M/S. STATE BANK OF MAURITIUS LTD.,MUMBAI vs. DDIT (I.T) RG. 0 2(1), MUMBAI

In the quantum order passed u/s.143(3) r.w.s.147 of the Act, the assessee has challenged reassessment order so passed on the ground that no notice u/s.143(2) was issued within the statutory time period, therefore assessment framed requires to be annulled. It was contended by ld. AR that assessee has filed its return in response to notice u/s.148, 2 & ITA No.3138/08 on 29-11-1999. As per proviso to Section 143(2), statutory notice u/s.143(2) ought to have been served on assessee on or before 30th November, 2000, whereas in the instant case, the statutory notice u/s.143(2) was served only on May 30, 2001, therefore, assessment so framed deserves to be annulled.

We have considered rival contentions and found that the original return filed on 17-3-1998 was processed u/s.143(1)(a) and an intimation was issued on 25-11-1998. No order was passed u/s.143(3). Thereafter assessment was reopened by issue of notice u/s.148 dated 24.08.1999. In response to notice u/s.148 the assessee filed return on 29-11-1999. After filing of return, however notice u/s.143(2) was served on the assessee on 30-5-2001, which ought to have been served upto 30.11.2000. The assessment order so framed u/s.143(3) r.w.s 147 was challenged by the assessee before the CIT(A) not only on the plea of validity of reopening but also on validity of reassessment order so passed. The CIT(A) dismissed both the grounds after having the following observation :- “4.6 I have carefully considered the submissions made by the learned Authorised Representative of the appellant. I have also considered the facts of the case and reasons for reopening of the assessment. It is a settled proposition of law now that for the purpose of reopening of assessment under section 147, all that is required is to have prima facie material, which certainly exists in the instant case. Legal position in this regard is very clear as held in the decisions in the cases of Raymond Woolen Mills Ltd. vs. ITO 236 ITR 34 (SC); G. Suresh vs. CIT 252 ITR 230 (Ker) and Dr. Amin's Pathology Laboratory vs. P.N. Prasad & Others 202 ITR 73 (Born). In fact, as noted by the Hon'ble Delhi High Court in the case of Bawa Abhai Singh vs. DCIT 253 ITR 83 and also in Rakesh Agarwal vs. ACIT 225 ITR 496, the provisions of section 147, as amended with effect from 01.04.1989, are contextually different and 3 & ITA No.3138/08 the cumulative conditions spelt out in clauses (a) and (b) of section 147 prior to its amendment are not present in the amended provision. The only condition for action is that the Assessing Officer should have reasons to believe that income has escaped assessment. Such belief can be reached in any manner and is not qualified by a pre-condition of faith and true disclosure of material fact by an assessee as contemplated in the pre-amended section 147(a). Viewed in that angle, power to reopen assessment is much wider under the amended provisions. 4.7 The appellant’s contention that reassessment is invalid for want of issue of notice under section 143(2) in this case within the statutory period of one year, is also not acceptable. Firstly it must be understood that assessment under consideration is reassessment made under section 147 of the Act which is independent of provisions of section 143 of the I.T.Act. The emphasis laid down by the appellant on provisions of section 148 to say that while an assessee furnishes the return of income in response to notice under section 148, the provisions of this Act apply as if the return was a return required to be furnished under section 139, is misconceived. The provisions of section 143(2) are for the purposes of enabling the A.O. to take up a case for scrutiny. Since the case of reassessment is automatically a case of scrutiny, there is no question of holding that by virtue of requirement of section 148 a notice under section 143(2) in such a situation will have to be issued and the assessment will be bad if the same is not issued within the prescribed 12 months period.” Against the above order of CIT(A), assessee is in appeals before us and contended that the assessment is invalid not only because of non-service of notice u/s.143(2) within the statutory time period, but also for the reason that reasons recorded for reopening was not supplied to assessee till completion of the assessment. With respect to statutory requirement of issue of notice u/s.143(2), reliance was placed by the ld. AR on the decision of Hon’ble Supreme Court in the case of Hotel Blue Moon, 321 ITR 362 (SC), wherein it was held that if an assessment is to be completed u/s.143(3), notice u/s.143(2) should be issued within one year from the date of filing of the return. The omission on the part of the 4 & ITA No.3138/08 Assessing Authority to issue notice u/s.143(2) cannot be a mere procedural irregularities and the same is not curable.

The Special Bench of the Delhi Tribunal in the case of Raj Kumar Chawala & Ors., 94 ITD 1(Del)(SB), observed as under :- “No doubt, the foundation to assess or reassess is laid by issue of a valid notice under s. 148, but such jurisdiction is subject to further compliance a has been stipulated in the statute itself. If compliance of the proviso is not made, the very purpose of creating the proviso is defeated, i.e., uncertain of assessee with respect to assessment shall continue. It is again a settled principle of interpretation that no construction of a statute should be made in a manner, which leaves a statute redundant. On the contrary, law require a strict interpretation of the proviso. Provisions of limitation are to be strictly construed. If limitations are not followed strictly, chaotic situation would follow. Thus, the return filed pursuant to notice under s. 148 must be assumed and treated to be a return filed under s. 139 and the assessment must thereafter be made under s. 143 or 144 after complying with all the mandatory provisions. Accordingly, it is incumbent upon the assessing authority to issue notice under s. 143(2) within the period as stipulated in the proviso thereunder. No assessment can be made if the notice under s. 143(2) is not served within the time prescribed by the proviso under s. 143 (2) and thus the return filed will be deemed as accepted.

In view of the legal fiction created by s. 148 that a return filed under that section is to be treated as one under s. 139, proviso to s. 143(2) also applies to a return filed in response to notice under s. 148 and no assessment can be made if the notice under s. 143(2) is not served within the time prescribed by the proviso under s. 143(2)”

Ld. AR was specially asked with regard to the amendment brought in Section 148 by inserting proviso by Finance Act, 2006 with retrospective effect from 1-10-1991. According to the amendment so brought in by the Finance Act, 2006, even if notice u/s.143(2) is served before completion of assessment, it will be deemed to be proper service of notice.

Ld. AR placed on record the decision of Hon’ble Supreme Court in the case of Onkarmal Meghraj (HUF), 93 ITR 233, wherein it was held that any amendment brought in with retrospective effect if after completion of the limitation period, will only apply prospectively. As per ld. AR, in this case, notice u/s.143(2) was to be issued uptil 30-11-1999, however, it was issued only on 30-5-2001, and assessment u/s.143(3) was completed on 19-3-2002. As per ld. AR the amendment in Section 148 was brought by the Finance Act, 2006, which was much later than passing of the order on 19-3-2002. Accordingly, the amended provision cannot be applied retrospectively to the assessment completed under consideration, which is much prior to the amendment so brought in.

IN view of the above, we hold that the notice issued on 30-5-2001 was barred by limitation and the amended provisions cannot be made effective retrospectively so as to cover the assessment framed on 19-3- 2002 9. In the instant case it is not in dispute that after filing of return by the assessee in response to the notice u/s.148, the AO has not issue notice 6 ITA No.5459/05 & ITA No.3138/08 u/s.143(2) within the statutory time limit of one year ending on 30.11.1999 and the same was issued only on 30-5-2001, which was beyond the limitation period. Accordingly the assessment framed was not sustainable in law. We accordingly allow the ground raised