Scope of Section 292BB : Notice deemed to be valid in certain circumstances

Background

Prior to introduction of Section 292BB by the Finance Act, 2008 w.e.f. 01.04.2008 in the Income Tax Act, non-service or no service in time, or improper service were taken as grounds for attacking assessment orders. The Courts also took cognizance of non-service of notice such as one u/nder section 148 for reassessment, and often quashed reassessment orders. Further, there used to be defect in service of the other notices such as under sections 143(2) or 142(1). In order to save assessment/reassessments framed pursuant to such defectively served notices, Section 292BB was introduced, wherein Revenue was protected from proving service of notices. However, a safeguard has been provided thereunder, if assessee objects to the proper/no service of notice then Revenue has to prove such service. This provision was restricted to cure defects in service of the notice or notices and not defects in issuance of notices.

In the memorandum explaining the provisions of section 292BB reference is made to sub-section (2) of section 143. However, the section does not limit its applicability only to notice under section 143(2). The scope of section is that where an assessee has appeared in any proceedings or has co-operated in any inquiry relating to the assessment or re-assessment, then the consequences that would ensue would be that it will be deemed that any notice under any provisions of the Act which is required to be served on an assessee has been duly served on him and it will further be deemed to have been served in time and in accordance with the provisions of the Act. The assessee is debarred from taking the defence or raise any objection in any proceeding or inquiry that the notice was -

(a)   not served upon him;

(b)   not served upon him in time; and

(c)   served upon him in any improper manner.

The assessee has a right of being served with the notice in case proceedings are taken against him and in case of invalid notice the whole proceedings taken pursuant to that notice would be void ab initio (subject to provisions of section 292B) and will have no legal consequences. To overcome such situations section 292BB has been brought on the statute as explained in the memorandum explaining the provisions as well as notes on clauses. The applicability of section 292BB is not strictly restricted to issue of notice under section 143(2) but it is in respect of other notices relating to any provisions of the Act which include notice to initiate re-assessment proceedings and other proceedings also.

It is well-settled that while construing a deeming provision, full effect must be given to the statutory fiction. It should also be carried to its logical conclusion. To that end, it would be proper and even necessary to assume all those facts on which alone the fiction can operate. Therefore, where the statute under section 292BB deems service of notice, it will always include issue of notice, as service cannot be effected without issuance thereof.

According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.

Text of Section 292BB

^[1][292BB. Notice deemed to be valid in certain circumstances

Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was—

(a) not served upon him; or

(b) not served upon him in time; or

(c) served upon him in an improper manner:

PROVIDED that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.]

 

KEY NOTE

1.  Inserted by the Finance Act, 2008 with effect from 01.04.2008.

 

Ingredients of Section 292BB

Analysis of section 292BB indicates following ingredients -

(i)      There is a proceeding of, or inquiry relating to an assessment or reassessment.

(ii)     A notice is required to be served on the assessee in connection with such proceedings or inquiry (relating to an assessment or reassessment).

(iii)    There is a defect in the service of the notice of the nature of (a) non-service, (b) non-service in time, or (c) non-service in a proper manner.

(iv)    The assessee has appeared in the proceedings (relating to an assessment or reassessment) or co-operated in the inquiries relating thereto.

(v)     He has not raised any objections during assessment or reassessment proceedings about defect in the service.

(vi)    Then the assessee cannot raise such objection during appellate proceedings.

Section 292BB provides a deeming fiction

Section 292BB is a deeming fiction to the effect that once the assessee has appeared in any proceedings or co-operated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act.

Section 292BB incorporates principle of estoppel

Section 292BB can be pressed into action to safeguard the Revenue from getting the assessment quashed due to non-service upon the assessee, or non-service in time or not properly served, if the assessee (i) appeared in any proceeding, or (ii) co-operated in any inquiry relating to an assessment or reassessment. However, the proviso states that the principle of estoppel incorporated in the main section would not apply, if the assesses raises objection, before completion of assessment/reassessment about non-service upon the assessee or non-service in time or not properly served, then Section 292BB cannot be invoked to safeguard assessment/reassessment. The Revenue has to prove the service of the notice upon the assessee, and in time and service it in accordance with law.

