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TMI Blog2010 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Act. According to the assessee, service of notice on the assessee under Section 143(2) of the Act within the prescribed period of time is a pre-requisite for framing the block assessment under Chapter XIV-B of the Act. The Appellate Tribunal held, while affirming the decision of the CIT(A) that non-issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Guwahati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were: - "(1) Whether on the facts and in circumstances of the case the issuance of notice u/s 143(3) of the Income Tax Act, 1961 within the prescribed time limit for the purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And (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 Income Tax Act, 1961 should be deleted or set aside." 4) The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142 and sub- sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIV B, there is no discretion left with the assessing officer. It is further contended that the source and origin of a Block assessment is the search which has been conducted under Section 132 of the Act. Once the search has been carried out, the assessing officer is left with no discretion but to proceed with the Block assessment. It is also submitted that in search cases the material is already found and is in the knowledge of the assessing officer. This is distinct and different from the situation of an ordinary assessment, where, the assessing officer does not have any material other than the return filed by the assessee. Therefore, the requirement of notice under Section 143(2) is essential for production of material by the assessee. This is so because in regular assessments the assessing officer in the first instance has no material available to him except the return filed by the assessee. It is further submitted that the computation of undisclosed income of the Block period has to be done in accordance with the provisions of Section 158 BB and on the basis of evidence found as a result of search or requisition of books of account, or other documents and such other materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. However, if the assessing officer is not satisfied with the return so filed, then he is required to issue further notice under Section 143(2) before an assessment order is passed under Chapter XIV-B of the Act. 7) The only question that arises for our consideration in this batch of appeals is, whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a pre-requisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961? 8) Chapter XVI-B prescribes the special procedure for making the assessment of search cases. 9) Section 158 B defines "undisclosed income", and "block period" which are the two basic factors for framing the block assessments. 10) Section 158 BA is an enabling section, empowering the assessing officer, to assess "undisclosed income" as a result of search initiated or requisition made after June 30th, 1995, in accordance with the provisions of this Chapter and tax the same at the fixed rate specified in Section 113. Section 158 BB provides the methodology for computation of undisclosed income of the block period. Section 158 BC prescribes the procedure for making the Block assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing officer. Therefore, the income assessable in Block assessment under Chapter XIV-B is the income not disclosed but found and determined as the result of search under Section 132 or requisition under Section 132A of the Act. 13) Section 158 BC stipulates that the Chapter would have application where search has been effected under Section 132 or on requisition of books of accounts, other documents or assets under Section 132A. By making the notice issued under this Section mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the Section is required to be served on the person who is found to be having undisclosed income. The Section itself prescribes the time limit of 15 days for compliance. In respect of searches on or after 1.1.1997, the time limit may be given up to 45 days i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC (b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC (a), the assessing officer must necessarily issue notice under Section143 (2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly for the purpose 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 meaning of the expression so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC (a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143. 17) Section 158 BH provides for application of the other provisions of the Act. It reads: "Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter." This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes Section 142 and sub-sections (2) and (3) of Section 143. 18) On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court. 19) The result is that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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