2021 (10) TMI 829 - AT - Income Tax

Validity of the assessment framed u/s 147 - there was no notice issued u/s 143(2) of the Act which was mandatory under the provisions of law - Curable defect u/s 292BB or not? - HELD THAT - Once a return is filed by the assessee in response to the notice issued under section 148 of the Act, the same is treated as if such return was furnished under the provisions of section 139(1) of the Act. Accordingly, all other provisions as prescribed under the Act shall apply to the return filed in response to the notice under section 148 of the Act. Thus it is implied that the revenue was under the obligation to serve the notice upon the assessee under section 143(2) of the Act. In holding so, we draw support and guidance from the judgment of Alpine Electronics Asia Pte. Ltd. 2012 (1) TMI 100 - DELHI HIGH COURT . As the mandatory notice was not available in the records of the Revenue. Thus it can be inferred that the notice under section 143(2) of the Act was not issued by the Revenue. Thus in the absence of such mandatory notice, the proceedings initiated under section 147 of the Act are not maintainable and liable to be quashed. Provisions of section 292BB cannot extend any benefit to the revenue. Revenue cannot be absolved from its duty for issuing notice under the provisions of section 143(2) of the Act in the given facts and circumstances for initiating the proceedings under section 147 - Decided in favour of assessee.

Issues:

1. Validity of reopening of assessment under section 147 of the Income Tax Act for Assessment Year 2000-2001.
2. Absence of notice under section 143(2) of the Act before completion of assessment.
3. Interpretation of provisions regarding notice issuance for income escapement assessment.
4. Application of section 292BB of the Income Tax Act in the absence of a mandatory notice.
5. Legal implications of not serving notice under section 143(2) for proceedings under section 147 of the Act.
6. Decision on the appeal filed by the assessee and the appeal filed by the revenue.

Issue 1: Validity of Reopening of Assessment:
The appeal challenged the reopening of the assessment for the Assessment Year 2000-2001, contending that the reasons recorded did not have a nexus with the belief that income had escaped assessment. The assessee also argued that the reassessment was time-barred. The AR argued that the absence of a notice under section 143(2) of the Act rendered the assessment unsustainable, as it was mandatory for the revenue to follow the prescribed procedure. The DR supported the authorities' order, but the tribunal found the absence of the notice crucial for the validity of the assessment under section 147.

Issue 2: Absence of Notice under Section 143(2):
The tribunal emphasized the necessity of serving a notice under section 143(2) of the Act before completing the assessment under section 147. Referring to a judgment, it highlighted that the failure to issue such a notice is not a procedural irregularity but a mandatory requirement. The absence of the mandatory notice led to the conclusion that the proceedings initiated under section 147 were not maintainable and should be quashed.

Issue 3: Interpretation of Notice Issuance Provisions:
The tribunal analyzed the provisions related to issuing a notice for income escapement assessment. It noted that the return filed by the assessee in response to the notice under section 148 is treated as if filed under section 139(1) of the Act. Citing a judgment, it reiterated the mandatory nature of serving a notice under section 143(2) for proceedings under section 147/148, emphasizing the importance of adhering to statutory timelines.

Issue 4: Application of Section 292BB:
The tribunal examined the applicability of section 292BB of the Act in the absence of a mandatory notice. It clarified that while this section deems a notice served in certain circumstances, it does not cover situations where no notice was served to initiate proceedings. Relying on a Supreme Court judgment, it concluded that the requirement of a notice under section 143(2) cannot be dispensed with, emphasizing the revenue's duty to comply with statutory provisions.

Issue 5: Legal Implications of Notice Absence:
The tribunal held that the absence of a notice under section 143(2) was a critical flaw in the assessment process under section 147. It rejected the contention to apply section 292BB to salvage the assessment, emphasizing that the revenue cannot be absolved from issuing the mandatory notice. Consequently, the assessment framed under section 147 was deemed bad in law and liable to be quashed.

Issue 6: Decision on Appeals:
The tribunal partially allowed the appeal filed by the assessee due to succeeding on the technical ground of the absence of the mandatory notice. As a result, it did not address the issues raised on merit. The appeal filed by the revenue was dismissed in light of the invalidity of the assessment under section 147. The combined result saw the assessee's appeal partly allowed and the revenue's appeal dismissed.

This detailed analysis of the judgment highlights the key legal issues, interpretations of statutory provisions, and the tribunal's decision regarding the validity of the assessment under section 147 of the Income Tax Act for the Assessment Year 2000-2001.

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