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2010 (11) TMI 209 - AT - Income TaxUnexplained investment - Search and seizure - Block assessment - Addition - In view of decision of Supreme Court in the case of ACIT v. Hotel Blue Moon 2010 -TMI - 35251 - SUPREME COURT OF INDIA - Held that - service of notice under section 143(2) within the prescribed time as per the provisions of section 143(2) is mandatory - In the absence of service of such notice, the Assessing Officer cannot make the addition in the income of the assessee and the Assessing Officer is bound to accept the income as returned by the assessee - Decided in the favour of the assessee
Issues Involved:
1. Validity of the notice issued under section 153C. 2. Legality of the assessment without issuing a notice under section 143(2). 3. Justification of the addition of Rs. 13,350 as unexplained investment. Issue-wise Detailed Analysis: 1. Validity of the notice issued under section 153C: The assessee argued that the notice issued under section 153C on 20-10-2009 for A.Y. 2001-02 was illegal, unjustified, and bad in law. The CIT(A) treated the notice as timely and valid under the Act. The tribunal did not find sufficient cause for adjournment and decided to proceed with the appeal in the absence of the assessee's representative. 2. Legality of the assessment without issuing a notice under section 143(2): The tribunal examined the provisions of sections 153A(1)(a), 148, and 143(2) of the Income-tax Act, 1961. It was noted that the Assessing Officer did not issue any notice under section 143(2), which the assessee claimed rendered the assessment void ab initio. The CIT(A) dismissed this claim, stating that section 153A provides a complete code for search and seizure assessments, distinct from regular assessments under section 143. The CIT(A) argued that the purpose of issuing a notice under section 143(2) is to provide the assessee an opportunity to justify their income claims, which was achieved through the notice under section 142(1). The tribunal, however, disagreed with the CIT(A), emphasizing that section 153A creates a legal fiction that all provisions applicable to returns filed under section 139 also apply to returns filed under section 153A. Thus, the mandatory issuance of a notice under section 143(2) within the prescribed time is required. The tribunal referenced the Special Bench decision in Raj Kumar Chawla v. ITO, which held that the assessment must comply with all mandatory provisions, including the issuance of a notice under section 143(2). The tribunal also cited the Supreme Court judgment in ACIT v. Hotel Blue Moon, which clarified that the issuance of a notice under section 143(2) is mandatory for block assessments under Chapter XIV-B, and the omission to issue such notice is not a curable procedural irregularity. 3. Justification of the addition of Rs. 13,350 as unexplained investment: Given the tribunal's finding that the assessment was invalid due to the absence of a notice under section 143(2), the tribunal did not find it necessary to adjudicate on the addition of Rs. 13,350 as unexplained investment. The tribunal concluded that without the mandatory notice, the Assessing Officer must accept the income as returned by the assessee. Conclusion: The tribunal allowed the appeal filed by the assessee, holding that the failure to issue a notice under section 143(2) within the prescribed time rendered the assessment invalid. Consequently, the addition of Rs. 13,350 as unexplained investment was also deleted, and other grounds raised by the assessee were deemed unnecessary for adjudication.
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