Section 292BB does not give power to condone delay in issuing statutory notice required to be issued under section 143(2)

Section 292BB does not give power to condone failure or delay in issuing statutory notice required to be issued under section 143(2) and it deals with failure of service of notice and not with regard to failure to issue notice. Since in instant case, notice under section 143(2) was not issued within period of six months prescribed for purpose, same could not be condoned by referring to section 292BB and thus, jurisdiction assumed by Assessing Officer under section 143(3) was erroneous. [In favour of assessee] (Related Assessment year : 2011-12) – [PCIT v. Consortium Nussli Comfort Net (2022) 139 taxmann.com 337 (Del.)]

 

Section 292BB only cures any defect in service of any ‘notice’ issued and does not deal with ‘orders’ passed beyond period of limitation

Sub-sections (1) to (4) are not applicable in the facts of the present case. Sub-section (7) of section 153 is applicable in relation to the orders passed on or before 01.06.2016 which is also not relevant in the present case. Therefore the only relevant sub-sections to be examined are (5) and (6) of section 153.

Sub-section (5) of section 153 applies in relation to those orders which are to be passed by the Assessing Officer to give effect to any direction or finding [other than fresh assessment/re-assessment] contained in the order of the Commissioner (Appeals) passed under section 250 or order of this Tribunal passed under section 254 or order passed in appeal or reference before the High Court under section 260 or an order passed by the Supreme Court under section 262 or revisionary order passed by the Principal Commissioner under section 263/264. The order covered by section 153(5) is required to be passed within three months from the end of the month in which the order has been passed or received. In the present case, the order impugned was passed in consequence of the direction contained in the order dated 11.08.2017 passed by the Calcutta High Court in writ proceedings, which does not constitute an appeal or reference made under section 260. Therefore, there is merit in the finding of the Commissioner (Appeals) that sub-section (5) of section 153 cannot be pressed into service in the present case as the assessment order impugned was passed in pursuance of the directions given by the High Court in the writ proceedings which are extraordinary proceedings and not statutory Appellate proceedings under section 260. So, sub-section (5) of section 153 is not applicable in the facts of this case.

Coming to sub-section (6) of section 153 it is noted that it is the residuary clause for all classes of assessments or re-assessments or re-computations which are otherwise not covered specifically in sub-section (3) or (5) of section 153. It is noted that the orders passed under section 250/254/260/262/263/264 are found mentioned both in sub-sections (5) and (6) of section 153. Plain reading of sub-section (6) shows that, if any order is covered by sub-section (5), then the period of limitation set out in the latter would prevail. Meaning thereby, only if the finding or direction contained in the aforesaid orders under section 250/254/260/262/263/264 is not covered by the scope of sub-section (5) that the period of limitation set out in sub-section (6) shall come into play. As noted earlier, in the facts of the present case, the order impugned has not been passed in consequence of any order under section 250/254/260/262/263/264. It is noted that apart from the aforesaid orders, there is another class of order covered by sub-section (6) of section 153 viz., an order passed by the Assessing Officer in consequence of any finding or direction contained in an order by any Court in a proceeding other than appeal or reference under this Act. In such a case, the Assessing Officer is required to pass the order within twelve months from the end of the month in which the order has been received by the Commissioner. As rightly observed by the Commissioner (Appeals), the case of the assessee falls under this sub-category contained in clause (i) of section 153(6).

Having regard to the fact that the Assessing Officer had issued fresh show cause notice dated 06.10.2017 in consequence of the directions contained in the order passed by the High Court dated 11.08.2017 in writ petition, it can be safely inferred that the office of the Commissioner had received the order of High Court on or before the date of notice i.e. 06.10.2017. Accordingly, the period of twelve months for completion of assessment began from the end of the month of October 2017 which ended on 31.10.2018. It is noted that the impugned order was passed on 28.12.2018 which was well beyond the date on which the proceedings got time barred. Therefore, there is no infirmity in the order of Commissioner (Appeals) holding that the Assessing Officer did not had the jurisdiction to frame assessment after the limitation period has set in and therefore the assessment order passed by Assessing Officer on 28.12.2018 was barred by limitation and therefore it is null in the eyes of law.

