2015 (2) TMI 1301 - HC - Income Tax

Assessment u/s 143(3) without issuing notice under section 143(2) - reopening of assessment - HELD THAT - As followed by this Court in Commissioner of Income Tax Vs. Bihari Lal Agrawal, 2012 (5) TMI 198 - ALLAHABAD HIGH COURT wherein the Court has also held that the assessee had participated in the assessment, would be of no legal consequences when the proceedings are vitiated on account of non issuance of notice under section 143(2) of the Act, 1961. Question no. 1, therefore, is answered in favour of the assessee. No manner of doubt that if an earlier order of assessment under section 143(3) is found illegal for want of notice under section 143(2) and period within which notice under section 143(2) may be issued is still available, the assessing authority can proceed further by issuing a fresh notice and thereafter can pass fresh order, but, if in the meantime, period within which notice under section 143(2) could be issued, has already lapsed, no such fresh exercise is permissible. Therefore, we answer question no. 2 accordingly. We dispose of this appeal by directing the Assessing Officer that it shall first examine whether the period within which notice under section 143(2) could have been issued, was available to the Assessing Officer on the date when Tribunal passed impugned order. It can proceed further only if such period was available and not otherwise. The order of Tribunal shall stand modified accordingly.

Summary

Issues:
1. Validity of assessment made under section 143(3) without notice under section 143(2)
2. Procedural irregularity of non-issuance of notice under section 143(2) and its curability

Issue 1: Validity of assessment made under section 143(3) without notice under section 143(2):
The case involved an assessment under the Income Tax Act, 1961 for the year 1990-91. After a search operation, the income was estimated at a significantly higher amount than initially declared by the assessee. The subsequent assessment under section 143(3) was challenged on the grounds of not issuing a notice under section 143(2). The High Court analyzed the legal implications of such non-issuance of notice. The Tribunal held that an assessment without a notice under section 143(2) is not a nullity but can be set aside for procedural irregularity. The Court affirmed this position, stating that the absence of a notice under section 143(2) renders the assessment illegal, but it can be rectified by setting it aside for a fresh assessment. The Court referred to relevant case law and upheld the Tribunal's decision on this issue.

Issue 2: Procedural irregularity of non-issuance of notice under section 143(2) and its curability:
The Court further delved into the aspect of the non-issuance of a notice under section 143(2) and its implications. It was established that the notice under section 143(2) is a jurisdictional issue crucial for the validity of the assessment under section 143(3). Citing previous judgments, the Court emphasized that the failure to issue such a notice is a procedural irregularity that cannot be cured. The Court referenced specific cases to support this stance. It was clarified that the absence of the notice within the stipulated period results in the assessment proceedings being deemed final. The Court highlighted the mandatory nature of serving the notice within the prescribed time under section 143(2). The judgment reiterated that the requirement of notice under section 143(2) cannot be dispensed with and outlined the legal consequences of non-compliance with this procedural requirement.

In conclusion, the High Court addressed the issues concerning the validity of assessments made under section 143(3) without the requisite notice under section 143(2) and the curability of such procedural irregularities. The judgment provided a detailed analysis of the legal principles and precedents governing these issues, ultimately directing the Assessing Officer to assess the availability of the period for issuing the notice under section 143(2 before proceeding further.