Gangaram Reddy Tekulapalli Vs ITO (ITAT Hyderabad)
Hotel Blue Moon Still Shines -Tribunal Annuls 147 Orders – Absence of 143(2) Fatal Despite ROI Filed
Background
- Assessees: Husband & wife NRIs (Gangaram Reddy & Haripriya).
- Transaction: Sold agricultural lands in Puppalguda village; purchased a flat in Manikonda Jagir.
- AO’s Action: Reopened assessments u/s 147. Computed LTCG of ₹68,06,390 each (½ share) after considering investment in flat but denied full 54F relief.
- Procedure: Draft assessment u/s 144C issued → objections filed before DRP but rejected as belated. AO passed final assessment order (02.11.2023).
- CIT(A): Dismissed appeal, holding remedy against DRP directions lies only before ITAT.
Issues Raised before ITAT
- Faceless proceedings not followed – Notice u/s 148 issued by jurisdictional AO, not faceless AO, allegedly violating sec.151A & CBDT notifications.
- No statutory notice u/s 143(2) issued despite assessee filing return in response to notice u/s 142(1).
ITAT’s Findings
On Faceless Assessment :
- Notice u/s 148 issued on 26.03.2021, prior to CBDT notification dated 29.03.2022 mandating faceless reassessment.
- Since faceless scheme not applicable at that time, assessee’s objection rejected.
On 143(2) Notice :
- Assessee filed ROI belatedly (07.09.2022) in response to notice u/s 142(1).
- AO considered this ROI while framing assessment.
- Once return is acted upon, issuance of notice u/s 143(2) becomes mandatory.
- Failure to issue 143(2) notice = jurisdictional defect, not curable u/s 292BB.
- Relied on SC rulings in Hotel Blue Moon (321 ITR 362) & Laxman Das Khandelwal (417 ITR 325), and ITAT Hyderabad ruling in Jahangir Syed.
Decision
- Ground-faceless issue: Rejected.
- Ground- 143(2) defect): Accepted – reassessment held invalid.
- Assessment orders quashed as bad in law.
If AO accepts & acts upon a belated ROI filed in response to notice, service of notice u/s 143(2) is mandatory. Absence of such notice is a fatal jurisdictional defect, rendering reassessment void. Faceless procedure objection, however, fails if notice was issued prior to CBDT’s 29.03.2022 notification.
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