2016 (8) TMI 1190 - AT - Income Tax

Reopening of assessment - invalid returns - Held that - In the present cases the AO did not find any defect in the returns of income filed by the assessee and therefore these returns cannot be treated as invalid returns. The arguments of the learned Departmental representative that these returns were invalid returns do not hold any force in view of the above provisions of section 139(9) and also in view of the fact that the Assessing Officer in view of the returns filed by the asses see carried out assessment proceedings on December 29 2008 and December 30 2008 and passed the order on December 30 2008 after hearing the counsel of the assessee. The entries in the order-sheet indicate that the Assessing Officer on the basis of the returns filed by the assessee on December 29 2008 required the assessee to furnish certain information and after obtaining information the counsel of the assessee again appeared on December 30 2008. The replies of the assessee in the form of two letters both dated December 30 2008 are placed at (paper book pages 4 to 6). The Assessing Officer after considering the replies of the assessee has passed the order on December 30 2008. In view of these facts and circumstances the plea of the learned Departmental representative that the returns filed by the assessee were invalid returns do not hold any force and this argument is rejected. - Decided in favour of assessee Notice not Issued under section 143(2) - as per revenue time available for completion of assessment was not sufficient - Held that - Arguments of DR that the time available for completion of assessment was not sufficient and therefore notice was not required to be issued under section 143(2) also do not hold any force in view of the fact that on December 29 2008 itself the Assessing Officer could have served the notice under section 143(2) on the counsel of the assessee which would have been sufficient compliance with the provisions. As per the order-sheet entries the counsel of the assessee took part in assessment proceedings on December 29 2008 and December 30 2008. The issue of notice under section 143(2) is a mandatory requirement which cannot be cured even after the insertion of section 292BB of the Act as held in various judicial pronouncements. The Hon ble Allahabad High Court in the case of CIT v. Salarpur Cold Storage P. Ltd. 2014 (8) TMI 732 - ALLAHABAD HIGH COURT has clearly held that assumption on jurisdiction without issuing of notice under section 143(2) cannot be cured by taking recourse to deeming fiction under section 292BB of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the assessment orders due to non-service of notice under section 143(2).
2. Whether the returns filed by the assessee were valid or non est (invalid).

Issue-wise Detailed Analysis:

1. Validity of the Assessment Orders Due to Non-Service of Notice Under Section 143(2):

The primary contention raised by the assessee was that the notice under section 143(2) was not served, rendering the assessment orders illegal and void ab initio. The Departmental Representative (DR) admitted that the assessment records did not contain evidence of service of notice under section 143(2). However, the DR argued that such notices were not required because the returns were filed under section 148 just before the assessments were time-barred. The DR further contended that the assessee deliberately delayed filing the returns to thwart the assessment process.

The Tribunal noted that the service of notice under section 143(2) is a necessary requirement for assuming jurisdiction for passing an order under section 143(3), as upheld in several judicial pronouncements, including the Supreme Court's decision in Asst. CIT v. Hotel Blue Moon and the Allahabad High Court's decision in CIT v. Salarpur Cold Storage P. Ltd. Failure to issue such notice cannot be cured by section 292BB. The Tribunal concluded that the Assessing Officer (AO) could have served the notice on the assessee's counsel on December 29, 2008, thereby complying with the mandatory requirement. The Tribunal decided the additional ground in favor of the assessee, quashing the assessment orders.

2. Whether the Returns Filed by the Assessee Were Valid or Non Est (Invalid):

The DR argued that the returns filed by the assessee were non est and invalid because they were filed much beyond the time allowed under section 148. The DR pointed out that the assessee sought multiple extensions and eventually filed the returns just two days before the assessments were time-barred, suggesting a deliberate delay.

The Tribunal examined the provisions of section 148 and section 139(9) of the Income-tax Act, 1961. It noted that the AO did not find any defect in the returns filed by the assessee and did not treat them as invalid under section 139(9). The AO took cognizance of the returns and conducted assessment proceedings based on them. The Tribunal rejected the DR's argument, stating that the returns could not be treated as invalid.

Conclusion:

The Tribunal quashed the assessment orders due to the non-service of notice under section 143(2), a mandatory requirement for assuming jurisdiction. Consequently, all other grounds raised by the assessee and the Revenue became infructuous. The appeals filed by the assessee were allowed concerning the additional ground, and the appeals filed by the Revenue were dismissed.

Order Pronounced:

The order was pronounced in the open court on August 1, 2016.