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2010 (1) Supreme 494
SUPREME COURT OF INDIA
S.H. Kapadia and H.L. Dattu, JJ.
Assistant Commissioner of Income Tax & Anr. — Appellants
versus
M/s. Hotel Blue Moon — Respondent
Civil Appeal No.1198 of 2010
(Arising out of SLP(C) No. 22973 of 2007)
Decided on : 02-02-2010
Income Tax Act, 1961- Sections 260A, 143(2), 158 BC(b) - Issue of notice under Section 143(2) of the Act within the prescribed time for purpose of block assessment under Chapter XIV-B of the Act -Whether is mandatory for assessing undisclosed income detected during search conducted under Section 132 of the Act- 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 Act, the legislature would have or could have indicated that also- A reading of the provision clearly indicates, 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 Section 143(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 refers to applicability of the proviso thereto cannot be exclude- Again clarification given by CBDT in its circular No.717 dated 14.08. 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 sub-section (2) of Section 143 of the Act-Hence held 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 158 BC, 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 (Para15)
Facts of the Case :
Issue in consideration in present case was whether issue of notice under Section 143(2) of the Act within the prescribed time for the purpose of block assessment under Chapter XIV-B of the Act is mandatory for assessing undisclosed income detected during search conducted under Section 132 of the Act.
Findings of the Court :
An analysis of Section 158 BC(b) indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded.But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to undisclosed income inferred by the authorities,there is no reason, why the authorities should issue notice under Section 143(2). However, 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 block return.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.
Result : Appeal dismissed.
JUDGMENT
H.L. Dattu, J.
1) Leave granted in all the special leave petitions.
2) These six appeals have been heard together. They arise out of similar facts and the question of law arising therefrom is the same.
3) The facts in the lead case are : This is an appeal against the judgment of the High Court of Guwahati in a appeal under Section 260A of the Income Tax Act, 1961, hereinafter referred to as ‘the Act’, and the point that is raised for our determination is, whether issue of notice under Section 143(2) of the Act within the prescribed time for the purpose of block assessment under Chapter XIV-B of the Act is mandatory for assessing undisclosed income detected during search conducted under Section 132 of the Act. While, according to the department, issue of a notice under Section 143(2) is not essential requirement in block assessment under Chapter XIV-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- sections (2) and (3) of Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158 BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the revenue. The revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal.
5) The learned counsel Sri Shekhar for the revenue submitted, that, Chapter XIV B of the Act provides a special procedure for search cases and is a complete code in itself dealing with both the substantive as well as procedural aspects of search cases and, therefore, there is a distinction between the procedure for regular assessment under Chapter XIV and the procedure of Block assessment under Chapter XIV B. Therefore, it is submitted for the purpose of block assessments the assessing authority need not follow the procedure prescribed under Chapter XIV which includes issuance of notice under Section 143(2). The learned counsel has further contended that in a proceeding under Section 158 BC, there is no requirement of a notice to be issued under Section 143(2), since issuance of notice for the purpose of Section 158 BC is separately prescribed. It is further submitted that Block assessment is in addition to regular assessment, and what is included in regular assessment, cannot be assessed again in the course of a Block assessment and similarly, what is assessed in Block assessment, cannot be the subject matter of regular assessment. It is further submitted that Section 143(2) of the Act is in two parts. The first part deals with jurisdiction and the second with the procedure. The proviso to Section 143(2) puts an embargo on the assessing officer to exercise jurisdiction after the expiry of 12 months from the end of the month in
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