LIMITATION- LAW AS ON 1ST APRIL OF ASSESSMENT YEAR WILL APPLY A FAVORABLE VIEW IS ADOPTED.

[C.A. DEV KUMAR KOTHARI]

Relevant links:

Proviso to section 143(2) (ii) as it stood till 31.03.2007 and w.e.f. 01.04.2008 providing for limitation.

Tulsi Food Products Versus DCIT  2012 -TMI - 212714 - Allahabad High Court

CIT vs. Shaan Finance (P) Ltd (1998 -TMI - 5659 - SUPREME Court )

Premier Cable Co. Ltd. vs. Commissioner of Income- Tax, (1999 -TMI - 5734 - SUPREME Court)

The explanatory notes to the provisions of the Finance Act, 2008 vide Circular No. 1/2009 

As per proviso to S.143(2)(ii) till assessment year 2007-08 a notice u/s 143(2) to commence scrutiny assessment proceedings could be issued within twelve months from end of the month in which return was filed u/s 139.

From 01.04.2008 this proviso was amended and now it provides that notice can be issued within six month from the end of the financial year in which return was filed u/s 139.

Tulsi Food Products Versus DCIT  2012 -TMI - 212714 - Allahabad High Court

In this case assessment year involved is assessment year 2007-08, that is prior to amendment of the said proviso. The question arose was whether the proviso as it stood till  31.03.2007 will apply or the proviso as amended w.e.f. 01.04.2008 will apply.

The normal rule is that in case of tax law, the any provision which is in force as on 1^st day of April of assessment year will apply. Therefore , assessee pleaded that limitation as stood before amendment will apply while considering income of assessment year 2007-08. Therefore, as per assessee, the time limit to issue notice u/s 139(2) was till 30.07.2008  and not 30.09.2008.

Revenue pleaded that the proviso is a procedural provision, the return was filed on 24.07.2007 in the previous year 2007-08, therefore limitation, as per amended proviso, to issue notice was till 30.09.2008 and not 30.07.2008 as pleaded by assessee.   

The High court accepted the contention of the assessee and held that the notice u/s 143(2) was belated by less than two months and once the notice was invalid the assessment order passed pursuant of invalid / time barred notice was also invalid.