Time limit for issue of notice u/s 143(2) is from the date of filing of original return of income

Time limit for issue of notice u/s 143(2) is from the date of filing of original return of income – ITAT

In a recent judgment, ITAT Delhi has held that time limit for issue of notice u/s 143(2) has to be considered for date of filing of original return of income. The relevant date for initiation of proceedings, dates back to original date of return of income.

ABCAUS Case Law Citation:
4339 (2024) (12) abcaus.in ITAT Delhi

In the instant case, the assessee had challenged the order passed by the CIT(A) in deciding the jurisdictional issue raised by the assessee u/s 143(2) of the Income Tax Act, 1961 (the Act) against it.

The assessee was a limited company engaged in construction. The case was selected for scrutiny through CASS and notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 ( ‘the Act’) were issued and served on the assessee.

During assessment proceedings, the Assessing Officer (AO) observed that the assessee had sub-contracted the contract for a cost over and above the contract value. The AO observed that even assessee managed to execute the work order without any escalation or additional cost, it will lose on the abovesaid contract. In order to investigate, the AO issued summons u/s 131 of the Act to sub-contractors. The AO observed that majority of sub-contractors were not found at the addresses given by the assessee. The assessee was show-caused as to explain and asked to produce sub-contractors before him. The assessee had not produced any sub-contractors and also not submitted various documents to satisfy the AO, the AO proceeded to disallow the total expenses claimed on sub-contact. Further the AO also found that the amount received by the assessee on the main contract was more than the amount shown to have been received by the assessee. The AO came to the conclusion that assessee had under-stated its receipts on contract Accordingly, he proceeded to make the addition as undisclosed income.

Before the CIT(A), the assessee raised the ground of im-proper notice issued u/s 143 (2) of the Act and also additions made by the AO. However, CIT (A) though gave part relief, decided the jurisdictional issue raised by the assessee u/s 143(2) against the assessee

The assessee contended that CIT(A) had held that notice u/s 143(2) issued was valid. The reasoning given by the CIT(A) for holding so was that the assessee had filed the original return of income which was found to be defective by the assessing officer and defects were removed and a rectified return was filed on later. According to the CIT(A), the notice u/s 143(2) could have been issued reckoning the date of rectified return and, therefore, according the notice u/s 143(2) was valid.

Thus, the issue for consideration by the ITAT was whether the time limit for issue of notice u/s 143(2) is to be reckoned from the date of original return or the rectified return u/s 139(9).

The assessee contended that the issue is no more res-integra. It is a settled law the once the defects are removed, the same would relate back to the original date of filing of return of income and time limit for issue of notice u/s 143(2) has to be reckoned from the date of furnishing of original return of income. He relied on several case laws.

The Tribunal observed that the exact similar issue was considered by the Hon’ble jurisdictional High Court.

The Tribunal observed that in decisions held by various High Courts, it is held that the limitation period for issue of notice u/s 143(2) is relevant to the financial year and assessment year. When the AO considered the return of income after rectification for the purpose of initiation of assessment proceedings, the relevant date for initiation of proceedings, dates back to original date of return of income, therefore the time limit for issue of notice u/s 143(2) has to be considered for date of filing of original return of income.

Respectfully following the decision of Hon’ble High Court, the Tribunal held that the notice issued u/s 143(2) was invalid notice. Accordingly, further proceedings initiated with invalid notice were bad in law.

Therefore, assessment order passed on the basis of invalid notice was also bad in law and accordingly quashed.

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