Facts of the Case

The assessee filed its return of income for Assessment Year 2013-14 on 17.10.2013 declaring nil income, which was accepted under Section 143(3) by order dated 30.09.2015. Subsequently, reassessment proceedings were initiated under Section 147 by issuance of notice under Section 148 dated 20.03.2020 based on information received from the Investigation Wing alleging receipt of ₹53.95 lakh from two entities through bank transactions. The assessee filed a return in response and reassessment was completed by treating the receipts as unexplained share capital under Section 68. A similar reassessment was initiated for Assessment Year 2014-15. The assessee challenged the validity of reassessment proceedings before the Tribunal.

Issues Involved

Whether a reassessment initiated on the basis of an unsigned notice under Section 148 is valid, whether reassessment beyond four years from the end of the relevant assessment year is permissible in absence of any failure on the part of the assessee to disclose fully and truly all material facts, and whether the consequent reassessment orders are sustainable in law.

Petitioner’s Arguments

The assessee contended that the notice issued under Section 148 was unsigned, neither digitally nor manually, and therefore was invalid and void ab initio, failing to confer jurisdiction on the Assessing Officer. It was further argued that the reassessment was initiated beyond four years from the end of the relevant assessment year after completion of assessment under Section 143(3), without establishing any failure on the part of the assessee to disclose material facts. Reliance was placed on judicial precedents including decisions of the Bombay High Court, Karnataka High Court, jurisdictional Calcutta High Court, and the Supreme Court holding that service of a valid notice is a jurisdictional precondition for reassessment.

Respondent’s Arguments

The Revenue supported the reassessment proceedings and the orders passed by the Assessing Officer and the CIT(A), contending that income had escaped assessment on the basis of information received from the Investigation Wing and that the reopening was justified.

Court Order / Findings

The ITAT Kolkata held that the notice issued under Section 148 was admittedly unsigned and therefore invalid in law. The Tribunal observed that an unsigned notice does not vest jurisdiction in the Assessing Officer to initiate reassessment proceedings. Relying on binding judicial precedents, the Tribunal held that the reassessment proceedings initiated on the basis of such notice were void ab initio. The Tribunal further held that the reassessment was initiated after expiry of four years from the end of the relevant assessment year without demonstrating any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, which is a mandatory condition under the proviso to Section 147. Accordingly, the reassessment proceedings and the consequent assessment orders for both assessment years were held to be without jurisdiction and liable to be quashed.

Important Clarification

The Tribunal clarified that issuance of a valid notice under Section 148 is a jurisdictional requirement and absence of signature renders the notice void. Further, reassessment beyond four years from the end of the relevant assessment year cannot be sustained unless the Assessing Officer clearly establishes failure on the part of the assessee to disclose fully and truly all material facts. Mere escapement of income or information from third-party sources does not confer jurisdiction to reopen completed assessments.

Final Outcome

Both appeals filed by the assessee for Assessment Years 2013-14 and 2014-15 were allowed, and the reassessment proceedings as well as the assessment orders passed under Sections 143(3) read with 147 of the Income-tax Act were quashed as being without jurisdiction and void ab initio.

Source Link- https://itat.gov.in/public/files/upload/1768387832-8d5AXt-1-TO.pdf

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