TMI Blog2014 (1) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143 (2) (ii) as applicable - All proceedings pursuant to such notice are held to be illegal - Decided in favour of assessee. - ITA No. 5796/Del/2010 - - - Dated:- 20-12-2013 - Shri S. V. Mehrotra And Shri A. D. Jain,JJ. For the Petitioner: Shri Ajay Vohra, Advocate For the Respondent : Shri Sanjeev Sharma, CIT,DR ORDER Per A. D. Jain, Judicial Member: This is Assessee's appeal for Assessment Year 2007-08 against the order dated 27.10.2010, passed by the Assessing Officer u/s 144C read with Section 143 (3) of the IT Act, 1961, taking the following grounds:- "1. That on the facts and circumstances of the case the assessment order dated 27.10.2010 passed under section 144C read with section 143 (3), pursuant to directions issued by the DRP under section 144C (5) of the Income-tax Act, 1961 ('the Act'), is barred by limitation, beyond jurisdiction, bad in law and void-ab initio. 1.1 That on the facts and circumstances of the case, the assessment proceedings having been initiated vide notice under section 143 (2) of the Act served upon the assessee beyond the prescribed time limit was barred by limitation. 1.2 That on the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther without prejudice, that the Assessing Officer and DRP erred on facts and in law in attributing profits for the functions performed in India @ 50% of the global operating profit margin (2.3%) of the foreign company. 4. That the Assessing erred on facts and in law in charging interest under section 234B of the Act." 2. The assessee, OIP Sensor Systems India Liaison Office, as the name suggests, is Liaison Office of M/s OIP Sensor Systems, a company incorporated in Belgium. M/s OIP Sensor Systems specializes in design and development of manufacturing of high-end-opto-electronics components and systems for security, defence and space specifications. The Head Office of OIP Sensor Systems is in Flanders, Belgium. It manufactures and supplies night vision equipment and sensor imaging. 3. Apropos Ground No.1, the stand of the assessee is that the assessment order dated 27.10.2010, passed u/s 144C read with Section 143 (3) of the IT Act is barred by limitation, the notice u/s 143 (2) of the Act having been served upon the assessee beyond the prescribed time limit. The ld. Counsel for the assessee has contended in this regard that even as per the assessment order, para 1.2, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r erred in setting aside the assessment, keeping in view the provisions of Section 144C (8) of the Act; that the authorities below have wrongly taken recourse to the provisions of Section 27 of the General Clauses Act in arriving at the conclusion that the notice u/s 143 (2) of the Act was served within limitation; that in fact, the governing provision in this regard is the specific provision laid down in the Proviso to Section 143 (2)(ii) of the Act; that as per the erstwhile Proviso, no notice u/s 143 (2)(ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished; that this Proviso has been amended w.e.f. 01.04.2008, laying down that no notice u/s 143 (2)(ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished; that it is this amendment, being procedural in nature, which is applicable to pending assessments, as herein; that this position is also recognized vide CBDT Circular No.1 of 2009, dated 27.03.2009, 310 ITR (St.) 42, at page 86, para 42.8, which states that "the amended provision (sic proviso) of Section 143 (2) of the Act sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Section 292-BB shall not apply where the assessee has raised an objection regarding the non-service of any notice under the Act on him in time, before the completion of the assessment or re-assessment; and that 'Alpine Electronics Asia Pte Ltd. vs. ITO', 341 ITR 347 (Del) (APB 12-36) recognizes this position under the Proviso to Section 292-BB of the Act. 5. The Ld. DR, on the other hand, has filed written submissions on this issue. 6. We have heard the parties on this issue with regard to the material placed on record. The first question up for determination is the provision under which the limitation is to be considered. The Proviso to Section 143 (2) (ii) is the relevant specific provision in this regard. Section 143 (2) (ii) reads as follows:- "143 (2) (ii) - Where a return has been furnished u/s 139, or in response to a notice under sub-section (i) of Section 142, the Assessing Officer shall, (i) .............. (ii) Notwithstanding anything contained in Clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excess loss or has not under-paid the tax in any manner, serve on the assessee a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice u/s 34, rather a partner thereof had been served with such notice. It was held that it was not open to the other partners of the firm to contend that the proceedings taken by the ITO u/s 34 were invalid on the ground that notices of those proceedings were not served on the other alleged partners of the firm. It was in this context that their Lordships held that the notice prescribed by Section 34 of the Income- tax Act, 1922 for the purpose of initiating re-assessment of proceedings is not a mere procedural requirement. 13. Therefore, there is no force in the reliance by the department on this decision. Undeniably, so far as the aspect of limitation is concerned, the governing provisions regarding the limitation are procedural provisions and, hence, retrospective in nature, a position also recognized by the CBDT while issuing Circular No.1 of 2009 (supra), dated 27.03.2009, which is binding on the Taxing Authorities. To quote from the said Circular: "42.6 Further, clause (ii) of sub-section (2) of section 143 of Income- tax Act has been amended to provide that the notice under sub-section (2) of section 143 shall be served on the assessee within a period of six months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual service and not the date of issuance of such notice. The authorities below have taken the date of issuance of notice, i.e., 30.09.2008 as the deemed date of service, seeking to invoke the provisions of Section 27 of the General Clauses Act. The assessee, on the other hand, maintains that since the notice was served on 01.10.2008, it is this date which is the date of service of notice and which date is beyond the limitation prescribed by the applicable Proviso to Section 143 (2) (ii) of the Act. 17. As observed herein before, the amended Proviso to Section 143 (2) (ii) is the specific provision governing the limitation in question. Therefore, there is no justification in taking recourse to the provisions of the General Clauses Act. 18. Moreover, in 'Vardhaman Estate (P) Ltd.' (supra), it has been held that where there is no material to suggest that the notice u/s 143 (2) of the Act, sent by speed post, was served on the assessee on any date earlier than the one maintained by the assessee, the contention that since the notice was dispatched on a particular date, that should be the deemed date of service, cannot be accepted. While holding so, the Hon'ble jurisdictional High C ..... 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