2012 (7) TMI 939 - AT - Income Tax

Appellate Tribunal Invalidates Assessment Due to Delayed Notice, Emphasizes Statutory Timelines

The Appellate Tribunal allowed the appeal filed by the appellant-company primarily due to the notice under section 143(2) being issued beyond the ... Reopening of assessment - whether the lapse of issuing notice under section 143 (2) of the Act beyond prescribed time limit can be cured by the provisions of section 292BB? - Held that:- Notice under section 143(2) was issued beyond the prescribed limit, hence, it was not a valid notice. As the assessment year under consideration is prior to AY 2008-09, so, provisions of section 292BB of the Act are also not applicable. In our opinion assessment proceedings completed in pursuance of a time barred notice were bad in law and invalid. Issues:1. Validity of notice under section 143(2) of the Income Tax Act.2. Reopening of assessment under section 147 of the Act.3. Applicability of section 292BB of the Act.4. Treatment of consideration for capital gains taxation.Issue 1: Validity of notice under section 143(2) of the Income Tax Act:The appellant raised concerns regarding the notice issued under section 143(2) of the Act being beyond the prescribed time limit. The Appellate Tribunal noted that the notice was indeed issued after the stipulated period. The Tribunal referred to the provisions of section 292BB of the Act and emphasized that these provisions are applicable from April 1, 2008, onwards. Citing legal precedents, the Tribunal concluded that the notice issued beyond the time limit was not valid, especially considering that the assessment year in question was before 2008-09. Consequently, the Tribunal held that the assessment proceedings based on the time-barred notice were legally flawed and invalid.Issue 2: Reopening of assessment under section 147 of the Act:The Assessing Officer (AO) reopened the assessment for the appellant-company based on discrepancies related to the consideration for development rights granted by the company. The AO considered the stamp duty authorities' valuation of the property, which was significantly higher than the consideration recorded by the company. The AO applied section 50C of the Act to determine capital gains. The appellant contested the reopening, arguing that it was a change of opinion and lacked new tangible evidence. However, the First Appellate Authority upheld the AO's decision. Ultimately, the Tribunal did not delve into this issue extensively due to the primary focus on the validity of the notice under section 143(2).Issue 3: Applicability of section 292BB of the Act:The appellant contended that section 292BB, which deems notices valid in certain circumstances, did not apply to the assessment year in question. The Tribunal analyzed legal interpretations and concluded that section 292BB had prospective applicability from April 1, 2008. Given that the assessment year predated this, the Tribunal determined that section 292BB did not validate the notice issued beyond the prescribed time limit.Issue 4: Treatment of consideration for capital gains taxation:The appellant argued that the consideration recorded in the books of account should be accepted for capital gains taxation purposes, as per section 45(3) of the Act. The AO, however, relied on section 50C, emphasizing the full value of consideration received. The Tribunal did not extensively address this issue due to the primary focus on the notice's validity. However, the appellant's grounds were decided in their favor based on the notice's invalidity, rendering further adjudication unnecessary.In conclusion, the Appellate Tribunal allowed the appeal filed by the appellant-company primarily on the grounds of the notice under section 143(2) being issued beyond the prescribed time limit, leading to the invalidity of the assessment proceedings. The Tribunal's decision highlighted the importance of adhering to statutory timelines and the legal implications of notices issued outside the stipulated period.