The Commissioner of Income Tax-II vs Garg Lottery Agency

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 06.04.2005 passed by the Income Tax Appellate Tribunal, Lucknow in ITA No. 1266/Alld/97 for the assessment year 1994-95.

The brief facts of the case are that on 05.08.1993 a search and seizure operation was conducted at the business and residential premises of the Assessee. Return for the assessment year under consideration (1994-95) was filed on 31.10.1994. The A.O. issued the notice u/s 142(1) to the Assessee on 13.06.1995 and later on, notice u/s 143(2) was issued on 13.12.1995. Finally, the assessment was completed u/s 144. In first appeal, CIT(A) has annulled the assessment order on the ground that notice u/s 143(2) was served upon the Assessee after expiry of 12 months from the end of the month in which the returned was filed. Thus, CIT (A) concluded that the A.O. could not have assumed jurisdiction to scrutinize and pass the assessment order u/s 143(3). Being aggrieved, the department has filed an appeal before the Tribunal who upheld the order of the CIT (A). Still being aggrieved, the department has filed the present appeal.

With this background, Sri D.D. Chopra, learned Counsel for the department justified the AO''s order but he admits that the notice u/s 143(2) was served upon the Assessee after expiry of 12 months from the end of the month in which the return was furnished. He further submits that the issue and service of notice u/s 143(2) is merely a technical formality and the same is curable.

On the other hand, Sri Mudit Agarwal learned Counsel for the Assessee has relied on the order passed by the Tribunal.

We have heard both the parties at length and gone through the material available on record.

It is an admitted fact that in the instant case, notice u/s 143(2) was served upon the Assessee after expiry of 12 months from the end of the month in which returned was furnished.

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. 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 preposition (supra), we are of the view that proviso to Section 143(2) applies to return filed in response to block return. 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

In view of above, we find No. merit in the appeal filed by the department. No. substantial question of law is emerging from the impugned order passed by the Tribunal. The same is hereby sustained along with the reasons mentioned therein. The appeal filed by the department is dismissed in limine.