2016 (9) TMI 746 - AT - Income Tax

Notice Issue Invalidates Assessment: Tribunal Quashes Order, Allows Appeal

The Tribunal quashed the assessment order due to the non-service of notice under Section 143(2) within the prescribed period, invalidating the ... Notice under Section 143(2) - jurisdiction to make assessment under Section 143(3) - service of notice versus issuance of notice - deeming fiction under Section 292BBNotice under Section 143(2) - service of notice versus issuance of notice - jurisdiction to make assessment under Section 143(3) - Validity of assessment where the notice under Section 143(2) was not served within the prescribed period - HELD THAT: - The Tribunal examined the assessment record and the AO's own recital that a notice dated 13.09.2012 was issued but not responded to, followed by a second notice dated 14.12.2012. The assessee filed return on 20.08.2011, making the last date for service of a Section 143(2) notice 30.09.2012. The AO's admission in the order and the assessee's affidavit that the notice dated 13.09.2012 was never served, together with absence of any evidence from the Revenue proving service, establish that no Section 143(2) notice was served within the prescribed period. The requirement under Section 143(2) is not merely issuance but service within the statutory time; issuance alone, without service in time, does not confer jurisdiction to proceed under Section 143(3). Relying on the chain of authorities including the reasoning in ACIT v. Greater Noida Industrial Development Authority and related precedents, the Tribunal held that in the absence of valid service of the Section 143(2) notice within the period, the AO lacked jurisdiction to make assessment under Section 143(3) and the assessment consequent thereto is invalid and liable to be quashed. [Paras 5, 6, 7]Notice under Section 143(2) was not served within the prescribed period; consequential assessment under Section 143(3) is without jurisdiction and is quashed.Deeming fiction under Section 292BB - service of notice versus issuance of notice - Whether Section 292BB cures non-service or delayed service of a Section 143(2) notice in the facts of this case - HELD THAT: - The Tribunal reviewed the scope of Section 292BB and the authorities which considered its limits. Section 292BB creates a deeming fiction that where an assessee has appeared or cooperated in proceedings, notices required to be served are to be deemed duly served, but the proviso preserves the right to raise an objection before completion of the assessment. The Tribunal held that Section 292BB relates to service of a notice and cannot cure the foundational failure to issue a Section 143(2) notice within the statutory period. Since the AO failed to serve a Section 143(2) notice within the prescribed period (and evidence of valid issuance/service within time is lacking), the deeming fiction in Section 292BB does not validate the assessment; issuance within time is a jurisdictional precondition and cannot be supplied by Section 292BB. [Paras 6, 20, 22]Section 292BB does not cure the absence of valid service/issuance of a Section 143(2) notice within the statutory period; it is inapplicable to validate the assessment in this case.Final Conclusion: The Tribunal allowed the appeal, quashed the assessment framed under Section 143(3) for AY 2011-12 on the ground that the Section 143(2) notice was not served within the prescribed period, and held that Section 292BB does not cure this jurisdictional defect. Issues Involved:1. Validity of assessment proceedings due to non-service of notice under Section 143(2) within the prescribed period.2. Legality of additions upheld by the CIT(A) without considering written submissions and evidence.3. Discrepancies in the balance sheet regarding an outstanding loan.4. Contradictions in the appellant's statements regarding the nature of a receipt.Detailed Analysis:1. Validity of Assessment Proceedings:The primary issue raised by the assessee was the validity of the assessment proceedings due to the non-service of the notice under Section 143(2) within the prescribed period. The assessee filed the return of income on 20.08.2011, and thus, the notice under Section 143(2) had to be issued by 30.09.2012. The Assessing Officer (AO) claimed to have issued a notice on 13.09.2012, but it was not served on the assessee. Consequently, another notice was issued on 14.12.2012. The Tribunal noted that the AO's own admission indicated that the first notice was not served, which invalidated the jurisdiction to frame the assessment. The Tribunal relied on the judgment of the Hon'ble Allahabad High Court in ACIT v. Greater Noida Industrial Development Authority, which held that the non-service of notice within the prescribed period invalidates the assessment.2. Legality of Additions Upheld by CIT(A):The assessee contended that the CIT(A) erred in upholding the additions of Rs. 2,37,00,000 without considering the written submissions dated 09.10.2014 and 14.08.2014, along with the enclosed evidence. The Tribunal, however, did not delve into the merits of this issue as it had already quashed the assessment order due to the invalid notice under Section 143(2).3. Discrepancies in the Balance Sheet:The assessee argued that the CIT(A) erred in holding that there was no outstanding loan amount in the balance sheet of Krishna Enterprises, ignoring the evidence placed before him. This issue was also not addressed on merits by the Tribunal due to the quashing of the assessment order.4. Contradictions in Appellant's Statements:The assessee claimed that the CIT(A) erred in upholding the addition on the grounds of initial statements about the receipt being a fee for a project, which later got converted into a loan. The Tribunal did not address this issue on merits, as the assessment order was quashed.Conclusion:The Tribunal quashed the assessment order on the grounds that the notice under Section 143(2) was not served within the prescribed period, thus invalidating the jurisdiction of the AO to frame the assessment. Consequently, the Tribunal set aside the order of the CIT(A) and did not address the merits of the other issues raised by the assessee. The appeal of the assessee was allowed.