February 2020

ASSUMPTION OF JURISDICTION U/S 143(2) OF THE INCOME TAX ACT, 1961

Fenil Bhatt
Advocate

Putting one to notice is one of the most fundamental aspects of law and adjudication. As we are aware, in scrutiny proceedings the Assessing Officer (AO), in order to ensure that the assessee has not understated income or not claimed excessive loss, can call the assessee to produce evidence to support the return of income filed. To assume proper jurisdiction, the AO has to satisfy two conditions provided in section 143(2) of the Income Tax Act (the Act). This section states that where a return of income has been furnished, the AO shall, if he considers it necessary or expedient to ensure that the assessee has not understated income or has computed excessive loss, serve on the assessee a notice requiring him to adduce evidence in support of his return of income. The proviso to section 143(2) of the Act states that no notice under the sub-section shall be served on the assessee after the expiry of six months from the end of the month in which the return is furnished. It is pertinent to note that the section, including the proviso, has not gone through any material changes over the years.

 

It is clear from the above that it is incumbent upon the AO to serve a notice u/s 143(2) and the proviso puts a further limit on the AO to serve the notice within six months from the end of the month in which the return of income was furnished. Now, one does not require any authority to support the proposition that when the legislature has used the word ‘shall’, it has not left any discretion with the AO and that it is mandatory for him to follow such procedure. The issue eventually boils down to interpretation of the word ‘serve’ and whether mere issuance of notice u/s 143(2) is sufficient compliance.

 

SECTIONS AND RULES DEALING WITH SERVICE UNDER THE ACT

At this point it would be useful to go through section 282 of the Act as it stood prior to the amendment brought in by the Finance (No. 2) Act, 2009; it stated that ‘a notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908’. Therefore, notice could have been served either through post or as if it were summons under the Code of Civil Procedure, 1908 (CPC). It would be pertinent to note that Order 5 of the CPC deals with issue and service of summons. In Order 5 of the CPC, Rules 9 to 20 are of relevance and Rules 17 and 20 are of some impor

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