In Cameron (Singapore) Pte Ltd v. ADIT, International Taxation, a division bench of the ITAT held that for completing assessment, the section 143(2) of the Income Tax Act notice has not only to be issued before the expiry of the limitation period but has also to be served upon the assessee before the expiry of the limitation period.
The bench further clarified that though service of the notice is not a condition precedent to conferment of jurisdiction upon the AO to deal with the matter, it is a condition precedent to making of the order of assessment.
Assesse received a notice under section 143(2) of the Income Tax Act after the expiry of the statutory limit of 6 months. The DRP rejected the contention by relying on the Apex Court ruling in the case of Banarsi Devi v. ITO and completed assessment.
Before the appellate authorities, the assesse contended that the action of the DRP was against the decision of the Delhi High Court in Lunar Diamonds case. It further contended that in the light of the binding precedents, the Revenue itself had admitted that the service was beyond the period of limitation.
Rebutting the arguments, the Revenue contended that the notice was issued before the limitation period and was sent by speed post and therefore, it cannot be said that the notice was served beyond the prescribed time.
The bench noted that in the above case, the Hon’ble Supreme Court held that the mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of time as 31.03.1970 was the last day of that period.
Following the decision in Lunar Diamonds case, the bench quashed the assessment order being barred by limitation and held that “Moreover, the assessing authority is bound by the Circular of CBDT. The CBDT Circular No. 549 dated 31.10.1989 states in clear terms that the AO is required to serve the notice on the assessee within the prescribed period, if a case is picked up for scrutiny. It follows that if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the Department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return.”
Read the full text of the Order below.
