Nirman Realtors and Developers Ltd. Vs Circle-2(3)(1) (ITAT Mumbai)
Valid Section 143(2) Notice by Original AO Survives Jurisdiction Transfer: ITAT Mumbai Upholds Scrutiny Assessment and Remands Loss Claim for Verification
The Mumbai Bench of the ITAT dismissed the assessee’s legal challenge to the validity of scrutiny assessment for AY 2012-13 and held that once a notice under section 143(2) is validly issued within limitation by the jurisdictional Assessing Officer, a subsequent transfer of jurisdiction due to administrative cadre restructuring does not mandate issuance of a fresh notice by the transferee AO. The Tribunal distinguished cases like Gulf View Homes Ltd., observing that those decisions applied where the original notice itself was issued by an officer lacking jurisdiction, which was not the situation here. Accordingly, the assessment framed under section 143(3) was held to be valid in law.
On merits, the dispute related to disallowance of a loss of ₹1.84 crore claimed by the assessee, a real estate developer, arising from reversal of sales booked in earlier years under the percentage completion method due to cancellation of bookings and refund of advances to buyers. The Tribunal noted that the assessee had furnished ledger accounts, project details, and explanations relying on accounting standards and arbitration/settlement material, but proper factual verification was required. While upholding the CIT(A)’s view on the legal issue of notice under section 143(2), the ITAT sustained the direction for verification of the loss claim by the Assessing Officer.
Thus, the Tribunal confirmed that absence of a fresh section 143(2) notice after transfer of jurisdiction does not invalidate an otherwise valid scrutiny assessment, and the substantive issue of loss on reversal of sales was left to be examined on facts in accordance with law
FULL TEXT OF THE ORDER OF ITAT MUMBAI
