2017 (1) TMI 895 - AT - Income Tax

Validity of reopening of assessment - notice u/s 143(2) not served within the stipulated time prescribed - calculation of time limit - Held that - The decision of Krishna Mohan Banik Versus Income Tax Officer 1997 (9) TMI 72 - GAUHATI High Court clearly supports the plea of the Assessee that the notice u/s.143(2) of the Act ought to have been served on the Assessee in the present case on or before 31.5.2008 as per the law as it prevailed when the Assessee filed return of income on 15.5.2007, whereas it was served only on 5.9.2008. Hence, the entire reassessment proceedings ought to be held as invalid and the order of reassessment is hereby annulled. In view of the aforesaid conclusion, the determination of total income in the reassessment order will have no effect. In the result, the appeal of the Assessee is allowed on the issue of order of assessment being held to be invalid for want of service of notice u/s.143(2) of the Act within the time required by law. - Decided in favour of assessee

Summary

Issues:
Validity of notice u/s.143(2) of the Income Tax Act, 1961.

Analysis:

Issue: Validity of notice u/s.143(2) of the Act

The appeal concerns the validity of the notice u/s.143(2) of the Income Tax Act, 1961, in relation to the assessment year 2005-06. The Assessee, an individual deriving income from commission as an insurance agent, filed a return of income on 1.8.2005. Subsequently, a notice u/s.148 was issued due to a claimed deduction of interest on loans against insurance commission income. The Assessee requested the return filed on 1.8.2005 to be treated as filed in response to the notice u/s.148 on 15.5.2007. The notice u/s.143(2) was served on 5.9.2008, beyond the time limit prescribed under the Act.

The dispute revolves around the timing of the service of notice u/s.143(2) - whether it should adhere to the law prevailing when the return was filed by the Assessee or when the assessment proceedings were conducted. The Assessee argued that the law applicable at the time of filing the return should govern, citing judicial precedents. The Gauhati High Court's decision in Krishna Mohan Banik's case supported this view, emphasizing that the law at the time of return filing should apply.

The Tribunal concurred with the Assessee's argument, holding that the notice u/s.143(2) should have been served by 31.5.2008 based on the law prevailing when the return was filed on 15.5.2007. As the notice was served on 5.9.2008, the reassessment proceedings were deemed invalid. Consequently, the order of reassessment was annulled, rendering the determination of total income in the reassessment order ineffective.

In conclusion, the Tribunal allowed the Assessee's appeal, ruling in favor of the Assessee on the grounds of the invalidity of the assessment order due to the untimely service of the notice u/s.143(2) of the Act.

---