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2009 (1) TMI 304 - AT - Income TaxValidity of Block assessment and reassessment proceedings - default in issue of notice u/s.158BC - Whether the assessee who has participated in the block assessment proceedings is precluded from taking any objection that notice u/s.143(2) was not served upon him or was not served upon him in time in view of the provisions of s. 292BB inserted by the Finance Act, 2008 w.e.f. 1st April, 2008 and if so, since when he can be said to be so precluded? - assessment order is silent about issuance of notice u/s.143(2) - no such objection was raised by the assessee either before the AO or CIT(A) that in the absence of notice u/s.143(2) the assessment framed u/s.158BC cannot be held valid - first time the assessee raised this issue by way of an additional ground before the Tribunal. HELD THAT - It can be noted that assessee has a right of being served with the notice in case proceedings are taken against him and in case of invalid notice the whole proceedings taken pursuant to that notice would be void ab initio (subject to provisions of s. 292B) and will have no legal consequences. To overcome some of such situations s. 292BB has been brought on the statute as explained in the Memorandum Explaining the Provisions as well as Notes on Clauses. It has already been pointed out that the applicability of s. 292BB is not strictly restricted to issue of notice u/s.143(2) but it is in respect of other notices relating to any provisions of the Act which include notice to initiate reassessment proceedings and other proceedings also. It has been the contention of the ld AR that in his case notice was not issued at all. Therefore, there was no question of valid service thereof and, hence, provisions of s. 292BB are not applicable. With regard to this contention of ld AR, it may be mentioned that if provisions of s. 292BB are held to be applicable to the case of assessee, then the question of considering the issuance of notice separately will become irrelevant according to well established rule of interpretation explained by Hon'ble Supreme Court in the case of CIT vs. S. Teja Singh 1958 (11) TMI 2 - SUPREME COURT . It has, therefore, to be followed that in a situation when the statute says that you must imagine certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. Therefore, where the statute u/s.292BB deems service of notice, it will always include issue of notice as service cannot be effected without issuance thereof. Thus, the argument of ld AR that unless there exists issuance of notice, service thereof cannot be presumed or deemed and s. 292BB will not be applicable, cannot be accepted and has to be rejected. No doubt, the issue of notice as well as service of notice are a procedural section, but when the same has time limitation; the obligation of the Department to issue notice within a prescribed time becomes the right of the assessee to receive that notice in time to validly commence the proceedings and validly completing the same. Their Lordships of Hon'ble Supreme Court in the case of H.V. Thakur vs. State of Maharashtra 1994 (7) TMI 343 - SUPREME COURT have culled out the following principles of interpretation after considering the various cases decided by Hon'ble Supreme Court and have observed that these principles are illustrative though not exhaustive which will cover the ambit and scope of Amending Act and its retrospective operation. By insertion of s. 292BB such right of the assessee to challenge the validity of assessment or reassessment proceedings during the course of appellate proceedings has been taken away by the statute w.e.f. 1st April, 2008. It is also observed that the issue and service of notice relate to procedural law, but, at the same time, it created a new disability on the assessee litigant to the extent that he is debarred from taking a plea in the appellate proceedings to challenge the validity of the same on the ground of valid issuance/service of notice required to be given by the statute in a case where assessee has appeared in such proceedings or co-operated in the inquiry relating to assessment or reassessment. Therefore, applying the above principles of interpretation and keeping in view discussion it has to be held that s. 292BB cannot be construed to have retrospective operation and it has to be applied prospectively. Having arrived at the conclusion that s. 292BB has no retrospective effect and is to be construed prospectively, it has to be held that prior to 1st April, 2008, i.e., up to 31st March, 2008, as per s. 292BB, the assessee is not precluded from taking any objection (hereinafter referred to as 'such objection') regarding invalidity of assessment/reassessment on the ground of improper/invalid issuance/service of a notice. The second aspect which requires to be considered is that when assessee can be said to be precluded from taking such objection s. 292BB has been made applicable w.e.f. 1st April, 2008 by the Finance Act, 2008. As per well established law as explained by Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala 1965 (12) TMI 35 - SUPREME COURT (which is a decision rendered by five Judges of Hon'ble Supreme Court) that the IT Act as it stands amended on the first day of any financial year must apply to the assessments of that year. Summarising our findings, we hold as follows (i) Sec. 292BB even if it is procedural it is creating a new disability as it precludes the assessee from taking a plea which could be taken as a right, cannot be construed retrospectively as the same is made applicable by the statute w.e.f. 1st April, 2008. (ii) Sec. 292BB is applicable to the AY 2008-09 and subsequent assessment years. Now, the matter will be placed before the regular Bench to decide the appeals in regular manner.
