2014 (2) TMI 225 - AT - Income Tax

Validity of Order u/s 158BC of the Act Notice u/s 143(2) not served Jurisdiction to initiate the proceedings Held that - the decision in ACIT & Anr. Vs. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA followed - If the assessing officer, for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), he must necessarily issue notice under Section 143(2) within the time prescribed in the proviso to Section 143(2) - Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically - Thus, when Section 158 BC(b) specifically refers to applicability of the provision, proviso thereto cannot be excluded - even for the purpose of Chapter XIV-B, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) - The Assessing Officer repudiates the return filed u/s 158BC (a) and proceeds to make an inquiry, he has necessarily to follow the provisions of Sections 142, 143(2) and 143 (3) of the Act - no notice u/s 143 (2) of the Act was issued by the Assessing Officer prior to the framing of the assessment u/s 158BC of the Act, the assessees are right in contending that the assessment framed was without jurisdiction Decided in favour of Assessee.

Summary

Issues:
Initiation of proceedings under Chapter XIV-B without jurisdiction due to non-issuance of notice u/s 143(2) - Validity of assessment orders under Section 158BC.

Analysis:
The judgment pertains to the assessees' appeals for the block period from 01.04.1986 to 01.11.1996, involving common facts across five cases. The primary contention revolved around the jurisdictional issues raised in ground Nos. 2 and 10. The central argument focused on the initiation of proceedings under Chapter XIV-B of the IT Act and the completion of assessment without satisfying the mandatory requirements of the said Chapter, specifically the non-issuance of notice u/s 143(2) prior to framing the assessment. The assessees argued that the assessments were without jurisdiction, citing the Supreme Court ruling in 'ACIT & Anr. Vs. Hotel Blue Moon', emphasizing the necessity of complying with procedural requirements. The assessing officer's failure to issue notice u/s 143(2) before framing the assessment under Section 158BC was deemed crucial in establishing the assessments as illegal and without jurisdiction.

The Hon'ble Supreme Court's interpretation of Section 158BC(b) was pivotal in the judgment, highlighting the procedural intricacies involved in completing block assessments under Chapter XIV-B. The Court's analysis underscored the significance of adhering to the provisions of Sections 142, 143(2), and 143(3) for a valid assessment under Section 158BC. The absence of a notice u/s 143(2) was deemed a critical procedural irregularity, as clarified by the legislative intent and judicial precedents. The judgment emphasized that the requirement of notice under Section 143(2) cannot be dispensed with for completing assessments under Chapter XIV-B, reiterating the importance of procedural compliance in such cases.

Consequently, the Tribunal, in line with the Supreme Court's ruling and the legal principles discussed, held that the assessments in all five cases were without jurisdiction due to the non-issuance of notice u/s 143(2) before framing the assessment under Section 158BC. The assessments were quashed as illegal, emphasizing the fundamental nature of jurisdictional issues in the validity of tax assessments. The judgment nullified the assessments based on the jurisdictional flaw, rendering further adjudication unnecessary. The decision to allow the appeals filed by the assessees was based on the foundational issue of jurisdiction, precluding the need for arguments on other aspects such as limitation.