2017 (10) TMI 166 - AT - Income Tax

Validity of best judgement assessment u/s 144 - delay in issuing notice u/s 143(2) - period of limitation - Held that - The assessee has filed return for the A.Y. 2006-07 on 12-6-2007. As per the pre amended proviso, notice ought to have been issued on or before 30-6-2008. The A.O. has issued notice u/s 143(2) on 24-9-2008. Therefore, considering the facts of the case and also respectfully following Allahabad High Court decision in the case of Tulsi Food products vs. DCIT (2012 (4) TMI 379 - Allahabad High Court) we are of the view that notice issued u/s 143(2) is clearly barred by limitation and hence, consequent assessment order passed by the A.O. u/s 144 dt 15-12-2008 is hereby quashed.

Summary

Issues Involved:
1. Validity of notice issued under Section 143(2) of the Income Tax Act.
2. Additions and disallowances made by the Assessing Officer (AO).
3. Penalty levied under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Validity of Notice under Section 143(2):
The primary issue was whether the notice issued under Section 143(2) was within the prescribed time limit. The assessee argued that the notice was barred by limitation as it was issued on 24-09-2008, whereas it should have been issued by 30-06-2008. The CIT(A) agreed with the assessee, holding that the notice was served beyond the 12-month limit from the end of the month in which the return was filed, making the assessment order invalid. This conclusion was supported by the precedent set in the case of Tulsi Food Products vs. DCIT (2016) 380 ITR 192 (All). The ITAT upheld this view, quashing the assessment order on technical grounds.

2. Additions and Disallowances by the AO:
The AO made several additions and disallowances, including those related to purchases, bad debts, commission, traveling expenses, miscellaneous expenses, and liabilities. The CIT(A) partly allowed the appeal, deleting some disallowances but confirming others, particularly a partial disallowance of commission expenses. However, since the ITAT quashed the assessment order on the ground of invalid notice, all these additions and disallowances became infructuous and were thus deleted.

3. Penalty under Section 271(1)(c):
The AO had levied a penalty for concealment of income under Section 271(1)(c). The CIT(A) confirmed the penalty related to the disallowed commission but deleted penalties on other additions. The ITAT, having quashed the assessment order, directed the AO to delete the penalty as well, rendering the penalty proceedings infructuous.

Conclusion:
The ITAT quashed the assessment order due to the invalidity of the notice issued under Section 143(2), making all subsequent additions, disallowances, and penalties void. Consequently, the appeals filed by the assessee were allowed, and the appeal by the Revenue was dismissed.