2014 (2) TMI 517 - HC - Income Tax

Court emphasizes mandatory nature of notice under Income Tax Act for block assessment orders

The High Court upheld the Tribunal's decision that declared the block assessment order invalid due to the Assessing Officer's failure to issue a notice ... Validity of block assessment proceedings within time limit - Notice u/s 143(2) of the Act not issued – Held that:- The decision in Assistant Commissioner of Income-Tax and another vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] - Notice u/s 143(2) would be mandatory even in case of block assessment proceedings - issuance of notice is mandatory, it is the notice which is the very foundation of the jurisdiction of the Assessing Officer – Omission on the part of the Assessing Officer to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable, and therefore, the requirement of notice cannot be dispensed with – thus, the Assessing Officer failing to issue notice within time limit merely because the assessee participated or that the notice was issued later on would not cure the jurisdictional defect – Decided against Revenue. Issues:Validity of block assessment proceedings in absence of notice issued under section 143(2) of the Income Tax Act within the prescribed time limit.Analysis:The case involved an appeal by the Revenue against the judgment of the Income Tax Appellate Tribunal regarding the validity of block assessment proceedings due to the absence of a notice issued under section 143(2) of the Income Tax Act within the prescribed time limit. The Appellate Commissioner had declared the block assessment order invalid for this reason. The Tribunal upheld this decision, relying on the Supreme Court's ruling that the notice under section 143(2) is mandatory for block assessment proceedings. The Tribunal dismissed the Revenue's appeal, leading to the current appeal before the High Court.The High Court confirmed the Tribunal's decision after hearing arguments from the Revenue's counsel. It was established that the Assessing Officer had failed to issue the notice within the prescribed time, even though a delayed notice was eventually issued. The Court reiterated the Supreme Court's stance that the notice under section 143(2) is crucial for the Assessing Officer's jurisdiction. The Court emphasized that the failure to issue the notice within the specified time would invalidate the assessment order. The Revenue's argument based on section 292BB of the Act, regarding substantial compliance and the assessee's participation in the proceedings, was rejected by the Court. The Court held that the jurisdictional defect caused by the late notice issuance cannot be cured by the assessee's participation or by subsequent compliance.The Court highlighted that the provisions of section 292BB, which the Revenue relied on, were not applicable in this case as they were introduced after the relevant period. Therefore, the Court dismissed the Tax Appeal, affirming the Tribunal's decision and emphasizing the mandatory nature of the notice under section 143(2) for block assessment proceedings.