2015 (10) TMI 918 - AT - Income Tax

Tribunal annuls assessment under section 143(3) citing selection period non-compliance.

The Tribunal ruled in favor of the appellant, annulling the assessment under section 143(3) due to non-compliance with the prescribed selection period, ... Unexplained credit in the bank account - addition under section 68 - whether assessment framed under section 143(3) is contrary to the provisions of section 143(2)(ii)? - Held that:- Instruction No. 9 of 2004 dated September 20, 2004, was applicable in the present case, in view of the specific stipulation in the circular that 'for returns filed during the current financial year 2004-05, the selection of cases for scrutiny will have to be completed within three months of the date of filing the returns' and considering that the return had admittedly, been filed by the assessee on October 29, 2004, i.e., during the current financial year 2004-05. The selection for scrutiny of the assessee's case and completion of the assessment was not valid - Decided in favour of assessee. Issues involved:1. Addition under section 68 of the Income Tax Act.2. Validity of assessment under section 143(3).Analysis:Issue 1: Addition under section 68 of the Income Tax ActThe appellant contested the addition of Rs. 3,17,935 under section 68 of the Income Tax Act, claiming it was contrary to the law. The appellant argued that the provisions of section 68 were not applicable, and the addition should be deleted as the identity, genuineness, and creditworthiness of the donors were established. The appellant provided complete evidence regarding the gifts received, which the Commissioner of Income-tax (Appeals) allegedly disregarded unjustly. The appellant maintained that the explanations and evidence provided were not false. However, the Commissioner of Income-tax (Appeals) upheld the addition. During the hearing, the appellant sought to admit an additional ground challenging the assessment under section 143(3) as illegal and contrary to the law. The appellant argued that the assessment was not in accordance with the instructions issued by the Board, as the scrutiny notice was issued after the prescribed period. The appellant relied on judgments from the Chattisgarh High Court and Calcutta High Court to support their contentions. The Departmental representative argued that the assessment was valid as per the time available under the Act, even if it did not adhere to the specific instruction period.Issue 2: Validity of assessment under section 143(3)The appellant contended that the assessment under section 143(3) was invalid due to the scrutiny notice being issued beyond the prescribed period as per the Board's instructions. The appellant highlighted that the return was filed on a specific date, and the notice was issued after the permissible period, rendering the assessment legally flawed. The appellant cited judgments from the Chattisgarh High Court and Calcutta High Court, emphasizing the binding nature of the Board's instructions on the Income-tax authorities. The High Courts held that assessments made after the prescribed scrutiny selection period are invalid. The Tribunal concurred with this view, annulling the assessment and setting aside the Commissioner of Income-tax (Appeals) order. Consequently, the appeal was allowed, and the assessment was deemed void, leading to no further merit consideration.In conclusion, the Tribunal ruled in favor of the appellant, annulling the assessment under section 143(3) due to non-compliance with the prescribed selection period, as per the Board's instructions. The judgments from the Chattisgarh High Court and Calcutta High Court supported the appellant's argument, leading to the appeal's success and the assessment's cancellation.