2014 (8) TMI 732 - HC - Income Tax

Validity of belated notice u/s 143(2) in pursuance of section 292BB - scrutiny assessment - Assessee had cooperated with the proceedings - Held that - The Tribunal had rightly noted that the AO had recorded in the order of assessment that a notice u/s 143 (2) of the Act was issued on 6 October 2009 much beyond the period prescribed u/s 143(2) of the Act which was till 30 September 2009 - no notice u/s 143(2) of the Act was issued within the prescribed period, the Tribunal rightly held that the assessment was not valid - where the AO fails to issue a notice within the period of six months as spelt out in the proviso to clause (ii) of Section 143 (2) of the Act, the assumption of jurisdiction u/s 143 (3) of the Act would be invalid. The defect in regard to the assumption of jurisdiction cannot be cured by taking recourse to the deeming fiction u/s 292BB of the Act - Section 292 BB of the Act cannot come to the aid of the revenue in a situation where the issuance of a notice itself was not within the prescribed period, in which event the question of whether it was served correctly or otherwise, would be of no relevance whatsoever - Failure to issue a notice within the prescribed period would result in the AO assuming jurisdiction contrary to law thus, the order of the Tribunal is upheld Decided against Revenue.

Summary

Issues:
- Validity of assessment order under Section 143(3) of the Income Tax Act, 1961
- Interpretation of Section 292 BB of the Act
- Effect of non-issuance of notice under Section 143(2) within the prescribed period

Validity of assessment order under Section 143(3) of the Income Tax Act, 1961:
The case involved an appeal by the Revenue under Section 260A of the Income Tax Act, 1961, concerning the assessment year 2008-09. The dispute arose from the issuance of a notice under Section 143(2) of the Act beyond the prescribed period. The Commissioner of Income Tax (Appeals) and the Tribunal held that the assessment order passed under Section 143(3) was invalid due to the late issuance of the notice. The Tribunal emphasized that the notice under Section 143(2) is crucial for the Assessing Officer to assume jurisdiction over the assessee for assessment. As the notice was issued beyond the stipulated time frame, the assessment was deemed invalid, leading to the dismissal of the Revenue's appeal.

Interpretation of Section 292 BB of the Act:
The discussion revolved around the provisions of Section 292 BB of the Act, inserted in 2008. This section creates a deeming fiction where, if the assessee has cooperated in any assessment or reassessment proceeding, any notice required to be served is deemed to have been duly served on time. The assessee is barred from challenging the notice's service, timing, or manner if no objection was raised before the completion of assessment or reassessment. However, this deeming provision does not override the necessity of complying with jurisdictional conditions. The judgment highlighted that Section 292 BB cannot cure a defect in jurisdiction, such as the non-issuance of a notice within the prescribed period.

Effect of non-issuance of notice under Section 143(2) within the prescribed period:
The Court emphasized the significance of issuing a notice under Section 143(2) within the specified time frame for assuming jurisdiction over the assessee. Failure to issue the notice within the prescribed period renders the subsequent assessment invalid. The judgment referenced a Supreme Court decision emphasizing that the omission to issue a notice under Section 143(2) is not a procedural irregularity and cannot be cured. The failure to issue a notice within the prescribed period results in the Assessing Officer assuming jurisdiction unlawfully, making the assessment invalid. The judgment dismissed the Revenue's appeal, affirming the Tribunal's decision regarding the invalidity of the assessment order due to the late issuance of the notice.