2024 (3) TMI 372 - AT - Income Tax

Limitation Period for issuance of notice u/s 143(2) - Scrutiny Assessment - after filing of the return of income, defect notice u/s 139(9) had been sent to the assessee which was cured by the assessee - case of the Revenue is that the limitation for issuance of notice u/s 143(2) of the Act was to be determined from the date when the defect was removed by the assessee, i.e. 19.08.2018 and therefore, in the present case, the notice u/s 143(2) of the Act was issued within the limitation prescribed HELD THAT - As per Section 139(9) of the Act which deals with the defective returns and on going through the same, we find that the said section itself amply and clearly brings out that the removal of defect is no bar to the Assessing Officer from proceeding with his assessment proceedings. That, he does not have to wait for the removal of the defects to proceed with the regular assessment. As per Section 139(9) of the Act, the assessees on being intimated of defects in their returns are required to remove the defects within the prescribed time limit. However, the proviso provides that if the defect is removed after the expiry of the time, but before the assessment is made, the Assessing Officer can condone the delay and treat the return as valid return which means in clear terms and very clear language that the assessee can cure/remove defects upto to the framing of the assessment. This clearly implies that the Assessing Officer can proceed with the assessment without waiting for the removal of defects, which as per law can be removed upto or before the assessment is made. This is further clarified from the fact that the defects which can be cured are in relation to non-filing of documents corroborating the return of income filed by the assessee like computation of income , proof of tax deducted at source , financial statements audited/ unaudited, personal accounts and such other financial data of assesses. These are not such grave defects to invalidate the return of income on the occurrence of such defects, but are curable and hence opportunity is given to the assessee to cure the same and only when it remains uncured despite opportunity given that the return is treated as invalid. It is abundantly clear therefore that as per law there is no bar in proceeding with assessment where returns are found defective and therefore the limitation for issuing notice u/s 143(2) of the Act for assuming jurisdiction to frame assessment will logically run from the year in which return is filed and not when the defect is removed by the assessee. Even the Hon ble jurisdictional High Court in the case of Kunal Structure (India) (P.) Ltd. ( 2020 (2) TMI 725 - GUJARAT HIGH COURT ) noted the same from the reading of section 139(9) of the Act, finding that a defect in a return does not requiring any fresh return to be filed but only the defect to be removed. Notice u/s 143(2) of the Act was to be issued within the time prescribed from the date of filing return of income and not from the date of removal of defect u/s 139(9) of the Act. Thus we find that in the facts of the present case the jurisdictional notice u/s 143(2) of the Act having been issued beyond the limit prescribed under the Act, the assessment framed is without jurisdiction and, therefore, directed to be quashed. As for the argument of the ld. DR that the assessee had not cured the defect within the period prescribed u/s 139(9) of the Act and therefore the original return was to be treated as invalid and limitation for issuing notice u/s 143(2) of the Act be determined from the date of removal of defect, we find, is a self-defeating argument. Going by this argument, if the original return is to be treated invalid since the defect was not cured in time, then considering the fact that no other return was filed by the assessee, we fail to understand how notice for framing assessment, u/s 143(2) of the Act, could be issued in the absence of any valid return of income. Even otherwise as per the proviso to the section 139(9) AO is empowered to condone the delay in the removal of the defect which, we have noted, he has done by accepting the defect removed by the assessee and subsequently processing the return u/s 143(1) and issuing refund to the assessee. So much so that as per the case of the Revenue itself, after removal of the defect, the AO went on to issue notice u/s 143(2) of the Act. Meaning thereby that he had condoned the delay in removal of defect, which he was empowered to do in terms of Section 139(9) of the Act. Appeal of the assessee is allowed.

Issues Involved:
1. Validity of the notice issued under Section 143(2) of the Income-tax Act, 1961.
2. Disallowance of Employees' contribution to PF and ESIC.
3. Addition on account of difference in receipt between Form 26AS and Profit and Loss account.
4. Disallowance for interest on payment of TDS.
5. Disallowance for penalty expenses.
6. Addition on account of unsecured loan under Section 68.
7. Addition under Section 269SS.
8. Disallowance for employees benefit expenses.
9. Disallowance for Web Design & Development expenses, Data entry operating expenses, and Advertisement and promotion expenses.

Summary:

1. Validity of the Notice Issued under Section 143(2):
The primary issue was whether the jurisdictional notice issued under Section 143(2) of the Act was issued within the time limit prescribed. The assessee argued that the notice was issued beyond the time prescribed, as it was issued on 22.09.2019, whereas the original return was filed on 28.10.2017. The Revenue contended that the limitation should be determined from the date when the defect was removed by the assessee, i.e., 19.08.2018. The Tribunal found that as per Section 139(9) of the Act, the removal of defect is no bar to the Assessing Officer from proceeding with assessment and that the limitation for issuing notice under Section 143(2) should run from the year in which the return is filed. The Tribunal relied on the jurisdictional High Court's decision in Kunal Structure (India) (P.) Ltd. and concluded that the jurisdictional notice issued beyond the prescribed limit rendered the assessment invalid. Consequently, the assessment order was quashed.

2. Disallowance of Employees' Contribution to PF and ESIC:
The Tribunal did not adjudicate this issue as the assessment order was quashed due to the invalid jurisdictional notice.

3. Addition on Account of Difference in Receipt:
Similarly, this issue was not addressed due to the quashing of the assessment order.

4. Disallowance for Interest on Payment of TDS:
This issue was also rendered academic and was not adjudicated by the Tribunal.

5. Disallowance for Penalty Expenses:
The Tribunal did not address this issue as well.

6. Addition on Account of Unsecured Loan under Section 68:
This issue was not adjudicated due to the quashing of the assessment order.

7. Addition under Section 269SS:
The Tribunal did not address this issue.

8. Disallowance for Employees Benefit Expenses:
This issue was also rendered academic and was not adjudicated.

9. Disallowance for Web Design & Development Expenses, Data Entry Operating Expenses, and Advertisement and Promotion Expenses:
The Tribunal did not address this issue due to the quashing of the assessment order.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order on the grounds that the jurisdictional notice under Section 143(2) was issued beyond the prescribed time limit. Consequently, other grounds raised on the merits of the case were rendered academic and were not adjudicated.

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