2023 (11) TMI 44 - HC - Income Tax

Validity of notice issued u/s 143(2) with 142(1) - Period of limitation - Relevant Date - Date of filing of original return to be considered or date of removal of defect u/s 139(9) is to be taken into account - Scrutiny / Regular assessment - Assessee submitted that return date relates back to the date on which the original ROI was filed seems to have been the yardstick that the AO applied in the instant case - HELD THAT - By logical extension, if the date of the ROI originally filed on 14.10.2016 is taken into account, then, the impugned notices served on the petitioner/assessee would be time-barred, as the first proviso appended to Section 143(2) stipulated, at the relevant point in time, that the notice under the said Section could not have been served on the assessee, in this case, the petitioner, after the expiry of six (6) months from the end of the financial year in which the ROI is filed. The financial year, in the case of the petitioner s/assessee's original return, would have ended on 31.03.2017. Six (6) months, as mandated by the proviso, would have ended on 30.09.2017. Undoubtedly, the notice issued u/s 143(2) is time-barred. Consequently, the notice u/s 142(1) will also collapse. The impugned notices are, accordingly, quashed.

Summary

Issues Involved:
The issues involved in this legal judgment are the validity of the notices issued under Section 143(2) and Section 142(1) of the Income-tax Act, 1961 for Assessment Year 2016-17 and whether these notices were time-barred.

Validity of Notices Under Section 143(2) and Section 142(1):
The petitioner/assessee challenged the notice dated 11.08.2018 (first notice) under Section 143(2) and the notice dated 31.08.2018 (second notice) under Section 142(1) of the Income-tax Act, 1961, for Assessment Year 2016-17, contending that these notices were barred by limitation. The petitioner had initially filed its Return of Income (ROI) on 14.10.2016, declaring a loss. Subsequently, notices were issued pointing out defects in the ROI, which were rectified by the petitioner. The Assessing Officer processed the ROI on 22.11.2017 after the defects were rectified. The petitioner argued that the impugned notices were time-barred as they were issued beyond the prescribed limitation period. The petitioner's position was supported by the decision in the case of Commissioner of Income-tax vs. Sohan Lal Chhajan Mal, which emphasized that a return of income should be considered valid once defects are rectified. The Supreme Court had dismissed a Special Leave Petition against this judgment on both delay and merit grounds.

Contentions of the Parties:
The petitioner contended that the impugned notices were time-barred as per the first proviso to Section 143(2) of the Act, which stipulated a limitation period of six months from the end of the financial year in which the ROI is filed. The financial year for the petitioner's original return ended on 31.03.2017, making the limitation period expire on 30.09.2017. The petitioner argued that the notices served after this date were invalid. On the other hand, the respondent/revenue argued that the notices were issued within the prescribed time after the defects in the ROI were rectified, as per the statute.

Judgment and Disposition:
The High Court found that the impugned notices under Section 143(2) and Section 142(1) were indeed time-barred. Considering the provisions of the Act and the relevant case law, the Court held that the notices served on the petitioner were beyond the limitation period specified in the first proviso to Section 143(2). Consequently, the Court quashed the impugned notices and disposed of the writ petition in favor of the petitioner/assessee. The interim order dated 01.11.2018 was also vacated in light of this decision.