2014 (11) TMI 905 - HC - Income Tax

Court affirms Tribunal decision on time-barred assessment appeals under Income Tax Act

The Court upheld the Tribunal's decision, dismissing the Revenue's appeals regarding time-barred assessment proceedings under Section 143 (3) r/w 147 for ... Validity of reassessment proceedings made in absence of any notice issued u/s 143(2) - Whether the Tribunal was right in holding that the assessment proceedings passed u/s 143 (3) r/w 147 is time barred on the ground that the notice u/s 143(2) was issued beyond six months from the end of the financial year in which the return was furnished by relying on the proviso u/s 143(2)(ii) – Held that:- In Sapthagiri Finance & Investments Vs Income Tax Officer [2012 (8) TMI 523 - MADRAS HIGH COURT] it has been rightly held that the notice u/s 143 (2) is mandatory and it should have been served on the assessee before the expiry of six months - in completing the assessment u/s 148 of the Act, compliance of the procedure laid down u/s 142 and 143(2) is mandatory - beyond notice u/s 142(1), there was no notice issued u/s 143(2), and the reassessment was the failure on the part of the assessee in not disclosing the capital gains arising on the transfer of property for assessment and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to Section 148 of the Act, there was total failure on the part of the Revenue from complying with the procedure laid down under Section 143(2) of the Act, which is mandatory one – thus, the order of the Tribunal is upheld – Decided against revenue. Issues:- Assessment proceedings under Section 143 (3) r/w 147 being time-barred due to notice under Section 143 (2) issued beyond the prescribed period.Analysis:The judgment pertains to appeals against the order of the Income Tax Appellate Tribunal regarding assessment proceedings for the assessment year 2007-2008. The assessee, engaged in jewelry business, challenged the assessment due to the notice under Section 143 (2) being issued beyond the limitation period. The Tribunal, relying on the Supreme Court judgment in ACIT Vs Hotel Blue Moon, found the notice to be beyond the prescribed period and allowed the appeal. The Revenue filed the present appeals against this decision.In the present appeals, the main issue revolves around the interpretation of Section 143 (2) of the Income Tax Act. The Revenue argued that the notice issued was within the limitation period as per the provisos to Section 148. However, the Tribunal's decision was based on the mandatory nature of the notice under Section 143 (2) being served within the specified time limit. The Court, after considering the arguments and relevant legal provisions, disagreed with the Revenue's interpretation and upheld the Tribunal's decision.The Court referenced the case of Sapthagiri Finance & Investments Vs Income Tax Officer, where it was held that compliance with the procedure laid down under Sections 142 and 143(2) is mandatory for completing assessments under Section 148. The failure to issue a notice under Section 143 (2) within the prescribed time was deemed a total failure on the part of the Revenue. This precedent was considered applicable to the present case, reinforcing the mandatory nature of the notice under Section 143 (2).Additionally, the Court addressed the Revenue's contention regarding Proviso (1) to Section 148, stating that it was not applicable to the assessment period in question (2007-2008). The Court clarified that Proviso (1) to Section 148 was only relevant for the period 1991 to 2005, further supporting its decision to dismiss the appeals.In conclusion, the Court found no merit in the Revenue's arguments and upheld the Tribunal's order, dismissing the appeals and affirming the decision regarding the time-barred assessment proceedings under Section 143 (3) r/w 147. The judgment provides a detailed analysis of the legal provisions and precedents, emphasizing the mandatory nature of serving notices within the specified time limits for assessment proceedings.