2015 (10) TMI 2168 - AT - Income Tax

Revision u/s 263 - assessee submitted that CIT(A) has failed to appreciate the fact that no notice u/s 143(2) was served before the assessment proceeding was initiated within the statutory period which is a statutory requirement and as such the entire assessment was without authority of law and as such no order as passed should have been passed rather it should have cancelled instead of setting it aside - Held that - Admittedly the notice u/s 143(2) was issued beyond time and, therefore, the assessment order was bad in law. Ld. CIT(DR) s submission is that assessee has not challenged the assessment order. However, since the assessee was not aggrieved with the assessment order, therefore, he did not challenge. However, nothing turns on this when we consider the issue in the backdrop of proceedings initiated u/s 263 by ld. Commissioner. The moot point for consideration is as to whether this objection can be entertained at this stage of proceeding or not. In this regard we find that the decision of Hon ble Delhi High Court in the case of Escorts Farms Pvt. Ltd. (1989 (7) TMI 64 - DELHI High Court), which we have extensively reproduced earlier, clearly supports the assessee s plea. However, u/s 263 the ld. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice u/s 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. - Decided in favour of assessee. - Decided in favour of assessee.

Issues Involved:
1. Validity of the original assessment order due to the delayed issuance of notice under Section 143(2).
2. Treatment of income from sale of land and constructed shops as business income or long-term capital gain.
3. Verification of short-term capital loss.
4. Inclusion of NSC interest in total income.
5. Verification of expenses incurred in the construction of shops.
6. Treatment of marriage expenses as unexplained under Section 69C.

Detailed Analysis:

1. Validity of the Original Assessment Order:
The primary issue in this appeal was the validity of the original assessment order due to the delayed issuance of notice under Section 143(2). The appellant argued that since the notice was issued beyond the statutory period, the assessment order was bad in law and could not be revised under Section 263. The Tribunal noted that the notice under Section 143(2) was indeed issued beyond the permissible time limit, rendering the assessment order invalid. Citing the Delhi High Court's decision in Escorts Farms Pvt. Ltd., the Tribunal held that an invalid assessment order could not be revised under Section 263, as it was non est in the eyes of law. Consequently, the Tribunal quashed the revisional order passed under Section 263.

2. Treatment of Income from Sale of Land and Constructed Shops:
The Commissioner had observed that the income from the sale of land and constructed shops should have been treated as business income rather than long-term capital gain. The appellant contended that the land was held as a capital asset, and the sale proceeds were correctly declared as long-term capital gain. The Tribunal, however, did not delve into the merits of this issue, as it had already quashed the revisional order on the ground of the invalidity of the original assessment order.

3. Verification of Short-Term Capital Loss:
The Commissioner noted that the Assessing Officer (AO) accepted the short-term capital loss without obtaining documentary evidence. The appellant argued that the loss was duly proved and verified from the books of accounts. Again, the Tribunal did not address this issue on merits due to the quashing of the revisional order.

4. Inclusion of NSC Interest in Total Income:
The Commissioner observed that the AO failed to include the NSC interest in the total income, which was credited directly to the capital account. The appellant contended that the interest was already shown as income on an accrual basis. This issue was also not examined on merits by the Tribunal, given the quashing of the revisional order.

5. Verification of Expenses Incurred in Construction of Shops:
The Commissioner directed the AO to verify the details of expenses incurred in the construction of shops. The appellant argued that these expenses were already verified from the books of accounts. The Tribunal did not address this issue on merits due to the quashing of the revisional order.

6. Treatment of Marriage Expenses as Unexplained under Section 69C:
The Commissioner treated certain marriage expenses as unexplained under Section 69C and directed the AO to assess the same as income. The appellant contended that the source of these expenses was duly explained. The Tribunal did not examine this issue on merits due to the quashing of the revisional order.

Conclusion:
The Tribunal allowed the appeal, quashing the revisional order passed under Section 263 on the ground that the original assessment order was invalid due to the delayed issuance of notice under Section 143(2). Consequently, the Tribunal did not address the merits of the individual issues raised by the Commissioner in the revisional order. The appellant's appeal was allowed, and the revisional order was quashed.

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