2015 (9) TMI 1624 - AT - Income Tax

Invalid assessment order under section 143(2) quashed; subsequent proceedings deemed inconsequential.

Krishan Kumar Saraf, S/o Sh. Brij Lal Saraf, Versus Commissioner of Income-tax, Hissar.

The assessment order was deemed invalid due to the late issuance of the notice under section 143(2). Consequently, all subsequent proceedings, including ... Scope of revision u/s 263 - eligibility to revise a non est order - Held that:- There is no quarrel with the proposition advanced by ld. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. As u/s 263 Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice u/s 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Case of CIT Vs. Gitsons Engineering Co. [2014 (11) TMI 59 - MADRAS HIGH COURT] clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter. If ld. Commissioner revises such an assessment order which is non est in the eye of law, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the statute. - Decided in favour of assessee Issues Involved:1. Validity of the assessment order due to late issuance of notice under section 143(2).2. Treatment of income from the sale of land and constructed shops as business income versus long-term capital gain.3. Verification of short-term capital loss.4. Inclusion of NSC interest in total income.5. Verification of construction expenses and unexplained investments.6. Treatment of marriage expenses as unexplained under section 69C.Detailed Analysis:1. Validity of the Assessment Order:The primary issue raised by the assessee was the validity of the assessment order due to the notice under section 143(2) being issued beyond the statutory period. The assessee contended that the notice, issued on 5-9-2008, should have been issued within 12 months from the end of the month in which the return was filed (31-7-2007). The Tribunal agreed with the assessee, referencing the decision of Hon'ble Madras High Court in CIT Vs. Gitsons Engineering Co. and Hon'ble Delhi High Court in CIT Central-I Vs. Escorts Farms Pvt. Ltd., which supported the plea that the assessment order was invalid if the notice was not timely. Consequently, the assessment order was deemed non est (invalid) in the eyes of the law, and all subsequent proceedings were rendered inconsequential.2. Treatment of Income from Sale of Land and Shops:The Commissioner had observed that the income from the sale of land and constructed shops should be treated as business income based on precedents from the Punjab & Haryana High Court and the Supreme Court. However, this issue became moot due to the invalidity of the assessment order itself.3. Verification of Short-Term Capital Loss:The Commissioner noted that the short-term capital loss declared by the assessee was accepted without obtaining documentary evidence. This was highlighted as a failure of the AO to scrutinize the genuineness of the loss. However, this issue also became irrelevant due to the invalid assessment order.4. Inclusion of NSC Interest in Total Income:The Commissioner pointed out that the AO failed to include the NSC interest received on maturity in the total income. This oversight was considered prejudicial to the interest of revenue. Yet, this issue was also rendered moot due to the invalid assessment order.5. Verification of Construction Expenses and Unexplained Investments:The Commissioner directed the AO to verify the expenses incurred in the construction of shops and tax any unexplained investments. However, this directive could not stand due to the invalidity of the initial assessment order.6. Treatment of Marriage Expenses as Unexplained:The Commissioner treated certain marriage expenses as unexplained under section 69C and directed these to be assessed as income. This issue, like the others, was rendered inconsequential due to the invalidity of the assessment order.Conclusion:The Tribunal concluded that the assessment order was invalid due to the late issuance of the notice under section 143(2). Consequently, the revisional order passed under section 263 was quashed, and the assessee's appeal was allowed. The Tribunal emphasized that the Commissioner could not revise an assessment order that was non est in the eyes of the law, as it would prejudice the rights of the assessee and effectively extend the statutory limitation period, which is impermissible.