TMI Blog2010 (4) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... section 158BC under Chapter XIV-B, is erro-neous - The order of the Tribunal as well as the order of the authority below are set aside. - ITA NO 120/09, ITA NO 126/09 - - - Dated:- 19-4-2010 - RAJES KUMAR and PANKAJ MITHAL, JJ. Judgment: Rajes Kumar J.- These are two appeals under section 260A of the Income-tax Act, 1961, relating to the block period April 1, 1988 to April 28, 1998 arising from the order of the Tribunal dated February 6, 2009, raising the following substantial questions of law in both appeals : "Income-tax Appeal No. 120 of 2009 (i) Whether on the facts and in the circumstances of the case, the decision of the learned Tribunal is not erroneous in holding that the application of the provisions of section 143(2) would not be applicable to the block assessment procedure and the matter would necessarily travel back to the file of the Assessing Officer for the purpose of cur-ing the defect of non-service of notice under section 143(2) whereas the assessment deserves to be quashed ? (ii) Whether such restoration is valid in terms of section 292B of the Act which cures only the defect or omission in the notice issued or purported to have been is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-mitted that no notice was issued under section 143(2) within the specified time and, therefore, the entire block assessment orders against both appel-lants were illegal and without jurisdiction and liable to be quashed. 5. It appears that the senior departmental representative, before the Tri-bunal, has admitted that no notice under section 143(2) has been issued to the appellants. The Tribunal, in the impugned order, has held that the pro-visions of section 143(2), i.e., the issue of verification notice for the block assessment under Chapter XIV-B, is applicable. The Tribunal, however, held that the application of the proviso to section 143(2), providing for a time limit for the service of notice issued thereunder and, thus, also, to its issue, would not be applicable to the block assessment procedure. The Tri-bunal, accordingly, remanded back the matter to the Assessing Officer to cure the defect. The Tribunal observed as follows : "6. This, then, concludes all the issues arising for adjudication of the assessee's additional ground. The matter, thus, would necessarily travel back to the file of the Assessing Officer, for the purpose of curing the defect of non-service o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rightly remanded back the matter to the assessing authority to cure the defect by issuing the notice under section 143(2). He further sub-mitted that the Tribunal has rightly held that the proviso to section 143(2), which provides time limit, is not applicable to the assessment under sec-tion 158BC. 8. Section 143(2) of the Income-tax Act, 1961 reads as follows : "Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assess-ing Officer shall,- (i) where he has reason to believe that any claim of loss, exemp-tion, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim : Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003 ; (ii) notwithstanding anything contained in clause (i), if he con-siders it necessary or expedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is passed in such a situation without complying with section 143(2), it would be invalid and not be merely irregular." 11. The aforesaid decisions of the Gauhati High Court and the Delhi High Court have been affirmed by the apex court in the case of Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362. The question for consideration before the apex court was whether the service of the notice on the assessee under section 143(2), within the prescribed period of time, is a prerequisite for framing the block assessment under Chapter XIV-B of the Income-tax Act. The apex court has held as follows (page 369) : "We may now revert back to section 158BC(b) which is the mate-rial 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 143, section 144 and section 145 shall, so far as may be, apply.' An analysis of this sub-section indicates that, after the return is filed, this clause enables the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ([1995] 215 ITR (St.) 70), has a binding effect on the Department, but not on the court. This circular clarifies the requirement of law in respect of ser-vice of notice under sub-section (2) of section 143 of the Act. Accord-ingly, 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 . . . The case of the Revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and mean ..... X X X X Extracts X X X X X X X X Extracts X X X X
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