2014 (11) TMI 59 - HC - Income Tax

Requirement of service of notice u/s 143(2) fulfilled or not Notice issued beyond the period of limitation - Held that - The assessee filed return of income on 31.10.2007 - even though the department claims to have sent a notice u/s 143(2) of the Act on 17.9.2008, the Revenue failed to produce any records to show that the said notice was despatched and served on the assessee - the department subsequently issued another notice u/s 143(2) of the Act on 27.8.2009, which, on the face of it, is beyond the period of limitation prescribed u/s 143(2) of the Act - the basic requirement of Section 143(2) of the Act having not been satisfied, the department's further proceedings becomes nonest in law the same is also held in Asst. CIT v. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA - omission on the part of the assessing authority to issue notice u/s 143(2) cannot be a procedural irregularity and it is not curable and, therefore, the requirement of notice u/s 143(2) cannot be dispensed with thus, no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
1. Validity of notice served under Section 143(2) of the Income Tax Act.
2. Application of Section 292BB of the Income Tax Act.

Analysis:

Issue 1: Validity of notice served under Section 143(2) of the Income Tax Act
The appeal raised questions regarding the validity of the notice served under Section 143(2) of the Income Tax Act for the assessment year 2007-2008. The case involved the assessee filing a return of income, which was selected for scrutiny based on the Computer Assisted Scrutiny System. The Assessing Officer disallowed certain expenditures claimed by the assessee and added them to the total income. The assessee appealed to the Commissioner of Income Tax (Appeals), who upheld the Assessing Officer's order. Subsequently, the Tribunal found that the notice under Section 143(2) was served beyond the prescribed time limit, rendering the assessment invalid. The High Court emphasized the mandatory nature of serving notice under Section 143(2) to ensure proper assessment and held that the failure to comply with this requirement renders further proceedings nonest in law. Citing a Supreme Court decision, the High Court concluded that the absence of a notice under Section 143(2) is not a procedural irregularity and cannot be cured, thus dismissing the appeal.

Issue 2: Application of Section 292BB of the Income Tax Act
The second issue raised in the appeal was the non-application of Section 292BB of the Income Tax Act by the Tribunal. Section 292BB provides that an assessment cannot be declared invalid merely due to a procedural defect or mistake in the notice, if the assessee participated in the proceedings without raising an objection. However, in this case, the High Court primarily focused on the failure to serve a valid notice under Section 143(2) and did not delve into the application of Section 292BB. The High Court's decision to dismiss the appeal was based on the fundamental non-compliance with the mandatory notice requirement, rendering further proceedings legally invalid.

In conclusion, the High Court's judgment emphasized the critical importance of serving a valid notice under Section 143(2) of the Income Tax Act for conducting a proper assessment. The failure to adhere to this statutory requirement was deemed fatal to the assessment process, leading to the dismissal of the appeal.