2008 (1) TMI 444 - AT - Income Tax

Reassessment Void: Tribunal Rules Lack of Section 143(2) Notice Invalidates Process, Dismisses Appeals as Moot.

Income-tax Officer, Ward 23 (1), New Delhi. Versus RK Gupta.

Income-tax Officer, Ward 23 (1), New Delhi. Versus RK Gupta. - [2009] 308 ITR 49, ITD 115, 384, TTJ 122, 256 Issues Involved:1. Validity of reassessment without service of notice under section 143(2).2. Procedural irregularities and their impact on the reassessment.3. Applicability of section 292B.4. Participation of the assessee in the assessment proceedings.5. Retrospective effect of the proviso to section 148(1) inserted by the Finance Act, 2006.Issue-Wise Detailed Analysis:1. Validity of reassessment without service of notice under section 143(2):The primary issue was whether the reassessment made without issuing and serving a notice under section 143(2) of the Income-tax Act was valid. The Tribunal noted that no such notice was issued to the assessee, and the reassessment was thus invalid. The Tribunal relied on the Special Bench decision in Raj Kumar Chawla, which held that the proviso to section 143(2) applies to returns filed pursuant to notice under section 148. If the notice is not served within the prescribed period, the Assessing Officer loses jurisdiction to make an assessment under section 143(3) read with section 147. The Tribunal found that the assessee had informed the Assessing Officer to treat the original return as the return filed under section 148, making the last day for issuing the notice under section 143(2) as 31-3-2001. Since no notice was issued within this period, the reassessment was deemed invalid.2. Procedural irregularities and their impact on the reassessment:The Tribunal examined whether the non-issue of the notice under section 143(2) was a procedural irregularity that could invalidate the assessment. The Tribunal referred to the judgment of the Madras High Court in Areva T & D India Ltd., which suggested that non-issue of the notice was a procedural irregularity. However, the Tribunal emphasized that the jurisdictional High Court's judgments in Lunar Diamonds Ltd. and Vardhman Estate (P.) Ltd. were more pertinent, establishing that the reassessment order is invalid without the issuance of the notice under section 143(2).3. Applicability of section 292B:The Tribunal addressed whether section 292B could save the reassessment order. Section 292B states that a notice with inconsequential mistakes or omissions does not invalidate the proceedings. However, the Tribunal clarified that this section does not apply when no notice was issued at all. Thus, section 292B could not rescue the department's case.4. Participation of the assessee in the assessment proceedings:The Tribunal considered the department's argument that the assessee's participation in the proceedings absolved the Assessing Officer from issuing the notice under section 143(2). The Tribunal rejected this argument, stating that the assessee's participation in response to notices under section 142(1) does not relieve the Assessing Officer from the statutory duty of issuing and serving the notice under section 143(2) within the stipulated time.5. Retrospective effect of the proviso to section 148(1) inserted by the Finance Act, 2006:The Tribunal examined the applicability of the first proviso to section 148(1), which saves the validity of a reassessment order where a notice under section 143(2) was not served within the prescribed period, provided certain conditions are met. The Tribunal found that while the assessee had filed the return within the specified period, no notice under section 143(2) was served at all. Therefore, the proviso could not save the reassessment order.Conclusion:The Tribunal concluded that the reassessment made under section 148 read with section 143(3) was invalid due to the non-issuance of the notice under section 143(2). As a result, the reassessment was quashed, and the appeals filed by the assessee and the department were dismissed as infructuous.