High Court rules assessments void without proper notice under Income-tax Act

The High Court of Bombay allowed the Appeals challenging an impugned order under the Income-tax Act for Assessment Years 1992-93, 1993-94, and 1994-95. The Court held that assessments made under Section 143(3) without issuing the mandatory notice under Section 143(2) are void ab-initio, following the Supreme Court precedent in ACIT v. Hotel Blue Moon. As no such notice was issued in this case, the Court ruled in favor of the appellant-assessee, emphasizing the importance of complying with procedural requirements for valid assessments. The Appeals were allowed, highlighting the necessity of adhering to statutory procedures for assessment validity.

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Issues:
Challenge to impugned order under Income-tax Act for Assessment Years 1992-93, 1993-94, and 1994-95 based on absence of mandatory notice under Section 143(2) of the Act.

Analysis:
The judgment delivered by the High Court of Bombay pertained to three Appeals challenging a common impugned order dated 23rd November, 2016, concerning Assessment Years 1992-93, 1993-94, and 1994-95 under the Income-tax Act, 1961. The primary question of law raised in these Appeals was whether an assessment made under Section 143(3) read with Section 147 of the Income Tax Act is void ab-initio without issuing the mandatory notice under Section 143(2) of the Act. Despite the respondent waiving service, no appearance was made on their behalf during the proceedings. The appellant's counsel highlighted that the issue at hand had been settled in favor of the appellant-assessee by the Supreme Court in the case of ACIT v. Hotel Blue Moon, 321 ITR 362 (SC).

The High Court referred to the Supreme Court's decision in Hotel Blue Moon, where it was held that the issuance of a notice under Section 143(2) of the Act is imperative before conducting an assessment under Section 143(2) of the Act. Notably, in the present case, no such notice had been issued, leading to a clear violation of the mandatory requirement. Consequently, the substantial question of law for all three assessment years was deemed to be resolved in favor of the appellant-assessee and against the respondent-Revenue based on the precedent set by the Supreme Court in the Hotel Blue Moon case. The Court, therefore, answered the substantial question of law in the affirmative, favoring the appellant-assessee and ruling against the respondent-Revenue.

In conclusion, the Appeals were allowed based on the above findings, emphasizing the significance of adhering to the mandatory procedural requirements outlined in the Income Tax Act. The judgment reiterates the essential nature of issuing a notice under Section 143(2) before conducting assessments to ensure the validity and legality of the assessment process, as established by the Supreme Court's authoritative interpretation in the Hotel Blue Moon case.

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