Advocate Akhilesh Kumar Sah
Oberoi Hotels recent appeal before Calcutta High Court: Failure to issue notice under Section 143(2) will result in the entire proceedings, including any order of assessment, to be quashed
PCIT vs. Oberoi Hotels Pvt. Ltd. [ITAT No.152 of 2015, decided on 22.06.2018], the substantial questions of law that had arisen were in the context of reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961(for short ‘the Act’) pursuant to a notice under Section 148 thereof. The Appellate Tribunal had quashed the entire reassessment proceedings on the assessee’s assertion that no notice under Section 143(2) of the Act was issued by the Assessing Officer before undertaking the reassessment.
The following substantial questions of law arose:
1. Whether the failure to issue a notice under Section 143(2) of the Act in course of reassessment proceedings would vitiate the reassessment proceedings altogether?
2. What is the effect in view of Section 292BB of the Act when a notice under Section 143(2) of the Act is not issued at all?
Hon’ble judges of the Calcutta High Court observed that it is evident that the dictum of the Supreme Court in ACIT vs. Hotel Blue Moon[321 ITR 362 ] is that a notice under Section 143(2) is mandatory if he return as filed is not accepted and an assessment order is to be made at variance with the return filed by the assessee. It is also evident that the issue is not limited to block assessment but would apply to every case where a notice under Section 143(2) of the Act is necessary. In the judgment and order of the Appellate Tribunal impugned herein dated May 14, 2015, the Tribunal noticed a judgment of Calcutta High Court of April, 8, 2014 rendered in ITAT 149 of 2013 (CIT vs. Humboldt Wedag India Pvt. Ltd.) where the Court had expressed an opinion that when an order of assessment was passed in course of reassessment under Section 143(3) of Act, “The omission could have been a reason for setting aside the order of assessment, but that could not have been a reason, in the facts and circumstances of this case, for nullifying the exercise under section 147 of the Income Tax Act.”
Such view taken by the Court in Humboldt Wedag India Pvt. Ltd(supra) was without noticing the Supreme Court judgment in Hotel Blue Moon(supra). The relevant Bench also did not take into consideration a previous order of the Court of April 4, 2013 when the reassessment proceedings were quashed merely on the ground that no notice under Section 143(2) of the Act was issued to the assessee before making the reassessment.
The Hon’ble Judges of Calcutta High Court after considering the facts & circumstances of the case, rival submissions, legal position, relevant rulings, answered the two substantial questions of law as follows:
(1) If the time for issuance of the notice under Section 143(2) of the Act has expired or the time for completing the reassessment proceedings under Section 153(2) of the Act has run out, the failure to issue such notice under Section 143(2) of the Act would result in the entire proceedings, including any order of assessment, to be quashed.
(2) Section 292BB of the Act does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the defect of service of such notice if an objection in such regard is not taken before the completion of the assessment or reassessment. In addition, it is held that in the light of the Supreme Court dictum in Hotel Blue Moon(supra), the view expressed in Humboldt Wedag India Pvt. Ltd(supra) is per incuriam and, as such, no good law.