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2017 (12) TMI 1063 - HC - Income TaxValidity of notice u/s 143(2) - period of limitation - Held that - In the present case, we do not see any such proceedings in which the assessee was informed of the inadmissibility of the returns or the grounds on which the returns were sought to be rejected. A notice was issued under Section 158BC on 23.05.2000 and the assessee filed its return in Form 2B on 24.07.2000. It was after the returns were filed, the necessity of a notice under Section 143(2) of the Act arises; if the return is not accepted. Assessing Officer was obliged to issue such a notice within the 12 month period as provided under Section 143(2) of the Act. Herein, though a contention is raised that the notice was dated prior to the limitation period, it was served only after the period of limitation, as admitted by the department before the Tribunal. Whether it is three days, three months or three years, if the notice is served after the limitation period, there could be no further proceedings taken. We are inclined to agree with the order of the Income Tax Appellate Tribunal and answer the question in favour of the assessee and against the Department.
Issues:
1. Sustainability of proceedings for reassessment due to notice served beyond the time stipulated in Section 143(2) of the Income Tax Act, 1961. Analysis: 1. The case involved the question of the sustainability of reassessment proceedings due to a notice served on the assessee beyond the time limit specified in Section 143(2) of the Income Tax Act, 1961. The notice under Section 158BC was issued on 23.05.2000, and the notice under Section 143(2) was served on the assessee on 03.08.2001, three days after the limitation period, as prescribed in the Proviso to Section 143(2) of the Act. 2. The interpretation of Section 143(2) was crucial in this case. The Government of India (Taxes) Senior Counsel relied on precedents such as Assistant CIT v. Hotel Blue Moon and a Division Bench judgment in I.T.A No.65 of 2015. The contention was whether the notice under Section 143(2) needed to be served within the stipulated time or merely issued. The Division Bench in I.T.A No.65 of 2015 found that the absence of a notice under Section 143(2) is not relevant when the assessee participates in the proceedings, citing precedents like K.J Thomas v. Commissioner of Income Tax. 3. Referring to the Hotel Blue Moon case, it was established that the notice under Section 143(2) is mandatory for initiating an inquiry post the filing of a return. The argument was made that the Supreme Court's decision in Hotel Blue Moon emphasized the issuance of notice under Section 143(2) and not just the service within the prescribed time limit. However, the court disagreed, stating that the proviso clearly mentions 'service' and not 'issuance,' and the Supreme Court did not address the specific issue of service within the time limit. 4. The Division Bench's decision in I.T.A No.65 of 2015 regarding the reopening of assessment under Section 147 due to income escapement was also considered. The court highlighted the importance of informing the assessee of the grounds for rejection of returns and inadmissibility of deductions. The absence of such notice post-assessment was deemed unsustainable, as seen in previous cases like K.J. Thomas. 5. Ultimately, in the present case, the court found that the notice under Section 143(2) was served after the limitation period, rendering any further proceedings invalid. The court upheld the Income Tax Appellate Tribunal's decision in favor of the assessee, emphasizing the importance of adhering to the statutory time limits for serving notices. 6. The Senior Counsel's argument that the assessee did not raise the limitation issue earlier was countered by the court, stating that the question of limitation can be raised at any time. The enactment of Section 292BB was cited as a remedy, deeming a notice served if the assessee cooperated in the assessment process. However, the court rejected the appeal, upholding the Tribunal's decision, and no costs were awarded in the matter.
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