2010 (1) TMI 800 - AT - Income Tax

Block assessment - Legality and validity of the assessment - assessee has raised issue on jurisdiction of the A.O. to make assessment on the reason that the A.O. failed to issue the notice u/s. 143(2) for selecting the assessee s return for scrutiny - Held that - admittedly in this case, the A.O. did not issue the notice u/ s. 143(2) when he decided to select the return filed by the assessee for the block period for verification. - the order passed by the A.O. is void ab initio - Revenue s appeal is dismissed and the assessee s Cross Objection is allowed.

Summary

Issues Involved:
1. Legality and validity of assessment proceedings under Section 158BD of the Income Tax Act.
2. Validity of notices issued by the Assessing Officer during the proceedings.
3. Levy of surcharge in block assessment.

Detailed Analysis:

1. Legality and Validity of Assessment Proceedings under Section 158BD:
The assessee challenged the legality and validity of the assessment framed by the Assessing Officer (A.O.) under Section 158BD of the Income Tax Act, arguing that the A.O. failed to issue a notice under Section 143(2) for selecting the assessee's return for scrutiny. The Tribunal previously held that non-issue of notice under Section 143(2) was a procedural lapse and curable, restoring the matter to the A.O. for completion after observing procedural laws. However, the Tribunal revisited the issue following the decision of the Hon'ble Jurisdictional High Court in CIT v/s. Mrs. Mudra G. Nanavati, which held that non-issue of notice under Section 143(2) vitiates the assessment proceedings. The Tribunal, adhering to this precedent, quashed the assessment order, declaring it void ab initio.

2. Validity of Notices Issued by the Assessing Officer:
The A.O. issued a notice to the assessee under Section 158BD on 9.2.99, requiring a block return within 15 days. The assessee filed the return on 21.5.99, declaring undisclosed income at 'Nil'. The A.O. completed the block assessment on 31.1.2000 without issuing a notice under Section 143(2). The Tribunal, referencing the Hon'ble Jurisdictional High Court's decision in Mrs. Mudra G. Nanavati, concluded that the non-issue of notice under Section 143(2) invalidated the assessment proceedings. The Tribunal dismissed the Revenue's argument that the issue of notice under Section 143(2) is procedural and not mandatory.

3. Levy of Surcharge in Block Assessment:
The assessee contested the levy of surcharge in the block assessment. However, since the Tribunal quashed the assessment order on the primary issue of non-issuance of notice under Section 143(2), it did not find it necessary to decide on the surcharge issue.

Conclusion:
The Tribunal allowed the assessee's Cross Objection, holding that the assessment order was void ab initio due to the non-issuance of notice under Section 143(2). Consequently, the Revenue's appeal, which contested the relief given by the Commissioner of Income Tax (Appeals), was dismissed as it did not survive the quashing of the assessment order. The order was pronounced on 8th January 2010.