2014 (10) TMI 296 - AT - Income Tax

Validity of Assessment order u/s 143(3) Notice served beyond the time prescribed Held that - The AO claimed to have served the notice u/s 143(2) of the Act to one Shri Bherulal on 24/09/2010 fixing the date of hearing for 07/10/2010 - The notice u/s 143(2) of the Act was to be served on the assessee before 30/09/2010 whereas notice dated 07/10/2010 was received by the assessee first time on 11/10/2010 i.e. after the statutory time limit prescribed u/s 143(2) of the Act for service of notice as decided in ACIT & another Vs. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA it has been held that after the return is filed, clause (b) of section 158BC provides that the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section145 shall, so far as may be, apply. The omission on the part of assessing authority to issue notice u/s 143(2) of the Act cannot be procedural irregularity and is not curable - Therefore, requirement of notice u/s 143(2) of the Act cannot be dispensed with - since the AO failed to serve the notice u/s 143(2) of the Act to the assessee within the stipulated time limit prescribed, therefore, CIT(A) rightly quashed the assessment framed by the AO on the basis of invalid notice u/s 143(2) of the Act Decided against revenue.

Summary

Issues:
- Validity of assessment order passed under section 144 of the Income Tax Act
- Jurisdiction of the Assessing Officer in issuing notice under section 143(2) of the Act
- Quashing of assessment order by the CIT(A) due to invalid notice under section 143(2) of the Act
- Contention regarding presumption of receipt of statutory notice under section 292BB of the Act

Analysis:

Validity of assessment order passed under section 144 of the Income Tax Act:
The case involved an appeal by the department against an order dated 05/03/2013 of the ld. CIT (A), Udaipur. The assessee filed a return of income belatedly, which was processed under section 143(1) of the Income Tax Act. As it was a survey case, it was selected for scrutiny. The Assessing Officer, despite the assessee's claim of not receiving notice under section 143(2) of the Act, framed the assessment under section 144, making various additions to the income. The issue raised was whether the assessment order passed under section 144 was valid.

Jurisdiction of the Assessing Officer in issuing notice under section 143(2) of the Act:
The assessee contended that the assessment order was without jurisdiction as the notice under section 143(2) of the Act was not issued and served within the prescribed time. The Assessing Officer claimed to have served the notice, but the recipient denied receiving it. The Assessing Officer proceeded with the assessment under section 144, leading to the appeal before the CIT(A). The question here was whether the Assessing Officer had the jurisdiction to proceed with the assessment in the absence of valid service of notice under section 143(2).

Quashing of assessment order by the CIT(A) due to invalid notice under section 143(2) of the Act:
The CIT(A) quashed the assessment order passed by the Assessing Officer, citing that the notice under section 143(2) was served after the prescribed time limit, rendering it invalid. The CIT(A) observed that the Assessing Officer failed to controvert the affidavit submitted by the assessee, which stated that the notice was not received within the stipulated period. The CIT(A) held that the assessment completed on the basis of an invalid notice under section 143(2) was liable to be quashed.

Contention regarding presumption of receipt of statutory notice under section 292BB of the Act:
The department contended that the assessee's participation in the assessment proceedings implied receipt of the statutory notice under section 143(2) of the Act. However, the Assessing Officer's claim of serving the notice was contradicted by the recipient. The department argued for the presumption of receipt under section 292BB. The Tribunal, after considering the submissions, upheld the CIT(A)'s decision to quash the assessment order, emphasizing the importance of valid notice under section 143(2) within the prescribed time limit.

In conclusion, the Tribunal dismissed the department's appeal, affirming the CIT(A)'s decision to quash the assessment order due to the invalid notice under section 143(2) of the Income Tax Act. The judgment highlighted the significance of adhering to procedural requirements, specifically the timely service of statutory notices, in conducting assessments under the Act.