2007 (12) TMI 244 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice u/s 143(2) of the Income-tax Act, 1961.
2. Consequences of failure to serve notice u/s 143(2) within the statutory period.

Summary:

Issue 1: Validity of Notice u/s 143(2)

The assessee contended that the notice u/s 143(2) was not served within the prescribed time limit, making the assessment invalid. The CIT(A) upheld the validity of the notice, relying on the Supreme Court's decision in Prima Realty v. Union of India, which deemed the Post Office as the agent of the assessee, thus considering the notice served on the date it was dispatched (31-10-2002).

Issue 2: Consequences of Failure to Serve Notice u/s 143(2) within the Statutory Period

The Tribunal examined whether the Assessing Officer could establish the service of the notice within 12 months from the end of the month in which the return was filed. It was concluded that mere issuance of the notice within the statutory period is insufficient; the notice must be served within this period. The Tribunal found that the Assessing Officer failed to prove the service of the notice by 31-10-2002, making the subsequent assessment proceedings time-barred and invalid.

Legal Precedents and Case Law:

1. Whirlpool India Holdings Ltd. v. Dy. DIT: The Tribunal held that the date of service, not the date of issue, is crucial for compliance with the statutory period.
2. CIT v. Vardhman Estate (P.) Ltd.: The Delhi High Court ruled that the date of dispatch cannot be deemed the date of service.
3. CIT v. Bhan Textiles (P.) Ltd.: The court emphasized that notice must be served within the prescribed time limit.
4. CIT v. Lunar Diamonds Ltd.: The Delhi High Court upheld the Tribunal's decision that failure to serve notice within the statutory period invalidates the assessment.
5. Raj Kumar Chawla v. ITO: The Special Bench of the Tribunal held that failure to serve notice within the statutory period results in the loss of jurisdiction to make an assessment.

Conclusion:

The Tribunal concluded that the revenue failed to establish the service of the notice u/s 143(2) within the statutory period, rendering the assessment invalid. Consequently, the assessment framed by the Assessing Officer was quashed, and the demand raised thereunder was also cancelled. The appeal filed by the assessee was allowed on these grounds, making it unnecessary to adjudicate the other grounds on merits.