2003 (8) TMI 194 - AT - Income Tax

Block Assessment in search case - Whether the provisions of sub-section (2) of section 143 of the Income-tax Act, 1961, are applicable to the block assessment proceedings - Whether non issuance and non service of the notice u/s 143(2) shall have the effect of mitigating the block assessment order, so as to render the assessment orders itself as null and void? - HELD THAT - Once a notice u/s 158BC is issued for filing the return and the period specified therein is expired then, in our opinion, the Assessing Officer not only is at liberty but is also bound to proceed to assess irrespective of the filing of the return. There is nothing in section 158BC which may compel the Assessing Officer to wait for filing of the return by the assessee. All seized material is normally required to be examined in the light of the explanation of the assessee, which may take lot of time. That is perhaps the reason that no limitation whatsoever is prescribed by the Statute on the powers of the Assessing Officer to proceed to make the assessment except to provide an opportunity, which is part of the natural justice. Since no prescribed procedure is provided in such situation, we are of the view that the Assessing Officer may issue any kind of notice to achieve the object of making the assessment. Therefore, where the assessee does not file the return in response to notice u/s 158BC(a) and the Assessing Officer wants to proceed to make assessment then no notice u/s 143(2) is required to be issued since filing of return is condition precedent for issue of such notice. In such situation, the procedure prescribed in section 144 would become applicable which provide for granting of an opportunity to the assessee. So, the only requirement is the compliance of rules of natural justice. However, if the Assessing Officer decides to wait for the return to be filed by the assessee then Assessing Officer is bound to issue notice u/s 143(2) after filing of the return. We are of the considered view that non-issuance of notice u/s 143(2) cannot render the block assessment as a nullity since foundation of such assessment is validly laid by issue of notice by the Assessing Officer u/s 158BC(a) asking the assessee to file the return. It is settled legal position that assessment proceedings are validly initiated either by filing of the return or by issuance of notice for filing of the return in view of Supreme Court Judgment in the case of Ghanshyamdas v. Regional Asstt. Commissioner of Sales Taxes 1963 (8) TMI 2 - SUPREME COURT . There is no provision under Chapter XIV-B for filing of voluntary return. The only provision under which such return can be filed is section 158BC. Therefore, assessment proceedings can be said to be validly initiated when the notice u/s 158BC is issued. Once assessment proceedings are validly initiated by issuance of notice u/s 158BC, then the Assessing Officer would have seisin over the case resulting in vesting of overall jurisdiction of the Assessing Officer. Accordingly non-issuance of notice u/s 143(2) would only be a case of deviation from a rule of law resulting in irregularity only, which is curable, and not a nullity. Thus, we hold that non-issuance of notice u/s 143(2) would only be an irregularity which is curable and not as nullity. Hence the assessment order passed in violation of such requirement cannot be declared as null and void. Having held that non-issuance of Notice u/s 143(2) is not a nullity but is an irregularity, the question may arise as to what course should be adopted in such cases by the appellate authority. One easy course would be to set aside the assessment and restore the matter to the file of the Assessing Officer for fresh assessment after giving reasonable opportunity of being heard to the assessee. But there may be cases where sufficient opportunity might have already been given by the Assessing Officer or the assessee might have participated in the proceedings before the Assessing Officer or there may be sufficient materials on the record for adjudication. In such cases mere restoration may prove to be a futile exercise. Therefore, in such cases, the appellate authority may adjudicate the issue itself after giving reasonable opportunity to the assessee to explain his case. These observations are mere guidelines and no limitations are being placed on the powers of the appellate authority. The appellate authority would be free to choose the right course depending upon the facts of the each case. The matter will now go to the regular bench for final disposal of the appeal on merit.

Summary

Issues Involved:
1. Applicability of Section 143(2) to Block Assessment Proceedings.
2. Effect of Non-Issuance and Non-Service of Notice under Section 143(2).

Summary:

1. Applicability of Section 143(2) to Block Assessment Proceedings:

The primary issue was whether the provisions of sub-section (2) of section 143 of the Income-tax Act, 1961, are applicable to block assessment proceedings. The Tribunal held that the provisions of section 143(2) are applicable to block assessment proceedings but only to the extent possible or practical, not in their entirety. The Tribunal emphasized that the procedural requirements of section 143(2) should be followed unless deviation is justified. The Tribunal relied on the Supreme Court judgment in Dr. Pratap Singh v. Director of Enforcement, which interpreted the phrase "so far as may be" to mean "to the extent possible."

2. Effect of Non-Issuance and Non-Service of Notice under Section 143(2):

The second issue was whether non-issuance and non-service of notice under section 143(2) would render the block assessment order null and void. The Tribunal concluded that non-issuance of notice under section 143(2) would not render the block assessment order null and void but would be considered an irregularity, which is curable. The Tribunal distinguished between nullity and irregularity, stating that non-issuance of notice under section 143(2) is a deviation from the rule of law but does not take away the foundation or authority for the proceeding. The Tribunal cited the Supreme Court judgment in Guduthur Bros. v. ITO, which held that denial of opportunity to the assessee vitiated the order by irregularity, which could be corrected by issuing another notice.

Conclusion:

The Tribunal held that while the procedural requirements of section 143(2) are applicable to block assessment proceedings, non-issuance of such notice does not render the assessment null and void but is an irregularity that can be cured. The matter was remanded to the regular bench for final disposal of the appeal on merit.