Notice served on old address couldn't be quashed if assessee didn't intimate the new address to dept.

Facts

a)    The case of the assessee was selected for scrutiny and, accordingly, notice under section 143(2) was issued upon him. The notice was generated through the software application of the Income-tax Department and was sent to the assessee at the address given in the return of income.

b)    Assessee filed an affidavit stating that said notice was not served. However, in affidavit, assessee had not furnished any reasons or evidences as to why notice sent at correct address could not be served on assessee.

c)    It was noticed that address of assessee in affidavit was different from address provided in return of income, which showed that assessee had changed his address and new address was not communicated to Income-tax Department.

Now AOs to issue scrutiny notice along with questionnaire to convey compliance requirement

It was noticed that while issuing the initial/first notice for cases selected under scrutiny, Assessing Officers (‘AO’) do not convey the specific compliance requirements like production of accounts, furnishing of documents, information, evidences, etc.

Taxpayers or their authorised representatives needs to appear before the AO as they are required to comply with the statutory notice issued by the AO. Thus, their appearance before the AO does not serve any fruitful purpose except recording of their presence. This causes undue hardship to the taxpayers and unnecessary wastage of their time.

Sec. 143(1) intimation won't be deemed as completion of assessment to bar filing of revised return, rules HC

Issue of intimation under section 143(1) could not amount to completion of assessment so as to bar an assessee from filing a revised return under section 139(5)

The issue that arose before the High Court was as under-

Whether issue of intimation under section 143(1) could not amount to completion of assessment so as to bar an assessee from filing of revised return under section 139(5)?

The High Court held in favour of assessee as under-

1)The provision of section 143(1)(i) contemplates an assessment without prejudice to the provisions of Section 143(2).

2)Section 143(2) allows Assessing Officer (AO), if he considers it necessary, to serve on the assessee a notice requiring him, on a date to be specified therein, to attend his office or to produce or cause to be produced thereon, any evidence on which the assessee may rely on in support of the return and after taking into account all relevant materials the AO shall by an order in writing make an assessment.

3)Thus, AO could resort to the provisions of section 143(2) even after issuing of intimation under section 143(1) and, therefore, processing of return under section 143(1) could not be said to be completion of assessment so as to restrict assessee from filing a revised return under section 139(5)- TATA METALIKS LTD V. CIT [2014] 52 taxmann.com 480 (Calcutta)

Failure to issue notice in time couldn't be cured by sec. 292BB

Failure to issue a notice under section 143(2) within prescribed period cannot be cured by taking recourse to section 292BB.

Facts:

a)The Assessing Officer issued a notice under section 143(2) to assessee. Thereafter assessment proceedings were completed and an order of assessment was passed under section 143(3).

b)On appeal, the CIT(A), held that the notice under section 143(2) was not issued within the period stipulated in that provision. Hence, section 292BB would not save a situation where the notice itself had not been issued before the expiry of the period of limitation since it could only cure a defect of service within the stipulated period.

c)Further, the Tribunal held that since no notice under Section 143(2) was issued within the prescribed period, the assessment was not valid. The aggrieved revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1)In the present case, the notice under Section 143(2) was issued much beyond the period of six months. Section 292BB provides a deeming fiction that once the assessee has appeared in any proceedings or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that notice has been duly served upon assessee in time in accordance with the provisions of the Act.

2)Once the deeming fiction came into operation, the assessee was precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. However, Section 292BB could not obviate the requirement of complying with a jurisdictional condition. Where the Assessing Officer failed to issue a notice under Section 143(2) within the period of six months as spelt out in the proviso to clause (ii) of section 143(2), the assumption of jurisdiction under section 143(3) would be invalid.

3)The deeming fiction in section 292BB overcomes a procedural defect in regard to the non-service of a notice on the assessee, and obviates a challenge that the notice was either not served or that it was not served in time or that it was served in an improper manner.

