2014 (2) TMI 657 - HC - Income Tax

Interpretation of Tax Law: Section 158BC(b) Optional?

The case centered on the interpretation of section 158BC(b) regarding the applicability of section 143(2) in block assessment proceedings. The Tribunal ... Block Assessment - Requirement to serve Notice u/s 143(2) of the Act - Held that:- The decision in Asstt. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] followed - The AO must necessarily issue notice u/s 143(2) of the Act within the time prescribed in the proviso to s. 143(2) - by making the issue of notice mandatory, s. 158BC, dealing with block assessments, makes such notice the very foundation for jurisdiction - Such notice is required to be served on the person, who is found to have undisclosed income - The requirement of notice under s. 143(2) cannot be dispensed with - The non-consideration of s. 292BB, which is rule of evidence and a deeming provision to cannot validate the notice in certain circumstances - the very foundation of the jurisdiction of the AO is on the issuance of the notice under s. 143(2) – Decided against Revenue. Issues:1. Interpretation of section 158BC(b) regarding the applicability of section 143(2) in block assessment proceedings.2. Validity of block assessment order in absence of notice under section 143(2).3. Impact of section 292BB on the requirement of notice under section 143(2) in block assessments.Analysis:1. The main issue in this case revolves around the interpretation of section 158BC(b) concerning the applicability of section 143(2) in block assessment proceedings. The Tribunal had to determine whether the non-issuance and non-service of a notice under section 143(2) would affect the validity of the block assessment order. The Tribunal held that the phrase 'so far as may be' in section 158BC(b) made the applicability of section 143(2) optional, leading to a question of legal correctness in this interpretation.2. The Supreme Court precedent in the case of Hotel Blue Moon established that the issuance of a notice under section 143(2) is crucial for establishing jurisdiction in block assessments. The Court emphasized that the notice is the foundation for jurisdiction and must be served on the assessee with undisclosed income. In this case, the Tribunal found that the notice under section 143(2) was not issued, leading to a lack of jurisdiction for the assessing authority to proceed with the assessment.3. The introduction of section 292BB as a rule of evidence aimed to validate notices in certain circumstances. It deems that a notice required to be served upon an assessee has been duly served if the assessee has cooperated in related proceedings. However, the Court clarified that the absence of consideration of section 292BB does not impact the requirement of a notice under section 143(2) as the foundation of the AO's jurisdiction. The judgment in Hotel Blue Moon reiterated the mandatory nature of the notice under section 143(2) for block assessments, emphasizing its significance in establishing jurisdiction.In conclusion, the dismissal of the income tax appeal underscores the importance of adhering to procedural requirements, particularly the issuance of notices under section 143(2) for block assessments to maintain the validity of assessment orders and establish jurisdiction effectively.