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 issued beyond the six-month limit and therefore to be deemed not served, applying the principle that returns filed following a reopening notice require timely service of the 143(2) notice, with reliance on the Supreme Court precedent. The court held estoppel under statutory notice provisions inapplicable because no final assessment order was passed, quashed the reassessment proceedings, and directed issuance of an NOC to the foreign assessee for liaison office closure to meet RBI requirements.

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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.

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