By TIOL News Service

AHEMDABAD, APRIL 19, 2017: THE ISSUE IS - Whether scrutiny assessment passed u/s 143(3) can be quashed, on ground of non-service of notice u/s 143(2) within prescribed period of limitation. YES is the verdict.

Facts of the case:

The assessee filed its return declaring total income at Rs.31,879/-. Consequently, the case of assessee was selected for scrutiny and accordingly notice u/s 143(2) was issued. However, notice dated 29/09/2009 was dispatched to the postal authority for speed post on 30/09/2009. Nothing was on record that the notice issued on 29/09/2009, which was given to the postal authority on 30/09/2009, was served upon the assessee on or before 30/09/2009. Even the said notice was served upon the assessee or not was also not on record. Thereafter notice u/s 142(1) dated 17/02/2010 was served upon the assessee and at that time it came to the knowledge of assessee that its case was selected for scrutiny. The assessee thus raised objection before the AO that the notice u/s 143(2) was not validly served within the statutory limits, and therefore, it was requested not to proceed further. However, the AO did not accept the same and treated the assessee having been served with the notice u/s 143(2) before the due date provided u/s 143(2) and thereafter passed the scrutiny assessment order u/s 143(3) determining the return of income at Rs.11,88,35,320/-. On appeal, the CIT(A) set aside the scrutiny assessment solely on the ground that the notice u/s 143(2) was not served upon the assessee within the prescribed period of limitation.

On appeal, the HC held that,

++ it is not in dispute that as per Section 143(2), for the A.Y 2008-09, notice u/s 143(2) was required to be served within the period of six months i.e. on or before 30/09/2009. It is not in dispute that for the first time notice u/s 143(2) was issued on 29/09/2009 and in fact dispatched to the postal authority to serve the service upon the assessee on 30/09/2009. Nothing is on record and /or there is no acknowledgment received on record to show and /or suggest that in fact the notice u/s 143(2) dated 29/09/2009 was served upon the assessee. Under the circumstances, notice u/s 143(2) was not served upon the assessee within the prescribed period of limitation provided u/s 143(2). Therefore, the tribunal has rightly confirmed the order passed by CIT(A) setting aside the assessment order. Now so far as the submission on behalf of the revenue that the tribunal has not properly appreciated the fact that the premises of assessee was sealed by the High Court since 25/02/2009 and /or that the assessee was frequently changing its address and did not intimate the Department regarding the change of address is concerned, at the outset it is required to be noted that as such and so stated even in the assessment order that after the notice u/s 143(2) was issued on 29/09/2009, first notice u/s 142(1) was issued on 17/02/2010 and the same was served upon the assessee through speed post. In the assessment order, it has been observed by the AO that subsequently due to change of the AO and also due to the change of address of the assessee, notices u/s 142(1) were issued on 19/07/2010, 23/07/2010, 10/08/2010, 02/11/2010 and 15/12/2010 respectively. Till the AO issued the notice u/s 143(2) dated 29/09/2009, the AO was not even aware that the premises of the assessee has been sealed by the High Court since 25/02/2009, and therefore, the aforesaid factum shall not help the AO.

(See 2017-TIOL-754-HC-AHM-IT)