2016 (7) TMI 1327 - HC - Income Tax

Reopening of assessment - Held that - Question that return filed was within or beyond time prescribed under section 139 or has been filed after notice issued under section 148 or filed earlier after expiry of period under section 139 is not relevant to determine the question whether Assessing Officer can proceed to make assessment under section 143(3) without issuing notice under section 143(2). The provision being mandatory Assessing Officer cannot proceed to make assessment without issuing notice under section 143(2) of Act 1961. - Decided in favour of appellant and against Revenue.

Summary

Issues Involved:
1. Validity of assessment without notice under section 143(2) of the Income Tax Act, 1961.
2. Impact of filing return after the statutory period under section 139 of the Income Tax Act, 1961.
3. Jurisdictional error due to non-issuance of notice under section 143(2).

Issue-wise Detailed Analysis:

1. Validity of Assessment Without Notice Under Section 143(2):
The core issue in this case is whether the Tribunal was justified in holding that the non-issuance of notice under section 143(2) does not vitiate the assessment made by the Assessing Authority since the Assessee filed the return under section 148 after the prescribed period. The court noted that it is undisputed that no notice under section 143(2) was issued before making the assessment. Citing the Supreme Court's decision in ACIT vs. Hotel Blue Moon, the court emphasized that the omission to issue notice under section 143(2) is not a mere procedural irregularity but a jurisdictional error, rendering the assessment invalid.

2. Impact of Filing Return After the Statutory Period Under Section 139:
The Tribunal had relied on the Patna Bench decision in Chand Bihari Agrawal vs. ACIT, which held that if the return is filed after the statutory period, the absence of notice under section 143(2) would be inconsequential. However, the court found this interpretation incorrect. The court clarified that even if the return is filed late, the Assessing Officer must issue a notice under section 143(2) to proceed with the assessment. The court reiterated that the requirement of notice under section 143(2) is mandatory, irrespective of the timing of the return filing.

3. Jurisdictional Error Due to Non-Issuance of Notice Under Section 143(2):
The court underscored that the issuance of a notice under section 143(2) is essential for the Assessing Officer to complete the assessment under section 143(3). This principle applies equally to block assessments under section 158BC. The court referenced several authoritative pronouncements, including CIT vs. Rajeev Sharma, which held that the provision under section 143(2) is mandatory and failure to issue such notice results in a jurisdictional error. The court concluded that the absence of notice under section 143(2) invalidates the entire assessment procedure.

Conclusion:
The court concluded that the Tribunal's view was erroneous and held that the non-issuance of notice under section 143(2) vitiates the assessment. The appeal was allowed, and the impugned order of the Tribunal, as well as the assessment order for the Assessment Year 2004-2005, were quashed. However, the judgment does not preclude the Assessing Authority from proceeding with the assessment in accordance with the law after issuing the requisite notice under section 143(2).