Wednesday, September 14, 2011

Delhi High Court: Search Assessment u/s 153A Does Not Require Issue of Notice U/s 143(2)

Delhi High Court: Search Assessment u/s 153A Does Not Require Issue of Notice U/s 143(2)

Issue of notice u/s 143(2) before passing search assessment order has been controversial issue . This is for simple reason that  no clear provision regarding issue of notice has been given in the Income T Act in case of search proceeding u/s 153A . Therefore, among many grounds on which counsel for assessee challenge order by A.O u/s 153A is issuance of notice u/s 143(2).

Notice in Search Case u/s 153A

In recent past , Tribunals have given verdict that in case of search proceeding u/s 153A also , the notice u/s 143(2) is necessary . In fact , ITAT, Agra , in its order dt 30/11/2010 in case of Narendra Singh vs ITO 138 TTJ 615 held that notice u/s 143(2) is mandatory in case of search case u/s 153A.
However, Delhi High Court in a very recent judgment in case of Ashok Chadha vs CIT held that the notice u/s 143(2) is not mandatory for search assessment u/s 153A.
Search case issue before Delhi High Court
"(a) Whether the issue of notice under Section 143(2) of the Income Tax Act is mandatory for finalization of assessment under Section 153A? (b) Whether the findings of the authorities below upholding addition of Rs.10 lac of cash seized from Mr. D.S. Rawat in the hands of the Assessee was perverse and required to be set aside? "

The Court held on the issue of notice u/s 143(2) in case of search assessment u/s 153A as under

11. It is also to be noted that Section 153A provides for the procedure for assessment in case of search or requisition. Sub section (1) starts with non-obstante clause stating that it was 'notwithstanding? anything contained in sections 147, 148 and 149, etc. Clause(a) thereof provides for issuance of notice to the person searched under Section 132 or where documents etc are requisitioned under Section 132(A), to furnish a return of income. This clause nowhere prescribes for issuance of notice under Section 143(2). Learned counsel for the assessee/appellant sought to contend that the words, "so far as may be applicable" made it mandatory for issuance of notice under Section 143(2) since the return filed in response to notice under Section 153A was to be treated as one under Section 139. Learned counsel relies upon R. Dalmia v CIT (supra) wherein the question of issue of notice under Section 143(2) was examined with reference to Section 148 by the Supreme Court in the context of Section 147. The Apex Court held as under:
"As to the argument based upon Sections 144-A, 246 and 263, we do not doubt that assessments under Section 143 and assessments and reassessments under Section 147 are different, but in making assessment and re-assessments under Section 147 the procedure laid down in Sections subsequent to Section 139, including that laid down by Section 144B, has to be followed."
12. The case of R. Dalmia v CIT (supra) primarily was with regard to applicability of section 144B and Section 153 (since omitted with effect from 01.04.1989) to the assessment made under section 147 and 148 and thus cannot be said to be the decision laying down the law regarding mandatory issue of notice under Section 143(2).
13. The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A. The use of the words, "so far as may be" cannot be stretched to the extent of mandatory issue of notice under Section 143(2). As is noted, a specific notice was required to be issued under Clause (a) of sub-section (1) of Section 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A.
14. No specific notice was required under section 143(2) of the Act when the notice in the present case as required under Section 153 (A) (1) (a) of the Act was already given. In addition, the two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him.

In nutshell, the controversy regarding the issue of notice u/s 143(2) in case of search assessment u/s 153A has been set to rest by Hon'ble Delhi High Court.

1 comment:

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