2012 (2) TMI 32 - AT - Income Tax

Jurisdiction defect u/s 158BD undisclosed income of any other person - assessee filed return in pursunace of notice issued to him u/s 158BD on 24.08.06 after two years 8 months and 23 days of passing the order in case of group searched - Notice u/s 143(2) issued to the assessee on 24.07.08 i.e. after one year 9 months and 12 days from the date of filing of the block return by assessee Revenue rescuing to Section 292BB Held that - Prior to 1.4.2008 a notice u/s 143(2) could have been given within 12 months from the end of the month in which the return is furnished. Hence, in the present appeal, the notice could have been given only upto 31.10.2007 as on 1.4.2008 the limitation period had already expired. Omission on the part of the A.O. to issue notice u/s 143(2), therefore, cannot be a procedural irregularity and the same cannot be dispensed with. Where the legislature intended to exclude certain provisions from the ambit of section 158BC(b), it has done so specifically. Thus, when section 158BC(b) specifically refers to applicability of the proviso hereto, it cannot be excluded, therefore, section 292BB cannot come to Revenue's rescue. Even otherwise, section 292BB was effective from 1.4.2008 , whereas the return u/s 158BD was filed by the assessee on 12.10.2006 and notice u/s 143(2) was issued beyond period of limitation Decided against the Revenue.

Summary

Issues:
1. Proper assumption of jurisdiction under section 158BD of the Act.
2. Validity of notice issued under section 143(2) of the Act.
3. Applicability of section 292BB of the Act.

Issue 1: Proper assumption of jurisdiction under section 158BD of the Act

The case involved a dispute regarding the assumption of jurisdiction under section 158BD of the Act. The Assessing Officer initiated proceedings under section 158BD after a search action on Malani and Chandak group. The appellant contended that the proceedings were initiated beyond the limitation period and proper satisfaction was not recorded. The first appellate authority held the assessment null and void, which was challenged by the revenue. The Tribunal analyzed the facts, noting the timeline of events and the challenge raised by the appellant on three grounds. The Tribunal referred to various judicial pronouncements and circulars to determine the validity of the proceedings under section 158BD. It was observed that the notice issued under section 143(2) was beyond the prescribed limit, rendering the appeal of the revenue without merit, and it was dismissed accordingly.

Issue 2: Validity of notice issued under section 143(2) of the Act

The validity of the notice issued under section 143(2) of the Act was a crucial aspect of the case. The appellant challenged the notice on the grounds that it was issued beyond the stipulated time limit. The Tribunal examined the relevant provisions before and after the amendment introduced by the Finance Act, 2008. It was highlighted that the notice under section 143(2) is a mandatory requirement, and non-compliance would be fatal. The Tribunal delved into the procedural aspects of block assessment, emphasizing the importance of serving the notice within the specified period. The Tribunal concluded that the notice issued under section 143(2) was beyond the prescribed limit, leading to the allowance of the cross objection by the assessee and the dismissal of the revenue's appeal.

Issue 3: Applicability of section 292BB of the Act

The applicability of section 292BB of the Act was a significant issue in the case. The appellant argued that section 292BB was introduced by the Finance Act, 2008, and therefore applied prospectively. The Tribunal analyzed the provisions before and after the amendment to ascertain the timeline for issuing notices under section 143(2). It was noted that the notice in this case was served after the expiration of the prescribed limit, rendering it invalid. The Tribunal emphasized the mandatory nature of the notice requirement and cited relevant judicial decisions to support its conclusion. Ultimately, the Tribunal allowed the cross objection of the assessee based on the expiration of the limitation period for issuing the notice under section 143(2) and dismissed the revenue's appeal.

In conclusion, the Tribunal's judgment addressed the issues of jurisdiction under section 158BD, validity of the notice under section 143(2), and the applicability of section 292BB comprehensively, leading to the dismissal of the revenue's appeal and the allowance of the cross objection by the assessee.