2019 (8) TMI 660 - SC - Income Tax

Requirement of notice under section 143(2) is mandatory; section 292BB cannot validate absence of notice

Commissioner of Income Tax Versus Laxman Das Khandelwal

SC affirmed that the requirement of notice under section 143(2) is mandatory and, while section 292BB can cure infirmities in service where the assessee ... Applicability of the requirement of notice u/s 143(2) - Scope of insertion of Section 292BB - assessment was completed u/s 143(3) read with Section 153A - HELD THAT:- The law on the point as regards applicability of the requirement of notice u/s 143(2) is quite clear from the decision in Blue Moon’s case [2010 (2) TMI 1 - SUPREME COURT] . The issue that however needs to be considered is the impact of Section 292BB According to Section 292BB, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. Since the facts on record are clear that no notice u/s 143(2) was ever issued by the Department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter. Issues:1. Effect of absence of notice under Section 143(2) of the Income Tax Act, 1961.2. Applicability and impact of Section 292BB of the Income Tax Act.Issue 1: Effect of absence of notice under Section 143(2) of the Income Tax Act, 1961:The case involved an individual carrying out a brokerage business, where search and seizure operations were conducted at the individual's premises. The assessment resulted in various additions to the income under different categories. The Commissioner of Income Tax (Appeal) deleted certain amounts, and the Tribunal quashed the reassessment proceedings due to the absence of a notice under Section 143(2) of the Act. The High Court considered the mandatory application of Sections 142 and 143(2) and (3) in such cases. The Supreme Court analyzed the impact of the absence of the notice under Section 143(2) and the applicability of the provisions of Section 292BB.Issue 2: Applicability and impact of Section 292BB of the Income Tax Act:Section 292BB of the Income Tax Act, effective from 01.04.2008, deems a notice to be valid in certain circumstances if the assessee has participated in the proceedings. The section precludes the assessee from objecting to the notice based on certain grounds if they have cooperated in the inquiry. The Respondent argued that the absence of a notice under Section 143(2) rendered the entire proceedings invalid. However, the Supreme Court clarified that Section 292BB does not cure the complete absence of notice. It only validates the notice if there are infirmities in the service, provided the notice originated from the department. As no notice under Section 143(2) was issued in this case, the Court upheld the findings of the High Court and the Tribunal, dismissing the Appeals.In conclusion, the Supreme Court dismissed the Appeals, emphasizing that Section 292BB does not cure the absence of notice under Section 143(2) of the Income Tax Act. The Court upheld the decision that the absence of the notice rendered the proceedings invalid, in line with the provisions of the Act and previous legal interpretations.