Court Invalidates Block Assessment Without Timely Notice

The court dismissed both appeals, affirming that the block assessment without timely notice u/s 143(2) was invalid. The ITAT's rectification under section 254(2) was deemed justified based on the Supreme Court's ruling in Hotel Blue Moon, which mandates timely issuance of notice for block assessments.

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Issues Involved:
1. Validity of block assessment without issuance of notice u/s 143(2) within the prescribed time.
2. Scope of rectification of mistake u/s 254(2) of the Income Tax Act, 1961.
3. Applicability of the Supreme Court's decision in Hotel Blue Moon.

Summary:

Issue 1: Validity of Block Assessment Without Issuance of Notice u/s 143(2) Within Prescribed Time
The ITAT allowed the rectification application filed by the assessee u/s 254(2) against its earlier order dated 28.04.2006, holding that the completion of assessment u/s 158BC without issuance of notice u/s 143(2) within the prescribed time was wholly without jurisdiction and void ab-initio. This decision was based on the Supreme Court's ruling in ACIT vs. Hotel Blue Moon, which mandates the issuance of notice u/s 143(2) within the prescribed time for block assessments.

Issue 2: Scope of Rectification of Mistake u/s 254(2)
The revenue argued that the scope of rectification u/s 254(2) is limited and does not extend to upsetting the finality of orders. They contended that the rectification application was not maintainable based on the subsequent decision in Hotel Blue Moon, as it was not available at the time of the original order. However, the court held that a judicial decision acts retrospectively, and the ITAT was correct in applying the law as declared by the Supreme Court in Hotel Blue Moon.

Issue 3: Applicability of the Supreme Court's Decision in Hotel Blue Moon
The court emphasized that the law declared by the Supreme Court in Hotel Blue Moon must be applied retrospectively. The ITAT's order dated 12.10.2010, which annulled the block assessment due to the failure to issue notice u/s 143(2) within the prescribed time, was in conformity with the Supreme Court's decision. The court dismissed the revenue's appeals, affirming that the required notice was not issued within the prescribed time, rendering the assessment void ab-initio.

Conclusion:
Both appeals (Nos. 347/2011 and 576/2011) were dismissed, confirming that the block assessment without timely notice u/s 143(2) was invalid, and the ITAT's rectification was justified under the law declared by the Supreme Court in Hotel Blue Moon.

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