The notice u/s 143(2) served after the expiry of limitation of time is not valid and the assessment passed in pursuance of an invalid notice is illegal and void.
ITAT, INDORE BENCH, INDORE
Servite Sisters Society
C. O. No. 139/Ind/2007
May 22, 2009
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3. Facts of the case are that the assessee filed return of income on 14th October, 2003. Notice u/s 143(2) was issued on 11th October. 2004 which was served on the assessee on 1st November, 2004. There is no dispute regarding to the above dates. The Id. Counsel for the assessee during course of hearing argued that the assessee society registered under M.P. Societies Registration Adhiniyam, 1973 and carrying out charitable activities in remotes areas of the country. The notice u/s 143(2) was served on the society on 1.11.2004 and the assessee society vide letter dated 20.12.2004 had protested and intimated to the assessing officer that the notice has been served beyond the limitation of 12 months from the end of the month in which the return of income was filed. Therefore, the proceedings initiated vide notice u/s 143(2) is invalid, illegal, ab-initio.
4. To deal with the issue, it is felt necessary to reproduce the provisions of sec. 143 as under:
'Assessment _ _
143. [(1) Where at return has been made under section 139, or in response to a notice under sub-section (1) of section 142.-
(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee:
Provided that except as otherwise provided in this sub-section the acknowledgement of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him:
Provided further that no intimation under this sub- section shall be sent after the expiry of [one year from the end of the financial year in which the return is made:]
[ Provided also that where the return made is in respect of the income first assessable in the assessment year commencing on the 1st day of April, 1999, such intimation may be sent at any time up to the 31st day of March, 2002.] (IA) [ Omitted by the Finance Act, 1999, w.e.f. 1-6-1999.] (IB) [ Omitted by the Finance Act, 1999,w.e.f. 1-6-1999.] [(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, 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: __ [Provided that ho notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;] (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not under-stated- the income or as not computed excessive loss or has not under-paid the tax in any manner, serve on 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 of the return:
Provided that no notice under [clause (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.] [(3) On the day specified in the notice,-
(i) issued under clause (i) of sub-section (2), or as soon afterwards as may be, after hearing such evidence and after taking into account such particulars as the assessee may produce, the Assessing Officer shall, by an order in writing, allow or reject the claim or claims specified in such notice and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment;
(ii) issued under clause (ii) of sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:] [Provided that in the case of a-
(a) scientific research association referred to in clause (21) of section 10; (b)news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; . (d) institution referred to in clause (23B) section 10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v).or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) of clause (23C) of section 10, . Which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such scientific research association; news agency, association or .institution or fund T>r trust T>r university, or othex educational institution or any hospital or other medical institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless-(i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, by such scientific research association, news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, where in his view such contravention has taken place; and
(ii) the approval granted to such scientific research association or other association or institution or university or other educational institution or hospital or other medical institution has been withdrawn or notification issued in respect of such news agency or fund or trust or institution has been rescinded.]
(4) Where a regular assessment under sub-section (3) of the section or section 144 is made,-
(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment:
(b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the exercise amount refundable on regular deemed to be tax payable b the assessee and the provisions of this Act shall apply accordingly."
5. The Id. Counsel for the assessee contended that no notice was served on the assessee within the limitation of time prescribed under proviso to clause(ii) of sub-sec (2) of section 143 of the IT Act. This means that the return filed by the assessee become final and no scrutiny proceedings were to be Started in respect of that return of income. The Id. AF of the assessee in support of his submission placed reliance on various judgments. He placed reliance on the decision of ITAT, Bangalore in the case of Arasina Hotels Ltd. Vs. DCIT, 60 ITD 667 wherein it is held that - "it is true that both the above decisions relate to issue notice u/s 148 but the principle laid down is applicable to the facts of the case on hand. Here, the AO has issued a notice u/s 143(2) inviting the assessee to come with all the documents in respect of the claim of the assessee to pass an assessment order. The fact that the notice was served on the assessee beyond the period of limitation of 12 months is not in dispute. Therefore, we hold that the notice issued u/s 143(2) is not valid. Therefore, as held by the Hon'ble Supreme Court and the Mysore High Court, the assessment passed in pursuance of an invalid notice is illegal and void. Therefore, the assessment passed by the AO has to be cancelled. We do so."
