2012 (8) TMI 955 - HC - Income Tax

Delayed notice under Section 143(2) renders block assessment void; unexplained cash credits deleted.

COMMISSIONER OF INCOME TAX-III Versus PANORAMA BUILDERS PVT LTD.

The High Court affirmed that the delayed issuance of notice under Section 143(2) rendered the block assessment order null and void. The addition of ... Validity of notice - mandatory requirement of issuance of notice within the statutory fixed by the proviso to section 143(2) - period of limitation - Held that:- We are of the considered opinion that section 292BB does not apply to issuance of notice, neither it cures the defect or enlarges statutory period where a mandatory notice under section 143(2) of the Act is required to be issued within limitation fixed under the Act. In absence of issuance of the notice under the proviso to section 143(2) of the Act within a period of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to block assessment period 1.4.1997 to 25.7.2002 on the basis of notice issued on 6.7.2006 under section 143(2), after about 20 months, was time barred and the entire proceedings in pursuance of such notice is null and void. - Decided in favour of assessee. Issues Involved:1. Validity of block assessment order due to delayed notice under Section 143(2).2. Deletion of addition on account of unexplained cash credits.3. Applicability of Section 292BB concerning deemed service of notice.Issue-wise Detailed Analysis:1. Validity of Block Assessment Order Due to Delayed Notice Under Section 143(2):The core issue was whether the block assessment order was null and void because the notice under Section 143(2) was not issued within the prescribed time. The facts revealed that the assessee filed the return on 6.10.2004, and the notice under Section 143(2) was issued on 6.7.2006, well beyond the 12-month period stipulated by the proviso to Section 143(2). The Commissioner of Income-tax (Appeals) [CIT(A)] and the Tribunal both held that such a delayed notice rendered the entire assessment proceedings null and void, relying on precedents like Assistant Commissioner of Income Tax v. Hotel Blue Moon and Smt. Bandana Gogoi v. Commissioner of Income Tax. The High Court affirmed this view, stating that the mandatory notice under Section 143(2) must be issued within the statutory period, and failure to do so invalidates the assessment proceedings.2. Deletion of Addition on Account of Unexplained Cash Credits:The Assessing Officer had added Rs. 1,42,01,000/- to the assessee's income under Section 68 due to unexplained cash credits. However, since the notice under Section 143(2) was not issued within the prescribed time, the entire assessment order, including the additions made, was rendered null and void. Consequently, the deletion of the addition by the CIT(A) and its affirmation by the Tribunal were upheld by the High Court.3. Applicability of Section 292BB Concerning Deemed Service of Notice:The Revenue argued that under Section 292BB, any defect in the service of notice is cured if the assessee has appeared in any proceeding or cooperated in any inquiry. However, the High Court clarified that Section 292BB, inserted by the Finance Act, 2008, applies prospectively and not retrospectively. Even if assumed to apply retrospectively, Section 292BB only cures defects in the service of notice and does not extend to the issuance of notice. The High Court emphasized that Section 292BB does not override the mandatory requirement of issuing a notice within the statutory period as prescribed by Section 143(2). Since the notice was issued beyond the statutory period, Section 292BB could not be invoked to validate the assessment proceedings.Conclusion:The High Court dismissed the Revenue's appeal, holding that the delayed issuance of notice under Section 143(2) rendered the block assessment order null and void. The deletion of the addition of unexplained cash credits was upheld, and Section 292BB was deemed inapplicable to cure the defect of delayed issuance of notice. The appeal did not raise any substantial questions of law and was devoid of merits.