(1), New Delhi: Assessment Year 2011-12

Case Number: ITA 6485/DEL/2019

Appellant: Flovel Energy Pvt Ltd, New Delhi

Respondent: ACIT Circle-9(1), New Delhi

Assessment Year: 2011-12

Order Date: 29th November 2019

Pronounced On: 29th November 2019

Order Type: Final Tribunal Order

Background

Flovel Energy Pvt Ltd, the appellant in this case, contested the reassessment order passed by the Assistant Commissioner of Income Tax (ACIT) Circle-9(1), New Delhi, for the assessment year 2011-12. The reassessment was initiated under section 147/143(3) of the Income Tax Act, 1961, after the original assessment was completed. However, the appellant argued that the reassessment was invalid due to the non-issuance of a statutory notice under section 143(2) within the prescribed period.

Why the Case Was Filed

The reassessment proceedings were initiated based on a survey conducted under section 133A of the Income Tax Act on 22nd January 2014, during which a diary containing details of unaccounted cash receipts, unrecorded sales of scrap, and excess interest payments was found. The Assessing Officer (AO) used this evidence to reopen the assessment under section 148 of the Act, but the appellant challenged the validity of the reassessment process, primarily on the grounds that no notice under section 143(2) was issued within the required timeframe.

Grounds of Appeal

The appellant raised several grounds of appeal, including:

• The reassessment order was passed without assuming proper jurisdiction and without complying with the statutory conditions stipulated under sections 147 to 151 of the Income Tax Act, 1961.
• No notice under section 143(2) was issued or served within the statutory period, rendering the reassessment order invalid.
• Disallowances made by the Assessing Officer (AO) were based on incorrect facts and in violation of the principles of natural justice.
• The AO also made an addition on account of scrap sales without proper justification.
• The appellant contested the charging of interest under sections 234B and 234C of the Income Tax Act, 1961.

Key Issue: Non-Issuance of Notice under Section 143(2)

The central issue in this case was the non-issuance of a notice under section 143(2) of the Income Tax Act within the statutory period. The appellant argued that this delay rendered the reassessment proceedings invalid. The Tribunal noted that the AO had issued the notice on 15th March 2016, well after the due date, and therefore, the reassessment could not be sustained.

Arguments by Revenue

The Revenue, represented by Ms. Ratchi Bimal, Senior Departmental Representative (DR), argued that the appellant did not raise this objection during the assessment proceedings, and therefore, was precluded from raising it at this stage under section 292BB of the Income Tax Act. Section 292BB stipulates that if the assessee has cooperated in the assessment proceedings, they cannot later object to the service or timeliness of the notice.

Tribunal’s Findings

The Tribunal, comprising Shri R.K. Panda (Accountant Member) and Shri K. Narasimha Chary (Judicial Member), reviewed the facts and arguments presented by both parties. The Tribunal emphasized that the issuance of a notice under section 143(2) is a mandatory requirement, even in cases of reassessment. They relied on the judgment of the Jurisdictional High Court in the case of Alpine Electronics Asia Pvt. Ltd. vs. CIT (341 ITR 247), which held that the omission to issue a notice under section 143(2) is not curable and cannot be overlooked.

Conclusion

Based on the findings, the Tribunal held that the reassessment proceedings initiated by the Revenue were invalid due to the failure to issue a notice under section 143(2) within the prescribed period. Consequently, the reassessment order was quashed, and the appeal was allowed in favor of Flovel Energy Pvt Ltd.

As the assessment was quashed ab initio, the Tribunal did not adjudicate on the other grounds raised by the appellant, rendering them infructuous.

Final Judgment

The appeal filed by Flovel Energy Pvt Ltd was allowed, and the reassessment order passed by the ACIT Circle-9(1), New Delhi, was declared null and void.

This case highlights the critical importance of adhering to procedural requirements in reassessment cases, particularly the issuance of statutory notices within the prescribed time frame.

Flovel Energy Pvt Ltd vs ACIT Circle-9(1), New Delhi | Assessment Year 2011-12 | Reassessment Invalid Due to Lack of Notice