Reassessment Without 143(2)? Structure Unsound—ITAT Orders Complete Demolition- AOs Can’t Bypass 143(2): ITAT Bulldozes Reassessment of Real Estate Company
Assessee, a real-estate developer of a 36-unit residential project “Intact Avenue”, faced reassessment for AYs 2015-16 to 2017-18 following a survey u/s 133A on 19.02.2018. During survey, books of account were found missing & statements of the Managing Director revealed inconsistencies regarding maintenance of accounts. Enquiries into construction/contract expenses showed several vendors were either non-existent, untraceable or were providing only name-lending services, with bank accounts operated by company staff & cash withdrawal patterns suggesting bogus claim of expenses. Based on these findings, reopening notices u/s 148 were issued. Assessee did not file a fresh return within the 30-day time allowed, but vide letter dated 20.05.2019 specifically requested that its original return filed u/s 139(1) be treated as return filed in response to notice u/s 148. The AO, however, ignored this request & proceeded to frame reassessments u/s 144 r.w.s. 147 without issuing statutory notice u/s 143(2). Substantial disallowances of contract expenses were made across the three years.
CIT(A) upheld the assessments on the ground that Assessee had merely re-filed materials furnished before AO & failed to counter the clear findings of bogus contractors & inflated expenses. CIT(A) held that the AO had established a modus operandi of withdrawing cash through third-party bank accounts.
Before the Tribunal, Assessee raised a pure legal plea– that no valid notice u/s 143(2) was ever issued after Assessee requested that its earlier return be treated as return in response to notice u/s 148. Tribunal noted that (i) Assessee’s reply letter dated 20.05.2019 was reproduced by the AO himself in the assessment order, (ii) the AO’s finding that “no return was filed in response to s.148” was factually incorrect, & (iii) once a return exists on record—whether freshly filed or adopted by specific declaration—the AO is mandatorily required to issue notice u/s 143(2) before finalizing reassessment. Tribunal further held that section 292BB cures defects in service but does not cure non-issuance of a jurisdictional notice. Section 144 cannot be invoked where a return exists & the AO seeks to make variations. The third proviso to s.148 inserted in 2023 (disallowing belated returns as valid s.148 returns) had no application to these years.
Relying on Supreme Court in ACIT v. Hotel Blue Moon (321 ITR 362) & multiple High Court judgments including Jai Shiv Shankar Traders (Delhi HC), S.G. Portfolio (Delhi HC), Oberoi Hotels (Calcutta HC) & Nagendra Prasad (Patna HC), Tribunal held that absence of notice u/s 143(2) is fatal & renders reassessments void. Tribunal therefore quashed the reassessments for all three years, without proceeding to examine the merits of additions.
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