2025 (10) TMI 1098 - AT - Income Tax

Belated return filed after s.142(1) notice held valid; AO wrongly treated it invalid, s.144 assessment quashed

ITAT, Visakhapatnam held that a belated return filed on 31.03.2019 in response to a s.142(1) notice is a valid return despite delay. The AO wrongly ... Validity of return filled belatedly - whether or not the AO is right in treating the “return of income” that was belatedly filed by the assessee society in response to the notice issued u/s 142(1) dated 01.12.2017 on 31.03.2019, as invalid, and framing the assessment, vide his order passed u/s 144 of the Act dated 28.12.2019, dispensing with the issuance of a notice u/s 143(2) of the Act? HELD THAT:- The “return of income” filed by the assessee society on 31.03.2019 in response to the notice issued by the AO u/s 142(1) of the Act, dated 01.12.2017, having been filed during the pendency of the assessment proceedings which had culminated vide the impugned order of assessment passed by him u/s 144 of the Act, dated 28.12.2019, is a valid “return of income” though involving a delay. A.O by treating the “return of income” filed by the assessee society on 31.03.2019 in response to notice issued u/s 142(1), dated 01.12.2017 as invalid and non-est, had wrongly withdrawn the notice u/s 143(2) of the Act, dated 22.09.2019 that was initially issued by him. A.O by dispensing with the statutory obligation cast upon him to issue notice u/s 143(2) of the Act, had wrongly framed the impugned assessment vide his order passed u/s 144 of the Act, dated 21.12.2019; AND As the deeming provisions of Section 292BB of the Act only cure the infirmities in the manner of service of notice and is not intended to cure the complete absence of notice itself, therefore, the absence of the notice u/s 143(2) of the Act, despite the fact that the A.O had before him the return of income that was filed by the assessee society in response to notice issued u/s 142(1) of the Act, dated 01.12.2017, i.e., on 31.03.2019 will not be saved by the deeming provisions of the said statutory provision. Accordingly, A.O in the present case before us, had erroneously held the “return of income” filed by the assessee society on 31.03.2019, i.e., in response to the notice u/s 142(1) of the Act, dated 01.12.2017 as invalid and nonest, and thereafter had on the said wrong premises dispensed with the statutory requirement of issuing the notice u/s 143(2) and framed the impugned assessment order passed u/s 144 dated 28.12.2019, therefore, the assessment order so passed by him cannot be sustained and is liable to be quashed for want of valid assumption of jurisdiction. ISSUES PRESENTED AND CONSIDERED 1. Whether a 'return of income' filed belatedly in response to a notice under Section 142(1) but before completion of assessment ceases to be a valid return and can be treated as invalid/non-est so as to dispense with further statutory action. 2. Whether the Assessing Officer, having before him a return filed (though belatedly) in response to a notice under Section 142(1), may lawfully withdraw or not issue a notice under Section 143(2) and proceed to frame an assessment under Section 144. 3. Whether the deeming/protective provision (Section 292BB) can validate or cure the absence of issuance of a notice under Section 143(2) where a return filed in response to a notice under Section 142(1) was delayed and the assessee participated in proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of a belated return filed in response to a Section 142(1) notice Legal framework: Filing of return in response to a notice under Section 142(1) may be delayed; statutory consequence for delay is levy of interest under Section 234A. No provision declares such a belated return invalid per se. Precedent Treatment: The Court followed prior pronouncements of higher and coordinate fora holding that a return filed beyond the period stipulated in a notice nonetheless remains a 'return of income' and can be acted upon so long as further assessment proceedings are pending. Interpretation and reasoning: The Tribunal reasoned that statutory machinery contemplates interest for delay (Section 234A) but does not provide that delay converts the document into a non-return. A return filed during the pendency of assessment proceedings in response to a Section 142(1) notice, even if belated, retains its character as a return and must be treated as such. Analogous authority concerning returns in response to other notices (e.g., under Section 148) supports this view. Ratio vs. Obiter: Ratio - A return filed belatedly in response to a Section 142(1) notice during the pendency of assessment does not cease to be a valid