2019 (12) TMI 677 - AT - Income Tax

Validity of scrutiny assessment order passed u/s 143(3) - No valid notice u/s 143(2) within the time prescribed under the provisions of law - rectification u/s 292BB - HELD THAT - In the case on hand, the notice, as alleged by the Revenue on the basis of acknowledgement of speed post, has been issued through the speed post. The copy of the acknowledgement is placed on page 103 of the paper book. On perusal of the same, we find certain infirmities as submitted by the assessee before the learned CIT (A) which are discussed somewhere in the preceding paragraph. First of all the acknowledgement does not bear any date suggesting the issuance of the notice. Secondly, it does not contain any tracking number which is normally issued by the postal authorities. DR has not brought any corroborative evidences in support of the contention that the notice was issued within the prescribed time. In our considered view, the Revenue has failed to discharged the onus by producing sufficient documentary evidence for establishing the fact that the statutory notice under section 143(2) of the Act was issued within the prescribed time. Thus in absence of contrary evidences, we are not convinced with the finding of the authorities below. Indeed, it (acknowledgment issued by the postal department) is a vague and inchoate document. Hence, no reliance can be placed on the same. Accordingly, we hold that the assessment framed under section 143(3) of the Act without the issuance/serving of notice under section 143(2) of the Act within the time is not sustainable. Hence the ground of appeal of the assessee is allowed.

Issues Involved:
1. Validity of notice under Section 143(2) of the Income Tax Act, 1961.
2. Interpretation of Section 292BB of the Income Tax Act, 1961.
3. Legality and validity of the assessment order.
4. Addition of ?10 lakhs on account of decline in Gross Profit (G.P.).

Detailed Analysis:

1. Validity of Notice under Section 143(2):
The assessee challenged the validity of the assessment on the ground that no valid notice under Section 143(2) was issued within the prescribed time. The assessee argued that the notice dated 4th September 2015 was barred by time as the last date for service was 30th September 2014. The CIT(A) called for a remand report, and the AO claimed the first notice was issued on 5th September 2014. However, the assessee pointed out several defects in the postal delivery slip, including blank columns for the date and time of delivery, missing postal stamps, and illegible signatures. The CIT(A) observed that the assessee participated in the assessment proceedings and thus was precluded from objecting under Section 292BB. However, the Tribunal held that the Revenue failed to substantiate with documentary evidence that the notice was issued within the prescribed time. The Tribunal found the acknowledgment issued by the postal department to be vague and unreliable.

2. Interpretation of Section 292BB:
Section 292BB precludes an assessee from objecting to the service of notice if they have participated in the proceedings. However, the Tribunal clarified that this provision applies only if the statutory notice was issued within the prescribed time but not served properly. Since the notice was not issued within the prescribed time, Section 292BB could not cure this defect. The Tribunal relied on the Supreme Court judgment in Hotel Blue Moon, which held that the omission to issue notice under Section 143(2) is not a procedural irregularity and cannot be cured.

3. Legality and Validity of the Assessment Order:
The Tribunal emphasized that the service of notice under Section 143(2) within the prescribed time is mandatory for acquiring jurisdiction for assessment under Section 143(3). The Tribunal found that the Revenue did not provide sufficient evidence to prove that the notice was issued within the prescribed time. Consequently, the assessment order was deemed invalid and unsustainable.

4. Addition of ?10 Lakhs on Account of Decline in G.P.:
The assessee also challenged the addition of ?10 lakhs due to a decline in Gross Profit. However, since the Tribunal decided the case in favor of the assessee on the technical ground of invalid notice, it refrained from adjudicating this issue on merit, rendering it infructuous.

Conclusion:
The Tribunal allowed the appeal of the assessee on the technical ground that the assessment framed under Section 143(3) without the issuance/serving of notice under Section 143(2) within the prescribed time is not sustainable. The Tribunal did not address the issue of the addition of ?10 lakhs on account of decline in G.P. due to the technical resolution of the case. The appeal was partly allowed, and the assessment order was quashed.

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