Cameron Pte Ltd (Singapore) vs. ADIT (ITAT Jaipur) Case – Notice Under 143(2) must be Served Within the Specified Time Before the Expiry of the Restricted Period

The notice under the provisions of section 143(2) of the Income tax Act is issued when the Assessing Officer (AO) evaluates the tax return submitted by the assessee and is not satisfied with the documents provided. This notice is a sign that the party has been chosen for the detailed scrutiny of the documents by the AO. Read in detail about Cameron Pte Ltd (Singapore) vs. ADIT (ITAT Jaipur) Case.

Also, this notice has to be issued and served upon the assessee before the expiry of the restricted or set period.

The dispute between VRA Cotton Mills (P&H) and Lunar Diamonds 281 ITR 1 (Del) is illustrated taking into account the CBDT Circular No. 549, issued on 31st Oct 1989.

Cameron Pte Ltd (Singapore) vs. ADIT (ITAT Jaipur) Case

Punjab & Haryana High Court, in case of VRA Cotton Mills vs. UOI (2013) 33 Taxmann.com 675 (P&H), and Delhi high court in CIT vs. Vardhaman Estate 287 ITR 368 (Del) and CIT vs. Vardhaman Estate 287 ITR 368 (Del) have contrasting views regarding this issue under scrutiny.

In the Cameron (Singapore) Pte Ltd vs. ADIT (International Taxation) conflict hearing before the ITAT Jaipur in July this year, one of the questions that came into light was whether the circumstances or the facts of the inquiry, and in law, the Assessing Officer misjudge in conjecturing the authority under section 143(3). This was based on the notice that has not been delivered to the plaintiff in error, as per the time limitation under the section 143(2) of the Income Tax Act.

The learned counsels of the ITAT, Jaipur, emphasized upon all the circumstances and facts involved in the case along with rival submissions, legal provisions, and case laws.

The CBDT circular number 549 dated 31st Oct 1989 conditions as following

The new procedure of assessment in para 5.13 of section 143(2) renders with the information that the notice under this sub-section can be served on assessee, only either throughout the financial year in which the return is registered, or within the time of six months beginning from the period in which the return is submitted, whichever comes later.

Hence the income tax department must serve the mentioned notice to the assessee in the said period, in case of any such investigation.

And in a case, the assessee does not receive the notice after filing the returns of income, have not obtained a notice from the related department within the period mentioned above, he can consider it final submission and take that no investigation or legal scrutiny is to be started against him regarding the returns.

Talking about the CIT v. Lunar Diamonds Ltd case that was put before the Delhi High Court, where the learned counsel pointed out whether the notice was actually served before said period or not. The notice, in this case, was issued on 27th Nov 1997 and posted on 28th Nov 1997 and was accepted by the appellant on 1st Dec 1997. Since the assessee had filed the returns on 20th Nov 1996 and the notice served under the section (2) of the Income Tax was not received by him within the stipulated time, which was going to be expired on 30th Nov 1997. And hence, the Division Bench of the Hon’ble court rejected the argument saying that the notice was not served.

Similarly, the case of CIT vs. Bhan Textiles P. Ltd. (2006), before Delhi High Court, following the above case the learned members of the court adopted the same approach.

This way banking upon the CBDT Circular number 549 dated Oct 31, 1989, and pursuing the verdict of the Delhi High Court given in the case of CIT vs. Bhan Textiles (supra), the learned members of  the ITAT Jaipur, revoked the DAO (draft assessment order) dated Mar 28, 2013 being outlawed by the time of reaching the notice period.

Hence, this scrutiny initiated by the AO was considered barred as the notice under the sub section (2) of the Income Tax Act was not served on the appellant within the period directed by the legal authorities.