4)Section 292BB could not come to the aid of the revenue in a situation where the issuance of a notice itself was not within the prescribed period, in which event the question of whether it was served correctly or otherwise, would be of no relevance whatsoever. Thus, failure to issue a notice under section 143(2) within prescribed period could not be cured by taking recourse to section 292BB. – CIT V. SALARPUR COLD STORAGE (P.) LTD [2014] 50 taxmann.com 105 (Allahabad)

CIT couldn’t revise order of AO because AO lost his jurisdiction due to a circular issued by CBDT subsequently

Income tax Officer had valid jurisdiction at time of issuance of notice under section 143(2), subsequent disqualification would not deprive him of jurisdiction of making assessment.

Facts:

a)The Assessing Officer (‘AO’) issued notice under section 143(2) after analyzing various claims made by the assessee. The ITO passed assessment order, which was partly allowed by the CIT(A).

b)However, later on the Commissioner initiated proceeding under section 263. But on basis of detailed submission of assessee, said revisional proceeding was dropped by him

c)Thereafter, the subsequent CIT initiated revisional proceeding on ground that there was an internal circular according to which with effect from 1-4-2001 for any return of income of any assessment year, being over Rs. 5 lakh, ITO would have no jurisdiction, as jurisdiction in such case would lie with Dy. CIT /ACIT.

d)On appeal, the Tribunal quashed the order of CIT. The aggrieved-revenue filed the instant appeal. The High Court held in favour of assessee as under:

1)The AO had the jurisdiction when the notice under section 143(2) was issued. Once the ITO had valid jurisdiction at the time of issuance of notice, the Assessing Officer ought to have informed the assessee if there was some internal circular.

2)The opinion of CIT that the ITO had no jurisdiction could not be said to be proper, as the assessee appeared on valid notice and after considering all the submissions or representation, the ITO passed the order.

3)It was not the case where the ITO had passed order in a cryptic or summary manner accepting the returned income. The order could not be termed to be erroneous only because the CIT was not satisfied with the conclusion.

4)If the CIT was of the view that the AO had passed the order without jurisdiction then he ought to have initiated departmental enquiry against such officer. No such information had been brought forward from the appellant-revenue or perused from the order of Commissioner under section 263.

5)Thus, the order of CIT under section 263 would be deemed as a change of opinion and would tantamount to abuse of powers granted to him. The practice adopted by the CIT amounted to unnecessary harassment to the assessee for no fault of his. Thus, there was no infirmity or perversity in the order of the Tribunal so as to call for any interference.- CIT V. KAILASH CHAND METHI [2014] 47 taxmann.com 59 (Rajasthan)

Survey party's promise of non-selection of case in scrutiny won't invalidates cases selected as per set norms

Even where petitioner disclosed additional income on assurance of survey party that his case would not be taken-up for scrutiny; Assessing Officer was still empowered to select petitioner’s case for scrutiny assessment.

Facts:

a)  Pursuant to survey carried out by Income-tax department, the statement of petitioner had been recorded in which he had disclosed additional income;

b)  The petitioner contended that he had signed said statement after an assurance had been given by survey party that his return of income would not be taken-up for scrutiny;

c)  Subsequently, the petitioner was served with notice under section 143(2) informing him that his case was selected for scrutiny assessment. In the instant writ, the petitioner had challenged the legality and validity of scrutiny assessment.

The High Court held as under:

1)  The Assessing Officer is empowered to select a particular case for scrutiny assessment in view of guidelines fixed for selection of cases for income tax scrutiny;

2)  The Assessing Officer recorded reasons for selection of petitioner's case, sought approval of approving authority, who approved selection and, thereafter, assigned case for assessment;

3)  Thus, the requisite procedure was followed which was necessary before issuing notices under sections 143(2) and 142(1). Hence, the petition was to be dismissed. – Ajay v. Dy.CIT [2014] 42 taxmann.com 210 (Bombay)