Assessment – Notice u/s 143(2) of ITA, 1961 – Limitation – Date of filing of original return u/s 139(1) has to be considered for purpose of computing period of limitation under sub-section (2) of section 143 and not date on which defects actually came to be removed u/s 139(9)

Assessment – Notice
u/s 143(2) of ITA, 1961 – Limitation – Date of filing of original return u/s
139(1) has to be considered for purpose of computing period of limitation under
sub-section (2) of section 143 and not date on which defects actually came to
be removed u/s 139(9)

The petitioner is a company registered
under the Companies Act, 2013. For the A.Y. 2016-17, the petitioner had filed
its return of income u/s 139(1) of the Income-tax Act, 1961 on 10^th
September, 2016. Thereafter, the petitioner received an intimation of defective
return u/s 139(9) on 17^th June, 2017. The petitioner received a
reminder on 5^th July, 2017 granting him an extension of 15 days to
comply with the notice issued u/s 139(9) of the Act and accordingly, the time
limit for removal of the defects u/s 139(9) of the Act stood extended till 20^th
July, 2017. The petitioner removed the defects on 7^th July, 2017
within the time granted. Subsequently, the return was processed under
sub-section (1) of section 143 of the Act on 12^th August, 2017,
wherein the date of original return is shown to be 10^th September,
2016. Thereafter, the impugned notice u/s 143(2) of the Act came to be issued
on 9^th August, 2018, informing the petitioner that the return of
income filed by it for A.Y. 2016-17 on 7^th July, 2017 has been
selected for scrutiny calling upon the petitioner to produce any evidence on
which it may rely in support of its return of income.

The petitioner filed a writ petition
under Articles 226 and 227 of the Constitution of India and challenged the
notice u/s 143(2) dated 9^th August, 2018 and the proceedings
initiated pursuant thereto. The Gujarat High Court allowed the writ petition
and held as under:

‘i)   On a plain reading of sub-section (2) of
section 143 of the Act, it is apparent that the notice u/s 143(2) must be
served on the assessee within a period of six months from the end of the
financial year in which such return is furnished. Thus, if, after furnishing a
return of income, the assessee does not receive a notice under sub-section (2)
of section 143 of the Act within the period referred to in the sub-section, the
assessee is entitled to presume that the return has become final and no
scrutiny proceedings are to be started in respect of that return. It is only
after the issuance of notice under sub-section (2) of section 143 of the Act
that the A.O. can proceed further under sub-section (3) thereof to make an
assessment order. Therefore, the notice u/s 143(2) of the Act is a statutory
notice, upon issuance of which the A.O. assumes jurisdiction to frame the
scrutiny assessment under sub-section (3) of section 143 of the Act.
Consequently, if such notice is not issued within the period specified in
sub-section (2) of section 143 of the Act, viz., before the expiry of six months
from the end of the financial year in which the return is furnished, it is not
permissible for the A.O. to proceed further with the assessment.

ii)   In the facts of the present case, the
petitioner filed its return of income under sub-section (1) of section 139 of
the Act on 10^th September, 2016. Since the return was defective, the
petitioner was called upon to remove such defects, which came to be removed on
7^th July, 2017, that is, within the time allowed by the A.O.
Therefore, upon such defects being removed, the return would relate back to the
date of filing of the original return, that is, 10^th September, 2016
and consequently the limitation for issuance of notice under sub-section (2) of
section 143 of the Act would be 30^th September, 2017, viz., six
months from the end of the financial year in which the return under sub-section
(1) of section 139 came to be filed. In the present case, it is an admitted
position that the impugned notice under sub-section (2) of section 143 of the
Act has been issued on 9^th August, 2018, which is much beyond the
period of limitation for issuance of such notice as envisaged under that
sub-section. The impugned notice, therefore, is clearly barred by limitation
and cannot be sustained.

iii)  For the foregoing reasons, the petition
succeeds and is, accordingly, allowed. The impugned notice dated 9^th August,
2018 issued under sub-section (2) of section 143 of the Act and all proceedings
taken pursuant thereto are hereby quashed and set aside.’