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2012 (5) TMI 754 - AT - Income TaxProcess of selection of cases for scrutiny for corporate assessee - issuance of notice u/s. 143(2) - Held that - The selection of scrutiny in this case is also completed beyond the prescribed period as prescribed in Instruction No. 9/2004 dated 20.09.2004. The assessee s case was selected for scrutiny first time on 18.10.2004, as per copy of order sheet entry, and notice was issued fixing the hearing on 18.10.2004 itself. As per Instruction No. 9/2004 dated 20.09.2004, the process of selection of cases for scrutiny for returns filed up to 31.03.2004, in the present case assessee filed its return of income on 01.12.2003 must be completed by 15.10.2004. The factual position as noted by CIT(A) in his appellate order that notice u/s. 143(2) is dated 10.10.2004, is not supported by Ld. Sr. DR at the time of hearing rather assessee contested that this finding of fact is erroneous and actual case was selected by issuing notice as on 18.10.2004. Even the basis of recording this fact is only from the assessment order wherein it is mentioned that notice u/s. 143(2) is dated 10.10.2004 and the same was served on the assessee on 19.10.2004 fixing the date of hearing on 16.12.2004. When going through the order sheet entry, which is taken by assessee from the assessment records clearly reveals that factually notice u/s. 143(2) was first time issued on 18.10.2004 and not on 10.10./2004. Thus we quash the issuance of notice u/s. 143(2) of the Act and subsequent assessment framed u/s. 143(3) of the Act. Appeal of assessee is allowed.
Issues Involved:
1. Validity of the selection of the case for scrutiny under CBDT Instruction No. 9/2004. 2. Validity of the notice issued under section 143(2) of the Income Tax Act, 1961. 3. Adherence to the prescribed time limit for the selection of cases for scrutiny. Detailed Analysis: 1. Validity of the Selection of the Case for Scrutiny under CBDT Instruction No. 9/2004: The assessee contested the selection of their case for scrutiny, arguing that it was against the norms set out in CBDT Instruction No. 9/2004 dated 20.09.2004. The instruction mandated that the process of selection for scrutiny of returns filed up to 31.03.2004 must be completed by 15.10.2004. The assessee's case was selected for scrutiny on 18.10.2004, which was beyond the prescribed time limit. The CIT(A) and AO noted that the notice was issued on 10.10.2004, but the assessee provided evidence from the order sheet indicating the selection date as 18.10.2004. This discrepancy was central to the assessee's argument that the selection process was invalid. 2. Validity of the Notice Issued under Section 143(2) of the Income Tax Act, 1961: The notice under section 143(2) of the Act was issued on 18.10.2004, which the assessee argued was beyond the time limit set by the CBDT Instruction No. 9/2004. The CIT(A) held that the violation of an instruction is an administrative matter and does not supersede the statutory time limit. However, the assessee maintained that the notice was not issued within the prescribed period, rendering the selection for scrutiny and subsequent assessment invalid. 3. Adherence to the Prescribed Time Limit for the Selection of Cases for Scrutiny: The critical issue was whether the selection of the assessee's case for scrutiny adhered to the time limit prescribed by CBDT Instruction No. 9/2004. The instruction specified that the selection process for returns filed up to 31.03.2004 must be completed by 15.10.2004. The assessee's return was filed on 01.12.2003, and the selection was made on 18.10.2004, beyond the stipulated deadline. The CIT(A) noted that the notice was dated 10.10.2004, but the order sheet entry indicated 18.10.2004. The Tribunal found that the notice was indeed issued on 18.10.2004, supporting the assessee's claim. Tribunal's Decision: The Tribunal referenced the Hon'ble Chhattisgarh High Court's decision in DCIT Vs. Sunita Finlease Ltd., which held that instructions issued under section 119 of the Act are binding and cannot override statutory provisions. The High Court quashed the selection of scrutiny and completion of assessment as invalid when the selection process did not adhere to the prescribed time limit. Applying this precedent, the Tribunal quashed the issuance of the notice under section 143(2) and the subsequent assessment framed under section 143(3), allowing the assessee's appeal. Conclusion: The appeal was allowed on the grounds that the selection of the case for scrutiny and the issuance of the notice under section 143(2) did not comply with the prescribed time limit set by CBDT Instruction No. 9/2004. The Tribunal quashed the notice and the subsequent assessment, deeming them invalid.
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