2018 (11) TMI 873 - HC - Income Tax

Validity of assessment - Requirement of issuance of notice within prescribed time u/s 143(2) - barred by limitation - deemed service of notice - whether ITAT was justified in law in deleting direction of DRP solely on the ground that the notice u/s 143(2) was not served within limitation? - Held that - Noticeable it is that even in Gyan Prakash Gupta 1985 (7) TMI 9 - RAJASTHAN HIGH COURT , this Court did not hold that omission to serve within time was merely a procedural irregularity. In the said decision, this Court observed that assessment so made without notice under Section 143(2) could only be set aside and not annulled. Be that as it may, now the law declared in Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA) puts it beyond a pale of doubt that the requirement of issuance of notice within prescribed time under Section 143(2) of the Act for the purpose of assessment in case of the AO repudiating the return filed by the assessee in response to the notice under Section 158BC is a mandatory requirement and omission to serve such a notice within time is not a curable irregularity of procedure, as assumed by the ITAT in its earlier order dated 28.04.2006. The order dated 12.10.2012 being squarely in consonance with the requirements of justice, and on the admitted fact situation that the notice under Section 143(2) of the Act was not given in this case within prescribed time, no case for interference is made out. - Decided against revenue

Summary

Issues:
1. Validity of notice served under section 143(2) for assessment.
2. Justification of ITAT's decision on technical issues over merits.
3. Legality of quashing draft assessment order due to limitation.

Issue 1: Validity of notice served under section 143(2) for assessment

The appellant challenged the Tribunal's decision to allow the assessee's appeal based on the service of the notice under section 143(2). The appellant contended that the Tribunal erred in holding that the notice was not served in the prescribed manner. Citing precedents like Banarasi Devi vs. Income Tax Officer and Income Tax Officer vs. Dharam Narain, the appellant argued that the notice should be considered valid even if served beyond the prescribed time. However, the respondent supported the tribunal's decision, emphasizing the mandatory requirement of serving the notice within the prescribed time as per the Supreme Court's ruling in Hotel Blue Moon. The respondent also highlighted the pendency of an appeal against a previous order, indicating that the proceedings had not attained finality. Ultimately, the High Court agreed with the tribunal's decision, stating that no substantial question of law arose, and dismissed the appeal.

Issue 2: Justification of ITAT's decision on technical issues over merits

The appellant raised concerns about the ITAT's decision to focus on technical issues rather than delving into the merits of the case. The appellant argued that the ITAT should have considered the substantive aspects of the case instead of solely relying on procedural grounds. However, the respondent supported the ITAT's approach, citing previous court decisions to justify the tribunal's actions. The High Court concurred with the tribunal's reasoning, finding no grounds for interference in the matter, and upheld the decision.

Issue 3: Legality of quashing draft assessment order due to limitation

The appellant contested the ITAT's decision to quash the draft assessment order on the grounds of limitation. The appellant claimed that the ITAT's action was unwarranted and that the circular relied upon by the CBDT did not apply in this case. However, the respondent defended the ITAT's ruling, citing relevant court judgments to support the decision. The High Court, after considering the arguments presented, agreed with the ITAT's decision, stating that the notice under section 143(2) was not served within the prescribed time, and thus, no case for interference was made out. Consequently, the appeal was dismissed.

In conclusion, the High Court upheld the Tribunal's decision in favor of the assessee, emphasizing the importance of serving notices within the prescribed time limits as mandated by law. The Court found no substantial questions of law to warrant interference in the matter and dismissed the appeal accordingly.