2010 (4) TMI 1165 - AT - Income Tax

Validity of notice issued u/s 143(2) beyond the prescribed period - unaccounted income for the block period 1988-89 to 1998-99 - Block assessment u/s 158BC - AO passed an order of assessment - CIT, set aside the assessment order and remanded the matter back to AO - Subsequent to the remand, AO held the same to be suppressed income and completed and assessment for the block period. HELD THAT - It is not in dispute that in the instant case, notice was issued u/s.143(2) pursuant to a search conducted on 6.7.1998 in the premises of the respondent-assessee and it was with regard to the block period of 1988-89 to 1998-99 and the said notice though originally issued u/s 158 BC and the assessment order was completed and the same became a subject of remand. We find that subsequently the notice issued on 9.8.2002 is beyond the prescribed period of limitation. Keeping in mind the proviso to section 143(2) as it then stood, where the limitation period was one year, since the date of filing of the return in the instant case is 4.5.1999 keeping in mind the ration of the decision of the Apex Court in the case of HOTEL BLUE MOON 2010 (2) TMI 1 - SUPREME COURT , wherein it has been stated that if the AO for any reason repudiates the return filed by the assessee in response to a notice u/s 158BC (a) then he must necessarily issue a notice u/s 143(2) within the time prescribed in the proviso to Sec. 143(2). If there is a omission of the part of the Assessing Authority to issue notice u/s 143(2), then it is not a more procedural irregularity and the same is not curable. Therefore, the notice issued u/s 143(2) was beyond the period of limitation as stated in proviso (2) to the said section and hence the proceedings initiated pursuant to the notice are vitiated. We have to dismiss the appeal.

Summary

Issues:
1. Validity of relying on withdrawn statement under Section 132(4) of the Act.
2. Reliance on evidence for taxing unaccounted income without examining managing director.
3. Consideration of evidence from pocket diary and loose sheets.
4. Correctness of taxing unaccounted income from function hall and catering services.

Analysis:

Issue 1:
The appeal challenges the Tribunal's decision on the validity of relying on a withdrawn statement under Section 132(4) of the Act. The Tribunal held that the statement recorded during the search, where the Manager and Director confessed unaccounted income, could not be relied upon as it was withdrawn subsequently under an affidavit. The Tribunal's decision raises questions regarding the admissibility and reliability of withdrawn statements under the Act.

Issue 2:
Another issue raised is whether the Tribunal was correct in not examining the managing director and relying solely on other evidence to tax the unaccounted income detected during the search. The Tribunal's decision highlights the importance of examining key individuals and the sufficiency of evidence required for tax assessment purposes.

Issue 3:
The Tribunal was also questioned on failing to consider evidence from a pocket diary and loose sheets found during the search, which disclosed receipts related to the function hall and catering services. The appeal argues that this evidence corroborated the statements made by the Manager and Director, raising concerns about the Tribunal's assessment of the evidence presented.

Issue 4:
Lastly, the correctness of taxing the unaccounted income from the function hall and catering services is challenged. The Assessing Officer had taxed specific amounts based on evidence found during the search, which was confirmed by the Appellate Commissioner. The appeal questions the accuracy of these tax assessments and the adequacy of evidence supporting the tax liabilities.

In the final judgment, the Tribunal dismissed the appeal after considering the issue of limitation raised by the respondent's counsel. The notice issued under sec.143(2) was found to be beyond the prescribed period of limitation, as per the proviso to the section. Citing a Supreme Court decision, the Tribunal concluded that the proceedings initiated based on the notice were vitiated due to the procedural irregularity of exceeding the limitation period. Therefore, the appeal was dismissed without addressing the substantial questions of law raised, emphasizing the significance of adhering to statutory limitations in tax proceedings.