2014 (10) TMI 627 - AT - Income Tax

Assessment order passed u/s 143(3) quashed Failure to serve notice u/s 143 - AO was of the view that notice u/s. 143(2) of the Act was issued to the assessee on 23/09/2010 fixing the date of hearing for 07/10/2010 and thereafter also, other notices were issued u/s. 143(2) of the Act - Held that - At the time of hearing, nobody was present on behalf of the assessee neither any adjournment was sought following the decision in ITO, Ward-1(2), Udaipur Vs. Shri Bhuvanesh Maheshwari, Prop. M/s. B. Maheshwari & Co., Udaipur 2014 (10) TMI 296 - ITAT JODHPUR also 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. This clause enables the AO after the return is filed, to complete the assessment u/s 143(2) by following the procedure like issue of notice u/s 143(2)/142 - This does not provide accepting the return as provided under section 143(3) only - If an assessment is to be completed u/s 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return - 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 - 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 - 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 Involved:
1. Quashing of the assessment order passed under section 143(3) of the Income Tax Act, 1961.
2. Validity of the service of notice under section 143(2) of the Income Tax Act, 1961.
3. Application of section 292BB of the Income Tax Act, 1961.

Detailed Analysis:

1. Quashing of the assessment order passed under section 143(3) of the Income Tax Act, 1961:
The Department appealed against the order of the CIT(A) quashing the assessment order dated 29/07/2013. The primary grievance was that the CIT(A) erred in quashing the assessment order by holding that the signature on the first notice under section 143(2) dated 23/09/2010 was not of the assessee, despite similar signatures being available on other documents. The CIT(A) quashed the assessment on the basis of invalid notice under section 143(2) of the Act. The Department contended that the assessee's participation in the assessment proceedings implied the presumption of receipt of the statutory notice as per section 292BB of the Act.

2. Validity of the service of notice under section 143(2) of the Income Tax Act, 1961:
The assessee claimed that the notice dated 23/09/2010 was not received, and the signature on the notice was forged. The Assessing Officer (AO) argued that the notice was served on 24/09/2010 by the Notice Server, but the assessee did not respond. The CIT(A) observed variations in the signature on the notice and other documents and noted that the AO mentioned the persons on whom other notices were served were not identifiable. The CIT(A) concluded that the statutory notice under section 143(2) was not served within the prescribed time limit, thereby quashing the assessment.

3. Application of section 292BB of the Income Tax Act, 1961:
The Department argued that as per section 292BB, the assessee's participation in the assessment proceedings should lead to the presumption that the notice was duly served. However, the Tribunal referred to the case of ITO, Ward-1(2), Udaipur Vs. Shri Bhuvanesh Maheshwari, where it was held that the omission to issue notice under section 143(2) within the stipulated time is not a procedural irregularity and cannot be cured. The Tribunal affirmed that the requirement of notice under section 143(2) cannot be dispensed with, and the failure to serve the notice within the prescribed time limit invalidates the assessment.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to quash the assessment order due to the invalid service of notice under section 143(2) of the Act. The Department's appeal was dismissed, and the Tribunal reiterated that the failure to serve the statutory notice within the prescribed time limit cannot be cured and invalidates the assessment proceedings. The judgment emphasized the importance of adhering to procedural requirements for the validity of assessment orders.