2016 (2) TMI 1347 - AT - Income Tax

Failure to Issue Notice under Section 143(2) Doesn't Invalidate Assessment

The Deputy Commissioner of Income-tax, Central Circle, Kollam Versus Shri E. Shamsudeen

The Tribunal held that the failure to issue notice under Section 143(2) within the prescribed period does not invalidate the assessment under Section 153A ... Validity of assessment u/s. 153A r.w.s. 143(3) - failure on the part of the AO to issue notice as per provisions contained in section 143(2) - HELD THAT:- Admittedly in the present case, a valid notice u/s. 153A was issued to the assessee. The ratio laid down in the case of ACIT vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] relied upon by the assessee is not applicable to the facts of the present case as the issue raised therein was pertaining to the issuance of notice u/s. 143(2) of the Act in the case of block assessment u/s. 158BC of the Act and not u/s. 153A of the Act. U/s. 158BC, there is a specific requirement of issuance of notice u/s. 143(2) of the Act which is not the case u/s. 153A of the Act. An identical issue came up before case of Smt. Sumanlata Bansal vs. ACIT [2015 (5) TMI 1031 - ITAT MUMBAI] held that question raised for consideration is answered that non-issuance of notice under sub-section (2) of section of the Act is not mandatory. As a consequence, the second question is also answered against the assesse. Assessment proceedings u/s. 153A cannot be held as null and void, for non-issuance of notice u/s. 143(2) of the Act, as this provision is not attracted to proceedings u/s. 153A of the Act - Decided in favour of revenue. Issues Involved:1. Validity of assessment under Section 153A read with Section 143(3) due to non-issuance of notice under Section 143(2) within the prescribed time.2. Applicability of Section 292BB in cases where notice under Section 143(2) was not served within the prescribed period.Detailed Analysis:Issue 1: Validity of Assessment under Section 153A r.w.s. 143(3) due to Non-issuance of Notice under Section 143(2)The primary issue in the appeals was whether the failure of the Assessing Officer to issue notice under Section 143(2) within the prescribed period rendered the assessment under Section 153A read with Section 143(3) invalid. The assessee argued that the assessment was void ab initio because the notice under Section 143(2) was served late, which was beyond the prescribed period.The Tribunal referred to the relevant provisions and judicial precedents to address this issue. Section 153A of the Income Tax Act provides the procedure for assessment in the case of a search. It was noted that Section 153A does not expressly mandate the issuance of notice under Section 143(2). The Tribunal cited the Delhi High Court's decision in Ashok Chaddha vs. ITO, which held that the issuance of notice under Section 143(2) is not mandatory for assessments under Section 153A.The Tribunal also distinguished the case of ACIT vs. Hotel Blue Moon, which pertained to block assessments under Section 158BC, where the issuance of notice under Section 143(2) is mandatory. It was emphasized that the requirement of notice under Section 143(2) in block assessments does not analogously apply to assessments under Section 153A.Based on these findings, the Tribunal concluded that the failure to issue notice under Section 143(2) within the prescribed period does not render the assessment under Section 153A read with Section 143(3) invalid. Consequently, the Tribunal allowed Ground No. 2 raised by the Revenue.Issue 2: Applicability of Section 292BBThe second issue was whether Section 292BB could validate the assessment despite the delay in serving the notice under Section 143(2). Section 292BB states that if an assessee has appeared in any proceedings or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice required to be served upon him has been duly served in time, unless the assessee has raised such objection before the completion of the assessment or reassessment.The Revenue argued that since the assessee participated in the assessment proceedings and did not raise any objection regarding the late issuance of notice under Section 143(2) until the appellate stage, Section 292BB should apply to validate the assessment. The Tribunal noted that the Ld. CIT(A) had held that Section 292BB would not apply where the notice under Section 143(2) was not issued within the prescribed period.However, since the Tribunal had already concluded that the issuance of notice under Section 143(2) is not mandatory for assessments under Section 153A, the applicability of Section 292BB became a moot point. Consequently, the Tribunal did not need to adjudicate on the grounds pertaining to Section 292BB (Ground Nos. 3, 4, 5 & 6).Cross Objections by the AssesseeThe assessee had filed Cross Objections challenging the non-consideration of issues on merits by the Ld. CIT(A). Since the Tribunal allowed the Revenue's appeals, it directed that the Ld. CIT(A) should consider the issues on merits. Therefore, the Cross Objections were allowed for statistical purposes.ConclusionIn conclusion, the Tribunal allowed the Revenue's appeals, holding that the failure to issue notice under Section 143(2) within the prescribed period does not invalidate the assessment under Section 153A read with Section 143(3). The Cross Objections filed by the assessee were allowed for statistical purposes, directing the Ld. CIT(A) to consider the issues on merits. The judgments and orders were pronounced in the open court on 01-02-2016.