2012 (4) TMI 656 - AT - Income Tax

Tribunal dismisses appeal due to procedural error in assessment notice issuance. Section 292BB not applicable pre-2008.

The Tribunal upheld the deletion of additions by the CIT(A) due to the invalidity of the assessment caused by the non-issuance of notice under Section ... Validity of assessment u/s.143(3) r.w.s 158BC - notice u/s.143(2) was issued and served beyond the period of 12 months from the date of filing of return of income in pursuant to notice u/s.158BC - Held that:- From a perusal of para 4 of the assessment order, it is seen that the Assessing Officer has mentioned, that notice u/s.143(2) and 142(1) were issued to the assessee. During the course of the hearing, it was clarified before the Bench by the learned AR that it is a matter of record that the notice u/s.143(2) has been issued beyond the period of 12 months from the end of the month in which the return was filed. i.e. 19.05.2003. DR has also not disputed this fact and admitted that the notice u/s.143(2) has been issued beyond the period of 12 months. Accordingly, the appeal filed by the department stands dismissed on the preliminary issue raised by the respondent-assessee. Issues Involved:1. Deletion of addition under Section 68 and bogus interest expenses under Section 69C.2. Consideration of documents and corroborative evidence found during the search.3. Acceptance of retraction of a statement after seven years.4. Validity of the assessment due to the timing of notice issuance under Section 143(2).Detailed Analysis:1. Deletion of Addition under Section 68 and Bogus Interest Expenses under Section 69C:The department challenged the deletion of an addition of Rs. 13.5 Lacs under Section 68 and bogus interest expenses of Rs. 3,68,958/- and Rs. 3,300/- under Section 69C by the CIT(A). The CIT(A) deleted these additions on the grounds that the assessee had failed to conclusively prove the creditworthiness of the donor and the genuineness of the transaction. However, the CIT(A) relied on the statement of the lender affirming the loan, which the department contended was not sufficient given the documents and other corroborative evidence found during the search.2. Consideration of Documents and Corroborative Evidence Found During the Search:The department argued that the CIT(A) failed to consider the documents and other corroborative evidence found during the search at the premises of Shri Khemchand Shah. The CIT(A) relied on the lender's statement without adequately addressing the evidence gathered during the search, which suggested the transactions were not genuine.3. Acceptance of Retraction of a Statement after Seven Years:The department also contested the CIT(A)'s acceptance of the retraction of Shri Khemchand Shah's statement after a gap of seven years. The original statement was recorded under oath at the time of the search, and the retraction was not considered timely or credible by the department.4. Validity of the Assessment Due to the Timing of Notice Issuance under Section 143(2):The assessee-respondent raised an additional ground, arguing that the assessment under Section 143(3) read with Section 158BC was invalid as the notice under Section 143(2) was issued and served beyond the period of 12 months from the date of filing the return of income. This additional ground was admitted by the Tribunal under Rule 27 of the Income Tax (Appellate) Tribunal Rules, 1963, as it involved a question of law regarding the validity of the assessment.The Tribunal noted that the notice under Section 143(2) was indeed issued beyond the stipulated 12-month period, which rendered the assessment invalid. This position was supported by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Hotel Blue Moon, which established that failure to issue notice within the specified time limit invalidates the assessment.Conclusion:The Tribunal upheld the deletion of the additions by the CIT(A) on the grounds that the assessment order was rendered invalid due to the non-issuance and service of notice under Section 143(2) within the prescribed time limit. Consequently, the appeal filed by the department was dismissed on this preliminary issue. The arguments on the merits of the addition were not adjudicated due to the finding on the validity of the assessment. The Tribunal confirmed that Section 292BB was not applicable prior to the assessment year 2008-09, as held by the jurisdictional High Court in the case of CIT Vs. Salman Khan. The appeal by the department was dismissed, and the order pronounced on April 13, 2012.