Facts of the Case

The present appeals were filed by the Revenue before the Delhi High Court challenging a common order of the Income Tax Appellate Tribunal concerning Assessment Years 2007–08 and 2008–09.

  • A survey under Section 133A was conducted in March 2010 involving the assessee and related entities.
  • The original assessment under Sections 143(3) read with 153C resulted in substantial additions, including:
    • Unexplained share application money
    • Unexplained deposits in bank accounts
  • The assessee succeeded before the CIT(A) in the first round on jurisdictional grounds (invalid invocation of Section 153C).
  • Subsequently, reassessment proceedings were initiated under Section 147.
  • In the second round, similar additions were made again by the Assessing Officer (AO).
  • The CIT(A) set aside the reassessment order, which was later upheld by the ITAT.

Issues Involved

  1. Whether reassessment proceedings under Sections 147/148 were valid without issuance of mandatory notice under Section 143(2)?
  2. Whether reassessment was valid when approval under Section 151 was granted without independent application of mind?
  3. Whether absence of tangible material invalidates reopening of assessment?
  4. Whether failure to challenge key findings of CIT(A) before ITAT affects Revenue’s case?

Petitioner’s Arguments (Revenue)

  • The assessee did not file a return in response to notice under Section 148; hence, notice under Section 143(2) was not required.
  • The CIT(A) erred in quashing reassessment ignoring Section 292BB.
  • Reopening was justified based on new material discovered during survey proceedings.

Respondent’s Arguments (Assessee)

  • The assessee had communicated that the original return should be treated as filed in response to Section 148 notice.
  • No notice under Section 143(2) was issued, which is mandatory for completing assessment under Section 143(3).
  • Approval under Section 151 was mechanical and without independent application of mind.
  • Reopening lacked tangible material and was legally unsustainable.

Court’s Findings / Order

  • Mandatory Notice under Section 143(2):
    Failure to issue notice under Section 143(2) after filing of return (even if original return is treated as response to Section 148) renders the assessment invalid.
  • Mechanical Approval under Section 151:
    The sanctioning authority failed to apply independent mind, which vitiates reassessment proceedings.
  • No Challenge to Key Findings:
    The Revenue did not challenge crucial findings of the CIT(A) (especially regarding approval under Section 151), which became final.
  • No Substantial Question of Law:
    The Court held that findings of CIT(A) and ITAT were factual and not perverse.

Result: Appeals dismissed; reassessment proceedings held invalid.

Important Clarifications

  • Issuance of notice under Section 143(2) is mandatory once a return is filed in response to Section 148.
  • Section 292BB cannot cure complete absence of notice under Section 143(2).
  • Approval under Section 151 must reflect application of mind, not be mechanical.
  • Failure to raise specific grounds before ITAT can weaken the Revenue’s case at higher forums.

Sections Involved

  • Section 143(2) – Mandatory notice for scrutiny assessment
  • Section 143(3) – Assessment procedure
  • Section 147 – Income escaping assessment
  • Section 148 – Notice for reassessment
  • Section 151 – Sanction for issue of notice
  • Section 153C – Assessment of income of other persons
  • Section 133A – Survey proceedings
  • Section 292BB – Deemed validity of notice

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS06092023ITA5092023_175726.pdf

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