2017 (6) TMI 874 - AT - Income Tax

Validity of assessment u/s 153C - wrong section was mentioned in the assessment orders - Notice for assuming jurisdiction for framing assessment order was issued under wrong section i.e. 153A instead of 153C - Held that - In the present case, undisputedly no search warrant was issued in the name of the respondentassessee but the respondent-assessee had responded to the notice issued u/s 153A by filing return of income, participated in the proceedings till the matter resulted in framing of the assessment order. During the course of assessment proceedings, the respondent-assessee was given due opportunity of meeting the case made against him and in the result there was no prejudice caused to the respondentassessee. Furthermore, it is not the case of the respondentassessee that his case even does not fall within the scope and ambit of the provisions of section 153C of the Act. The only mistake on the part of the AO is in mentioning section 153A instead of 153C. In the facts of the preset case, the provisions of section 292B clearly come into play. Under the provisions of section 292B, certain acts are not to be treated as invalid by reason of mistake or defect or omission either in the return of income, assessment, notice, summons or other proceedings. Notice cannot be invalidated by reason of any mistake such as one occurred in the present case i.e. mentioning section 153A instead of 153C. If this mistake is not allowed to be cured, the very purpose and object of enacting the provisions of section 292B is defeated. This notice, in substance and effect, is in conformity with or according to the intent and purpose of the Act. Having respondent, participated in the proceedings, respondent-assessee cannot be allowed to turn around or raise objections for the first time before the CIT(A) seeking invalidation of the proceedings initiated by issuing notice u/s 153A instead of 153C

Issues Involved:

1. Validity of notice issued under section 153A instead of 153C.
2. Applicability of section 292B to cure the defect in the notice.
3. Whether the assessee's participation in the proceedings validates the notice.
4. The role of procedural lapses in annulling the assessment.
5. Remand of the case for adjudication on merits.

Detailed Analysis:

1. Validity of Notice Issued Under Section 153A Instead of 153C:

The primary issue in these appeals is whether the assessments made under section 153A are valid when the correct section should have been 153C. The CIT(A) quashed the assessments on the grounds that there was no search warrant in the name of the assessee, and the notice issued under section 153A was invalid. The CIT(A) concluded that since the search was conducted in the case of M/s Corporate Leisure & Property Development (P) Ltd., and not the assessee, the provisions of section 153A were not applicable.

2. Applicability of Section 292B to Cure the Defect in the Notice:

The revenue argued that the provisions of section 292B should apply, which states that no notice shall be invalid merely due to any mistake, defect, or omission if it is in substance and effect in conformity with the intent and purpose of the Act. The Tribunal examined the provisions of section 292B, which aim to prevent invalidation of proceedings due to minor errors if the overall intent and purpose of the Act are met. The Tribunal referenced the jurisdictional High Court's decision in the case of Micro Labs Ltd., which emphasized that the notice should conform to the intent and purpose of the Act.

3. Assessee's Participation in the Proceedings:

The Tribunal noted that the assessee had responded to the notice issued under section 153A, filed returns, and participated in the assessment proceedings. It was observed that the assessee did not raise any objections regarding the validity of the notice during the assessment process. The Tribunal held that the assessee's participation without objection implied acceptance of the notice, and the procedural defect could be cured under section 292B.

4. Procedural Lapses and Annulling the Assessment:

The Tribunal found that the CIT(A) erred in annulling the assessments based on procedural lapses without considering the applicability of section 292B. It was emphasized that the purpose of issuing the notice was to assess the income based on incriminating material found during the search, and the mere mention of the wrong section did not invalidate the proceedings.

5. Remand for Adjudication on Merits:

The Tribunal concluded that the CIT(A) ignored the provisions of section 292B and should not have allowed the appeals solely on procedural grounds. The Tribunal remanded the matter back to the CIT(A) to adjudicate the case on the merits of the additions made by the Assessing Officer. Consequently, the appeals filed by the revenue were partly allowed for statistical purposes, and the cross objections filed by the assessee were dismissed as infructuous.

Conclusion:

The Tribunal's decision emphasizes the importance of substantive compliance over procedural lapses, highlighting that minor errors in notices can be cured under section 292B if the overall intent and purpose of the Act are met. The case was remanded for a fresh adjudication on the merits, ensuring that the substantive issues are addressed.

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