2013 (11) TMI 73 - HC - Income Tax

Assessment u/s 147, when the assessment u/s 142(1)(a); 143(3); or 144 has not been done assessee has voluntarily filed his return under Section 139 of the Act. On 23.06.2000, a notice under Section 139(9) was issued for the removal of the defects. These defects were not removed. So, again, a notice was sent on 25.10.2002. Ultimately, the defects were removed. But, there is no reference to this effect in the assessment order passed by the AO for the assessment year under consideration. Held that - Without passing the assessment order, there is no occasion to pass the re-assessment order under Section 147 of the Act, as per the ratio laid down in the case of U.P. Rajya Viddyut Utpadan Nigam vs. Dupty CIT, 1993 (1) TMI 38 - ALLAHABAD High Court Decided against the Revenue.

Summary

Issues:
1. Validity of notice u/s 148 for escapement of income
2. Time limit for issuing notice u/s 148
3. Validity of notice u/s 143(2)

Issue 1: Validity of notice u/s 148 for escapement of income
The Department appealed under Section 260A of the Income-Tax Act, 1961 against the ITAT's order for the assessment year 1998-99. The substantial questions of law raised were related to the validity of the notice u/s 148 in the case of clear escapement of income and the acceptance of the return filed u/s 139(4). The Court noted that the assessee voluntarily filed the return under Section 139, and despite notices for removing defects, no reference to this was made in the assessment order. The AO issued a notice u/s 148, and the assessee treated the original return as a response. However, no assessment order was passed under relevant sections. Relying on precedent, the Court upheld the appellate authorities' decision, concluding that without a proper assessment order, there was no basis for re-assessment under Section 147.

Issue 2: Time limit for issuing notice u/s 148
The second substantial question of law was whether the notice u/s 148 could be issued within 12 months from the end of the month in which the return of income was filed. The Court found that in this case, the notice was issued after the defects in the return were rectified, but the assessment order did not reflect this. As no valid assessment order was passed, the Court held that the notice u/s 148 was not valid within the prescribed time limit. The decision favored the assessee based on the circumstances and the lack of a proper assessment order.

Issue 3: Validity of notice u/s 143(2)
The third issue questioned the validity of the notice u/s 143(2) and whether it was barred by time. The Court's analysis focused on the absence of a proper assessment order, which rendered the notice u/s 143(2) irrelevant. Since no valid assessment order was passed under the relevant sections, the notice u/s 143(2) was deemed unnecessary and time-barred. The Court upheld the decisions of the appellate authorities, ruling in favor of the assessee and against the department.

In conclusion, the High Court dismissed the Department's appeal, sustaining the orders of the appellate authorities due to the lack of valid assessment orders and the procedural irregularities in issuing notices u/s 148 and u/s 143(2). The judgment favored the assessee on all substantial questions of law raised in the appeal.