6. The Hon'ble Supreme Court in the case of CIT vs. Kurban Hussain Ibrahimji Meethfcorwala, 82 ITR'821 has observed that - "it is well-settled that the Income Tax Officer’s jurisdiction t@ reopen an assessment under-section 34, depends upon the issuance of a valid notice. If the notice issued by-whom is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. In the notice issued under section 34, the Income Tax Officer sought to reopen the assessment of the assessee for the assessment year 1948-49 but in-fact he reopened the assessment of the year 1949-50. Hence, in our opinion, the High Court was right in holding that the notice in question was invalid and as such, the Income 7ax Officer had no jurisdiction to revise the assessment of the assessee for the AY 1949-50."
7. Originally the period of limitation was provided as "during the financial year in which the return is furnished" or within six months from the end of the month in which the return is furnished. By the Finance ( No.2) Act, 1991, the proviso was substituted by the present proviso extending the period of limitation to twelve months and vide departmental Circular No. 621 dated December 19, 1991 ( see [ 1992] 195 ITR (St.) 154), it was stated in paragraph No. 49.1 of the circular that: " The aforesaid period of limitation for the service of a notice under sub-section (2) of section 143 of the Act does no allow sufficient time to the Assessing Officers to select returns for scrutiny before assessment. Therefore, the provision was amended to provide that the notice can be served within twelve months from the end of the month in which the return is furnished". ( Ref: Central Board of Direct Taxes Circular No. 621, dated December 19, 1991 Chaturvedi a Pithisaria's Income-tax Law, Fifth edition, Vol. 3, page 4747 at page 4748). This circular has been considered by Hon'ble Gujarat High Court in the case of DCIT vs. Mahi Valley Hotels & Resorts, 287 ITR 360 wherein the Hon'ble High Court has observed that - "It goes without saying that the departmental authorities are bound by the circulars issued by the Central Board of Direct Taxes. In these circumstances, it is not open to the revenue to contend otherwise. These circulars are explanatory. They give contemporaneous exposition of the legal position. Even otherwise, on a plain reading of this sec. and the proviso, it is more than abundantly dear that the proviso prescribes a mandatory period of limitation in the light of scheme of assessment wherein the majority of returns are required to be accepted without scrutiny and only certain returns are takenup for scrutiny."
8. On the other hand, the Id. CIT, DR argued that the notice u/s 143(2) was "despatched on 25:1 a. 2004 through speed-post and normally 2 or 3 days are taken for service by speed post. On 30th a 31st October, 2004 being Saturday and Sunday and were not working days, therefore, the notice was served on 1st November, 2004. In support of his contention, he filed photocopy of EMS speed post receipt under the BNPL Booking Journal dated 25.10.2004. He further argued and referred section 10 of the provisions of General Clauses Act, 1897 which % stated as under:
"Computation of time
10.(1) Where, by any Central Act or Regulation made after the commencement of Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, if the court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if is done or taken on the next day afterwards on which the Court or office is upon: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877 (15 of 1877).
(2) This section applies also to all Central Acts and Regulation made on or after the fourteenth day of January, 1887."
