2011 (7) TMI 1225 - HC - Income Tax

Scrutiny Assessment - Issuance of notice beyond the period of limitation u/s 143(2) - Validation of notice u/s 292BB - It is the case of the Revenue that the provisions of Section 292BB of the Act are procedural in nature and therefore would apply to all pending proceedings - HELD THAT - Significantly section 292BB does not save non-issuance of notice before the expiry of limitation period. In our view Section 292BB can cure only a defect in service service within time or improper service of notice. It is not aimed at curing the defect of non-issuance of notice within the statutory period. We may notice that in the present case Tribunal had rendered its decision in the year 2006. Section 292BB was introduced with effect from 1.4.2008. We have serious doubt whether such provision can be applied to case on hand. However without entering into such controversy we are of the opinion that provisions contained in Section 292BB also would not save the proceedings in the present case. Decided against the Revenue.

Summary

Issues:
1. Validity of assessment order due to late issuance of notice under Section 143(2) of the Act.
2. Applicability of Section 292BB of the Act in precluding objections regarding notice service timing.
3. Interpretation of Section 292BB in relation to defects in notice service.

Issue 1: The High Court considered the challenge to the assessment order based on the late issuance of the notice under Section 143(2) of the Act. The Tribunal annulled the assessment due to the notice being issued beyond the prescribed period. The Court noted that the assessee had not raised this contention earlier, but the Tribunal allowed it based on a previous court decision. The Revenue argued that Section 292BB precludes such objections, but the Court emphasized that the issue was not about notice service timing but the non-issuance of notice within the statutory period, which Section 292BB does not cure. The Court cited a Supreme Court case to support the requirement of timely notice issuance. Despite doubts on the applicability of Section 292BB to the case, the Court dismissed the appeal, holding that Section 292BB does not save the proceedings in this scenario.

Issue 2: The Revenue contended that Section 292BB precludes the assessee from raising objections regarding the belated notice service due to participating in the assessment proceedings without contesting the notice's timing. The Revenue argued that the assessee's participation without raising objections precludes them from doing so at the appellate stage. However, the Court clarified that Section 292BB only addresses defects in notice service, not the non-issuance of notice within the statutory period. The Court emphasized that Section 292BB does not save proceedings in cases of non-issuance of notice within the prescribed period.

Issue 3: The Court analyzed the provisions of Section 292BB of the Act, introduced in 2008, which deem a notice served if the assessee participated in the proceedings without contesting the notice's service timing. The Revenue argued that Section 292BB's procedural nature applies to all pending proceedings. However, the Court highlighted that Section 292BB does not address the non-issuance of notice within the statutory period. The Court concluded that Section 292BB aims to cure defects in notice service, not the failure to issue notice within the prescribed timeframe.