2013 (12) TMI 710 - AT - Income Tax

Whether notice u/s 142(1) issued after end of one year from the relevant assessment year is barred by limitation or not - Held that - Following DIT vs. KLM Royal Dutch Airlines 2007 (7) TMI 577 - DELHI HIGH COURT - The notice issued u/s 142(1) of the Act is valid and consequently the assessment order passed cannot be held to be invalid in law - As per the proviso inserted to section 142(1) of the Act by Finance Act 2006 with retrospective effect from 1-4-1990 has clearly done away with any limitation with regard to the issuance of notice u/s 142(1) of the Act - The issue was restored for fresh adjudication.

Summary

Issues:
1. Validity of assessment due to notice u/s 142(1) issued beyond the prescribed time.
2. Interpretation of proviso to section 142(1) inserted by Finance Act 2006.
3. Whether notice u/s 142(1) issued beyond one year from the end of the relevant assessment year is valid.
4. Impact of the proviso on the limitation for issuing notice u/s 142(1).
5. Applicability of section 147 in relation to notice u/s 142(1).
6. Comparison of provisions of section 142(1) and section 147.

Analysis:
1. The appeal by the Revenue challenged the order of the CIT(A) for A.Y. 2005-06, questioning the validity of the assessment due to the notice u/s 142(1) being issued beyond the prescribed time. The AO treated the investment in shares as unexplained income under section 69 of the Act.
2. The CIT(A) quashed the assessment order citing the notice u/s 142(1) issued on 31.8.2007 as beyond the prescribed time limit, making the assessment legally untenable. The Revenue contended that the proviso to section 142(1) nullified any time limitation for issuing such notices.
3. The Tribunal analyzed the proviso introduced by the Finance Act 2006, allowing the AO to issue notices u/s 142(1) after the relevant assessment year without any time restriction. The Tribunal disagreed with the CIT(A)'s interpretation and referred to a similar decision by the Delhi High Court.
4. The Tribunal emphasized that the proviso to section 142(1) empowers the AO to issue notices beyond one year from the end of the assessment year, rejecting the argument that such notices are restricted by section 153(1) of the Act.
5. The Tribunal clarified that sections 142(1) and 147 serve distinct purposes, with section 147 applicable to escaped income assessments, and the proviso to section 142(1) not affecting the validity of notices issued under it.
6. Citing previous decisions, including one by the Delhi High Court, the Tribunal held that the notice u/s 142(1) in this case was valid, overturning the CIT(A)'s decision and remitting the matter back for a merit-based assessment by the CIT(A). The appeal by the Revenue was treated as allowed for statistical purposes.