2008 (1) TMI 444 - AT - Income Tax

Non issuance of notice u/s 143(2) - Validity of assessment order passed u/s 147 r/w section 143(3) - notices calling for certain information from the assessee and not notices calling for the return of income - HELD THAT - In the present case, the letter was written on 23-3-2000 and it is not in dispute that such a letter was received by the Assessing Officer. Therefore, the date of filing the return under section 148 was 23-3-2000 with the result that the last day for issue of the notice under section 143(2) was 31-3-2001 as per the proviso to the sub-section. As already noted, no notice u/s 143(2) was issued to the assessee before this date or at any time thereafter. Even if we were to consider the notices issued u/s 142(1) as notices calling for the return of income, they having been issued after 31-3-2001 are beyond, the time prescribed by the proviso to sub-section (2) of section 143 and would be barred by limitation. In point a fact, however, these notices are not notices calling for the return of income; they have only called for certain information from the assessee. We are unable to agree with the CIT(A) that a notice appears to have been issued u/s 143(2). He has examined the record and has found that the copy of the same is not on record at present . He has used guarded words, such as at present . Nevertheless, he has proceeded to hold that a notice appears to have been issued. We are unable to appreciate how in the absence of any evidence for issue or service of the notice, or even a copy of the notice on file, such a finding could have been recorded by the CIT(A). In the present case the assessee has been held to have filed such a return on 23-32000 and thus this condition is satisfied. The other condition is that the notice under section 143(2) should have been served within the time-frame prescribed under clause (b) of the proviso. This condition is not satisfied in the present case because no notice has at all been served under section 143(2) as found by us. The clause applies only to save a notice served on the assessee, though not within the period of 12 months from the end of the month in which the return was filed. When no notice at all has been served, the clause does not apply to save the validity of the reassessment order. Therefore, the first proviso to section 148(1) does not save the situation. Thus, we accept ground No. 1 taken by the assessee in his cross objection and hold that the reassessment made u/s 148 r/w section 143(3) of the Act is invalid and is quashed. In the view we have taken, it is not necessary to adjudicate upon the other grounds taken in the cross objection or to deal with the appeals filed by the assessee and the department. In the result, the assessee's cross objection is allowed and the appeals filed by the assessee and the department are dismissed as infructuous.

Issues Involved:
1. Validity of reassessment without service of notice under section 143(2).
2. Procedural irregularities and their impact on the reassessment.
3. Applicability of section 292B.
4. Participation of the assessee in the assessment proceedings.
5. Retrospective effect of the proviso to section 148(1) inserted by the Finance Act, 2006.

Issue-Wise Detailed Analysis:

1. Validity of reassessment without service of notice under section 143(2):
The primary issue was whether the reassessment made without issuing and serving a notice under section 143(2) of the Income-tax Act was valid. The Tribunal noted that no such notice was issued to the assessee, and the reassessment was thus invalid. The Tribunal relied on the Special Bench decision in Raj Kumar Chawla, which held that the proviso to section 143(2) applies to returns filed pursuant to notice under section 148. If the notice is not served within the prescribed period, the Assessing Officer loses jurisdiction to make an assessment under section 143(3) read with section 147. The Tribunal found that the assessee had informed the Assessing Officer to treat the original return as the return filed under section 148, making the last day for issuing the notice under section 143(2) as 31-3-2001. Since no notice was issued within this period, the reassessment was deemed invalid.

2. Procedural irregularities and their impact on the reassessment:
The Tribunal examined whether the non-issue of the notice under section 143(2) was a procedural irregularity that could invalidate the assessment. The Tribunal referred to the judgment of the Madras High Court in Areva T & D India Ltd., which suggested that non-issue of the notice was a procedural irregularity. However, the Tribunal emphasized that the jurisdictional High Court's judgments in Lunar Diamonds Ltd. and Vardhman Estate (P.) Ltd. were more pertinent, establishing that the reassessment order is invalid without the issuance of the notice under section 143(2).

3. Applicability of section 292B:
The Tribunal addressed whether section 292B could save the reassessment order. Section 292B states that a notice with inconsequential mistakes or omissions does not invalidate the proceedings. However, the Tribunal clarified that this section does not apply when no notice was issued at all. Thus, section 292B could not rescue the department's case.

4. Participation of the assessee in the assessment proceedings:
The Tribunal considered the department's argument that the assessee's participation in the proceedings absolved the Assessing Officer from issuing the notice under section 143(2). The Tribunal rejected this argument, stating that the assessee's participation in response to notices under section 142(1) does not relieve the Assessing Officer from the statutory duty of issuing and serving the notice under section 143(2) within the stipulated time.

5. Retrospective effect of the proviso to section 148(1) inserted by the Finance Act, 2006:
The Tribunal examined the applicability of the first proviso to section 148(1), which saves the validity of a reassessment order where a notice under section 143(2) was not served within the prescribed period, provided certain conditions are met. The Tribunal found that while the assessee had filed the return within the specified period, no notice under section 143(2) was served at all. Therefore, the proviso could not save the reassessment order.

Conclusion:
The Tribunal concluded that the reassessment made under section 148 read with section 143(3) was invalid due to the non-issuance of the notice under section 143(2). As a result, the reassessment was quashed, and the appeals filed by the assessee and the department were dismissed as infructuous.

← Previous Next →