2015 (11) TMI 1859 - HC - Income Tax

Validity of assessment - non issuing notice u/s 143(2) - Curable defect u/s 292BB - HELD THAT - The contention of the Department that it is no longer open to the assessee to question the service of notice in view of the provision of s. 292BB of the Act cannot be accepted in as much as the said section came into existence w.e.f. 2008 whereas the present appeal is of the financial year 1997-98. Further the Supreme Court DISTILLERS COMPANY LIMITED 2007 (4) TMI 200 - SUPREME COURT has held that the jurisdiction of the AO starts if the notice is issued within 12 months from the end of the month when the return was filed. It has nothing to do with the service of the notice which is contemplated under s. 292BB of the Act. In view of the aforesaid authoritative decision of the Supreme Court we are of the opinion that a substantial question arises for consideration which is based on the records and which does not require investigation of any facts and therefore in our view we entertain the appeal on the aforesaid question of law. Preliminary objection raised by the learned counsel for the Department is accordingly rejected for the reasons stated aforesaid. In view of the admitted position that no notice u/s 143(2) of the Act was issued we are of the opinion that the order of the Tribunal the first appellate authority and the assessment order cannot be sustained and are quashed. - Decided in favour of assessee.

Summary

Issues:
- Jurisdiction of AO to make an assessment order without serving a notice under s. 143(2) of the IT Act within the stipulated period.

Analysis:
1. The High Court considered whether the Assessing Officer (AO) was justified in making an assessment order without serving a notice under s. 143(2) of the IT Act within the prescribed time limit. The appellant raised substantial questions of law, but the Court focused on this specific issue regarding the timeline for issuing the notice.

2. The case pertained to the assessment year 1997-98 when the law required a notice under s. 143(2) of the Act to be issued within 12 months from the end of the month when the return was filed. The appellant filed the return on 28th Nov., 1997, and the 12-month period expired on 30th Nov., 1998.

3. The assessment order revealed that the notice under s. 143(2) of the Act, along with a questionnaire, was issued on 21st June, 1999, which was almost 7 months after the expiration of the stipulated period. The assessment order was subsequently made on 27th July, 2000.

4. Referring to a Supreme Court judgment, the Court emphasized that the AO must issue the notice within the prescribed time limit to inform the assessee of the scrutiny process. In this case, the notice was issued beyond the limitation period, depriving the AO of jurisdiction to proceed with the assessment.

5. The Court concluded that after the expiry of 12 months, the AO lacked jurisdiction to proceed with the assessment and should have accepted the return as filed by the assessee. Therefore, the assessment order by the AO, as well as the orders of the first appellate authority and the Tribunal, were deemed unsustainable.

6. The Department argued that the appellant's failure to raise the issue before the Tribunal precluded its consideration at the High Court. However, the Court referenced a Supreme Court decision to assert that if a substantial question of law is evident from the records, it can be raised before the High Court, even if not previously argued before the lower authorities.

7. The Court disagreed with the Department's contention that the provision of s. 292BB of the Act precluded the assessee from questioning the notice's service. The Court clarified that the AO's jurisdiction commences upon issuing the notice within the stipulated period, irrespective of the notice's service.

8. Rejecting the Department's preliminary objection, the Court quashed the orders of the Tribunal and the first appellate authority, along with the assessment order, due to the absence of a notice under s. 143(2) of the Act. The appeal was allowed in favor of the assessee.