2016 (11) TMI 1385 - HC - Income Tax

Validity of notice issued u/s 158BC - direction to file the return within 15 days - Held that - The issue is squarely covered by the decision of the Gujarat High Court in case of Commissioner of Income Tax vs. Amit K. Jain @ Anil K. Jain 2016 (8) TMI 1088 - GUJARAT HIGH COURT wherein held that fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words not less than fifteen days have to be interpreted correctly. Since the Assessing Officer asked the assessee to file the return within fifteen days of the service of the notice, the notice issued by the Assessing Officer is invalid. - Decided in favour of assessee

Issues Involved:
1. Validity of notice issued under section 158BC of the Income Tax Act, 1961.
2. Compliance with an illegal notice and estoppel against statutory provisions.

Detailed Analysis:

1. Validity of Notice Issued Under Section 158BC:

The primary issue in these appeals was whether the notice issued under section 158BC of the Income Tax Act, 1961, which required the assessee to file the return "within 15 days," violated the statutory provision that mandates a time period of "not less than 15 days." The court examined whether this discrepancy rendered the assessment based on such notice invalid.

The court referred to the decision of the Gujarat High Court in Commissioner of Income Tax vs. Amit K. Jain @ Anil K. Jain, which emphasized the importance of providing clear 15 days as stipulated by the statute. The Gujarat High Court, relying on various Supreme Court decisions, held that procedural requirements are designed to ensure fairness and must be strictly followed. The court noted that the words "not less than fifteen days" mean clear fifteen days, and any deviation from this mandate renders the notice invalid.

The court also considered the decision of the Karnataka High Court in Commissioner of Income-tax v. Micro Labs Ltd., which held that the time specified in section 158BC is mandatory and must be strictly complied with. The court reiterated that procedural rules are meant to afford a full and proper opportunity to the assessee and any violation that causes prejudice cannot be overlooked.

In light of these precedents, the court concluded that the notice issued by the Assessing Officer, which required the return to be filed within fifteen days, did not comply with the statutory requirement of "not less than fifteen days." Therefore, the notice was deemed invalid, and the assessment based on such notice was considered bad in law.

2. Compliance with an Illegal Notice and Estoppel Against Statutory Provisions:

The second issue was whether compliance with an illegal notice could validate the proceedings and whether there could be an estoppel against statutory provisions. The court examined whether the assessee's compliance with the notice, despite its procedural defect, could rectify the invalidity of the notice.

The court referred to various judgments, including those of the Supreme Court, which held that procedural defects that cause no prejudice to the assessee may not necessarily invalidate the assessment. However, the court emphasized that in this case, the statutory requirement of providing "not less than fifteen days" was mandatory and not merely procedural. The court noted that the compliance with such a defective notice could not validate the proceedings, as it would undermine the statutory protection afforded to the assessee.

The court also addressed the argument that the issue was not raised before the Tribunal. It was pointed out that the validity of the notice was indeed raised before the Commissioner of Income Tax (Appeals) and the Tribunal, as evidenced by the records. Therefore, the court concluded that the issue was a legal question that had been properly raised and needed to be addressed.

Conclusion:

The court held that the notice issued under section 158BC, which required the return to be filed within fifteen days, was invalid as it did not comply with the statutory requirement of providing "not less than fifteen days." Consequently, the assessments based on such notices were invalid. The court also held that compliance with an illegal notice could not validate the proceedings, and there could be no estoppel against statutory provisions. The appeals were allowed, and the impugned orders of the Tribunal were quashed and set aside.

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