The main legal point established in the judgment is the mandatory nature of the notice under Section 143(2) of the Income Tax Act and its non-dispensable requirement for reassessment proceedings.

CHITRA VENKATARAMAN,J

1. 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 circumstances of the case the Tribunal was right in holding that partners and firm are not distinct and as such the transfer made by the partners in their individual capacity is deemed to be the transfer made by the firm?

(iii) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the appellant has requested the Assessing Officer to complete the assessment, which amounts to waiver of notice under Section 143(2)?

(iv) Whether on the facts and in the circumstances of the case the Tribunal was right in not appreciating that there cannot be any Estoppels against law and as such notice under Section 143(2) has to be issued within the prescribed time limit even assuming that there was waiver of such notice?"

2. The assessee herein is a partnership firm consisting of seven partners engaged in the business of financing. It is seen from the facts projected in the case that the landed property at No.7B/ 7B-1 at Valakarutheeswarar Koil Street, Kanchipuram was purchased by all the seven parties in the individual capacity under three separate sale deeds for an amount of Rs.10,30,000/-. The funds for the purchase of said property was however drawn from the funds of the firm. The property was brought in as additional capital to the firm, for which each partner's current account was credited by Rs.1,08,692/- each as on 31.3.1997. The property was also shown on the asset side of the balance sheet as on 31.3.1997 for Rs.11,66,500/-. The return of income filed for the assessment years 1997-98 and 1998-99 referred to this state of affairs. On 16.7.1999 the property was sold to Kanchipuram Kamakshiamman Silk Handloom Weavers' Cooperative Society Limited, Kanchipuram by the partners in their individual capacity. Being a going concern, the property stood in the name of the firm could not be legally distributed without valid registered sale deeds. Considering the above legal position, the transferred landed property belonging to the firm was held to attract tax on the capital gains at the hands of the firm for the assessment year 2000-01. Thus, on a perusal of the balance sheet dated 31.3.99, on a finding that the property was not there in the balance sheet, the Officer questioned each of the partners and recorded their statements. The statement recorded from the Partner B.M.K. Viswanath Sah, was affirmed by other partners. They also 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 an