2022 (12) TMI 884 - AT - Income Tax

Non issuance of a notice u/s 143(2) on the revised return - filing of revised return on the last date - HELD THAT - The assessment proceedings were set into motion. Now section 139(5) provides two situations to an assessee for revising its return of income, namely if an assessee after furnishing the return under section 139(1) or in response to notice under section 142(1) discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of relevant assessment year or before the completion of the assessment, whichever is earlier. The assessee has filed the revised return no doubt within one year from the end of the assessment year 2013-14 as well as before the end of the completion of the assessment proceedings. The judgments, which are being referred by the ld. Counsel for the assessee are concerned, they propound that when revised return is being filed, then original return would obliterate. In other words, the original return would become redundant and the determination of taxable income is to be made on the basis of revised return. In none of the cases, it has been propounded that 143(2) notice was must on the revised return, otherwise whole assessment proceeding would vitiate. Let us explain the situation in a different manner also. Section 139(5) authorizes the assessee to file the return before completion of the assessment order. In the present case, assessment order has been passed on 18.03.2016. Hearing must have been concluded 2-3 days prior to this date because AO has to draft the assessment order. On 17th March, assessee filed a revised return without the knowledge of the AO because such return in A.Y. 2013-14 would be filed at the receipt counter. Can assessment order would be declared nullity for not issuing 143(2) notice on such return, because it is quite impossible at the end of the ld. Assessing Officer to take cognizance of such a fact in such a short period of time. This type of step can be taken at the end of an assessee for frustrating the whole assessment machinery. Yes, once a revised return is being filed, certainly its figure can be taken into consideration as propounded in the various decisions cited by the ld. Counsel for the assessee. Therefore, in our opinion, it was only an irregularity and not an illegality. It could have been cured by the ld. 1st Appellate Authority by calling a remand report from the ld. Assessing Officer after re-determination of the income on the basis of revised return, but to declare the assessment order as a null and void is not in accordance with law. On due consideration of all these facts and circumstances, we set aside the impugned order of the ld. CIT(Appeals) and restore this issue to the file of the ld. Assessing Officer.

Summary

Issues Involved:
1. Validity of the assessment order annulled by the CIT(A) due to non-issuance of notice under section 143(2) on the revised return.
2. Whether the non-issuance of notice under section 143(2) on the revised return is a fatal error or a mere irregularity.

Detailed Analysis:

1. Validity of the assessment order annulled by the CIT(A) due to non-issuance of notice under section 143(2) on the revised return:
The Revenue appealed against the CIT(A)'s decision to annul the assessment order based on the submission that no notice under section 143(2) was issued on the revised return. The CIT(A) found that the revised return was filed within the permissible time under section 139(5), and thus, the assessment should have been based on this revised return. The CIT(A) cited several judicial precedents which support the view that once a revised return is filed, the original return stands effaced, and the assessment must be based on the revised return. The CIT(A) concluded that the failure to issue a notice under section 143(2) on the revised return vitiated the assessment proceedings, rendering the assessment order invalid.

2. Whether the non-issuance of notice under section 143(2) on the revised return is a fatal error or a mere irregularity:
The Tribunal considered whether the non-issuance of a notice under section 143(2) on the revised return was a fatal error or a mere irregularity. The Tribunal noted that section 143(2) requires the Assessing Officer to issue a notice if it is necessary to ensure that the assessee has not understated income or claimed excessive loss. The Tribunal acknowledged that the courts have held that if no notice is issued within the prescribed time, the assessment proceedings would be void ab initio. However, in this case, a valid return was initially filed, and a notice under section 143(2) was issued within the time limit, setting the assessment proceedings into motion.

The Tribunal further observed that section 139(5) allows the assessee to file a revised return before the completion of the assessment. The key issue was whether the non-issuance of a notice under section 143(2) on the revised return rendered the assessment order void. The Tribunal distinguished the present case from the judicial precedents cited by the assessee, noting that none of those cases explicitly required a notice under section 143(2) on the revised return to validate the assessment proceedings. The Tribunal opined that the non-issuance of such a notice was an irregularity, not an illegality, and could have been rectified by the CIT(A) by calling for a remand report from the Assessing Officer.

Conclusion:
The Tribunal concluded that the non-issuance of a notice under section 143(2) on the revised return was an irregularity that could be cured, rather than a fatal error that nullified the assessment proceedings. The Tribunal set aside the CIT(A)'s order and remanded the matter to the Assessing Officer to re-determine the taxable income based on the revised return, after providing the assessee with an opportunity for a hearing. The appeal of the Revenue was allowed for statistical purposes.