2005 (3) TMI 396 - AT - Income Tax

Challenged the validity of assessment framed u/s 147 r/w s.143(3) - admission of additional grounds - assumption of jurisdiction - no notice u/s 143(2) served within the statutory period - HELD THAT - From the facts, we have to hold that the AO did not have jurisdiction to frame an order of assessment u/s 147 without complying with the requirement of service of notice under the proviso to s. 143(2) within the time prescribed by the said proviso. As to whether the provisions of s. 143(2) apply to a case of proceedings u/s 147 had been considered by a Special Bench of this Tribunal in the case of Raj Kumar Chawla Ors. vs. ITO 2005 (1) TMI 334 - ITAT DELHI-F . The Special Bench has held that provisions of s. 143 including the proviso would be applicable to assessment/reassessment u/s 147 and that if compliance of the proviso to s. 143(2) is not made, the AO will not be entitled to make an order of assessment. In view of the aforesaid decision of the Special Bench, we hold that the assessments framed in both the assessment years, deserve to be annulled and they are accordingly annulled. Since the appeals of the assessee are being allowed on preliminary issue, no adjudication on the other grounds of appeal raised by the assessee are taken up for adjudication. In the result, the appeals by the assessee are allowed.

Summary

Issues:
1. Admission of additional grounds in appeal challenging the jurisdiction of assessment under sections 147 and 143(3) of the Income Tax Act.
2. Validity of assessment orders for the assessment years 1999-2000 and 2000-2001 due to non-compliance with the statutory period for serving notice under section 143(2).
3. Applicability of section 143(2) provisions to assessment/reassessment under section 147.

Issue 1: Admission of Additional Grounds in Appeal
The assessee sought to raise an additional ground challenging the jurisdiction of the assessment under sections 147 and 143(3) of the Income Tax Act, claiming that the notice under section 143(2) was not served within the statutory period of 12 months from the end of the month in which the return was filed under section 148. The Tribunal admitted the additional ground for adjudication as it was a legal question that could be decided based on existing facts. The Departmental Representative opposed the admission, arguing that the ground was not raised before lower authorities and should not be allowed at the Tribunal level.

Issue 2: Validity of Assessment Orders
For the assessment year 1999-2000, the assessee requested the return filed on 29th Nov., 1999, to be treated as a response to the notice under section 148. However, the notice under section 143(2) was served on 23rd Aug., 2002, exceeding the 12-month period as required by the proviso to section 143(2). Similarly, for the assessment year 2000-01, the original return was filed on 1st Oct., 2000, but the notice under section 143(2) was served on 11th Dec., 2002, missing the 12-month deadline. The Tribunal held that the Assessing Officer lacked jurisdiction to frame assessment orders under section 147 without complying with the notice service requirement under section 143(2) within the stipulated time.

Issue 3: Applicability of Section 143(2) Provisions
The Tribunal referred to a Special Bench decision which concluded that the provisions of section 143, including the proviso, are applicable to assessments/reassessments under section 147. Failure to comply with the proviso to section 143(2) would render the Assessing Officer unauthorized to make an assessment order. Relying on this decision, the Tribunal annulled the assessments for both years as the notice under section 143(2) was not served within the prescribed time limit. Consequently, the appeals by the assessee were allowed solely on the preliminary issue, and other grounds of appeal were not addressed.

In conclusion, the Tribunal allowed the appeals by the assessee, annulling the assessment orders for the assessment years 1999-2000 and 2000-2001 due to the Assessing Officer's lack of jurisdiction in framing the assessments under sections 147 and 143(3) without serving the notice under section 143(2) within the statutory time frame. The decision was based on the legal interpretation of the applicable provisions and a previous Special Bench ruling establishing the necessity of complying with the notice service requirement for valid assessments under section 147.