2012 (4) TMI 379 - HC - Income Tax

Notice issued beyond time limit renders proceedings void under Section 144A of Income Tax Act.

Tulsi Food Products Versus DCIT

The Court found that the notice issued on 26.09.2008 exceeded the statutory time limit by almost two months, rendering the proceedings void for lack of ... Return filed u/s 139(1) - notice issued u/s 143(2)/115WE(2) - assessee pleaded as per amended proviso to Section 143(2) no notice under Section 143(2)(ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished - Writ petition – Held that:- if there are two interpretations then the interpretation favorable to assessee will have to be adopted as per the ratio laid down in the case of CIT vs. Shaan Finance (P) Ltd (1998 -TMI - 5659 - SUPREME Court ) - Though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year – twelve moths' period from the end of the month in which the return was filed, expires in 31st July, 2008, so a notice was supposed to be served maximum on/or before 1st August, 2008, but it was given on 26.09.2008 - in favour of assessee. Issues:Challenge to impugned order dated 24.03.2009 under Section 144A of the Income-Tax Act, 1961 and notice dated 26.09.2008 under Section 143(2)/115WD for assessment year 2007-08.Analysis:The petitioner contested the impugned order and notice, arguing that the notice served on 26.09.2008 exceeded the statutory time limit of twelve months from the end of the month in which the return was filed, which was 31.07.2008. The counsel relied on the case law defining the assessment year as a standard period commencing on April 1 of every year. The petitioner's position was that the notice should have been served by 01.08.2008, as per the law applicable for the assessment year 2007-08. The petitioner emphasized the need for the notice to be served within the prescribed time limit, failing which the proceedings would be void.The Department, on the other hand, argued that the notice served on 26.09.2008 was within the permissible time frame based on the amended proviso to Section 143(2) effective from 01.04.2008. They contended that the amended provision applied to the petitioner's case as the return was filed during the financial year 2007-08. The Department highlighted that the amendment was made applicable to pending proceedings as of 1st April, 2008, and requested the dismissal of the petition.The Court examined the provisions of Section 143(2)(ii) both before and after the amendment brought about by the Finance Act, 2008. The Court noted that the original provision allowed twelve months from the end of the month in which the return was filed, while the amended provision reduced this period to six months from the end of the financial year. Citing precedents, the Court emphasized adopting the interpretation favorable to the assessee and applying the law in force in the relevant assessment year.The Court found that the notice issued on 26.09.2008 was beyond the prescribed time limit by almost two months, rendering the proceedings void for lack of jurisdiction. Relying on legal principles, the Court concluded that the impugned order and notice were not issued within the statutory period and, therefore, set them aside. The petition was allowed, and no costs were imposed on either party.