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| Issue of s. 143 (2) notice is mandatory for block assessment proceedings |
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The Apex court in a recent case of
Assistant Commissioner of Income Tax & Anr Versus
M/s. Hotel Blue Moon Dt. February 2, 2010 held that if the assessing officer, if
for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within
the time prescribed in the proviso to Section 143(2) of the Act. Where the
legislature intended to exclude certain provisions from the ambit of Section
158 BC(b) it has done so specifically. Thus, when Section 158 BC(b)
specifically refers to applicability of the proviso thereto cannot be exclude.
The point that was raised
for determination is, whether issue of notice under Section 143(2) of the
Act within the prescribed time for the purpose of block assessment under
Chapter XIV-B of the Act is mandatory for assessing undisclosed income
detected during search conducted under Section 132 of the Act. While, according
to the department, issue of a notice under Section 143(2) is not essential
requirement in block assessment under Chapter XIV-B of the Act. According to
the assessee, service of notice on the assessee under Section 143(2) of the
Act within the prescribed period of time is a pre-requisite for framing the
block assessment under Chapter XIV-B of the Act. The Appellate Tribunal held,
while affirming the decision of the CIT(A) that non-issue of notice under
Section 143(2) is only a procedural irregularity and the same is curable. The High Court, disagreeing with the Tribunal, held, that the provisions of
Section 142 and sub- sections (2) and (3) of Section 143 will have mandatory
application in a case where the assessing officer in repudiation of return
filed in response to a notice issued under Section 158 BC(a) proceeds to make
an inquiry. Accordingly, the High Court answered the question of law framed in
affirmative and in favour of the appellant and against the revenue. The revenue
thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal.
The Court had elaborated that Section 158 BC(b) provides for
enquiry and assessment. The said provision reads "that the assessing
officer shall proceed to determine the undisclosed income of the Block period
in the manner laid down in Section 158 BB and the provisions of Section 142,
sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply." An analysis of this sub section
indicates that, after the return is filed, this clause enables the assessing
officer to complete the assessment by following the procedure like issue of
notice under Sections 143(2)/142 and complete the assessment under Section
143(3). This Section does not provide for accepting the return as provided
under Section 143(i)(a). The assessing officer has to complete the assessment
under Section 143(3) only. In case of default in not filing the return or not
complying with the notice under Sections 143(2)/142, the assessing officer is
authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would
appear to imply that the provisions of Section 143(1) are excluded. But
Section 143(2) itself becomes necessary only where it becomes necessary to
check the return, so that where block return conforms to the undisclosed
income inferred by the authorities, there is no reason, why the authorities
should issue notice under Section 143(2). However, if an assessment is to be
completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued
within one year from the date of filing of block return. Omission on the part
of the assessing authority to issue notice under Section 143(2) cannot be a
procedural irregularity and the same is not curable and, therefore, the
requirement of notice under Section 143(2) cannot be dispensed with. The other
important feature that requires to be noticed is that the Section 158 BC(b)
specifically refers to some of the provisions of the Act which requires to be
followed by the assessing officer while completing the block assessments under
Chapter XIV-B of the Act. This legislation is by incorporation. This Section
even speaks of sub- sections which are to be followed by the assessing
officer. Had the intention of the legislature was to exclude the provisions of
Chapter XIV of the Act, the legislature would have or could have indicated
that also. A reading of the provision would clearly indicate, in our opinion,
if the assessing officer, if for any reason, repudiates the return filed by
the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within
the time prescribed in the proviso to Section 143(2) of the Act. Where the
legislature intended to exclude certain provisions from the ambit of Section
158 BC(b) it has done so specifically. Thus, when Section 158 BC(b)
specifically refers to applicability of the proviso thereto cannot be exclude.
We may also notice here itself that the clarification given by CBDT in its
circular No.717 dated 14th August, 1995, has a binding effect on the
department, but not on the Court. This circular clarifies the requirement of
law in respect of service of notice under sub-section (2) of Section 143 of
the Act.
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