2010 (3) TMI 890 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice u/s 143(2) in block assessment.
2. Service of notice u/s 143(2) within the prescribed period.
3. Consequences of non-issuance of notice u/s 143(2) within the stipulated time.

Summary:

1. Validity of notice u/s 143(2) in block assessment:
The primary issue was whether the proviso to section 143(2) applies to block assessments. The Tribunal referred to section 158BC(b) which mandates that the provisions of section 143(2) apply to block assessments. The Tribunal cited the Hon'ble Supreme Court's judgment in Asstt. CIT v. Hotel Bluemoon [2010] 188 Taxman 113, which clarified that notice u/s 143(2) must be issued within one year from the end of the month in which the block return is filed. The Tribunal concluded that the issuance of notice u/s 143(2) is a mandatory requirement for block assessments.

2. Service of notice u/s 143(2) within the prescribed period:
The assessee filed the block return on 15-5-2000. The Tribunal examined whether the notice dated 16-5-2000 was served on the assessee. The Tribunal noted discrepancies in the notice, such as the incorrect date of return mentioned as 15-11-2000, which was impossible since the return was filed on 15-5-2000. The Tribunal also observed that the assessment record did not contain any entry for the issuance of the alleged notice on 16-5-2000. The Tribunal found that the only notice dated 20-12-2001 was served on the assessee on 24-12-2001, which was beyond the prescribed period.

3. Consequences of non-issuance of notice u/s 143(2) within the stipulated time:
The Tribunal held that since the notice dated 20-12-2001 was served on the assessee on 24-12-2001, it was time-barred. The Tribunal emphasized that the assessment cannot be based on a time-barred notice u/s 143(2). Consequently, the block assessment order was quashed. The Tribunal did not address the departmental appeal on merits due to the decision on the legal ground.

Conclusion:
The appeal of the revenue was dismissed, and the cross-objection of the assessee was allowed. The Tribunal quashed the block assessment order due to the invalidity of the notice u/s 143(2) served beyond the prescribed period.