2019 (8) TMI 1210 - HC - Income Tax

Non issue of notice u/s 143(2) in block assessment - Tribunal held that full opportunity was afforded to assessee to substantiate his claim, thus, the want of issue of notice u/s 143(2) on the part of AO was only a procedural error to be cured by suitable directions, and no prejudice was caused to the assessee - HELD THAT - The case of the assessee is covered by the decision of the Apex Court in case of Assistant Commissioner of Income-Tax and another vs. Hotel Blue Moon 2010 (2) TMI 1 - Supreme Court as Assessing Officer did not issue notice as contemplated under Section 143(2) of the Act in block assessment proceedings under Section 158BC, which was mandatory and non service thereof is fatal. The order of the Tribunal dated 13.10.2005 as far as non-issuance of notice under Section 143(2) of the Act is set aside. - Decided in favour of the assessee

Summary

Issues:
1. Whether non-issuance of notice under Section 143(2) in block assessment proceedings under Section 158BC is fatal?

Analysis:
1. The appeal challenged an order passed by the Income Tax Appellate Tribunal regarding the validity of a block assessment order. The key issue revolved around the non-issuance of notice under Section 143(2) of the Income Tax Act during the block assessment proceedings.

2. The case involved an assessee found carrying silver jewelry without a clear source of acquisition, leading to a block assessment under Section 158BC. The Assessing Officer treated a portion of the silver jewelry as unexplained income, which was taxed in the assessment year 1999-2000.

3. The appellant argued that the non-issuance of notice under Section 143(2) was a procedural error that needed correction, citing a Supreme Court decision emphasizing the mandatory nature of such notices in block assessment proceedings.

4. The Revenue contended that in block assessment under Section 158BC, a separate procedure was prescribed, negating the necessity of a notice under Section 143(2) as required in ordinary assessment proceedings.

5. The High Court analyzed the legal provisions of Section 143(2) and Section 158BC, along with relevant case laws. It noted that the Supreme Court decision in Assistant Commissioner of Income-Tax vs. Hotel Blue Moon established the mandatory nature of issuing notice under Section 143(2) in block assessments under Section 158BC.

6. The Court concluded that the failure to issue the mandatory notice under Section 143(2) in block assessment proceedings was fatal. As a result, the Tribunal's decision to overlook this non-issuance was set aside, and the appeal was allowed in favor of the assessee.

7. The judgment highlighted the importance of adhering to procedural requirements, especially in block assessment proceedings, and underscored the significance of issuing notices under Section 143(2) for a fair assessment process.