2012 (5) TMI 689 - AT - Income Tax

Whether notice u/s 142(1) issued after end of one year from the relevant assessment year is barred by limitation or not? - Held that - CIT (A) was not correct in holding the issuance of notice u/s 142(1) to be ab initio void. Since the CIT (A) has decided the appeal on technical issue without going into merits of the case, we think it proper to set aside the matter to the file of the CIT (A) and direct him to dispose of the appeal on merits in accordance with law after affording a reasonable opportunity of being heard to the assessee.

Summary

Issues:
Validity of notice u/s 142(1) issued after one year from the relevant assessment year.

Analysis:
The appeal was against an order passed in relation to the assessment year 2005-06, where the AO treated a sum of Rs. 10 lakhs invested in HSBC Mutual Fund by the assessee as unexplained investment under section 69 of the Act. The AO completed the assessment ex parte as the assessee did not comply with the notice and show cause. The CIT (A) found the notice u/s 142(1) issued by the AO to be void as it was issued after one year from the end of the assessment year. The main issue before the Tribunal was whether a notice u/s 142(1) issued after one year from the relevant assessment year is barred by limitation or not.

The Tribunal analyzed the provisions of section 142(1) along with its proviso introduced by the Finance Act, 2006 with retrospective effect from 1-4-1990. The Tribunal noted that the AO is empowered to issue a notice u/s 142(1) even after the end of the relevant assessment year if no return of income has been filed within the time allowed under section 139(1) of the Act. The Tribunal emphasized that since there is no express provision limiting the issuance of notice u/s 142(1) within a specific period from the end of the assessment year, such a limitation cannot be imposed. The Tribunal also clarified that the decision of ITAT, Calcutta Bench cited by the assessee was rendered before the insertion of the proviso to section 142(1) and hence was not applicable in this case. Therefore, the Tribunal held that the notice u/s 142(1) was not ab initio void as held by the CIT (A) and directed the matter to be reconsidered by the CIT (A) on its merits after affording a reasonable opportunity of being heard to the assessee.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the CIT (A)'s decision on the technical issue of the notice's validity and directing a fresh consideration on the merits of the case.