2011 (8) TMI 450 - AT - Income Tax

Block Assessment - Notice u/s.143(2) - Limitation - The appellant had disclosed only Rs.15.00 lakhs under the block return filed by it, whereas the AO assessed u/s. 158 BC(c) the undisclosed income at Rs. 4.71 crores - The assessee s counsel has taken a plea before the Bench that since the notice u/s. 143(2) was issued only on 15/10/2001 i.e. after the lapse of more than one year from the date of filing of block return on 19/07/2000, the entire block assessment order is time barred - The AO himself has admitted that such notice was not served within the time allowed in law - Decided in favour of assessee As regarding thr exemplary costs - Held that - there cannot be a fitter case for imposition of exemplary costs on the learned Departmental Representative, who is responsible for such a M.A. and for wasting the time of the Tribunal by raising frivolous arguments and making blatantly false submissions - The cost should have to be recovered from the salary of the delinquent employee, who is responsible for such actions and entry made in his service record on the adverse comments made against the revenue by the Tribunal - We however refrain from doing so in the hope that such indiscretion would not be repeated in future and also in view of the letter of apology filed by the revenue - Find no merits in the case sought to be pleaded by the Revenue and therefore dismiss the miscellaneous applications.

Summary

Issues Involved:
1. Validity of the order of assessment due to the alleged late issuance of notice under Section 143(2) of the Income Tax Act, 1961.
2. Procedural objections raised by the Departmental Representative regarding the hearing process and submission of written arguments.

Detailed Analysis:

Issue 1: Validity of the Order of Assessment Due to Late Issuance of Notice under Section 143(2)
The Assessee, a partnership firm engaged in the trading and export of diamonds, was subject to a search and seizure operation under Section 132 of the Income Tax Act, 1961, on January 17, 2000. Subsequently, a notice was issued under Section 158BC calling for the return of income for the Block period, which the Assessee filed on July 19, 2000, declaring undisclosed income of Rs. 15,00,000. The Assessee contended that the income declared was eligible for deduction under Section 80HHC.

The Assessing Officer (AO) issued a notice under Section 143(2)/142(1) on October 15, 2000, but the Assessee claimed the correct date was October 15, 2001, citing a typographical error. The AO passed the assessment order on January 31, 2002, determining the undisclosed income at Rs. 4,71,57,325.

The Assessee appealed to the CIT(A), arguing that the notice under Section 143(2) was issued beyond the one-year period from the end of the month in which the return was filed, rendering the assessment invalid. The CIT(A) dismissed this ground, noting it was not raised before the AO and the Assessee had participated in the proceedings.

In the appeal before the Tribunal, the Assessee reiterated the plea under Rule 27 of the Tribunal Rules, challenging the validity of the assessment order on similar grounds. The Tribunal examined the issue and found that the correct date of the notice under Section 143(2) was indeed October 15, 2001, based on letters from the CIT, DR, and the ACIT, confirming the typographical error.

The Tribunal referred to the Supreme Court's ruling in Assistant Commissioner of Income-tax v. Hotel Blue Moon, which mandates that the AO must issue a notice under Section 143(2) within the prescribed time for a valid block assessment. Failure to do so renders the assessment void. Consequently, the Tribunal dismissed the Revenue's appeal, sustaining the CIT(A)'s order and holding the assessment void due to the late issuance of the notice under Section 143(2).

Issue 2: Procedural Objections Raised by the Departmental Representative
The Departmental Representative (DR) raised several procedural objections, alleging that the Tribunal allowed the Assessee to raise a new issue during the hearing without proper notice, and that the DR was not given adequate opportunity to present written submissions. The DR claimed that the Tribunal's order was passed in undue haste and without considering the Department's arguments.

The Tribunal addressed these objections, noting that the Assessee had raised the issue of the late notice under Section 143(2) multiple times before the final hearing. The Tribunal had granted the DR time to file written submissions, which were not submitted within the stipulated period. The Tribunal found the DR's allegations baseless and factually incorrect, emphasizing that the issue of the late notice was not new and had been consistently raised by the Assessee.

The Tribunal also criticized the DR's conduct, highlighting that the DR's letters contained frivolous assertions and false statements. The Tribunal considered imposing exemplary costs on the DR for wasting the Tribunal's time but refrained from doing so in light of the DR's subsequent apology.

Conclusion
The Tribunal dismissed the Revenue's appeal, holding that the assessment was invalid due to the late issuance of the notice under Section 143(2). The procedural objections raised by the DR were found to be without merit and based on false premises. The Tribunal's decision was pronounced on August 30, 2011.