2016 (7) TMI 1584 - HC - Income Tax

Reopening of assessment u/s 147 - non issue of notice under section 143(2) - HELD THAT - Question that return filed was within or beyond time prescribed under section 139 or has been filed after notice issued under section 148 or filed earlier after expiry of period under section 139 is not relevant to determine the question whether AO can proceed to make assessment under section 143(3) without issuing notice under section 143(2). The provision being mandatory Assessing Officer cannot proceed to make assessment without issuing notice under section 143(2). - Decided against revenue.

Summary

Issues Involved:
1. Validity of assessment without notice under Section 143(2) of the Income Tax Act, 1961.
2. Interpretation of the Supreme Court judgment in ACIT vs. Hotel Blue Moon.
3. Application of Section 143(2) in the context of returns filed under Section 148.

Issue-Wise Detailed Analysis:

1. Validity of Assessment Without Notice Under Section 143(2):
The core issue was whether the Tribunal was justified in holding that the non-issuance of notice under Section 143(2) would not vitiate the assessment made by the Assessing Authority, given that the assessee filed the return under Section 148 after the prescribed period. The High Court found that the Tribunal's view was erroneous. It emphasized that the issuance of a notice under Section 143(2) is mandatory for the Assessing Officer to complete the assessment under Section 143(3). The absence of such notice constitutes a jurisdictional error, rendering the assessment invalid.

2. Interpretation of the Supreme Court Judgment in ACIT vs. Hotel Blue Moon:
The Tribunal had relied on the Patna Bench Tribunal's decision in Chand Bihari Agrawal vs. ACIT, interpreting the Supreme Court's judgment in ACIT vs. Hotel Blue Moon to mean that the absence of a notice under Section 143(2) would not be fatal if the return was not filed within the statutory period. However, the High Court clarified that the Supreme Court in Hotel Blue Moon held that the omission to issue a notice under Section 143(2) is not a mere procedural irregularity but a jurisdictional error. This requirement is mandatory irrespective of whether the return was filed within the statutory period or not.

3. Application of Section 143(2) in the Context of Returns Filed Under Section 148:
The High Court reiterated that even if a return is filed in response to a notice under Section 148, the Assessing Officer must issue a notice under Section 143(2) before proceeding with the assessment. This principle was supported by the judgment in CIT vs. Rajeev Sharma, which held that the provisions of Section 143(2) are mandatory and must be followed strictly. The High Court emphasized that the Assessing Officer has no jurisdiction to proceed with the assessment without issuing the necessary notice under Section 143(2).

Conclusion:
The High Court allowed the appeal, quashing the Tribunal's order and the assessment order for the Assessment Year 2003-2004. It held that the Assessing Authority must issue a notice under Section 143(2) before proceeding with the assessment under Section 143(3) or Section 148. This judgment does not preclude the Assessing Authority from proceeding with the assessment in accordance with the law after issuing the requisite notice under Section 143(2).