2012 (1) TMI 100 - HC - Income Tax

Validity of reassessment under Sections 147/148: late 143(2) notice deemed not served, reassessment quashed and NOC directed.

Validity of reassessment proceedings turns on whether a notice under section 143(2) was served within the proviso period; the court found the notice ... Validity of reassessment proceedings u/s 147/148 - failure to issue notice u/s 143(2) within the period stipulated in the proviso to clause (ii) - effect of Section 292BB - petitioner had filed returns of income vide letter dated 19th November, 2009 in response of notice issued u/s 147/148, adopting their earlier returns u/s 139(1) – objections to the reopening were filed by petitioner on 13th July, 2010 and 19th July, 2010 and supplementary objections on 8th August, 2010 - A.O. issued notice u/s 143(2) on 23rd November, 2010 which is beyond the period of six months prescribed in the proviso to Section 143(2)(ii) - petitioner being foreign company, filed an application with the RBI for closure of their liaison office – NOC required from the Income Tax Department – Held that:- In the present case, the final assessment order has not been passed and only a draft assessment order u/s 144C has been passed. The proviso to section 292BB is applicable. The principle of estoppel u/s 292BB will, therefore, not apply. In respect of returns filed pursuant to notice u/s 148 after 1st October, 2005, it is mandatory to serve notice u/s 143(2), within the stipulated time limit. Thus, in present case, notice u/s 143(2) is deemed not to be served within the stipulated time. See ACIT vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT]. In view of the aforesaid position, reassessment proceedings should not continue as no notice u/s 143(2) was served on the assessee within the stipulated time. Accordingly, the writ petition is allowed and a Writ of Certiorari is issued quashing the assessment proceedings pursuant to the notices u/s 148. A Writ of Mandamus is issued to the Department to issue NOC to the petitioner as per the needs and requirements of the RBI within the stipulated time – Decided in favor of petitioner. Issues Involved:1. Validity of reopening assessment under Section 147/148 of the Income Tax Act.2. Requirement and timing of notice under Section 143(2) of the Act.3. Applicability of Section 292BB of the Act.4. Issuance of no objection certificate by the Income Tax Department.Detailed Analysis:1. Validity of Reopening Assessment under Section 147/148 of the Act:The petitioner, Alpine Electronics Asia Private Limited, filed an application with the Reserve Bank of India (RBI) for closing their liaison office. The RBI required an Income Tax Clearance Certificate (ITCC) or 'no objection certificate' from the Income Tax Department. The petitioner applied for the certificate, but the respondent, Assistant Director of Income Tax, initiated a detailed inquiry into the petitioner's business activities, financial details, and other information. The petitioner argued that the liaison office was only engaged in coordination work and not authorized to carry on any business activity. The respondent, however, issued notices under Section 147/148 for reopening assessments for the assessment years 2003-04 to 2006-07, alleging that the liaison office was involved in activities beyond its scope and should be treated as a permanent establishment (PE) generating income.2. Requirement and Timing of Notice under Section 143(2) of the Act:The petitioner contended that the notice under Section 143(2) of the Act was not issued within the stipulated time. The court noted that it is mandatory to serve notice under Section 143(2) within the statutory time limit. The court referred to the case of Commissioner of Income Tax vs. Lunar Diamonds Ltd., which emphasized the importance of serving notice within the prescribed period. The court also cited the Supreme Court's decision in Assistant Commissioner of Income Tax vs. Hotel Blue Moon, which held that omission to issue notice under Section 143(2) is not a procedural irregularity and cannot be cured.3. Applicability of Section 292BB of the Act:The respondent argued that under Section 292BB, the petitioner is deemed to have been served notice if they appeared in any proceeding or cooperated in any inquiry. However, the court highlighted the proviso to Section 292BB, which states that the principle of estoppel does not apply if the assessee raises an objection before the completion of the assessment or reassessment. Since the petitioner had raised objections and the final assessment order had not been passed, the court held that the principle of estoppel under Section 292BB did not apply.4. Issuance of No Objection Certificate by the Income Tax Department:The petitioner argued that the delay in issuing the no objection certificate was holding up the winding-up proceedings in Singapore. The court observed that the detailed inquiry initiated by the respondent was beyond the scope of issuing a no objection certificate. The court directed the respondents to issue the no objection certificate within six weeks, as per the requirements of the RBI.Conclusion:The court concluded that the reassessment proceedings could not continue as no notice under Section 143(2) was served within the stipulated time. The writ petition was allowed, and the assessment proceedings pursuant to the notices under Section 148 of the Act were quashed. The court issued a Writ of Mandamus directing the respondents to issue the no objection certificate to the petitioner within six weeks.