2017 (6) TMI 1344 - AT - Income Tax

Validity of notice u/s.143(2) belatedly - notice issue beyond prescribed time - validity of revised return filed - notice beyond the statutory period of six months from the end of the financial year - HELD THAT - Admittedly, the last revised return filed by the assessee on 26.02.2014. This was admittedly a valid revised return. The AO has also not rejected the revised return. The assessee has also given his Explanation for filing the said revised return. In fact, after the said revised return was filed, notice u/s.142(1) has been issued on 10.12.2014 and show cause notice have been issued on 23.12.2014 and on 12.03.2015. In response to the show cause notice issued by the AO on 23.03.2015, intimating the assessee to provide his response by 27.03.2015, the assessee has intimated that the notice u/s.143(2) has not been issued on the assessee within the prescribed time. In fact, before the show cause notice being issued by the AO, the assessee never had an opportunity to intimate the AO that notice u/s.143(2) had not been issued. A perusal of the provisions of Sec.143(2) shows that the said notice is not assessment year specific but it is return specific. Its time limit is computed from the end of the financial year in which the return is furnished. It is mandatory for the issuance of notice u/s.143(2) in the event that the AO proposes to make assessment u/s.143(3). In the present case, the AO having not issued notice u/s.143(2) in respect of a valid revised return filed on 26.02.2014 and more so, the said return have not been treated as invalid, the consequential assessment is bad in law, in view of the principles laid down in the Hon ble Supreme Court in the case of ACIT vs. Hotel Blue Moon reported in 2010 (2) TMI 1 - SUPREME COURT . Further, in view of the position in law that if a revised return is filed u/s.139(5) and if such return is a valid return then the assessment can be completed only on the basis of such revised return as has been held in the case of Orissa Rural Housing Development Corporation Ltd. 2011 (12) TMI 230 - ORISSA HIGH COURT the assessment is liable to be annulled. - Decided against revenue.

Summary

Issues Involved:
1. Validity of assessment based on revised return without issuance of notice u/s.143(2).
2. Assessment completed on the basis of original return despite the filing of a revised return.

Analysis:

Issue 1: Validity of assessment based on revised return without issuance of notice u/s.143(2):
In the case of ITA Nos.22 & 351/Mds/2016, the Appellate Tribunal considered the appeal filed by the assessee against the Order of the Ld.CIT(A)-3 for the AY 2012-13. The assessee, engaged in construction and plot sales, filed a revised return disclosing Nil income after initially filing an original return. The AO did not issue notice u/s.143(2) for the revised return. The Tribunal held that as per legal principles, a revised return filed u/s.139(5) must be the basis for assessment, and the absence of notice u/s.143(2) for the revised return rendered the assessment invalid. Citing relevant case laws, the Tribunal annulled the assessment, emphasizing the mandatory nature of the notice u/s.143(2) for completing assessments.

Issue 2: Assessment completed on the basis of original return despite the filing of a revised return:
In the case of ITA No.3192/Mds/2016 for the AY 2013-14, the Revenue challenged the annulment of the Assessment Order by the Ld.CIT(A) due to completing the assessment based on the original return, ignoring the revised return filed by the assessee. The Tribunal upheld the Ld.CIT(A)'s decision, emphasizing that once a revised return is filed, it replaces the original return for assessment purposes. The Tribunal referred to legal provisions and case laws to support the view that notice u/s.143(2) is essential for assessments and that assessments must align with the latest valid return filed by the assessee. The Tribunal dismissed the Revenue's appeal, affirming the annulment of the assessment based on the original return without proper notice procedures.

In both cases, the Tribunal meticulously analyzed the legal requirements and precedents to ensure assessments were conducted in compliance with the law, emphasizing the significance of notice u/s.143(2) and the primacy of revised returns over original returns for assessment purposes. The decisions underscore the importance of procedural adherence in tax assessments to uphold the integrity and legality of the process.