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2024 (12) TMI 383 - AT - Income TaxScrutiny through CASS - limitation period for issue of notice u/s 143(2) - HELD THAT - It is held that the limitation period for issue of notice u/s 143(2) is relevant to the financial year and assessment year. When the AO considered the return of income after rectification for the purpose of initiation of assessment proceedings, the relevant date for initiation of proceedings, dates back to original date of return of income, therefore the time limit for issue of notice u/s 143(2) has to be considered for date of filing of original return of income. Respectfully following the decision of SMC COMTRADE LTD. VERSUS ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 24 (1) 2023 (11) TMI 44 - DELHI HIGH COURT we are inclined to treat the notice issued u/s 143(2) as invalid notice. Accordingly, further proceedings initiated with invalid notice are bad in law. Therefore, assessment order passed on the basis of invalid notice is also bad in law and accordingly quashed. Assessee appeal allowed.
Issues Involved:
1. Validity of the notice issued under Section 143(2) of the Income Tax Act. 2. Disallowance of transportation expenses claimed by the assessee. 3. Addition of undisclosed income regarding contract receipts. Issue-wise Detailed Analysis: 1. Validity of the Notice Issued Under Section 143(2): The primary issue was whether the notice under Section 143(2) was issued within the prescribed time limit. The assessee argued that the notice was issued after the expiry of six months from the end of the financial year in which the original return was filed, making it invalid. The CIT(A) had held that the notice was valid, considering the rectified return date. However, relying on the legal precedent that a rectified return relates back to the original filing date, the Tribunal concluded that the notice was time-barred. The Tribunal referenced several cases, including SMC Comtrade Ltd. v. ACIT, which supported the view that the limitation period should be calculated from the original return date. Consequently, the assessment order based on this notice was deemed invalid and quashed. 2. Disallowance of Transportation Expenses: The AO disallowed Rs. 21.37 crores claimed by the assessee as transportation expenses, citing that the subcontractors were non-existent. The CIT(A) partially allowed the assessee's appeal, reducing the disallowance to Rs. 2.67 crores, being 12.5% of the expenses claimed, on the grounds that the transactions with subcontractors were bogus. The CIT(A) acknowledged that the receipts from transportation services were genuine but found the expenses inflated. The Tribunal did not further adjudicate this issue due to the quashing of the assessment order based on the invalid notice under Section 143(2). 3. Addition of Undisclosed Income Regarding Contract Receipts: The AO made an addition of Rs. 6.21 crores as undisclosed income, alleging that the assessee understated its receipts. The CIT(A) deleted this addition, noting that the disputed amount was already included in the gross receipts shown in the Profit & Loss account. The Tribunal upheld this finding, agreeing that the addition resulted in double counting, as the amount was already accounted for by the assessee. Conclusion: The Tribunal allowed the assessee's appeal, quashing the assessment order due to the invalidity of the notice under Section 143(2). Consequently, the issues regarding the disallowance of transportation expenses and the addition of undisclosed income became academic and were not adjudicated further. The Revenue's appeal was dismissed.
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