Assessment is concluded if notice u/s 143(2) not issued within stipulated time -Delhi High Court

Assessment is concluded if notice u/s 143(2) not issued within stipulated time and in terms of CBDT circular no scrutiny can be started in such cases-Delhi High Court

ABCAUS Case Law Citation:
ABCAUS 1299 (2017) (07) HC

The Question framed for determination:

“Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the assessments for Assessment Year 2008-09 were pending, on the date of the search i.e. 25.03.2010, in the circumstances of the case?”

Assessment Year : 2008-09

Important Case Laws Cited/relied upon:

Vipan Khanna v. Commissioner of Income Tax (2002) 255 ITR 220 (P&H)
Assistant Commissioner of Income Tax v. Hotel Blue Moon (2010) 321 ITR 362 (SC)
Commissioner of Income Tax v. Kabul Chawla (2016) 380 ITR 573 (Del)
Indu Lata Rangwala v. Deputy Commissioner of Income Tax (2016) 384 ITR 337.

Brief Facts of the Case:

The Appellant assessee was a limited company engaged in the business of horticulture, agriculture and real estate. For AY 2008-09, the assessee filed its return of income on 28th October, 2008. No notice was received by it under Section 143(2) or 142(1) of the Income Tax Act, 1961 (‘the Act’). The period of issuing such notice expired on 30th September, 2009.

Subsequently, a search and seizure operation under Section 132(1) was conducted at the business and residential premises of the assessee on 26th March, 2010. No incriminating material related to AY 2008-09 was found during the search .

Later, the Assessing Officer (‘AO’) issued a notice dated 10th March, 2011 to the assessee under Section 153A(1) of the Act asking it to file its return of income in respect of AYs 2004-05 to 2009-10. In response thereto the assessee filed a return on 28th April, 2011 declaring the same income as was originally declared in the return filed under Section 139(1) of the Act.

The AO concluded the assessment inter alia making an addition of Rs. 84,84,910 under the head ‘bogus depreciation claimed’ for the AY 2008-09.

The appeal of the assessee was dismissed by the Commission of Income Tax (Appeals) [‘CIT(A)’] . The assessee contested the order before the ITAT in respect of the assessment orders for AY 2008-09; 2009-10 and 2010-11.

In regard to AY 2008-09, the assessee raised a specific plea that the assessment for AY 2008-09 had abated. This was because no notice had been issued to the Assessee either under Section 143(2) or under Section 142(1) of the Act within the stipulated time.

However, to this plea, the ITAT concluded that the date of initiation of search was 25th March, 2010 and the date of intimation under Section 143(1) of the Act was 27th March, 2010. The ITAT concluded that as on the date of initiation of the search the assessment for AY 2008-09 was pending and had not abated. With respect to the addition, it was confirmed by the ITAT also.

Aggrieved, the assessee was before the High court in the present appeal.

Contentions of the Petitioner Assessee:

The assessee referred to the CBDT Circular No. 549 dated 31st October, 1989, which clarified the legal position that when there was a failure to issue a notice to an Assessee under Section 143(2) of the Act within six months from the end of the month in which the return is furnished or during the financial year in which the return is furnished, whichever is later, then the Assessee “can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return.”

Observations made by the High Court:

The Hon’ble High court observed that the Punjab & Haryana High Court had noted that  CBDT circular makes it abundantly clear that once an Assessee does not receive a notice under Section 143(2) of the Act within the period stipulated then such an Assessee “can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return.”

The Hon’ble High court opined that the ITAT was in error in holding that the assessment for AY 2008-09 should be treated as ‘pending’ whereas in terms of the above CBDT circular it should be treated as final in respect of which no scrutiny are to be started.

Held:

The question framed was answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The impugned order of the ITAT to the extent of the specific plea of the assessee was set aside and the appeal was allowed.