|CORAM:||Kul Bharat (JM), Vikram Singh Yadav (AM)|
|SECTION(S):||143(2), 143(3), 144C|
|CATCH WORDS:||Assessment, limitation period, service of notice|
|COUNSEL:||Salil Kapoor, Sumit Lalchandani|
|DATE:||July 27, 2017 (Date of pronouncement)|
|DATE:||August 24, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 143(2)/ 144C: Though service of the notice is not a condition precedent to conferment of jurisdiction upon the AO to deal with the matter, it is a condition precedent to making of the order of assessment. Accordingly, the s. 143(2) notice has not only to be issued before the expiry of the limitation period but has also to be served upon the assessee before the expiry of the limitation period. Conflict between VRA Cotton Mills (P&H) and Lunar Diamonds 281 ITR 1 (Del) explained in light of CBDT Circular No. 549 dated 31.10.1989|
(i) There is a divergent view by the Hon’ble Punjab & Haryana High Court in VRA Cotton Mills vs. UOI (2013) 33 Taxmann.com 675 (P&H) and Hon’ble Delhi High Court in CIT vs. Lunar Diamonds 281 ITR 1 (Del) and CIT vs. Vardhaman Estate 287 ITR 368 (Del) in respect of the issue under consideration. We find that the Circular issued by the CBDT bearing No. 549 dated 31.10.1989 was not before the Punjab & Haryana High Court and also the judgment of Hon’ble Delhi High Court. Undisputedly, the Hon’ble Punjab & Haryana High Court has not considered this decision of the Hon’ble Delhi High Court and the judgment of Hon’ble Supreme Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 166 ITR 163 (SC). The Hon’ble Supreme Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel (supra) was considering the issuance and service of notice u/s 148 but not under section 143(2). The Hon’ble Supreme Court held that the mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of time as 31.03.1970 was the last day of that period.
(ii) Service under the 1961 Act is not a condition precedent to conferment of jurisdiction in the ITO to deal with the matter but it is a condition precedent to making of the order of assessment. The Hon’ble High Court, in our opinion, lost sight of the distinction and under a wrong basis felt bound by the judgment in Banarsi Devi’s case.
(iii) The Ld. Counsel for the assessee has also placed reliance on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC) wherein the Hon’ble Supreme Court held that there is no doubt that the acceptance of one or the other interpretation sought to be placed on section 271(1)(a)(i) by the parties would lead to some inconvenient result, but the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognized by this court in several of its decisions.
(iv) In the light of aforementioned judicial pronouncements, we are of the considered view that the authorities below ought to have adopted the view of the Hon’ble Delhi High Court. Moreover, the assessing authority is bound by the Circular of CBDT. The CBDT Circular No. 549 dated 31.10.1989 states in clear terms that the AO is required to serve the notice on the assessee within the prescribed period, if a case is picked up for scrutiny. It follows that if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the Department within the aforesaid period, he 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. Therefore, the assessee succeeds on this ground. The assessment framed by the AO is barred by time as the requisite notice under section 143(2) was not served on the assessee within the time as prescribed by law. Respectfully following the judgment of Hon’ble Delhi High Court rendered in the case of CIT vs. Bhan Textiles (supra), the draft assessment order dated 28.03.2013 cannot be sustained, same is hereby quashed being barred by time.