Issues Involved:
1. Validity of block assessment proceedings without issuance of notice under Section 143(2) of the IT Act. 2. Applicability of Section 292BB of the IT Act, introduced by Finance Act, 2008, w.e.f. 1st April, 2008. Detailed Analysis: 1. Validity of Block Assessment Proceedings Without Issuance of Notice Under Section 143(2): The primary issue raised by the assessee was the validity of the block assessment proceedings conducted without the issuance of a mandatory notice under Section 143(2) of the IT Act. The assessee contended that the absence of such notice rendered the assessment invalid. The assessee relied on several judicial precedents to support this argument, including Smt. Bandana Gogoi vs. CIT (2007) 209 CTR (Gau) 31, Smt. Tulika Mishra vs. Jt. CIT, and Gangour Foods (P) Ltd. vs. Dy. CIT. The Revenue, on the other hand, argued that the introduction of Section 292BB by the Finance Act, 2008, precluded the assessee from raising such objections if they had participated in the assessment proceedings. The Tribunal had to determine whether the non-issuance of the notice under Section 143(2) invalidated the assessment, considering the retrospective applicability of Section 292BB. 2. Applicability of Section 292BB of the IT Act: Section 292BB, introduced w.e.f. 1st April, 2008, deems that any notice required to be served under the Act has been duly served if the assessee has appeared in any proceeding or cooperated in any inquiry related to an assessment or reassessment. The assessee argued that this provision should not apply retrospectively to their case, as the assessment proceedings were completed before the introduction of Section 292BB. The Tribunal examined the legislative intent and judicial interpretations to determine whether Section 292BB could be applied retrospectively. It was noted that the provision was introduced to address situations where notices, though issued, were not received by the assessee within the prescribed time, leading to litigation. The Tribunal referred to various judicial precedents, including CIT vs. Shanker Lal Ved Prakash (2007) 212 CTR (Del) 47 and CIT vs. Bins Overseas (P) Ltd. (2007) 163 Taxman 95 (Del), to understand the implications of procedural amendments on vested rights. Conclusion: 1. Validity of Block Assessment Proceedings Without Issuance of Notice Under Section 143(2): - The Tribunal concluded that the issuance of notice under Section 143(2) is a mandatory requirement for the validity of block assessment proceedings. The absence of such notice renders the assessment invalid, as upheld in various judicial precedents cited by the assessee. 2. Applicability of Section 292BB: - The Tribunal held that Section 292BB, being a procedural provision that creates a new disability on the assessee, cannot be applied retrospectively. It is applicable prospectively from 1st April, 2008, and affects assessment years 2008-09 and onwards. Therefore, the assessee in the present case could validly challenge the assessment proceedings on the ground of non-issuance of notice under Section 143(2). Summary: The Tribunal ruled that the block assessment proceedings conducted without the issuance of notice under Section 143(2) were invalid. It also clarified that Section 292BB, introduced by the Finance Act, 2008, applies prospectively from 1st April, 2008, and does not preclude the assessee from raising objections regarding the non-issuance of mandatory notices for assessments completed before this date. The matter was remanded to the regular Bench for further proceedings in accordance with these findings.
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