2017 (1) TMI 1501 - HC - Income Tax

Notice issued u/s 158BC - file the return within 15 days does not violate the provisions of Section 158BC which requires to issue a notice providing time of not being less than 15 days which implies clear 15 days - Held that - Fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words not less than fifteen days have to be interpreted correctly. In that view of the matter, since the Assessing Officer asked the assessee to file the return within fifteen days of the service of the notice, the notice issued by the Assessing Officer is invalid. We are, therefore, of the opinion that the Tribunal has rightly cancelled the order of the AO. See Surya Dev Kumawat vs. CIT 2016 (11) TMI 1385 - RAJASTHAN HIGH COURT . The questions referred to us are, therefore, answered in favour of the assessee and against the revenue.

Summary

Issues Involved:
1. Validity of the notice issued under Section 158BC of the Income Tax Act, 1961.
2. Compliance to an illegal notice and the concept of estoppel against statutory provisions.

Detailed Analysis:

Issue 1: Validity of the Notice Issued Under Section 158BC
The appellant challenged the judgment and order of the Tribunal, which partly allowed the department's appeal. The primary question was whether the notice issued under Section 158BC by the assessing officer, which required the return to be filed "within 15 days," violated the provision of Section 158BC that mandates a time period of "not being less than 15 days." This implies clear 15 days, and thus, the assessment framed on the basis of such an illegal and invalid notice is bad in law.

The appellant's counsel argued that the issue is covered by the decision in Surya Dev Kumawat vs. CIT, which followed the Gujarat High Court's decision in Commissioner of Income Tax vs. Amit K. Jain. The Gujarat High Court held that the notice requiring the return to be filed "within 15 days" is invalid as it does not comply with the statutory requirement of "not less than 15 days." The court emphasized that the words "not less than fifteen days" must be interpreted strictly, and the notice issued by the authority must be in accordance with the provisions of the Income Tax Act.

Issue 2: Compliance to an Illegal Notice and Estoppel Against Statutory Provisions
The second question addressed whether compliance with an illegal notice can validate the proceedings and if there can be an estoppel against statutory provisions. The appellant's counsel cited several judgments, including those from the Supreme Court and various High Courts, to argue that procedural defects in the notice do not necessarily invalidate the assessment if substantial compliance is achieved and no prejudice is caused to the assessee.

The court referred to multiple precedents where procedural lapses were considered directory rather than mandatory, provided no substantial injustice was caused. However, in this case, the specific requirement of "not less than fifteen days" was deemed mandatory. The court concluded that the notice issued by the assessing officer was invalid because it did not comply with the statutory requirement, and thus, the assessment based on such notice was also invalid.

Conclusion
The court concluded that the issues were squarely covered by the Gujarat High Court's decision in Commissioner of Income Tax vs. Amit K. Jain. The Tribunal's order was quashed and set aside, and the questions were answered in favor of the assessee and against the revenue. The appeal was allowed, and the impugned order of the Tribunal was set aside.

Summary:
The Rajasthan High Court dealt with the validity of a notice under Section 158BC of the Income Tax Act, 1961, which required the return to be filed "within 15 days," contrary to the statutory requirement of "not less than 15 days." The court held that such a notice is invalid, and the assessment based on it is bad in law. The court also addressed whether compliance with an illegal notice could validate the proceedings, concluding that procedural defects do not invalidate an assessment if no substantial injustice occurs. However, the specific requirement of "not less than fifteen days" was mandatory, and non-compliance rendered the notice and subsequent assessment invalid. The appeal was allowed, and the Tribunal's order was set aside.