2005 (8) TMI 84 - HC - Income Tax

Assessment - (1) Whether Tribunal was right in law and on facts in holding that the assessment void ab initio holding that when an assessment is framed under section 143(3) by issuing statutory notice beyond the prescribed time limit the said assessment is bad in law and has to be quashed ignoring the fact that the assessee has not challenged the jurisdiction of the Assessing Officer during the course of assessment proceedings on the ground that notice under section 143(2) was served beyond the time limit prescribed under the Act? - revenue submitted that the assessee having participated in the proceedings before the Assessing Officer there was acquiescence and waiver on the part of the assessee which would result in the assessment being valid in law and the Commissioner of Income-tax (Appeals) and the Tribunal were wrong in reading the provisions as being mandatory so as to treat the assessment void ab initio. - revnue appeal dismissed

Summary

Issues:
1. Validity of assessment under section 143(3) of the Income-tax Act due to notice issued beyond the prescribed time limit.
2. Interpretation of the mandatory nature of the limitation prescribed under section 143(2) of the Act for serving notice.

Issue 1:
The appellant-Revenue challenged the validity of the assessment under section 143(3) of the Income-tax Act, contending that the notice under section 143(2) was issued beyond the statutory time limit, making the assessment void ab initio. The appellant argued that the assessee's failure to challenge the notice before the Assessing Officer and raising it only before the Commissioner (Appeals) did not render the assessment invalid due to acquiescence and waiver. However, the court held that the Commissioner (Appeals) has the same powers as the Assessing Officer and can entertain legal issues at any stage. The court emphasized that the notice was indeed issued beyond the prescribed time limit, making the assessment void.

Issue 2:
The second issue revolved around the mandatory nature of the limitation prescribed under section 143(2) of the Act for serving notice. The court analyzed the language of the provision and the historical context of the statutory scheme. It highlighted that the proviso to section 143(2) sets a mandatory limitation of twelve months for issuing the notice, as explained in departmental Circulars. The court emphasized that the circulars issued by the Central Board of Direct Taxes provide contemporaneous exposition of the legal position and must be adhered to by the departmental authorities. The court concluded that the orders of the Commissioner (Appeals) and the Tribunal correctly interpreted the statutory scheme, which is clear and in line with the circulars, dismissing the appeal.

The judgment underscored the mandatory nature of the limitation prescribed under section 143(2) for serving notices and upheld the assessment as void due to the notice being issued beyond the statutory time limit. The court's detailed analysis of the legal provisions and circulars emphasized the importance of adhering to prescribed timelines in the assessment process, ensuring procedural integrity and legal compliance.