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TMI Blog2012 (11) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside. Undisclosed Income as per section 158 BB – Held that:- As Block assessment being invalid is set aside; therefore, no need to go into the merits of the issue of addition. Consequently the appeal filed by the revenue is liable to be dismissed - In the result appeal filed by the assessee is allowed whereas the appeal filed by the revenue is dismissed. - IT(SS)A No.110/Mum/2004 & IT(SS)A No.103/Mum/2004 - - - Dated:- 25-7-2012 - SHRI VIJAY PAL RAO SHRI RAJENDRA, JJ. Assessee by Sh Prakash Pandit Revenue by Sh Pavan Ved PER VIJAY PAL RAO, JM These cross appeals are directed against the order dated 22/12/2003 of CIT(A) arising from the assessment order passed under section 158 BD read with section 143(3) of the Income Tax Act for the block period from 1/4/1989 to 21/12/1999. 2 The assessee has raised the following grounds in this appeal: 1. The Assessing Officer erred in making additions based on conjectures and surmises or estimates and presumption not supported by any evidence, documents etc. 2. The Assessing Officer failed to appreciate that the undisclosed income under Chapter XIVB has to determined on the basis of the evidence doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is commission earned by the assessee and thereby ignoring the explicit provisions of section 132(4A) of the I.T. Act. 3.1 Apart from the original grounds, the assessee has also raised additional grounds vide letters dated 3/5/2010 as well as 15/9/2011 as under: 3.2 Additional grounds raised on 3/5/2010: 1 In the facts and circumstances of the case and in law the learned A. 0. erred in issuing notice under section 158 BC read with section 158 BD of the Income Tax Act 1961. 2 In the facts and circumstances of the case and in law the assessment order passed by the A. 0. is arbitrary, without jurisdiction and ex-facie illegal. 3.3 Additional grounds raised on 15/9/2011: I In the facts and circumstances of the case and in law in absence of issuance of the notice and service thereof under section 143(2) within the prescribed time limit for the purpose of making assessment, the entire assessment made umder section 1 58BC read with section 1 58BD of the Income Tax Act 1961 is vitiated. 2 In the facts and circumstances of the case and in law in absence of issuance of the notice and service thereof under section 143(2) within the prescribed time limit for the purpose of mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any satisfaction recorded by the Assessing Officer having jurisdiction over Mr Mangat Arora. He has referred the letter dated 24/8/2010 of DCIT 8 (1) and submitted that the Assessing Officer has stated that no satisfaction note is found available in the block assessment records in the case of the assessee; therefore, the notice under section 158 BD was issued without any satisfaction of the Assessing Officer that any undisclosed income belongs to the person other than the searched person and thereby handed over the books of account, documents or assets seized to the Assessing Officer having jurisdiction over such other person. The learned A.R of the assessee has submitted that the notice under section 158 BD was issued without any such satisfaction of the Assessing Officer so recorded and any material, documents, books of accounts or assets handed over to the Assessing Officer having jurisdiction over the assessee. 5.1 The learned A.R. has forcefully contended that the assessment in case of Mr Mangat Arora was completed by the DCIT 8 (1)(1) whereas the notice under section 158 BD was issued to the assessee by ACIT 27 (1); therefore, in the absence of any satisfaction recorded b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High Court has held that the Assessing Officer is bound by the mandate of provisions of section 143(2) and on failure, the order of assessment will be without jurisdiction and consequently will have to be set aside. The ld AR of the assessee has also relied upon the decision of honourable Punjab and Haryana High Court in case of Commissioner of Income-tax v. Avi-Oil India P. Ltd. reported in 323 ITR 242 as well as decision of honourable Gujarat High Court in case of DCIT v Maxima Systems Ltd reported in 344 ITR 204 and submitted that it has been held that the assessment made in pursuant to the notice under section 143(2), which was served beyond the period of limitation prescribed by the provision of section 143 (2) of the Act was not a valid assessment. 5.3 Per contra, the ld DR has submitted that the decision of honourable Supreme Court in case of Manish Maheshwari (supra) is not applicable in the facts of the case in hand as the Assessing Officer having jurisdiction over the search party as well as the assessee is the same and therefore, there is no question of handing over of the seized material to the Assessing Officer of other person. He has further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom raising such objection in view of section 292 BB of the I T Act. In support of his contention, he has relied upon the decision of honourable Punjab and Haryana High Court in case of CIT vs M/s Panchvati Motors Pvt Ltd reported in 2011-TIOL-592 HC-P H dated 3.5.2011 and submitted that the honourable High Court has held that the provisions of section 143( 2) is a regulatory in nature and therefore in view of section 292 BB, the assessee cannot raise an objection that the notice was not served upon him with in time limit prescribed under the provisions of the Act. 5.6 The learned DR has further submitted that as per the proviso to section 148, which has been inserted by the Finance Act 2006 with effect from 1/10/1991, if the notice under section 143(2) has been served after expiry of twelve-month specified in the proviso to section 143(2), such notice will be deemed to be a valid notice. The learned DR then referred section 158 BH and submitted that all other provisions of this Act shall apply to the assessment made under Chapter XIV. 5.7 The learned DR has contended that even otherwise the chapter XIV contemplates as procedure for assessment and therefore, section 143(2) is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143 (2) was issued after the prescribed time limit. The honourable Supreme Court has reproduced the 2 questions as raised before the honourable High Court as under: Rs.1.Whether on the facts and in circumstances of the case the issuance of notice u/s 143(2) of the I T Act 1961 within the prescribed time limit for the purpose of making the assessment u/s 143(3) of the I T Ac t 1961 is mandatory ? 2. Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax(Appeals) the additions made u/s 68 of the I T act, 1961 should be deleted or set aside ? The question number 1 is regarding the mandatory nature of notice under section 143 (2). The honourable apex court has held in para 15 as under: We may now revert back to section 158BC(b) which is the material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads "that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the proviso to section 143(2) of the Act. Where the Legislature intended to exclude certain provisions from the ambit of section 158BC(b) it has done so specifically. Thus, when section 158BC(b) specifically refers to applicability of the proviso thereto it cannot be excluded. We may also notice here itself that the clarification given by the Central Board of Direct Taxes in its Circular No. 717 dated August 14, 1995, has a binding effect on the Department, but not on the court. This circular clarifies the requirement of law in respect of service of notice under subsection (2) of section 143 of the Act. Accordingly, we conclude that even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of section 158BC, 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) of the Act. However, it is contended by Sri Shekhar, learned counsel for the Department that in view of the expression "so far as may be" in section 153BC(b), the issue of notice is not mandatory but optional and are to be applied to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the time specified. Where the AO in repudiation of the return filed under s. 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of s. 142 and sub-ss. (2) and (3) of s. 143. 13. Admittedly, in the present case, the notice under s. 143(2) has not been issued. The period of limitation has already expired and, therefore, such notice cannot be issued. 14. Thus, we are of the view that the remand of the case to the Assessing Officer to cure the defect by issuing a fresh notice is wholly unjustified. We are also of the view that the view of the Tribunal that the proviso of s. 143(2), which provides limitation for serving of the notice, does not apply to the block assessment under s. 158BC under Chapter XIV-B, is erroneous. 6.5 A similar view has also been taken by the honourable jurisdictional High Court in case of CWT vs HUF of H H Late J M Scindia (supra) as well as in case of CIT vs Ms Mudra G Nanawati (supra) as well as a series of decisions as relied upon by the learned A.R. of the assessee. 6.6 It has been held in the above cited decisions that the requirement of section 143 (2) cannot be dispensed with as it is mandatory and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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