2013 (12) TMI 1308 - HC - Income Tax

Whether non-issuance of notice u/s 143(2) affect the validity of block assessment order - Held that - In the present case the admitted position is that the notice under Section 143 (2) of the Act was not issued, and thus question of service, or improper service is not relevant. The question nos.(i) to (v), framed by the Court are thus decided in favour of the assessee and against the department. - Decided in favor of assessee.

Summary

Issues involved:
1. Validity of block assessment order without issuance of notice under Section 143 (2) of the Income Tax Act.
2. Impact of non-compliance of Section 143 (2) provisions on the validity of block assessment order.
3. Interpretation of the phrase "so far as may be" in Section 158 BC (b) regarding the applicability of Section 143 (2) in block assessment proceedings.
4. Relevance of Circular No.717 dated 14th August, 1995 issued by CBDT on the applicability of Section 143 (2) in block assessment.
5. Effect of non-issuance/service of notice under Section 143 (2) on the validity of block assessment order.

Analysis:
The case involved a block assessment order passed under Section 158BC of the Income Tax Act after a search and seizure operation in May 1997. The primary issue revolved around the non-issuance of a notice under Section 143 (2) of the Act. The appellant contended that the absence of this notice rendered the block assessment order invalid. The Tribunal, however, held that such non-issuance was an irregularity curable by appropriate directions, citing a previous Special Bench decision. The appellant relied on the Supreme Court's ruling in Asstt. CIT v. Hotel Blue Moon, emphasizing the mandatory nature of issuing notice under Section 143 (2) for block assessments.

The department argued that the appellant's participation in the assessment proceedings validated the process. The assessment order revealed discrepancies in the appellant's transactions and excess gold stocks, indicating non-compliance with accounting norms. The judgment referenced CIT v. Mukesh Kumar Agrawal, highlighting Section 292BB as a rule of evidence validating notice service when the assessee cooperates in proceedings. However, the Court reiterated the Supreme Court's stance on the criticality of notice under Section 143 (2) for block assessments, emphasizing its jurisdictional significance.

Ultimately, the Court ruled in favor of the appellant, emphasizing the non-issuance of the Section 143 (2) notice as a crucial factor in determining the validity of the block assessment order. The judgment annulled the assessment orders, citing the lack of jurisdiction due to the absence of the mandatory notice. The decision aligned with legal precedents stressing the foundational importance of notice under Section 143 (2) in block assessment proceedings, ultimately leading to the allowance of the income tax appeal and setting aside of the ITAT's order.