9. However, we noted that the provisions of above sec. are in regard to furnishing of letter/document to any court or office which is .closed M a particular day or the last day of prescribed period then filing of any document for service of any other letter on the next day afterwards the office/court is open can be considered as furnished within the stipulated period. In the instant case, service was required to be on the assessee, therefore, the above provisions are not applicable in the instant case. He further invited our attention to provisions of sections 278irof the General Clauses Act, 1897 wherein meaning of service by post mentioned- "Meaning of service by post 27. Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the expressions " give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected as the time at which the letter would be delivered in the ordinary course of post." However, in the instant case, there is no dispute about the service of notice on 1.14.2004, therefore, the above provisions^do hot support © the contention of the Id: DR. _ The Id. GIT, DR thereafter placed reliance ©n the decision of Delhi High Court in the~case of Vins Overseas India Ltd., 165 Taxman 95 (Del) wherein it was held that - "in terms of sec. 27 of the General Clauses Act, if a notice is properly addressed and despatched through regd. post, there is presumption that it has been served on assessee. Further, the assessee was right in contending that the presumption was rebuttable, but on the facts of the instant case, the assessee had not been able to rebut the presumption." In the instant case, there is no dispute about the service of notice and the dispute was only in regard to the service of notice beyond the statutorily prescribed time. The (d. Df further placed reliance on the decision of Delhi High Court in the case of CIT vs. Atedhsy Films P. Ltd., 301 ITR 69 wherein it is held that - "sec. 27 of General Clause Act, 1897, provides that service by post is deemed to have been effected by properly addressing, pre-paying and sending by regard post, a letter, containing the notice required to be served. Unless the contrary is proved, the service is deemed to have been effected at the time when the letter would be delivered in the ordinary course of post." Reliance has also been placed on anothecdecision of the Delhi High Court in the case ClT vs. Yamu Industries Ltd., 306 ITR 309 wherein it is held - "that the requirement of -'sec. 282 of the Act is that notice may be served on the person named therein, either by post or as if it were a summon issued by a court under the Code of Civil Procedure, 1908. The record showed that notice u/s 143(2) of the Act dated October 7, 1997, had been sent by regd. post and according to the provisions of the Act, it was to be served on to the assessee on or before November 30, 1997. The notice had been sent by regd. post to the correct address of the assessee on October 9, 1997. So, the provisions of sec. 282 of the Act with regard to service of notice had been duly complied with by the department. Since the notice u/s 143(2) of the Act sent by regd. post and had not been received back "unserved" within 30 days of its issuance, there would be a presumption under the law that notice had been, duly served on the assessee within the period of limitation and the finding of the Tribunal' that no notice u/s 143(2) of the Act had been served within the prescribed period was liable to -be set aside?. The above decisions referred "by the Id. CIT, DR do zndt support his conteatidh because in %e instant case queslim of 4e&yiB%.service of notice is hot required for the reason that there is no dispute about service of notice on 1.11,2004. The contention of Id. DR that 30th a 31st October, 2004, were not working days on account of being Saturday & Sunday respectively, the notice was served on the assessee on 1.11,2004, therefore, the same should have been considered as served within the prescribed limitation of time.
10. We have carefully considered the rival submissions, various decision referred before us and the provisions of sec. 143(2) reproduced above. We have already mentioned that there is no dispute about the dates that the return of income was filed by the assessee on 14.10.2003, therefore, as per the provision of sec. 143(2), the notice should have been served on or before 31.10.2004 i.e. from the end of the month in which return of income was filed. However, in the instant case, notice was served on the assessee on 1.11.2004. This is not in dispute. The proviso to clause (ii) of sub-sec. (2) of sec. 143 categorically says that no notice under that sec. shall be served on the assessee after the expiry of 12 months from the end of the month in which the return is furnished. In the instant case, the notice was served after the expiry of 12 months from the end of the month in which the return was furnished. The sec. clearly stipulates the service of the notice and not issuance of the notice. Ld. CIT, DR also contended that the Id. AR has taken hyper-technical objection regarding service of notice beyond the period of limitation but we are unable to accept this contention because &£ majesty of law. Therefore, we are of the considered view that/the notice u/s 143(2) served after the expiry of limitation of time is not valid and the assessment passed in pursuance of an invalid notice is illegal and void J Consequently, the assessment passed by the AO is cancelled. Thus, the CO of the assessee is allowed.