As far as the revenue's contention that section 292BB, comes to the rescue of the Assessing Officer in such events is concerned, the provisions of section 292BB only cures any defect in the service of any 'notice' issued under the provision of this Act and does not deal with 'orders' passed beyond the period of limitation prescribed under the Act. Section 292BB states that, any notice under this Act which is required to be served upon the assessee shall be deemed to have been served upon him in time and such assessee shall be precluded from taking objection that either that notice was not served upon him or not served in time or served in an improper manner; provided the assessee had raised such objection before the completion of assessment. In the present case however, the assessee has objected to the validity of the ‘order’ impugned on the premise that it was barred by limitation in terms of section 153. The facts of the case are thus altogether different and the aforesaid provision relied upon by the revenue has no relevance whatsoever.

For the reasons set out above, the Commissioner (Appeals) was right in holding that the Assessing Officer did not had the jurisdiction to frame assessment after the limitation period has set in and therefore the assessment order passed by Assessing Officer on 28.12.2018 was barred by limitation and therefore it is null in the eyes of law. [In favour of assessee] – [PCM Stresscon Overseas Ventures Ltd. v. PCIT (2022) 138 taxmann.com 472 : 93 ITR(T) 682 (ITAT Kolkata)]

Reopening notice was issued against assessee on basis of information obtained from Investigation Wing that assessee had operated undeclared account with a bank located outside India and carried out unaccounted transactions and made deposits in it, impugned reopening notice was justified

Assessee filed return of income which was accepted and an assessment order was passed. Subsequently, an information was obtained from Investigation Wing that assessee had operated undeclared account with a bank located outside India and carried out unaccounted transactions and made deposits in it. On basis of same, a reopening notice was issued against assessee. Subsequently, a reassessment order was passed treating deposits in such bank account as undisclosed income of assessee. Assessee contended that reassessment proceedings were completed without issuing any notice under section 143(2) to assessee and since same was jurisdictional defect amounting to failure to follow mandatory procedure, entire re-assessment proceedings stood vitiated as per section 292BB. It was noted that assessment was reopened after recording reasons thereof with prior approval of Joint Commissioner. Further, notice under section 148 was issued by Deputy Commissioner and thereafter a notice under section 143(2) was also issued. In response to said notice assessee made submission and furnished details. After discussing case with assessee, reassessment was completed by Assessing Officer. Thus, it was evidently clear that there was proper issuance of notice under section 143(2) upon assessee; thus, there was no procedural irregularity so as to apply section 292BB. Impugned reopening notice on basis of said information of investigation wing as well as subsequent reassessment order were justified. [In favour of revenue] (Related Assessment years : 2006-07 and 2007-08) – [Pradeep Dayanand Kothari v. CIT, Chennai (2020) 429 ITR 14 : 121 taxmann.com 166 : (2021) 277 Taxman 260 (Mad.)]

 

Assessee filed writ petition challenging reassessment order on grounds that notice under section 148 was not served upon him, in view of fact that authorized representative appeared on behalf of assessee, contention of assessee could not be countenanced in view of section 292BB

Notice to an authorized representatives of an assessee is a notice to assessee. Assessee filed writ petition against reassessment order contending that notice under section 148, was not served on him. It was found that authorized representative had appeared on behalf of assessee. Contention of assessee that notice under section 148 was not served on him could not be countenanced in view of section 292BB. In view of alternative remedy available to assessee to file an appeal before Commissioner (Appeals) under section 246, assessee was at liberty to file such appeal. [In favour of revenue] – [A.Chandrasekaran v. ITO, Tirupur (2020) 117 taxmann.com 837 (Mad.)]

