Sections. 143(2), 147 – AO cannot suo moto treat the return of income filed before issue of notice u/s. 148 to be a return filed in response to the said notice. Notice u/s. 143(2) issued before the assessee has filed a return in response to notice u/s. 148 cannot be treated as a valid notice.
Facts:
For the assessment year 2006-07 the assessee filed his return of income u/s 139 on 10.7.2007. In the computation filed along with the said return the assessee stated that it has received Rs. 97,80,000 which has been treated as capital receipt. The said return of income was processed u/s. 143(1) of the Act.
On 24.12.2009, a notice u/s. 148 of the Act was issued for reopening the assessment. In response to the said notice the assessee did not file any return of income. On 23.9.2010, a notice u/s. 143(2) dated 17.9.2010 was dispatched by registered post. On 5.10.2010, an authorised representative of the assessee appeared before the AO and stated that the return of income originally filed could be treated as return filed pursuant to the notice u/s. 148 of the Act. On 5.10.2010, the AO issued a notice u/s. 142(1) of the Act but there was no notice u/s 143(2) of the Act.
The AO completed the assessment u/s 143(3) r.w.s. 147 of the Act.
Aggrieved by the action of the AO in framing an assessment u/s. 143(3) r.w.s. 147 without issue of a notice u/s. 143(2) of the Act, the assessee preferred an appeal to CIT(A) who confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal to Tribunal.
Held:
The Tribunal noted that in the case before it a notice u/s. 143(2) of the Act had been issued to the assessee, but on the date when such notice was issued viz. 23.9.2010, assessee had not filed any return pursuant to the reopening notice u/s. 148 of the Act. It, further, noted that the first instance when the assessee requested the AO to treat the returns originally filed by it as returns filed pursuant to the notices u/s. 148 of the Act, was on 5.10.2010 which was clear from the narration in the order sheet. It observed that the crux of the issue is whether notices u/s.143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified u/s. 143(2) of the Act.
The Tribunal noted that in the case of M/s. Amit Software Technologies Pvt. Ltd. (ITA No. 540(B)/2012 dated 7.2.2014), the co-ordinate Bench has after considering the decision of the Madras High Court in the case of Areva T and D India Ltd. and also the decision of the Delhi High Court in the case of M/s. Alpine Electronics Asia PTE Ltd. (341 ITR 247)(Del), held that section 143(2) of the Act was a mandatory requirement and not a procedural one.
If the income has been understated or the income has escaped assessment, an AO is having the power to issue notice u/s. 148 of the Act. Notice u/s. 148 of the Act issued to the assessee required it to file a return within 30 days from the date of service of such notice. There is no provision in the Act, which would allow an AO to treat the return which was already subject to a processing u/s. 143(1) of the Act, as a return filed pursuant to a notice subsequently issued u/s. 148 of the Act. However, once an assessee itself declares before the AO that the earlier return could be treated as filed pursuant to a notice u/s. 148 of the Act, three results can follow. AO can either say no, this will not be accepted, you have to file a fresh return or he can say that 30 days time period being over I will not take cognisance of your request or he has to accept the request of the assessee and treat the earlier returns as one filed pursuant to the notice u/s. 148 of the Act. In the former two scenarios, AO has to follow the procedure set out for a best judgment assessment and cannot make an assessment u/s. 143(3). On the other hand, if the AO chose to accept assessee’s request, he can indeed make an assessment u/s. 143(3). In the case before us, assessments were completed u/s 143(3) r.w.s. 147. Or in other words AO accepted the request of the assessee. This in turn makes it obligatory to issue notice u/s. 143(2) after the request by the assessee to treat his earlier return as filed in pursuance to notices u/s. 148 of the Act was received. This request, in the given case, has been made only on 5.10.2010. Any issue of notice prior to that date cannot be treated as a notice on a return filed by the assessee pursuant to a notice u/s. 148 of the Act. In other words, there was no valid issue of notice u/s. 143(2) of the Act, and the assessments were done without following the mandatory requirement u/s. 143(2) of the Act. This, it held, renders the subsequent proceedings invalid. The Tribunal, quashed the assessment done for the impugned years.
The appeals filed by the assessee were allowed.