return; applicable statutory consequences are interest for delay but not invalidity. Obiter - Observations on analogy to other provisions and decisions are supportive but ancillary. Conclusion: The belated return filed during the pendency of assessment was valid and could not lawfully be treated as invalid/non-est by the Assessing Officer solely on account of delay. Issue 2: Mandatory nature of issuance of notice under Section 143(2) when a return is on record Legal framework: Where a return of income has been filed (including one filed in response to a Section 142(1)/148 notice and filed belatedly but during pendency), the Assessing Officer remains under a statutory obligation to issue a notice under Section 143(2) to frame an assessment; framing an assessment under Section 144 without issuing Section 143(2) is susceptible to being quashed for want of jurisdiction. Precedent Treatment: The Tribunal applied binding and persuasive authority of the Supreme Court and several High Courts and Tribunals which have held issuance of Section 143(2) notice to be mandatory and that absence thereof vitiates assessment proceedings-even where the assessee participated in proceedings. Interpretation and reasoning: The Tribunal held that once the belated return was treated as valid, the AO's withdrawal of the earlier issued Section 143(2) notice (on the erroneous premise of invalidity of the return) and subsequent framing of an assessment under Section 144 amounted to dispensing with a statutory obligation. Jurisdictional defect arises from non-issuance of Section 143(2); such defect cannot be remedied by subsequent participation or action of the assessee. Ratio vs. Obiter: Ratio - The AO must issue notice under Section 143(2) where a return exists and cannot, on the basis of delay alone, decline to issue that notice and proceed under Section 144. Obiter - Discussion of the scope and applicability of various High Court rulings is supportive of the ratio. Conclusion: The Assessing Officer erred in withdrawing the Section 143(2) notice and framing assessment under Section 144; the assessment so framed is invalid for want of valid assumption of jurisdiction. Issue 3: Applicability of deeming provision (Section 292BB) to cure absence of Section 143(2) notice Legal framework: Section 292BB (deeming provision regarding service of notices) cures deficiencies in manner of service of notice but is not intended to validate the complete absence of the statutorily required notice. Precedent Treatment: The Tribunal adhered to binding precedent establishing that Section 292BB cannot be invoked to cure the complete absence of a Section 143(2) notice and that participation by the assessee in proceedings does not validate an assessment where the statutory notice was not issued. Interpretation and reasoning: The Tribunal rejected the Revenue's contention that participation by the assessee or reliance on Section 292BB could validate the assessment. It reasoned the deeming provision addresses service-related infirmities, not the failure to perform the substantive statutory duty of issuing a Section 143(2) notice; Supreme Court authority supports this limitation. Ratio vs. Obiter: Ratio - Section 292BB does not cure the absence of issuance of a Section 143(2) notice; participation by the assessee does not validate an assessment so lacking. Obiter - Examples and references to varied High Court decisions illustrate application but do not change the core rule. Conclusion: Section 292BB does not save the assessment framed without issuance of Section 143(2) notice despite the assessee having filed a belated return and having participated in proceedings. Conclusions and Operative Ratio (a) A return of income filed belatedly in response to a Section 142(1) notice but during the pendency of assessment proceedings is a valid return in law and attracts only the statutory consequence of interest for delay, not invalidity. (b) The Assessing Officer is under a mandatory statutory obligation to issue a notice under Section 143(2) where a return exists on record; he cannot lawfully withdraw or avoid issuance on the sole ground that the return was belatedly filed. (c) Non-issuance of Section 143(2) notice where a return exists renders the assessment jurisdictionally invalid and cannot be cured by Section 292BB or by the assessee's participation in proceedings. (d) Where an assessment is framed under Section 144 after treating a belated return as invalid and without issuing Section 143(2), the assessment is liable to be quashed for want of valid assumption of jurisdiction; other substantive grounds raised in the appeal remain open for adjudication upon fresh proceedings.