2014 (11) TMI 50 - HC - Income Tax

Reassessment order u/s 143(3) r.w. section 147 Notice issued within prescribed time or not Requirement of section 143(2) not fulfilled - Held that - In Deputy CIT v. Mahi Valley Hotels and Resorts 2005 (8) TMI 84 - GUJARAT High Court it has been held that the limitation prescribed u/s 143(2) is mandatory, the format of provision being in negative terms - if the requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language, that is to say, if the statute enacts that it shall be done in such a manner and in no other manner, such requirements are, in all cases absolute and neglect to attend to such requirement will invalidate the whole proceeding also in Asst. CIT v. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA it has been held that the AO has to necessarily follow the provisions of section 142 and sub-sections (2) and (3) of section 143 - both the CIT(A) and the Tribunal have held that the procedure prescribed of issuance of notice u/s 143(2) has not been followed at all - This realm of fact has not been disputed by the Revenue - the assumption of the jurisdiction of issuance of notice of reopening itself would not be sustainable - in the absence of fulfilment of mandatory requirement of issuance of notice u/s 143(2) both the authorities rightly and validly held against the Revenue Decided against revenue.

Summary

Issues Involved:
- Interpretation of tax laws regarding the issuance of notice under section 143(2) of the Income-tax Act within the prescribed time frame.

Detailed Analysis:

Issue 1: Interpretation of Tax Laws
The case involved the assessment year 1996-97 where the Assessing Officer reopened the assessment under section 148 of the Act due to the belief that the assessee had not offered the sale price of shares for tax purposes. The Commissioner of Income-tax (Appeals) annulled the reassessment order under section 143(3) read with section 147 of the Act, citing the absence of a notice under section 143(2) within the stipulated time frame. The Commissioner relied on the decision in R. Dalmia v. CIT to support this conclusion. The Tribunal concurred with the Commissioner's decision, emphasizing the mandatory nature of the notice under section 143(2). The court referenced the case of Deputy CIT v. Mahi Valley Hotels and Resorts, which highlighted the absolute requirement of complying with the notice provision. The court clarified that the issuance of notice under section 143(2) is crucial for scrutiny assessment and is a mandatory step in the assessment process.

Issue 2: Compliance with Statutory Requirements
The court examined the provisions of section 143(2) of the Act, which necessitates the Assessing Officer to serve a notice on the assessee within a specified time frame to ensure accurate income reporting. The court emphasized the mandatory nature of the proviso under section 143(2), stating that failure to adhere to the prescribed timeline would invalidate the assessment proceedings. The court referred to the Finance Act, 2008, which reduced the limitation period to six months, further reinforcing the significance of timely issuance of notices. The apex court's decision in Asst. CIT v. Hotel Blue Moon underscored the importance of strict adherence to statutory provisions, rejecting the notion that procedural irregularities could be overlooked. Both the Commissioner of Income-tax (Appeals) and the Tribunal in this case found that the mandatory requirement of issuing a notice under section 143(2) had not been fulfilled, leading to the dismissal of the tax appeals in favor of the assessee.

In conclusion, the judgment highlighted the critical role of complying with statutory requirements, particularly the issuance of notices under section 143(2) of the Income-tax Act within the prescribed time frame. Failure to adhere to these mandatory provisions can render assessment proceedings invalid, as emphasized by both the Commissioner of Income-tax (Appeals) and the Tribunal in their decisions. The court's ruling affirmed the importance of procedural compliance in tax assessments and upheld the dismissal of the tax appeals due to the absence of a crucial notice under section 143(2).