2019 (4) TMI 215 - HC - Income Tax

Court invalidates reassessment due to lack of notice under Income Tax Act. Section 292BB not a cure.

THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus MARCK BIOSCIENCES LTD.

The court affirmed that the reassessment was invalid due to the absence of a valid notice under section 143(2) of the Income Tax Act, 1961. The court held ... Validity of re-reassessment proceedings u/s 147 - non-issuance of notice u/s 143(2) - scope of section 292BB - HELD THAT:- Section 292BB of the Act provides for a deeming provision that any notice under any provision of the Act, which is required to be served upon the assessee, has been duly served upon him in time, in accordance with the provisions of the Act. In the opinion of this Court, this section would be applicable where a notice has, in fact, been issued and a contention is raised that such notice has not been served upon the assessee or has not been served in time or has not been served properly, namely, where there is a defect in the service of notice. This provision does not apply to a case where no notice has been issued at all. In the facts of the present case, at the cost of repetition, it may be stated that no notice under section 143(2) of the Act has been issued after the assessee had filed its return of income and hence, section 292BB of the Act would not be attracted. In the light of the fact that nonissuance of a notice under section 143(2) of the Act is not a procedural irregularity, the same cannot be cured under section 292BB of the Act and hence, the assessment order passed without issuance of notice under section 143(2) of the Act, would be rendered invalid. The Tribunal as well as the Commissioner (Appeals), therefore, did not commit any error in holding that the notice issued prior to the filing of the return of income was invalid and that, in absence of a valid notice under section 143(2) of the Act, the assessment order was rendered invalid. - Decided in favour of assessee Issues Involved:1. Validity of reassessment proceedings under section 292BB of the Income Tax Act, 1961.2. Requirement and timing of notice under section 143(2) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Validity of Reassessment Proceedings under Section 292BB of the Income Tax Act, 1961:The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) which quashed the reassessment proceedings. The appellant contended that under section 292BB, the assessee is deemed to have been duly served with the notice under section 143(2) if they participated in the proceedings. The appellant cited the Punjab and Haryana High Court decision in *Commissioner of Income-tax, Hisar v. Ram Narain Bansal* and the Madras High Court decision in *Venkatesan Raghuram Prasad v. Income-tax Officer*, where it was held that participation in proceedings precludes the assessee from objecting to the non-issuance or improper service of notice under section 143(2).2. Requirement and Timing of Notice under Section 143(2) of the Income Tax Act, 1961:The respondent-assessee argued that section 292BB does not apply when no notice under section 143(2) has been issued. The respondent cited the Gujarat High Court decision in *Shirishbhai Hargovandas Sanjanwala v. Commissioner of Income Tax* and the Calcutta High Court decision in *Principal Commissioner of Income-tax v. Oberoi Hotels (P.) Ltd.*, which clarified that section 292BB cures defects in the service of a notice but does not dispense with the issuance of a notice itself. The Supreme Court in *CIT v. Hotel Blue Moon* held that the omission to issue a notice under section 143(2) is not a procedural irregularity and cannot be cured, making it mandatory to issue such notice.Court's Findings:1. Non-Issuance of Notice under Section 143(2):The court noted that the Assessing Officer issued multiple notices under section 148 but recorded reasons for reopening only on 20.07.2010. The notice under section 143(2) was issued on 12.03.2010, before the assessee filed a letter on 19.07.2010 to treat the earlier return as the return in response to the notice under section 148. Therefore, no notice under section 143(2) was issued after the filing of the return, rendering the assessment invalid.2. Interpretation of Section 292BB:The court held that section 292BB applies only when a notice has been issued but not served properly or in time. It does not apply when no notice has been issued at all. The court disagreed with the Punjab and Haryana High Court's interpretation in *Ram Narain Bansal* and clarified that section 292BB cannot cure the complete non-issuance of a notice under section 143(2).Conclusion:The court affirmed that the issuance of a notice under section 143(2) is mandatory and its omission is not a procedural irregularity that can be cured under section 292BB. Hence, the Tribunal and the Commissioner (Appeals) were correct in holding the reassessment invalid due to the absence of a valid notice under section 143(2). The appeal was dismissed, and the question of law was answered in favor of the assessee and against the revenue.