2013 (11) TMI 839 - HC - Income Tax

Whether issuance of notice u/s 143(2) of the act is mandatory and not procedural Deeming provision under section 292BB of the Act - No valid reassessment order could be passed before issuing the said notice within the time prescribed under law Reassessment done u/s 147 of the Income tax act - Without issuing notice under section 143(2) of the Act the Assessing Officer straight away proceeded to issue notice dated 7th January, 2003 under section 142(1) of Act calling upon the assesseee to explain the issue regarding taxability of lease rent and deduction from it the expenses regarding business income - Assessment had been framed under section 147 read with section 143(3) of the Act without issuing notice under section 143(2) of the Act which is the mandatory requirement Held that - Time limit for issuing notice under section 143(2) has also been fixed which was earlier twelve months from the end of the month in which the return was furnished now it has been reduced to six months by Finance Act, 2008 with effect from 1st April, 2008. The notice contemplated under section 142(1) of the Act is only in respect of furnishing information on points or matters as the Assessing Officer may require. The two notices contemplated under section 142(1) and under section 143(2) of the Act are for entirely difference purposes. Reliance has been placed on the judgment in the case of Commissioner of Income Tax Allahabad and another vs. Sh. Mukesh Kumar Agarwal 2012 (7) TMI 543 - Allahabad High Court , wherein it was held that a deeming provisions to validate the notice in certain circumstances, would not have any effect where the very foundation of the jurisdiction of the Assessing officer is on the issuance of the notice under Section 143(2) of the Act - Following the aforesaid decision, the order of the Tribunal upholding the order of the Commissioner of Income Tax (Appeals) annulling the assessment under sections 147/148 read with Section 143(3) of the Act for want of issuance of notice under Section 143(2) of the Act does not suffer from any legal infirmity Decided against the Revenue.

Summary

Issues:
1. Validity of reassessment order passed within two years of notice.
2. Requirement of notice u/s 143(2) before passing reassessment order.
3. Impact of absence of notice u/s 143(2) on reassessment validity.

Analysis:
1. The case involved the challenge to a reassessment order passed under Section 147 of the Income Tax Act, 1961 within two years of the notice. The primary question was whether such a reassessment order could be annulled due to the timing of the notice and the subsequent assessment. The court considered the facts and circumstances surrounding the notice issuance and the reassessment order to determine the validity of the reassessment process.

2. A crucial issue raised was the necessity of issuing a notice under section 143(2) of the Act before passing a reassessment order. The court examined whether the absence of such a notice rendered the reassessment invalid. It was argued that the notice under section 143(2) was mandatory and not merely procedural, impacting the legality of the reassessment order. The court delved into the legal requirements and implications of the notice under section 143(2) in the reassessment process.

3. The case also addressed the consequences of not providing a notice under section 143(2) prior to the reassessment. The court analyzed whether the assessments should have been set aside or annulled due to the absence of the mandatory notice. Reference was made to relevant legal precedents, including the decision of the Gujarat High Court, to determine the appropriate course of action in cases where the procedural requirements, such as issuing notice under section 143(2), were not met before making reassessments. The court examined the legal position and the impact of such procedural lapses on the validity of the reassessment order.

In conclusion, the High Court upheld the decision annulling the assessment under sections 147/148 read with Section 143(3) of the Act due to the absence of the mandatory notice under Section 143(2). The court relied on legal precedents and statutory provisions to support its decision, emphasizing the significance of complying with procedural requirements in the reassessment process. The judgment highlighted the importance of adhering to statutory procedures and the legal implications of failing to fulfill mandatory notice requirements in reassessment proceedings.