2003 (8) TMI 461 - AT - Income Tax

Summary

Issues Involved:
1. Admission of additional ground No. 11.
2. Validity of the assessment order due to non-service of notice under section 143(2) within the prescribed period.
3. Interpretation of mandatory and directory provisions under section 143(2) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Admission of Additional Ground No. 11:
The appellant raised an additional ground (No. 11) challenging the validity of the assessment order dated 1-12-2000 due to non-compliance with the mandatory requirement of service of notice under section 143(2) within one year from the date of filing the return. The Tribunal directed the Departmental Representative (D.R.) to produce the assessment records. Upon examination, it was found that the order sheets dated 22-9-1999 and 8-6-2002 were not signed by the Assessing Officer, and the notice under section 143(2) dated 22-9-1999 was not available in the assessment record. Consequently, the Tribunal admitted the additional ground for hearing.

2. Validity of the Assessment Order:
The primary contention was whether the assessment order was valid in the absence of a served notice under section 143(2) within the stipulated period. The appellant argued that the notice must be served within twelve months from the end of the month in which the return was furnished, failing which the assessment order is null and void. The appellant relied on various judicial precedents, including the Allahabad High Court's decision in Rajmani Devi v. CIT and ITAT's decisions in Uma Polymers (P.) Ltd. v. Asstt. CIT and Smt. Saraswati Devi v. ITO, which supported the mandatory nature of serving the notice within the specified period.

The respondent, represented by the Standing Counsel, argued that the provisions of section 143(2) are directory and not mandatory, and non-service of notice does not render the assessment order null and void. The respondent cited several Supreme Court judgments, including State of U.P. v. Harendra Arora and Topline Shoes Ltd. v. Corporation Bank, to support the argument that procedural lapses do not necessarily invalidate the assessment.

3. Interpretation of Mandatory and Directory Provisions:
The Tribunal analyzed the provisions under section 143(2) and concluded that the issuance and service of a notice within the prescribed period are mandatory requirements. The Tribunal emphasized that the word "shall" in section 143(2) indicates a mandatory duty, and non-compliance with this provision vitiates the assessment order. The Tribunal referred to the legislative intent behind the proviso to section 143(2), which mandates that no notice under this section shall be served after the expiry of twelve months from the end of the month in which the return is furnished.

The Tribunal found that the assessment record did not contain any evidence of a valid notice issued or served within the required period. The order sheets were unsigned, and the assessment order did not mention the service of the notice. The Tribunal held that the absence of a valid notice under section 143(2) within the stipulated period rendered the assessment order null and void.

Conclusion:
The Tribunal held that the proviso to section 143(2) is mandatory, and non-service of notice within the specified period invalidates the assessment order. Consequently, the assessment order dated 1-12-2000 and the CIT(A)'s order dated 23-5-2002 were quashed, and all additions were deleted. The appeal of the assessee was allowed, and there was no need to address other grounds of appeal on merits.