Section 292BB does not save complete absence of notice. Section seeks to cure only infirmities in service of notice – Supreme Court
ABCAUS Case Law Citation:
ABCAUS 3120 (2019) (08) SC
Important case law relied upon by the parties:
ACIT v. Hotel Blue Moon’ (2010) 321 ITR 362
The instant appeals filed by the Revenue were directed against the judgment passed by the High Court in Income Tax Appeal.
The respondent assessee was an individual carrying a business of brokerage. A Search and seizure operation was conducted u/s 132 of the Income Tax Act, 1961 (the Act) at his residential premises.
The assessee submitted return of income and the assessment was completed under Section 143(3) read with Section 153(D) of the Act by making additions on account of unexplained cash u/s 69 of the Act, unexplained jewellery, unexplained hundies and unexplained cash receipts.
Aggrieved, the assessee filed an appeal before the Commissioner Income Tax (Appeal) who partly deleted addition holding that jewellery found in locker weighing 686.4 gms stood explained in view of circular No.1916 and further partly deleted the addition holding that the correct approach would be to apply the peak formula to determine in such transaction.
Aggrieved, Revenue filed an appeal. The Assessee filed cross objection on the ground of jurisdiction of Assessment Officer regarding non issue of notice under Section 143(2) of the Act of 1961.
The Tribunal vide impugned order upheld the cross objection and quashed the entire reassessment proceedings on the finding that the same stood vitiated as the assessment Officer lacked jurisdiction in absence of notice under Section 143(2) of the act of 1961.
The Tribunal observed that there was no notice issued u/s 143(2) prior to the completion of assessment under section 143(3) of the Act by the AO and the department had not controverted this facts at the stage of hearing. It was noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non issuance thereof is not a curable defect.
The matter reached the Hon’ble High Court where the issue was the effect of absence of notice under Section 143(2) of the Act.
The Respondent-Assessee relied upon the decision of the Hon’ble Supreme Court Court. On the other hand, the Revenue placed reliance on the provisions of Section 292BB of the Act to submit that the Respondent having participated in the proceedings, the defect, if any, stood completely cured.
The Hon’ble Supreme Court observed that one of the questions of law that arose for consideration in case law relied upon by the respondent assessee was whether notice under Section 143(2) would be mandatory for the purpose of making the assessment under Section 143(3) of the Act? However, in the instant case, the question that arose was whether Section 292BB which came into effect on and from 01.04.2008 has effected any change to the settled law?.
The Hon’ble Supreme Court observed that Said Section 292BB says that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner.
The Hon’ble Supreme Court noted that the case of the Revenue was that since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer.
On the other hand, the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.
The Hon’ble Supreme Court clarified that the law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act stood settled. The issue that needed consideration was the impact of Section 292BB of the Act.
Section 292BB does not save complete absence of notice.
The Hon’ble Supreme Court opined that the scope of the provisions of section 292BB is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. However, the Section does not save complete absence of notice.
The Hon’ble Supreme Court clarified that for Section 292BB to apply, the notice must have been issued by the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself
Accordingly, the Hon’ble Supreme Court upheld that findings recorded by the High Court and the Tribunal and dismissed the appeal.
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