Whether when assessee's representative actively participates in assessment proceedings, it can still dispute validity of service of notice u/s 143(2) - NO: HC

 issues before the Bench are - Whether issue of notice u/s 143(2) is a beneficial provision for the assessee; Whether such a facility granted to the assessee to adduce evidence in support of its case can be abused to nullify liability to pay tax and Whether when assessee's representative actively participates in assessment proceedings, it can still dispute validity of service of notice u/s 143(2). And the verdict goes against the assessee.

Facts of the case

the Tribunal was right in quashing the assessment proceedings on the ground that the assessee was not served with any notice u/s 143(2) within the statutory period prescribed when the conduct clearly shows that the assessee was aware of the receipt of the notice and the assessee participated in the proceedings on the date fixed by the said notice?

The assessee is a partnership firm consisting of two partners namely Manoj Gupta and his wife. The income declared in the return was Rs. 7,83,554/-. The return was processed on 01.03.2004 u/s 143(1)(a). Subsequently it was taken up for scrutiny and accordingly a notice u/s 143(2) was issued on 30.12.2004. Pursuant to the notice issued on 12.09.2005 u/s 142(1) and several notices issued thereafter, the assessee actively participated in the assessment proceedings and partly furnished the details, documents and information called for by the AO. The assessment proceedings ultimately resulted in an assessment order passed u/s 143(3) r/w Section 144. The total income assessed was Rs. 8,51,12,030/-. The AO did not allow the claim u/s 80HHC.

The CIT (A) held that so far as assessment completed u/s 144 was concerned, it was correct, and in accordance with the law, and therefore its validity was upheld. In appeal, the Tribunal agreed with the contentions of the assessee and concluded that the notice u/s 143(2) had not been served on any of the two partners of the assessee-firm and that it was not even the case of the AO that it was so served and quashed the assessment order.

Having heard the parties, the HC held that,

++ it cannot be sheer coincidence that the notice is served on 31.01.2004 upon some person available at the proper address and the person for whom the notice is meant participates in the proceedings on 05.01.2005 which is the date fixed by the said notice. It is difficult to visualise how else the assessee could have come to know that his case is posted before the AO on 05.01.2005, except from the notice;

++ the conduct clearly shows that the assessee was aware of the receipt of the notice and the posting of his case for hearing on 05.01.2005. The issue of a notice u/s 143(2) is to enable the assessee to adduce evidence in support of the return submitted by him. The provision is essentially conceived in the interests of the assessee and once he comes to know of the opportunity that has been accorded to him and also takes a step towards availing of the same, it does not lie in his mouth to turn round and contend that there was no valid service of the notice upon him;

++ there is nothing in law to compel the Court to hold that despite notice that his case is posted for hearing before the AO, the assessment order passed after giving him full opportunity of being heard would still be invalid. That will be a travesty of justice;

++ the participation of the assessee in the proceedings for the assessment in the present case is an important fact to be taken note of, not because of Section 292BB but in the light of the fact that the notice dated 30.12.2004 mentioned 05.01.2005 as the date of hearing, on which date the authorised representative had appeared and filed his power of attorney before the AO. It would be against the spirit of law relating to income tax assessments if one were too readily be willing to hold that there was non-service or invalid service of the notice u/s 143(2), merely on peripheral allegations or facts and not looking at the substance i.e. whether the notice in fact was served and even acted upon by way of appearance entered before the AO. This has made the impugned order erroneous and perverse as relevant and material aspects have been ignored and not given credence;

++ a provision intended for the benefit of the assessee and conceived in accordance with the rules of natural justice should not be permitted to be abused by the very person for whose benefit it is intended and should not be permitted to become a tool to ward off the liability to pay the tax. We are not to be understood as saying that in no case can the service of notice under Section 143(2) of the Act can be held to be invalid;

++ whenever a case is set up by the assessee that there has been no valid or proper service of the notice issued u/s 143(2), be it for the purpose of regular assessment u/s 143(3) for the purpose of a block assessment under Chapter XIV-B or for the purpose of an assessment u/s 153A, such a plea has to be examined thoroughly and in-depth by taking a practical and reasonable view of the matter, not inconsistent with the statutory provisions, keeping in mind the basic principle that the liability to pay tax, which is founded on the charging provisions of the statute, is not to be nullified on specious or unjustified pleas taken by the assessee;

++ the assessee was properly served with the notice u/s 143(2) and within the statutory period prescribed by the proviso to the said sub-section. Accordingly, the substantial question of law is answered in the in favour of the Revenue . We remit the issue to the Tribunal for a fresh disposal of the appeal filed by the Revenue before it in accordance with law.