2020 (1) TMI 1377 - AT - Income Tax

Reopening of assessment u/s 147 - belated issuance of notice under section 143(2) - HELD THAT - On bare reading of provisions of section 143(2), it is clear that, time period for issuance of notice is, 6 months from end of the financial year in which the return was filed. In the present facts of the case the time period reckons from 01/04/2014, since assessee intimated revenue vide letter dated 21/03/2014 filed with revenue on 25/3/2014 to consider the original return filed, in lieu of notice issued under section 148. No doubt that, notice under section 143(2) dated 11/03/2015 is issued to assessee beyond period of limitation. Notice under section 143(2) gives jurisdiction to assessing officer to proceed with the reassessment proceedings under the Act. In the present facts, notice issued beyond period of limitation is invalid and therefore the jurisdiction assumed by Ld.AO in view of such notice is bad in law. Revenue argued on applicability of provisions of section 292 BB of the act - It is clear from the provisions that section 292 BB of the act could only in select Ld.AO from the proof of service of notice. It does not in anyway insulate Ld.AO in a situation where the issuance itself is bad in law and beyond the period of limitation. Our view is supported by the decision rendered in the case of CIT Vs. Laxman Das Khandelwal 2019 (8) TMI 660 - SUPREME COURT . We therefore do not find any merit in the argument of the Ld.Sr.DR. Reassessment proceedings are invalid for the reason that notice under section 143(2) was not issued to assessee in the time period prescribed by the provisions. - Decided in favour of assessee.

Issues Involved:
1. Validity of the reassessment proceedings under Section 148 of the Income Tax Act.
2. Applicability of Section 2(22)(e) of the Income Tax Act regarding deemed dividends.
3. Timeliness and validity of the notice issued under Section 143(2) of the Income Tax Act.
4. Application of Section 292BB of the Income Tax Act.

Detailed Analysis:

1. Validity of the Reassessment Proceedings under Section 148:
The assessee challenged the reassessment proceedings initiated under Section 148 of the Income Tax Act, arguing that the notice issued under Section 143(2) was beyond the period of limitation. The Tribunal noted that the notice under Section 148 was issued on 06/03/2014 and received by the assessee on 12/03/2014. The assessee filed a return in response to this notice on 25/03/2014. According to the provisions, the notice under Section 143(2) should have been issued within six months from the end of the financial year in which the return was filed, i.e., by 30/09/2014. However, the notice was issued on 11/03/2015, making it beyond the prescribed period. The Tribunal concluded that the reassessment proceedings were invalid due to the belated issuance of the notice under Section 143(2).

2. Applicability of Section 2(22)(e) Regarding Deemed Dividends:
The assessing officer had invoked Section 2(22)(e) of the Income Tax Act, treating the loan advanced by Nitesh Estates Pvt. Ltd. to Nitesh Infrastructure Pvt. Ltd. as deemed dividends in the hands of the assessee, who held substantial interest in both companies. The CIT(A) upheld this view, stating that the assessee, being a major shareholder in both companies, attracted the provisions of Section 2(22)(e). However, the assessee argued that the loan was advanced to a non-shareholder entity and thus could not be taxed as deemed dividends. The Tribunal did not adjudicate this issue on merits since the reassessment proceedings were already quashed on procedural grounds.

3. Timeliness and Validity of the Notice Issued under Section 143(2):
The Tribunal emphasized that the notice under Section 143(2) issued on 11/03/2015 was beyond the statutory period of six months from the end of the financial year in which the return was filed (25/03/2014). The Tribunal cited the Supreme Court's decision in CIT Vs. Laxman Das Khandelwal, which held that the issuance of notice beyond the prescribed period is invalid and affects the jurisdiction of the assessing officer. Consequently, the reassessment order dated 19/03/2015 was quashed and set aside.

4. Application of Section 292BB:
The revenue argued that the error in issuing the notice could be rectified under Section 292BB of the Income Tax Act. However, the Tribunal clarified that Section 292BB only insulates the assessing officer from the proof of service of notice and does not validate the issuance of a notice beyond the period of limitation. The Tribunal found no merit in the revenue's argument and upheld that the reassessment proceedings were invalid due to the belated issuance of the notice under Section 143(2).

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the reassessment proceedings on the grounds of invalid issuance of notice under Section 143(2) beyond the prescribed period. Consequently, the issues on merits, including the applicability of Section 2(22)(e) regarding deemed dividends, were not adjudicated. The order pronounced on 11th Jan 2021 declared the reassessment order as void and set aside.

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