2023 (5) TMI 1179 - AT - Income Tax

Income escaping assessment - Validity of Assessment concluded without issuing a valid statutory notice u/s 143(2) - return filed pursuant to the notice issued under section 148 - HELD THAT - In the present case, undisputedly no return of income was originally filed by the assessee, and only pursuant to the notice issued under section 148 of the Act the assessee filed its return of income on 31/03/2011. Thus, the first notice dated 20/02/2011 under section 143(2) of the Act was issued when no return of income was available on record and therefore, this notice cannot be said to have been issued to verify whether the assessee has understated the income or has computed excessive loss or under-paid the taxes in any manner. Hence the first notice issued u/s143(2) of the Act in the present case is a mere empty formality, without any legal consequence, and therefore, cannot be treated as a notice on a return filed by the assessee. As in DIT v/s Society for Worldwide Interbank Financial, Telecommunications 2010 (4) TMI 43 - DELHI HIGH COURT held that the provisions of section 143(2) make it clear that the notice can only be served after the AO has examined the return filed by the assessee. Thus, first notice issued under section 143(2) is not a valid notice as per the provisions of the Act. Also since the return of income was filed by the assessee on 31/03/2011, therefore, the time limit for issuance of notice under section 143(2) of the Act, as per proviso to clause (ii), was available only till 30/09/2011. Second notice under section 143(2) of the Act was issued on 17/10/2011, i.e. beyond the time limit prescribed under the provisions of section 143(2) of the Act. Therefore, the second notice is also invalid as per the provisions of section 143(2) of the Act. In any case, it cannot be disputed that the AO in the present case has accepted the return of income filed by the assessee and has concluded the assessment under section 143(3) read with section 147 of the Act. Further, the mandatory requirement of issuance of notice under section 143(2) of the Act is quite clear from the decision of the Hon ble Supreme Court in ACIT vs Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT Since in the present case, no valid notice under section 143(2) of the Act was issued by the AO and the assessment was completed without following the mandatory requirement of the Act, therefore, the entire assessment proceedings concluded under section 143(3) read with section 147 of the Act is rendered null and void, and is accordingly quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of Notice under Section 143(2) of the Income Tax Act.
2. Requirement of Issuance of Notice under Section 143(2) for Reassessment Proceedings.
3. Impact of Non-compliance with Section 143(2) on the Assessment Proceedings.

Summary:

Validity of Notice under Section 143(2) of the Income Tax Act:
The assessee challenged the reassessment order on the grounds that no valid notice under section 143(2) of the Income Tax Act was issued. The first notice dated 20/02/2011 was issued before the assessee filed its return on 31/03/2011, making it non-est in law. The second notice dated 17/10/2011 was issued beyond the prescribed time limit under section 143(2), rendering it invalid.

Requirement of Issuance of Notice under Section 143(2) for Reassessment Proceedings:
The Tribunal analyzed the provisions of section 143(2) and concluded that a valid notice under this section is mandatory for reassessment proceedings. The Tribunal referred to the decision of the Hon'ble Supreme Court in ACIT vs Hotel Blue Moon, which emphasized the necessity of issuing a valid notice under section 143(2) for reassessment.

Impact of Non-compliance with Section 143(2) on the Assessment Proceedings:
The Tribunal found that the return filed by the assessee on 31/03/2011 was within the time allowed under section 139(4) of the Act. Thus, the requirement to issue a notice under section 143(2) was not dispensed with. The Tribunal rejected the Departmental Representative's argument that the return was invalid due to late filing. Consequently, the entire assessment proceedings were rendered null and void due to the failure to issue a valid notice under section 143(2).

Conclusion:
The Tribunal quashed the assessment proceedings under section 143(3) read with section 147 due to the absence of a valid notice under section 143(2). The appeal by the assessee was allowed, and the appeal by the Revenue was dismissed. The other issues raised in the cross-appeal were deemed academic and infructuous.