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June 30, 2022

The assessment is invalid because it was based on a late Section 143(2) notice

by CA Shivam Jaiswal in Income Tax

The assessment is invalid because it was based on a late Section 143(2) notice

Facts and issues of the case

The captioned appeal has been filed at the instance of  the assessee against the order of the Commissioner of Income Tax (Appeals)-III, Gurgaon (‘CIT(A)’ in short) dated 29.01.2015 arising from the assessment order dated 28.03.2013 passed by the Assessing Officer (AO) under Section 153B(1)(b) of the Income Tax Act, 1961 (the Act) concerning AY 2011-12.When the matter was called for hearing, ld. counsel for the assessee straightaway submitted that the assessment in  the  instant case has been passed on the basis of a time barred and nonest notice issued under Section 143(2) of the Act and therefore the entire assessment is required to be quashed at the threshold. It was pointed

out  that search in  the instant case was  conducted on  21.06.2010 and as a consequence thereof, notice under Section 153A were issued in respect of last six previous assessment years immediately preceding relevant to the Financial Year 2010-11 in  question. The assessment year A.Y. 2011-12 (F.Y. 2010-11), in the instant case, is the year of search and hence not covered by the Special provisions of  Section 153A but is governed by normal mechanism available for assessment and  thus normal procedure of  assessment stipulated under Sections 139 to 151 would apply. The  assessment  however,  in  the  instant case, has been carried out for  which order was  passed incorrectly under Section 153(B)(1)(b) r.w. Section 143(3) of the Act.

Adverting further, the ld. counsel pointed out that in the wake of the fact that normal procedure for assessment applies to the year of search, the notice under Section 143(2) is required to be issued within the limitation period specified in as per proviso to Section 143(2) of the Act. This would mean that the  notice under Section 143(2) for assumption of jurisdiction to  assess  the  income  of assessee for AY 2011-12 cannot be served to the assessee after the expiry of six months from the end of the financial year, i.e., F.Y. 2010-11 in which the return has been furnished. The return for the Assessment Year 2011-12  was  filed  on  14.10.2011. Consequently, the notice was required to be  issued by  30th September, 2012 as  per the limitation period specified under Section 143(2) of the Act. The notice under Section 143(2), in the instant case, has however been issued on 14.11.2012 which is clearly beyond the time  limit prescribed under Section 143(2) of the Act. As a consequence, the jurisdiction of the Assessing Officer to frame the assessment for Assessment Year 2011-12 is ousted at the threshold and the entire assessment framed in pursuance of a belated jurisdictional notice is null and void at the threshold.It was thus contended on behalf of the assessee that  the impugned assessment order is required to be quashed being clearly barred by limitation.Ld. DR for the Revenue, on the  other hand, relied upon the action of the lower authorities.

Observation by the court

The validity of impugned assessment order resulting in present appeal is under challenge on the grounds of notice  issued  under Section 143(2) purportedly barred by limitation. It is the case of the assessee that, in the instant case, assessee has filed the return  of income on 14.10.2011 and consequently in view of limitation period provided under Section 143(2) of the Act for framing assessment, the notice under Section 143(2) could not have been issued after 30th September, 2012. The notice under Section 143(2) in the instant case has been issued on 14.11.2012 which is beyond the time limit permissible under Section 143(2) of the Act. The second line of contention of  behalf of  the assessee is  that the order in  the instant case has been  innocuously passed under  Section 153B(1)(b) of  the Act which is clearly bad in law owning to the fact that the Financial Year 2010-11 relevant to Assessment Year 2011-12 in question is the year of search which is not covered by the special provision of Section 153A of the Act. A reference was made to several judgments including the case of ACIT vs.  Hotel  Blue  Moon  (2010)  321  ITR 0362 (SC); PCIT vs. Consortium Nussli Comfort Net 2022 (3) TMI 1247-Delhi High Court.

In view of the decision of Hon’ble  Supreme  Court  in  Hotel Blue Moon (supra), the Assessing Officer in the instant case has no jurisdiction to make assessment on the basis of belated notice issued under Section 143(2) of  the  Act.  The  defect, being  substantive, is not curable under Section 292B of the Act. Section 292BB also does not apply as the notice issued under Section 143(2) itself has been issued after limitation period and merely served belatedly. The impugned assessment order culminated from a belated jurisdictional notice is thus nonest and deserves to be quashed.

Conclusion

In the result, the appeal of the assessee is allowed.

Roshan-Lal-Verma-Vs-DCIT-ITAT-Delhi

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