2016 (8) TMI 1088 - HC - Income Tax

Validity of assessment - Whether the Appellate Tribunal is right in canceling the assessment order framed by AO without going into the merits, on the ground that the Assessing Officer had issued notice u/s. 158BC to the assessee to file the return within 15 days from the date of service of notice? - Held that - While block assessment is to be made, the Assessing Officer is having knowledge about the statutory provision and while issuing notice he should have mentioned in it about his source of power and should have referred to time which is required to be given for the purpose of filing of return under section 158BC of the Act. The words mentioned in the notice are within fifteen days whereas the provision mandates the time of not less than fifteen days . In view of the decisions of the Supreme Court referred more particularly New India Industries Ltd. (1995 (1) TMI 66 - SUPREME Court ), we are of the opinion, fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words not less than fifteen days have to be interpreted correctly. In that view of the matter, since the Assessing Officer asked the assessee to file the return within fifteen days of the service of the notice, the notice issued by the Assessing Officer is invalid. We are, therefore, of the opinion that the Tribunal has rightly cancelled the order of the Assessing Officer. The questions referred to us are, therefore, answered in favour of the assessee and against the revenue.

Issues Involved
1. Validity of the assessment order framed by the Assessing Officer (AO) based on the notice issued under Section 158BC of the Income-tax Act.
2. Whether the typographical error in the notice ("within 15 days") affects its validity under Section 292B of the Income-tax Act.

Issue-wise Detailed Analysis

Issue 1: Validity of the Assessment Order
The appellant-revenue challenged the Tribunal's decision which canceled the assessment order framed by the AO without delving into the merits, based on the notice issued under Section 158BC. The Tribunal found that the notice did not comply with the statutory requirement of providing "not less than fifteen days" for filing the return. The AO had issued a notice on 21.12.1998, served on 1.1.1999, requesting the assessee to file the return within 15 days of service. The assessee filed a nil income return for the block period, but the AO made certain additions. The Commissioner of Income-tax (Appeals) partly allowed the assessee's appeal, but the Tribunal canceled the AO's assessment order, leading to the revenue's appeal.

Issue 2: Typographical Error in Notice
The revenue's counsel argued that the phrase "within 15 days" was a mere typographical error and should be interpreted in light of Section 292B, which allows for procedural errors that do not affect the substance and intent of the Act. The counsel cited various judgments to support the argument that procedural defects should not invalidate the notice if there was substantial compliance with the law.

Key Judgments Cited:
1. Shirish Madhukar Dalvi v. Assistant Commissioner of Income-tax: The Bombay High Court held that procedural errors do not invalidate an order if there is substantial compliance.
2. Venad Properties Private Limited v. Commissioner of Income-tax: The Delhi High Court emphasized that procedural laws are meant to aid justice, not obstruct it.
3. Commissioner of Income-tax v. Jagat Novel Exhibitors P. Ltd.: The Delhi High Court ruled that service of notice is not a jurisdictional precondition but a procedural requirement.
4. K. Sakthivel v. Assistant Commissioner of Income-tax: The Madras High Court held that non-mentioning of the block period in the notice does not invalidate the assessment if the assessee was aware of the proceedings.

The counsel for the assessee argued that the Tribunal was correct in canceling the AO's order due to the procedural defect in the notice. The assessee's counsel relied on the Supreme Court's decision in Commissioner of Income-tax v. Braithwaite & Co. Ltd. and the Karnataka High Court's decision in Commissioner of Income-tax v. Micro Labs Ltd., which held that the time specified in Section 158BC is mandatory and non-compliance invalidates the notice.

Key Judgments Cited:
1. Commissioner of Income-tax v. Braithwaite & Co. Ltd.: The Supreme Court emphasized strict compliance with statutory provisions.
2. Commissioner of Income-tax v. Micro Labs Ltd.: The Karnataka High Court held that granting another opportunity to rectify procedural defects is improper.
3. Assistant Commissioner of Income-tax v. Hotel Blue Moon: The Supreme Court reiterated that procedural provisions in Section 158BC are mandatory.

Court's Decision
The court held that the notice issued by the AO was invalid as it did not comply with the statutory requirement of "not less than fifteen days." The court emphasized that the AO must be aware of and strictly adhere to the statutory provisions. The Tribunal's decision to cancel the AO's assessment order was upheld, and the appeal was dismissed.

Conclusion
The court concluded that procedural compliance with statutory requirements is mandatory, and any deviation, even if minor, invalidates the notice and subsequent proceedings. The Tribunal's decision to cancel the AO's assessment order was correct, and the appeal was dismissed with no order as to costs.

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