Section 143(2) notice wasn’t required in case no return was filed in response to section.148 notice.

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Section 143(2) notice wasn’t required in case no return was filed in response to section.148 notice.

Facts:

  1. Assessee-company filed its return declaring net loss. The return was filed belatedly. Therefore,the same could not be processed thereafter, proceedings under section 147 were initiated and a notice under section 148 was issued asking assessee to file return of income tax.
  2. However, Assessee did not file return. An order of assessment was passed making additions on various unexplained amounts. On appeal, the CIT(A) upheld all the additions made by the Assessing Officer (AO).
  3. The ITAT quashed the order of assessment on the ground that no notice under section 143(2) was issued before concluding the assessment Aggrieved-revenue filed the instant appeal before the High Court.

The High Court held in favors of revenue as under:

  1. Section 148 permits Issuance of notice in certain circumstances when it is discovered that income has escaped assessment. It also mandates filing of return after notice is served upon assessee. The provisions of Income-tax Act shall apply accordingly as If such return was a return required to be furnished under section 139.
  2. Section 143 pertains to an assessment and its opening words refer to a return being made under section 139 or in response to a notice under section 142(1). thus, plain reading of section 143(2) which talks about issuance of notice where return has been furnished and section 148(1) which talks about return filed in response to notice being treated as return under section 139, makes it clear that the procedure prescribed in section 143(2)becomes applicable only when a return has been furnished.  
  3. Notice under section 143(2) is mandatory, if the return filed is not accepted and assessment order is to be made at variance with the return filed by the assessee. Same would not apply to a case where no return is filed by the assessee as would be axiomatic from plain reading of section 143(2) also.
  4. Therefore, the substantial question of law framed by High Court was answered in favors of the revenue.
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