2019 (3) TMI 1005 - HC - Income Tax

Reopening of assessment - whether notice under Section 143(2) was validly served within limitation? - after issuance of notice u/s 148 the assessee in response to the same had submitted the return but after receiving the return no notice as prescribed under the Act was issued to the appellant - HELD THAT - It is admitted case between the parties that after issuance of notice u/s 148 the assessee in response to the same had submitted the return but after receiving the return no notice as prescribed under the Act was issued to the appellant. The statute provides that after filing of return, the assessing authority should apply its mind. After considering the fresh material on record and after recording reasons to believe, then issue notice under Section 143(2) of the Act afresh. The case in hand, the record reveals that in response to the notice u/s 148, the returns were filed in consequence thereof, the officer has to apply his mind to the contents of fresh return and then issue a notice u/s 143(2) which has not been done in the present case. The satisfaction under reasons to believe must be recorded by the AO after applying mind to the contents of fresh return before issuing notice under Section 143(2). It reveals that the provision contained in Section 143(2) is mandatory in nature and it shall be obligatory for the AO to apply mind to the contents of the return filed in response to notice under Section 148 and record reasons and thereafter, issue notice under Section 143(2) of the act before proceeding to decide the controversy with regard to escaped assessment. - Decided against revenue.

Summary

Issues:
1. Validity of notice under Section 143(2) and its service within limitation.
2. Requirement of assessing authority to apply its mind after fresh return is filed in response to notice under Section 148 before issuing notice under Section 143(2) of the Act.

Analysis:
1. The appeal was filed under Section 260(A) of the Income Tax Act against the Tribunal's order for the assessment year 1988-89. The main issue raised was regarding the validity of the notice under Section 143(2) and whether it was served within the limitation period. The Tribunal's order highlighted the amendment to the proviso of Section 143(2) and its implications on the notice served. The Tribunal concluded that the notice under Section 143(2) was validly served within the limitation period, as per the amended proviso. However, the appellant argued that the notice under Section 148 was not properly served upon them, and even after filing the returns, the assessing authority failed to independently consider the fresh return and record reasons to believe before issuing the notice under Section 143(2).

2. The assessing authority's obligation to apply its mind after the filing of a fresh return in response to a notice under Section 148 was a crucial aspect of the case. The appellant contended that the assessing officer must record reasons to believe and issue a notice under Section 143(2) only after considering the contents of the fresh return. The appellant relied on legal precedents to support this argument, emphasizing that the provisions in Section 143(2) are mandatory in nature. The judgments cited highlighted the importance of strict adherence to the statutory provisions, especially in cases of escaped assessment. The court agreed with the appellant's arguments, stating that the assessing officer must apply their mind to the fresh return's contents before proceeding with the assessment process.

In conclusion, the court allowed the appeal, ruling in favor of the appellant and against the Revenue. The judgment emphasized the mandatory nature of Section 143(2) and the assessing officer's obligation to thoroughly consider the fresh return filed in response to a notice under Section 148 before issuing further notices and proceeding with the assessment. The case underscored the importance of strict compliance with procedural requirements in income tax assessments to ensure fairness and legality in the process.