2019 (7) TMI 1875 - AT - Income Tax

Reopening of assessment u/s 147 - period of limitation to issue notice u/s 143 - HELD THAT - The proviso to sec. 143(2) states that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. So, from a bare reading of the provisions, it is clear that the AO is barred from serving any notice u/s. 143(2) of the Act on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in this case, since the assessee pursuant to the notice u/s. 147/148 of the Act dated 21.01.2013 had requested the AO to treat the original return of income filed u/s. 139 of the Act as the return in response to the notice u/s. 147/148 vide letter dated 19.02.2013 means the AO had to issue 143(2) notice before 31.08.2013. Admittedly, the 143(2) notice has been issued on 12.12.2013 and, therefore, the action of the AO is barred by the limitation prescribed by the 1st proviso to sec. 143(2) of the Act and the Hon ble Supreme Court in the case of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT has held that issuance of notice u/s 143(2) is mandatory for scrutiny assessment even in cases of assessments after search u/s 132 of the Act. Since issuance of notice u/s 143(2) is mandatory before scrutiny assessment even section 292BB of the Act cannot come to the rescue of the AO. Further, we do not find any merit in the argument of the Ld. CIT, DR that return of income should have been filed and not the letter requesting the AO to treat the original return as the return of income pursuant to the 147/148 notice. Therefore, the notice issued by A.O u/s 143(2) dated 12.12.2013 is hit by the 1st Proviso to section 143(2) of the Act and therefore the A.O had no jurisdiction to issue notice u/s 143(2) after 31.08.2013 and therefore the issuance of notice u/s 143(2) dated 12.12.2013 and all subsequent action is null in the eyes of the law - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of additional ground regarding notice u/s.143(2) issuance timing.
2. Consideration of objection raised by AO during scrutiny proceedings.
3. Allowing ground of assessee regarding initiation of proceedings u/s.147.
4. Jurisdiction of AO in issuing notice u/s.143(2) after statutory time limit.

Issue 1 - Admissibility of additional ground regarding notice u/s.143(2) issuance timing:
The appeal involved a dispute over the admissibility of an additional ground raised by the assessee regarding the timing of notice u/s.143(2) issuance. The Ld. CIT(A) had allowed the objection raised by the assessee, contending that the notice u/s. 143(2) was issued after the statutory time limit, rendering the reassessment non-est in the eyes of the law. The Revenue challenged this decision, arguing that the limitation period runs from the date of filing the return of income pursuant to notice u/s 148/147, not from any letter written by the assessee. The Tribunal upheld the Ld. CIT(A)'s decision, citing statutory provisions and judicial precedents, concluding that the action of the AO was barred by the limitation prescribed by the proviso to sec. 143(2) of the Act.

Issue 2 - Consideration of objection raised by AO during scrutiny proceedings:
The AO had raised an objection during the scrutiny proceedings that the assessee did not raise any objection to the initiation of proceedings u/s.147. The Ld. CIT(A) considered this objection, leading to a challenge by the Revenue. However, the Tribunal did not find merit in the Revenue's argument, and the action of the Ld. CIT(A) in quashing the reassessment proceeding was upheld.

Issue 3 - Allowing ground of assessee regarding initiation of proceedings u/s.147:
The Ld. CIT(A) had allowed the ground of the assessee regarding the initiation of proceedings u/s.147, which was challenged by the Revenue. The Tribunal examined the facts and circumstances of the case, emphasizing the importance of the timing of notice issuance u/s.143(2) in such proceedings. Ultimately, the Tribunal dismissed the appeal of the Revenue, upholding the decision of the Ld. CIT(A) in quashing the reassessment proceeding.

Issue 4 - Jurisdiction of AO in issuing notice u/s.143(2) after statutory time limit:
The main grievance of the assessee was that the notice u/s.143(2) was issued after the statutory time limit, rendering the initiation of reassessment non-est in the eyes of the law. The Tribunal analyzed the statutory provisions and judicial precedents to determine the validity of the notice issuance. Citing relevant case law, the Tribunal concluded that the AO had no jurisdiction to issue the notice u/s.143(2) after the prescribed time limit, thereby dismissing the appeal of the Revenue and upholding the decision of the Ld. CIT(A) in quashing the reassessment proceeding.