By TIOL News Service

ERNAKULAM, AUG 25, 2017: THE ISSUE BEFORE THE COURT IS - Whether mere omission to mention Section 143(2) literally in notices issued to assessee, would invalidate the assessment order, if no prejudice is caused to assessee in defending cases against him. NO is the verdict.

Facts of the case:

The Assessee is a company engaged in the business of manufacture and sale of Centrifuged Latex. Its Assessment for the year 2005-2006 was reopened u/s 148 on the ground that in computing net profit u/s 115JB, Rs.81,47,859/- was reduced in the agricultural income. According to the AO, Rs.81,47,859/- was represented as unrepresented liability and, therefore, could not have been reduced. The AO also noted that no agricultural income was credited to the P&L A/c other than Rs.5,228/- included in the other income. Overruling the objections of assessee, assessment order was passed u/s 148 and the same was confirmed by the CIT(A).

On appeal, the HC held that,

++ it is seen that Section 147 of the Income Tax Act provides for assessment of income escaping assessment. Such assessment has to be in terms of Section 148, which provides for recording of reasons and issue of notice where income has escaped assessment. This Section, inter alia, provide that before making an assessment, reassessment or recomputation u/s 147, the AO shall serve on the assessee a notice requiring him to furnish a return of his income which is assessable under the Act during the previous year corresponding to the relevant assessment year and that the provisions of the Act shall so far as may be applied accordingly as if such a return where such a return required to be furnished u/s 139. Section 143(2) shows that the purpose of issuing a notice thereunder is to require the assessee to produce, or cause to be produced, any evidence on which the assessee may rely, in support of the return filed by him. That a notice u/s 143(2) is a mandatory requirement and is not an empty formality has been clarified by the Apex Court in its judgment in Hotel Blue Moon. However, insofar as this case is concerned, question to be considered is whether the omission to mention Section 143(2) literally in any one of the notices issued to the assessee would invalidate the assessment order;

++ it is obvious that the procedure u/s 143(2) is intended to ensure that an adverse order is passed against the assessee only after affording the assessee a proper opportunity. Therefore, the question to be considered is whether the assessee in this case had such an opportunity. It is in this context, the notices that were issued to assessee assumes importance. Reading of the reasons recorded and communicated to the assessee, show that the assessee was put on notice the inadmissibility of reduction from the total income made by it and the assessee by its reply had justified the deduction made by it. Further, before assessment order was passed, the assessee was afforded an opportunity of hearing also. Evidently, therefore, the assessee had ample notice of the case it had to answer and the assessee availed of those opportunities by answering the case against it. In such a situation, we are not prepared to think that there was absence of notice u/s 143(2) or that any prejudice was caused to the assessee in defending the case against it. We are not, therefore, prepared to think that the assessment order is invalid on the ground contended by the assessee.

(See 2017-TIOL-1650-HC-KERALA-IT)