2014 (2) TMI 1297 - HC - Income Tax

Vladity of reopening of assessment - notice issued u/s 148 having not mentioned the requirement of filing Return and the date within which the Return should be filed - scope of Section 292B - Held that - The assessee not only responded to the notice under Section 148 within one month, but on the basis of the return filed earlier, participated in the proceedings till the matter reached the FAA and was disposed of. A glance at Section 292B shows that under this provision, certain Acts are not to be treated as invalid, may be by reason of any mistake, defect or omissions, either in return of income, assessment, notice, summons or other proceedings. A notice cannot be invalidated by reason of any mistake, such as the one occurred in the present case, namely, the period of filing return of income was not specified as contemplated by Section 148 of the Act. If such a defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid, despite the fact that assessee had taken that notice as valid and responded to it in letter and spirit and participated in the proceedings, the very purpose/objective of the provisions contained in Section 292B of the Act would stand frustrated/defeated - Decided in favour of revenue

Summary

Issues:
1. Validity of notice under Section 148 of the Income Tax Act for assessment year 1997-98.
2. Interpretation of Section 292B of the Income Tax Act regarding the validity of notices.

Issue 1: Validity of notice under Section 148:
The High Court considered the appeal by the Revenue challenging the validity of a notice issued under Section 148 of the Income Tax Act for the assessment year 1997-98. The notice did not specify the period for filing the return of income. The assessee, in response to the notice, submitted a letter requesting that the return filed for a different assessment year be considered as filed in response to the notice under Section 148. The assessee participated in the proceedings without challenging the notice's validity. The First Appellate Authority dismissed the appeal on merits, and the assessee raised the issue of the notice's validity for the first time before the Tribunal. The Tribunal held the notice invalid for not specifying the time for filing the return, a ground not raised earlier. The High Court analyzed the provisions of Section 148 and the assessee's conduct in responding to the notice before concluding that the notice's defect did not invalidate it, especially when the assessee participated in the proceedings based on the notice. The Court allowed the appeal in favor of the Revenue, emphasizing that the notice's intent and purpose were fulfilled despite the defect.

Issue 2: Interpretation of Section 292B:
The High Court examined the application of Section 292B of the Income Tax Act, which states that no return of income or notice shall be deemed invalid merely due to any defect if it conforms to the Act's intent and purpose. The Court referred to a previous judgment where the validity of a notice under Section 158BC was challenged due to a time extension granted beyond the specified limits. The Court held that such extensions rendered the notice void ab initio. In the present case, the Court found that the defect in the notice under Section 148, namely the absence of a specified period for filing the return, did not render the notice invalid. The Court emphasized that the assessee's participation in the proceedings based on the notice indicated acceptance of its validity. The Court interpreted Section 292B to prevent the invalidation of notices due to minor defects if they align with the Act's purpose. Ultimately, the Court ruled in favor of the Revenue, highlighting that the defect in the notice did not hinder the notice's substantive conformity with the Act's intent, especially considering the assessee's response and participation in the proceedings.

In conclusion, the High Court upheld the validity of the notice under Section 148 of the Income Tax Act for the assessment year 1997-98, emphasizing that the defect in the notice did not invalidate it, particularly when the assessee acknowledged and acted upon the notice. The Court's interpretation of Section 292B underscored the importance of substantive compliance with the Act's intent and purpose, allowing for minor defects in notices without rendering them invalid if the overall objective is met.