Date of removal of defects is irrelevant while considering limitation period to issue scrutiny notice

DCIT v. Kunal Structure (India) (P.) Ltd. – [2021] 123 taxmann.com 392 (SC)

Short Overview:

Assessee filed original return for the assessment year 2016-17 on 10-09-2016.

Thereafter, it was called upon to remove the defects under Section 139(9), which ultimately came to be removed on 07-07-2017.

 A notice was issued under Section 143(2) for scrutiny assessment on 09-08-2018.

 Assessee contended that the notice issued for scrutiny assessment was barred by limitation as the same was issued beyond the permissible time limit.

 It was submitted that considering the date of filing of the original return, a notice under Section 143(2) could have been issued on or before 30-09-2017.

However, the said notice was issued on 09-08-2018, which was beyond the period of limitation.

It was further submitted that the return filed in response to the notice under section 139(9) was not a fresh return, but was in continuation of the original return rectifying the specified defects.

When the provisions of section 139(9) provide an opportunity to the assessee to remove any defect in the original return filed and if the assessee removes the defect within the prescribed time period, then the same should be treated as a valid return duly filed with effect from the date of filing of the original return.

Therefore, the date of filing of the original return under section 139(1) was required to be reckoned for the purpose of calculating the time limit for issuance of notice under section 143(2).

On writ, the Gujrat High Court held that if after furnishing a return of income, assessee did not receive a notice under Section 143(2) within the prescribed period, assessee was entitled to presume that the return had become final and no scrutiny proceedings were to be started in respect of that return.

It was only after the issuance of notice Assessing Officer (AO) could proceed further to make an assessment order.

Therefore, the notice under section 143(2) is a statutory notice, upon issuance of which, AO assumes jurisdiction to frame the scrutiny assessment.

 Consequently, if such notice was not issued within the specified period viz. before the expiry of six months from the end of the financial year in which the return is furnished, it is not permissible for AO to proceed further with the assessment.

Since AO had issued notice much beyond the period of limitation for issuance of such notice as envisaged under Section 143(2), it was barred by limitation and could not be sustained.

Supreme Court dismissed the Special Leave Petition (SLP) filed against such decision of High Court