Court rules in favor of petitioners, quashes notices under Income-tax Act. Procedural compliance emphasized.

The court ruled in favor of the petitioners in both cases, quashing the notices issued under section 154 of the Income-tax Act, 1961. It was held that once assessment proceedings are initiated under section 143(2) and completed under section 143(3), there is no requirement for further notices under section 154(1)(b). The court emphasized the importance of following procedural requirements under the Act and set aside the impugned notices, orders, and demands issued by the Assessing Officer.

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Issues Involved:
Challenging validity of proceedings u/s 154 of the Income-tax Act, 1961 during pending assessment proceedings u/s 143(3) of the Act.

Special Civil Application No. 1047 of 1996:
The petitioner, a public limited company, challenged the notice u/s 154 issued during assessment proceedings for the year 1993-94. The Assessing Officer had already passed an order u/s 143(1)(a) accepting the loss claimed by the petitioner. Subsequently, a notice u/s 143(2) was issued, followed by proceedings u/s 143(3) leading to the final assessment order. However, a notice u/s 154 was issued regarding disallowance of royalty amount, which the petitioner challenged. The court held that once notice u/s 143(2) is issued, the assessment must be completed u/s 143(3), and there is no need for a notice u/s 154(1)(b) after the assessment is already completed. The impugned notice u/s 154 was quashed and set aside.

Special Civil Application No. 2178 of 1996:
In this case, another public limited company challenged the notice u/s 154 issued after the assessment proceedings for the year 1993-94. The Assessing Officer had already passed an order u/s 143(1)(a) accepting the depreciation claimed by the petitioner. Subsequently, a notice u/s 143(2) was issued, followed by a notice u/s 154 which the petitioner objected to. The court held that once the assessment is completed u/s 143(3), there is no requirement for a notice u/s 154(1)(b) and the Assessing Officer must follow the procedure under section 143(3) after issuing notice u/s 143(2). The impugned notice u/s 154, order passed u/s 154, and demand under section 156 were quashed and set aside in this case as well.

In both matters, the court found in favor of the petitioners, quashing the impugned notices u/s 154 and setting aside the subsequent orders. The court emphasized the procedural requirements under the Income-tax Act, specifically the necessity to complete assessments u/s 143(3) after issuing notices u/s 143(2), without the need for additional notices u/s 154(1)(b) once the assessment process is initiated.

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