 

Reopening of assessment justified if notice issued in the name of surviving entity only

Reopening of assessment was justified in case of EDPL as there were sufficient ‘reasons to believe’ that income had escaped assessment and the bar to reopening of proceedings after expiry of four years from the date of final assessment order, under the proviso, did not apply in assessee’s case and there was no requirement to issue two separate notices in the name of amalgamated company (i) as successor-in-interest of the amalgamating company and (ii) in its individual capacity as EDIPL had ceased to exist as a separate entity. (Related Assessment year : 2012-13) - [Experion Developers (P) Ltd v. ACIT – Date of Judgement : 13.02.2020 (Del)]

Notice seeking to reopen assessment was issued in name of deceased assessee, since she could not have participated in reassessment proceedings, provisions of section 292BB were not applicable to assessee's case and as a consequence, impugned reassessment proceedings deserved to be quashed

For relevant year, assessee filed her return declaring certain taxable income - Return was processed in a routine manner and assessee was intimated about it - After death of assessee, Assessing Officer issued a notice under section 148 in her name seeking to reopen assessment - Legal representative of assessee filed instant petition contending that Act did not provide any mechanism for issuing and carrying on reassessment in respect of a dead person, if reassessment notice was issued against a deceased. Revenue, on other hand, raised a plea that error in issuing notice to a non-existent person or entity was capable of correction by reason of section 292BB. On facts, if original assessee had lived and later participated in proceedings, then, by reason of section 292BB, she would have been precluded from saying that no notice was factually served upon her. However, in instant case, since notice was issued in name of assessee when she was no longer alive, it was inconceivable that she could have participated in reassessment proceedings to be estopped from contending that she did not receive it. Therefore, provisions of section 292BB were not applicable to assessee’s case and as a consequence, impugned reassessment proceedings deserved to be quashed. [In favour of assessee] (Related Assessment year : 2010-11) – [Rajender Kumar Sehgal v. ITO (2019) 414 ITR 286 : 260 Taxman 412 : 101 taxmann.com 233 (Del.)]

 

Where notice for reopening issued by Assessing Officer prior to approval by CIT, the reassessment is bad in law

The Assessing Officer had initiated reassessment proceedings based on a search/survey operation and made addition under section 68 in respect of share capital. On appeal, the CIT (A) deleted the addition. Aggrieved, the Department was in appeal before the Tribunal. The assessee had simultaneously filed cross-objections against the validity of the reassessment proceedings as the notice under section 148 was issued prior to approval of the concerned. The Tribunal noted that the approval of the CIT was obtained after issuing notice under section 148 and accordingly the mandatory conditions of section 148 were violated. Thus, the Tribunal held the reassessment to be void ab initio and bad in law. (Related Assessment year : 2007-08) - [DCIT v. Bhaijee Portfolio (P) Ltd. (2019) 73 ITR 403 (ITAT Delhi)]

Assessing Officer had completed assessment of assessee under section 143(3) read with section 147 without issuing any notice under section 143(2), re-assessment order passed was legally unsustainable and same could not be justified by invoking provisions of section 292BB

The Tribunal had quashed the entire re-assessment proceedings on the assessee's assertion that no notice under section 143(2) was issued by the Assessing Officer before undertaking the re-assessment. In instant appeal the revenue contended that in view of section292BB the ground that no notice under section 143(2) was issued by the Assessing Officer before undertaking the re-assessment could not be urged by the assessee before the Tribunal, particularly, as the assessee participated in course of the re-assessment. The objections of the assessee as to the re-assessment were considered by the Assessing Officer and it was not pointed out by the assessee prior to the re-assessment being completed that no notice under section 143(2) was issued to him in respect of the re-assessment. In the alternative, the revenue said that if a notice under section 143(2) was deemed to be mandatory so that in the absence thereof the subsequent order of assessment or re-assessment had to be annulled, the matter must be restored to the stage where a notice under section 143(2) might be issued for completing the assessment or re-assessment, as the case might be.

This is not a case where the Assessing Officer says that a notice had been issued and there is a contradiction thereof by the assessee. It is evident that the assessee carried the objection before the Commissioner (Appeals) and the Commissioner brushed aside the objection on the ground that it was a technicality without addressing the issue or applying his mind to such aspect of the matter. Further, it is evident from the order impugned passed by the Appellate Tribunal that no notice under section 143(2) had, in fact, been issued in this case. In such a situation, where a notice that is mandatorily required to be issued is found not to have been issued, section 292BB has no manner of operation. The two substantial questions of law are answered accordingly. If the time for issuance of the notice under section 143(2) has expired or the time for completing the re-assessment proceedings under section 153(2) has run out, the failure to issue such notice under section 143(2) would result in the entire proceedings, including any order of assessment, to be quashed. Section 292BB 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 re-assessment.

