TMI Blog2012 (8) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... there was total failure on the part of the Revenue from complying with the procedure laid down u/s 143(2), which is mandatory. Although on merits, contention of the assesee that the capital gains would not be assessable at the hands of the firm is not acceptable, yet for the reasons that in the absence of notice u/s 143(2) reassessment could not be held to be validly made - Decided in favor of assessee - TC(A). No. 159 of 2006 - - - Dated:- 17-7-2012 - Chitra Venkataraman And K Ravichandrabaabu, JJ. For Appellant: Mr C V Rajan For Respondent: Mr K Suresh Kumar JUDGEMENT Per : Chitra Venkataraman, J : The assessee has preferred the appeal as against the order of the Income Tax Appellate Tribunal relating to assessment year 2000-01. The above Tax Case (Appeal) was admitted on the following substantial questions of law:- "(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the capital gains has to be assessed in the hands of the firm even though the properties belonged to the partners and the same was transferred by the partners in their individual capacity? (ii) Whether on the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signed the sworn statement. Thus, the capital gains was held liable to be assessed at the hands of the firm. Consequently, notice under Section 148 of the Income Tax Act was issued for the assessment year 2000-01 on 20.5.2002 for the reassessment of capital gains at the hands of the firm which had escaped assessment by reason of the assessee's failure to disclose the same. Since, there was no reply, further proceedings were taken. A Notice under Section 142(1) of the Act was issued on 22.10.2002 calling for return of income for the assessment year 2000-01. The assessee's representative appeared on 18.10.2002 and filed a reply dated 18.12.2002 wherein the assessee reiterated that the title over the property was held in the name of the partners individually; that the sale deed was executed by the partners in the individual capacity only; that the sale was made after obtaining certificate under Section 230A in the partners' individual capacity; that the property was owned in their individual capacity and they had also offered the taxable capital gain on their individual hands and that the advance tax due thereon had also been paid by the partners. Thus, the assessee stated that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in treating the capital gains as exigible at the hands of the firm. Aggrieved by the same, the assessee has preferred the above appeal. 3. Learned counsel for the assessee placed before us the decision of the Apex Court reported in 321 ITR 362 - ASST. CIT v. HOTEL BLUE MOON . In considering the failure of the Assessing Officer in issuing notice under Section 143(2), in respect of block assessment, the Apex Court held that failure to issue notice under Section 143(2) would be fatal to the assumption of jurisdiction. If an assessment is to be completed under Section 143(3) read with Section 158 BC, notice under Section 143(2) should be issued within one year from the date of filing of the block return. The Apex Court viewed that omission on the part of the Assessing Authority to issue notice under Section 143(2) could not be a procedural irregularity and hence was not curable and the requirement of notice under Section 143(2) cannot be dispensed with. Thus, in the light of the decision of the Apex Court, learned counsel for the assessee submitted that the Tribunal committed serious error in drawing an inference on mere appearance of the assessee pursuant to notice issued under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently reassessment order could not be held as illegal and defect incurable. 7. Heard learned counsel for the assessee as well as learned Standing counsel for the Revenue and perused the materials available on record. 8. The facts led to the invoking of jurisdiction under Section 148 of the Act are already narrated in the preceding paragraph. As already seen, on the issue of notice under Section 148, the firm admittedly filed a letter through its representative, who appeared on 18.12.2002 before the Officer and stated that the original return filed be treated as one filed in response to the notice under Section 148. The assessment order makes no secret about this fact. Thus, on this admitted fact, we do not find any material based on which the Tribunal could arrive at this finding that there was no return in response to the notice under Section 148 of the Act. It is also admitted in the assessment order that the notice was issued under Section 142(1) calling upon the assessee to file return of income for the assessment year 2000-01, in response to which alone, the assessee's representative appeared before the Officer. After issuing notice under Section 142(1), there is no sembl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act issued therein. It is evident that the Officer had not proceeded with issuance of any such notice in this case. Merely because the matter was discussed with the assessee and the signature is affixed, it does not mean the rest of the procedure of notice under Section 143(3) of the Act stood complied with or that on placing the objection the assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued under Section 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued under Section 148 of the Act and the Officer had also noted that the same would be considered for completion of assessment, would show that the Assessing Officer has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued under Section 143(3) and there being no waiver, we do not find any justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued under Section 143(2) of the Act. 11. As rightly pointed out by the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complying with the notice under Section 143(2)/142, the Officer is authorised to complete the assessment ex parte under section 144. The Apex Court further pointed out that notice under Section 143(2) would become necessary only where the block return does not conform undisclosed income inferred by the authorities. Thus, if an assessment is to be completed under Section 143(3) read with Section 158BC, notice under Section 143(2) should be issued within one year from the date of filing of the block return. The Apex Court further held that omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable, and therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The legislation referring to the compliance of the provisions under Section 143, 144 and 145 of the Act is a legislation by incorporation. Thus, where the Assessing Officer repudiates the return filed by the assessee in response to notice under Section 158BC(a), the Assessing Officer must necessarily issue notice under Section 143(2) of the Act. Dealing with the contention that the issue of notice is not mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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