Question And Answer
Subject: Issue of section 143(2) notice for section 147 assessment
Category:  Income Tax
Asked by: Shefali Patel
Answered by:
Tags:
Date: October 18, 2018
Query asked by Shefali Patel

Are reassessment proceedings bad in law as no notice under section 143(2) of the Income-tax Act, 1961 was issued after filing the return of income pursuant to notice issued under section 148 of the act? Can it be argued that the notice under section 143(2) of the act was issued before the filing of the return of income and is therefore illegal and hence the order passed by the assessing officer is bad in law.

Answer given by

It is well settled when no notice under section 143(2) of the Act, which is a jurisdictional notice, is issued to the assessee in response to return filed under section 148 of the Act, the assessment framed is invalid and bad in law.

This law is laid down by the decision of the Hon’ble Bombay High Court in of ACIT vs. Geno Pharmaceuticals Ltd. (2013) 32 taxmann.com 162 (Bombay) & in CIT vs. Ms. Malvika Arun Somaiya (2010) 2 taxmann.com 144 (Bombay) and Hon’ble Delhi high Court in the case of DIT vs. Society for Worldwide Inter Bank Financial, Telecommunications (2010)323 ITR 249 (Delhi) and also Tribunal’s decision of Delhi Bench in ITAs No. 5163 & 5164/Del/2010, 5554/Del/2012 for AY 2004-5 & 2005-06 vide order dated 02.07.2018.

The provision of section 143(2) of the Act is clear that notice can be issued only when a valid return is pending assessment.

Accordingly, a notice issued before the filing of return has no meaning.

Can assessment be framed without issuing a notice under section 143(2) of the Act when the return was filed by the assessee in response to notice under section 148 of the Act?

This issue has been examined by Hon’ble Bombay High Court Geno Pharmaceuticals Ltd. (supra), wherein it is held as under: –

“5. Apart from that, it is an admitted position that no notice under Section 143(2) had been issued while making assessment under Section 143(3) read with Section 147. The Apex Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 has held that the Tribunal has discretion to allow or not to allow a new ground to be raised. But in a case where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.

The ITAT, after relying on the judgment of the Apex Court in R. Dalmia v. CIT [1999] 236 ITR 480/102 Taxman 702, came to the conclusion that issuance of notice under Section 143(2) was mandatory. The ITAT has taken into consideration the relevant provisions and has also taken into consideration the judgment of the Apex Court and relying on the said judgments, the ITAT has held that notice under Section 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot proceed to make an inquiry on the return filed in compliance with the notice issued under Section 148..”

Similar is the position in the case of Ms. Malvika Arun Somaiya (supra), wherein Hon’ble Bombay High Court has considered the similar issue.

Further, Hon’ble Delhi High Court in the case of Society for Worldwide Inter Bank Financial, Telecommunications (supra), wherein Hon’ble High Court considered identical situation on facts and held as under: –

“Section 143(2) of the said Act clearly indicates that where a return has been furnished under Section 139, or in response to a notice under Section 142(1), the Assessing Officer shall-

(i) Where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim.

(ii) Notwithstanding the aforesaid, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, he may serve the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support return.”

The provisions of Section 143(2) make it clear that the notice can only be served after the Assessing Officer has examined the return filed by the assessee.

A notice issued without examining the return amounts to gross violation of the scheme of Section 143 (2) of the said Act.

This law has been followed by the ITAT Mumbai Bench in Sudhir Menon vs. The Asst. Commissioner of Income Tax, Central Circle-8(2), ITA No. 1744/Mum/2016, and it was held in view of consistent view of jurisdictional High Court and Delhi High Court, in the absence of pending return of income, the provisions of section 143(2) of the Act is clear that notice can be issued only when a valid return is pending for assessment. Accordingly, this notice has no meaning.

Accordingly, assessment was quashed.



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