2014 (5) TMI 279 - HC - Income Tax

Validity of order u/s 143(3) r.w.s. 147 of the Act - Requirement of notice Held that - From the order passed by the AO, it is difficult to infer that the learned Advocates or representatives of the assessee had appeared seeking a copy of the recorded reason - copy had already been given to the assessee and he had also given reply the views expressed by the Tribunal are erroneous - Even assuming that the order u/s 143(3) r.w.s. 147 of the Act was passed by the AO without notice or proper notice u/s 143(2) of the Act - the omission could have been a reason for setting aside the order of assessment, but that could not have been a reason for nullifying the exercise u/s 147 of the Act thus, the order of the Tribunal is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue.

Issues:
1. Requirement of notice under section 143(2) of the Income Tax Act before assessment under section 143(3).
2. Effect of appearance of assessee before assessment order on the requirement of notice.
3. Interpretation of section 292BB of the Act regarding waiver of notice.
4. Retrospective effect of procedural amendments.
5. Error in the Tribunal's finding regarding appearance seeking reasons.
6. Setting aside the order of assessment due to lack of proper notice under section 143(2).

Analysis:

1. The High Court addressed the issue of whether a notice under section 143(2) of the Income Tax Act is essential before an assessment under section 143(3) can be made. The Court emphasized the necessity of such a notice and clarified that the primary question was not the requirement of the notice itself but the effect of its absence in this case.

2. The Court examined the impact of the assessee's appearance before the assessment order was passed on the need for a notice under section 143(2). It was concluded that when the party is already aware of the proceedings and has appeared, the service of a notice becomes a mere formality, not affecting the principles of natural justice. This principle was recognized under section 292BB of the Act, which the Court interpreted to have retrospective effect on pending proceedings.

3. Regarding the interpretation of section 292BB, the Court disagreed with the Tribunal's view that the provision has prospective operation. The Court held that the amendment to the section would have a retrospective effect and apply to ongoing proceedings, emphasizing the procedural nature of the matter.

4. The Court highlighted an error in the Tribunal's finding related to the appearance seeking reasons, noting discrepancies in the records provided by the Assessing Officer. The Court concluded that the Tribunal's views were erroneous and set aside the orders of the Tribunal, Commissioner of Income Tax, and the Assessing Officer.

5. Lastly, the Court discussed the possibility of setting aside the assessment order due to the lack of proper notice under section 143(2). While acknowledging that the omission could be a reason for setting aside the order, the Court emphasized that it should not nullify the exercise under section 147 of the Income Tax Act. Consequently, the matter was remanded to the Assessing Officer for fresh proceedings after issuing a new notice to the assessee.

In conclusion, the High Court's judgment delved into various aspects related to the requirement of notice under the Income Tax Act, the implications of the assessee's appearance, the interpretation of statutory provisions, and the errors in the Tribunal's findings. The Court's decision to set aside the previous orders and remand the matter for fresh proceedings reflected a thorough analysis of the legal issues involved.

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