Whether the action of AO for framing the assessment under section 147 is within his jurisdiction though the time for scrutiny assessment under section 143(3) has not lapsed.
At the outset, it was noticed that assessee has filed its return of income on dated 23.10.2002 as per the provisions of Sec. 139(1) of the Act for assessment Year 2002-03 which was duly processed under section 143(1) of the Act. Later the AO formed the reason to believe that the income of assessee has escaped from assessment and issued notice under section 148 of the Act on dated 15.7.2003. Here the pertinent point is that the AO has exercised his power to assess/ reassess the income under section 147 of the Act though the time for picking up the matter under scrutiny as specified under section 143(2) was very much there. In the present case the time available for the issue of notice under section 143(2) for making the assessment was till October 2013. It is easy to understand from the plain reading of the section which is reproduced below :
“143.[(1) …. ..
[(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, –
(i) … …
(ii) notwithstanding anything contained in clause (i(), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return:
[Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.]]
23. Substituted by the Finance Act, 2008, w.e.f, 1-4-2008, Prior to its substitution, proviso, as amended by the Finance Act, 2003, w.e.f. 1- 6-2003, read as under:
“Provided that no notice under clause (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.”
As per the provisions of the Act, the AO is under obligation to issue a notice and ensure the service of notice upon the assessee within the specified period. In the instant case, AO was having time to serve the notice u/s. 143(2) of the Act till 31.10.2003, however the AO sought to initiate proceedings u/s 147 of the Act by issuing notice u/s. 148 of the Act on 05.07.2003. It is beyond to understand that why AO issued a notice u/s 148 instead of 143(2) of the Act. In the instant case, the time for issuing notice u/s.143(2) did not expire for making the scrutiny assessment. But the AO has issued notice u/s 148 to initiate proceedings u/s. 147 of the Act for the concealment of the Income which is ultra varies. However the Ld. CIT(A) has also upheld the order of the AO on the ground that no objection about the jurisdiction was raised by the assessee at the assessment stage. However we find that similar issue has been decided by the various Hon’ble courts where the initiation of proceedings u/s. 147 of the Act was held as bad in law. We are relying in the judgment of Hon’ble Madras High Court in the case of CIT v. TCP Ltd. (2010) 323 ITR 346 (Mad) and in the case of CIT v. Qatalys Software Technologies Ltd. (2009) 308 ITR 249 (Mad) wherein such situations the proceedings under section 147 of the Act were held bad in law. From the aforesaid discussion, we find that the action of Assessing Officer is ultra various and not within the provision of the Income Act. Therefore, we are quashing the assessment proceedings done by AO u/s 147 of the Act.
Remaining grounds do not call for any adjudication at this stage because assessee’s principal ground u/s. 147 of the Act has been quashing the assessment proceedings.