Thus, where Assessing Officer had completed assessment of assessee under section 143(3) read with section 147 without issuing any notice under section 143(2), assessment order passed was legally unsustainable and same could not be justified by invoking provision of section 292BB. [In favour of assessee] – [PCIT v. Oberoi Hotels (P) Ltd. (2018) 409 ITR 132 : 96 taxmann.com 104 (Cal.)]

 

For section 292BB to apply, section 143(2) notice must have emanated from department and it is only infirmities in manner of service of notice that section seeks to cure and it is not intended to cure complete absence of notice itself

A close look at section 292BB shows that if the assessee has participated in the proceedings, it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner.

According to section 292BB, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said section. The scope of section 292BB is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee and section does not save complete absence of notice and, thus, for section 292BB to apply, the notice must have emanated from the department and it is only the infirmities in the manner of service of notice that the section seeks to cure and it is not intended to cure complete absence of notice itself.

Scope of section 292BB is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of assessee and section does not save complete absence of notice and, thus, for section 292BB to apply, section 143(2) notice must have emanated from department and it is only infirmities in manner of service of notice that section seeks to cure and it is not intended to cure complete absence of notice itself.  Since the facts on record are clear that no notice under section 143(2) was ever issued by the department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. There is no reason to take a different view in the matter. [In favour of assessee] (Related Assessment year : 2010-11) – [CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 : 266 Taxman 171 : 108 taxmann.com 183 (SC)]

Section 292BB can be made applicable only for assessment or reassessment proceedings and same cannot be made applicable for revisional proceedings as contemplated under section 263

Section 292BB can be made applicable only for the assessment or reassessment proceedings and the same cannot be made applicable for revisional proceedings as contemplated under section 263. Moreover, the provisions of section 292BB would not come to the rescue of the revenue when there is a basic fault on the assumption of jurisdiction itself on a non-existent entity by the Commissioner by issuing show cause and passing the order on the non-existent entity. When there is a jurisdictional defect, it does not become curable. [In favour of assessee] (Related Assessment year : 2010-11) - [Emerald Company Ltd. v. ITO (2017) 83 taxmann.com 29 : (2016) 46 ITR(T) 619 (ITAT Kolkata)]

Prior to completion of reassessment, assessee raised an objection that he had not been duly served in accordance with section 148, proviso to section 292BB was attracted and revenue could not take advantage of main portion of section 292BB

In the present case, prior to the completion of the reassessment, the assessee has raised an objection that he has not been duly served in accordance with section 148 of the Act. Consequently, the proviso to section 292BB is attracted and revenue cannot take advantage of the main portion of section 292BB. [In favour of assessee] – [CIT(C) v. Chetan Gupta (2016) 382 ITR 613 : (2015) 62 taxmann.com 249 (Del.)]

 

Provision of section 292BB as inserted by Finance Act, 2008, with effect from 01.04.2008, are not applicable to assessment year 2007-08

For relevant year assessee filed its return declaring certain income. Assessing Officer having issued notice under section 143(2), made certain additions to assessee's taxable income. On appeal, assessee raised an objection that notice under section 143(2) had been issued after expiry of prescribed period of twelve months. Commissioner (Appeals) held that objections raised by assessee was not tenable as per provisions of section 292BB. Tribunal, however, set aside impugned addition holding that section 292BB was not applicable to assessee’s case. Since provision of section 292BB was inserted by Finance Act, 2008, with effect from 01.04.2008, it was not applicable to assessment year in question. Therefore, impugned order of Tribunal was to be upheld. [In favour of assessee] (Related Assessment year : 2007-08) - [CIT, Lucknow v. Mohammad Khaleeq Commercial Taxes (2015) 229 Taxman 566 : (2014) 44 taxmann.com 484 (All.)]

 

It was held that in a case where no objection regarding valid service was taken before the completion of assessment, provisions of section 292BB will be applicable to all pending assessments as on 01.04.2008. - [CIT v. Panchvati Motors (P) Ltd. in ITA No. 292 of 2008, dated 03.05.2011 (P&H)]