2022 (9) TMI 415 - HC - Income Tax

High Court upholds Tribunal decision on assessment order for 2008-09

Pr. Commissioner of Income Tax-2, Hyderabad Versus M/s GJ Trading Pvt. Ltd.

The High Court dismissed the writ appeal, upholding the Tribunal's decision to set aside the assessment order for the assessment year 2008-09. The Court ... Valid notice u/s 143(2) - assessment on fringe benefits - whether notice issued for the purpose of assessment on fringe benefits? - whether the notice on which much reliance has been placed by the learned Standing Counsel for the Income Tax Department can be construed to be a notice under Section 143(2) of the Act? - HELD THAT:- Section 115WE of the Act deals with assessment. As per sub- section (1) thereof, where a return has been made under Section 115WD of the Act, such return shall be processed in the manner provided thereunder. Sub- section (2) of Section 115WE of the Act provides that where a return has been furnished under Section 115WD, the assessing officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the value of fringe benefits or has not underpaid the tax in any manner, serve on the assessee a notice requiring him to attend his office or to produce any evidence relied upon by the assessee on specified date. As per the proviso, no notice under sub-section (2) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. From a reading of the above notice in conjunction with Section 143(2) and Section 115WE(2) of the Act, there can be no manner of doubt that the above notice was issued in the context of the return filed for fringe benefits by the respondent. In Hotel Blue Moon's case [2010 (2) TMI 1 - SUPREME COURT] the question before the Supreme Court was whether issuance of notice under Section 143(2) of the Act within the prescribed time limit is mandatory or not. On due consideration, Supreme Court took the view that such a notice is not a mere procedural requirement, but a mandatory provision. Though the above question was examined in the light of Section 158BC dealing with block assessment following search and seizure, nonetheless Supreme Court upheld the views expressed that Section 143(2) of the Act is mandatory and violation thereof cannot be construed to be a procedural irregularity. Tribunal as followed the aforesaid decision which decision may not be strictly applicable to the facts of the case, nonetheless, we are of the view that the notice dated 17.09.2009 cannot be construed to be a notice under Section 143(2) of the Act for the purpose of assessment under Section 143 - It was a notice issued for the purpose of assessment on fringe benefits. Insofar this issue is concerned, we are of the view that it goes to the root of the matter and therefore, Tribunal was justified in entertaining the petition filed by the respondent raising the additional ground, which is nothing but a pure question of law going to the root of jurisdiction. WA dismissed. Issues involved:Appeal under Section 260A of the Income Tax Act, 1961 challenging an order of the Income Tax Appellate Tribunal for the assessment year 2008-09. Interpretation of the validity of notice under Section 143(2) of the Act and the application of the ratio of a Supreme Court judgment in a similar case.Analysis:The appeal was filed by the revenue against the order of the Income Tax Appellate Tribunal (ITA) for the assessment year 2008-09. The appellant raised substantial questions of law regarding the application of the Apex Court's decision in ACIT v. Hotel Blue Moon and the validity of the notice under Section 143(2) of the Act. The respondent, a company engaged in trading, had filed its return showing a loss, which was later estimated by the assessing officer due to lack of evidence. The first appellate authority upheld the assessment, leading the respondent to appeal to the ITA. The respondent raised an additional ground based on the Supreme Court's decision in NTPC Limited v. CIT, arguing that the notice under Section 143(2) was not issued within the prescribed time limit. The ITA allowed the additional ground, holding that the notice issued pertained to Fringe Benefit Tax and not the correct taxable income assessment. The Tribunal set aside the assessment order, citing the absence of a valid notice under Section 143(2) of the Act.The High Court analyzed the notice issued under Section 143(2) and Section 115WE(2) of the Act. It noted that the notice was related to fringe benefits and not the assessment under Section 143 of the Act. Referring to the Supreme Court's decision in Hotel Blue Moon, the Court emphasized the mandatory nature of the notice under Section 143(2). Despite the Tribunal's decision not being directly applicable, the High Court agreed that the notice dated 17.09.2009 did not fulfill the requirements of Section 143(2) for the assessment. The Court upheld the Tribunal's decision to entertain the respondent's additional ground, considering it a pure question of law affecting the jurisdiction of the assessment.In conclusion, the High Court dismissed the writ appeal, stating that no substantial question of law was found. The Court supported the Tribunal's decision based on the legal interpretation of the notice issued and the jurisdictional implications. The judgment emphasized the importance of complying with the mandatory provisions of the Income Tax Act for a valid assessment process.