2021 (11) TMI 505 - HC - Income Tax

Validity of reopening of assessment - non issuing the notice within the period of limitation under Section 143 (2) - whether curable defect u/s 292BB - HELD THAT - The infirmities in the manner of service of notice alone would be amenable to under Section 292BB of the Act, but not the complete absence of notice itself. Notice issued beyond the period of limitation partakes the character of absence of notice itself in the eye of law. As such, Section 292BB would not save such a notice dehorse the limitation prescribed. Tribunal has rightly observed that the foundation process of reassessment is under Section 148 of the Act, but such jurisdiction is subject to further compliance as being stipulated in the statute itself and thus, quashed the assessment being invalid. It is a well settled legal principle that issuance of notice beyond period of limitation or absence of notice goes to the root of the matter and is the jurisdiction aspect, not a procedural irregularity and the same is not curable. Failure of the assessing officer in issuing the notice within the period of limitation under Section 143 (2) of the Act which is a notice giving jurisdiction to the assessing officer to frame assessment cannot be condoned by referring to S.292BB of the Act. We find no ground to interfere with the impugned order of the Tribunal. Substantial question of law in favour of the assessee

Summary

Issues Involved:
1. Validity of the assessment order due to the issuance of notice under Section 143(2) of the Income Tax Act, 1961 beyond the prescribed period of limitation.
2. Applicability of Section 292BB of the Income Tax Act, 1961 in curing the defect of late issuance of notice.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order:
The primary issue in this case was whether the assessment order dated 28.03.2014 was valid, given that the notice under Section 143(2) of the Income Tax Act, 1961 was issued beyond the period of limitation. The Tribunal quashed the assessment order on the grounds that the notice under Section 143(2) was issued on 21.10.2013, which was beyond the prescribed period of limitation, as the financial year ended on 31.03.2013, and the six-month period lapsed on 30.09.2013. The Tribunal held that the assessing officer could not assume jurisdiction to frame the assessment due to this delay.

2. Applicability of Section 292BB:
The Revenue argued that the delay in issuing the notice should be considered curable under Section 292BB of the Act, which deems a notice valid if the assessee has participated in the proceedings without raising an objection. However, the Tribunal and the High Court both held that Section 292BB could not be invoked to cure the complete absence of a notice or a notice issued beyond the limitation period. The High Court referenced several judgments, including the Supreme Court's decision in Commissioner of Income-tax V/s. Laxman Das Khandelwal, which clarified that Section 292BB applies to defects in the service of notice, not the absence or late issuance of the notice itself.

Detailed Legal Reasoning:

1. Legal Provisions and Facts:
- Section 143(2) mandates that no notice shall be served on the assessee after three months from the end of the financial year in which the return is furnished.
- The search was conducted on 06.02.2012, and proceedings under Section 153C were initiated.
- Notice under Section 142(1) was issued on 12.09.2013, and the assessee replied on 08.10.2013, stating that the return for the assessment year 2012-13 was already filed on 26.09.2012.
- Notice under Section 143(2) was issued on 21.10.2013, beyond the statutory period.

2. Judicial Precedents and Arguments:
- The Revenue cited several judgments to argue that the delay could be cured under Section 292BB, but the High Court distinguished these cases, emphasizing that the issuance of notice within the limitation period is a jurisdictional requirement.
- The High Court referred to the Supreme Court's decision in Laxman Das Khandelwal, which held that Section 292BB does not save the complete absence of a notice or a notice issued beyond the limitation period.

3. High Court's Conclusion:
- The High Court concluded that the failure to issue the notice within the prescribed period under Section 143(2) is a jurisdictional defect, not a procedural irregularity, and cannot be condoned under Section 292BB.
- The High Court upheld the Tribunal's decision to quash the assessment order, stating that the notice issued beyond the limitation period is equivalent to the absence of notice itself.

Final Judgment:
The High Court answered the substantial question of law in favor of the assessee and against the Revenue, dismissing the appeal and upholding the Tribunal's decision to quash the assessment order due to the late issuance of the notice under Section 143(2).