The Commissioner of Income Tax vs Adarsh Travel Bus Service

Satish Chandra, J.—Present appeal u/s 260A of the Income Tax Act, 1961 has been filed by the department against the judgment and order dated 21.09.2005 passed by the Income Tax Appellate Tribunal, Lucknow in ITA No. 131/L/1991-92 for the assessment year 1997-98. This Court vide order dated 24.03.2006 admitted the appeal on the following substantial question of law:

Whether the learned Income Tax Appellate Tribunal was justified in law and on the facts of the case in holding that the proviso to Section 143(2)(ii) is also applicable in the case where return was filed in compliance with the notice u/s 148.

The brief facts of the case are that the Assessee drives income from plying the buses and gas tankers. During the assessment year under consideration, the Assessee has purchased new vehicles. The Assessee has filed its return of income on 29.10.1997, which was processed u/s 143(1) of the Income Tax Act on 20.12.1997. Later on, notice u/s 148 was issued on 20.12.1999. The Assessee vide his reply dated 16.02.2000 stated that the returned filed u/s 139(1) may be treated as return filed in compliance to notice u/s 148. Thereafter, A.O. has made additions. The same were affirmed by the first appellate authority. However, before the Tribunal, the Assessee took a legal ground that the notice u/s 143(2) was issued beyond one year from the date of filing of return in response to notice u/s 148. The Tribunal has admitted the said ground and allowed the appeal filed by the Assessee. Being aggrieved, the department has filed the present appeal.

With this background, we have heard Sri D.D. Chopra, learned Counsel for the department, who admits that the notice u/s 143(2) was issued beyond one year. He submits that this is merely a procedural irregularity and the same is curable. So, he made a request that the impugned order may kindly be quashed.

On the other hand, Sri Mudit Agarwal learned Counsel for the Assessee justified the Tribunal''s order.

By considering the rival submissions and on perusal of record, it appears that Section 143(2) of the Act is in two parts. The first part deals with jurisdiction and second with the procedure. The proviso to Section 143(2) of the Act puts an embargo on the assessing officer to exercise jurisdiction after the expiry of 12 months from the end of the month in which the return was filed by the Assessee. It is the discretion of the assessing officer to accept the return as it is or to proceed further with the assessment of income, once the assessing officer decides to proceed, he has to issue notice u/s 143(2) within the prescribed time-limit to make the Assessee aware that his return has been selected for scrutiny assessment.

It may be mentioned that the Hon''ble Supreme Court in the case of Assistant Commissioner of Income Tax and Another Vs. Hotel Blue Moon, observed that the notice u/s 143(2) within the time prescribed, is mandatory. Similar views were expressed by this Court in ITA No. 134 of 2005 (Commissioner of Income Tax v. M/s Bora Polyclinic Pvt. Ltd.) decided on 05.07.2010 as well as in ITA No. 19 of 2004 (Commissioner of Income Tax v. Rajeev Sharma) decided on 24.05.2010.

In view of well settled legal proposition (supra), we are of the view that proviso to Section 143(2) applies to return filed in response to notice u/s 148. Therefore, it was incumbent upon the assessing officer to issue notice u/s 143(2) within the period, as stipulated in the provision.

In the instant case, admittedly, the notice u/s 143(2) has been issued beyond the period of one year from the date of filing of the return. Further, it may be mentioned that omission on the part of the assessing officer to issue notice u/s 143(2) cannot be a procedural irregularity and the same is not curable, and, therefore, the requirement of notice u/s 143(2) cannot be dispensed with as already observed in Hotel Blue Moon (supra).

In view of above, the impugned order passed by the Tribunal is hereby sustained along with the reasons mentioned therein. The answer to the substantial question of law is in favour of the Assessee and against the revenue.

The appeal has No. merit and the same is dismissed.