Provisions of
Sec. 292BB won’t cure defect of non-issuance of notice u/s 143(2)
CIT v. Laxman Das Khandelwal
[2019] 108 taxmann.com 183 (SC)
Ratio:
In a recent ruling, the hon’ble Supreme Court has
held that Sec 292BB seeks to cure only the infirmities in the manner of service
of notice and the participation of the assessee in the proceedings does not
intend to cure complete absence of notice itself.
Facts of the case:
Search
and Seizure u/s 132 was carried out on the assessee individual on 11/03/2010.
The assessee submitted ROI declaring total income of Rs.9,35,130/-. The
assessment was completed u/s 143(3) r.w sec 153(D) of the Act. Additions on
account of unexplained cash, jewellery, hundies and cash receipts were made.
Aggrieved, the assessee filed an appeal before CIT(A) who ruled in assessee’s
favour by partly deleting the said additions.
Held by ITAT:
On
appeal being filed by the Revenue before ITAT, the assessee filed cross
objection on the ground of jurisdiction of AO regarding non-issuance of notice
u/s 143(2). The hon’ble ITAT placing reliance on the judgment passed by the
hon’ble SC in case of ACIT v. Hotel Blue
Moon [2010] 321 ITR 362 held that
issue of notice u/s 143(2) for completion of regular assessment is a statutory
requirement and non-issuance of the same is not a curable defect.
Issues
before HC:
i.
Whether
the issue of notice u/s 143(2) would be mandatory for the purpose of making
assessment u/s 143(3) ?
ii. Whether
the participation by the assessee in the proceedings cured the defect, if any,
as per provisions of Sec 292BB ?
Held
by High Court:
i. The hon’ble High
Court relying upon the decision passed in case of ACIT v. Hotel Blue Moon (supra) held that the AO in repudiation of the return filed,
has to follow provisions u/s 142, sub section (2) and (3) of Sec 143.
ii.
The
scope of the provisions of Sec 292BB is to make the service of the notice
having certain infirmities to be proper and valid if there was requisite
participation on part of the assessee and that this Section does not save
complete absence of the notice.
Held
by Supreme Court:
The
hon’ble SC upheld the findings rendered and the conclusion arrived by the
hon’ble ITAT and HC. It held that the AO had no valid jurisdiction to pass the
assessment order in absence of notice u/s 143(2) that ought to be served to the
assessee and, that this defect cannot be
cured by taking recourse to the provisions of sec 292BB. Hence, the foundation
of the assessment order is bad in law and deserves to be quashed.
Acelegal
Analysis:
There is a difference
between patent and latent jusrisdiction. Patent jurisdiction cannot be aquired with consent whereas Latent
jurisdiction can be aquired with aquisience of assessee. The SC held that
‘non issuance of notice’ is a patent illegality and hence will not get cured
unlike latent illegality of irregularity in issuance of notice. The SC
held that Sec 292BB can cure only defect in irregularity in issuance of notice
and that complete non- issuance cannot be cured even with participation of the
assessee. Therefore, even though the assessee had participated in proceedings,
the defect of non-issuance of notice is not cured u/s 292BB.
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