2016 (8) TMI 520 - HC - Income Tax

Court emphasizes statutory notice requirement for block assessments, ruling failure to comply is not curable

MARDIA STEEL LIMITED (IN LIQUIDATION) Versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4

The Court ruled in favor of the appellant, stating that the Income Tax Appellate Tribunal erred in its interpretation of the statutory notice requirement ... Block assessment framed u/s.158BC - necessity of issuing statutory notice u/s.143(2) - Held that:- As considering the decision of this Court in the case of Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] he questions, which are raised in the present appeal are required to be answered in favour of the assessee wherein held by the Apex Court that if an assessment is to be completed under Section 143(3) read with Section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable and therefore the requirement of notice under section 143(2) cannot be dispensed with. - Decided in favour of assessee Issues:1. Interpretation of statutory notice requirement under Section 143(2) in block assessment under Section 158BC.2. Validity of assessment without issuance of notice under Section 143(2).Analysis:1. The case involved a challenge to the judgment of the Income Tax Appellate Tribunal (ITAT) regarding the requirement of issuing a statutory notice under Section 143(2) of the Income Tax Act in a block assessment under Section 158BC. The appellant raised substantial questions of law questioning the ITAT's decision on the necessity of issuing such notice within the prescribed time frame. The ITAT had allowed the revenue's appeal, leading to the appellant filing the present Tax Appeal for judicial consideration.2. The appellant contended that the issue in the present case had already been settled by the Supreme Court in a previous case, emphasizing the importance of issuing notice under Section 143(2) for completing assessments under Section 158BC. The Supreme Court's ruling highlighted that failure to issue such notice within one year of filing the block return cannot be considered a procedural irregularity and is not curable. The appellant's argument was supported by legal precedent, and the respondent did not present any contradictory decision.3. After hearing arguments from both parties, the Court relied on the Supreme Court's decision and the principles established therein. The Court found in favor of the appellant, stating that the ITAT had erred in its interpretation of the statutory notice requirement under Section 143(2) for block assessments. The Court emphasized that the non-issuance of such notice cannot be deemed a procedural lapse that can be rectified. Consequently, the Court quashed the ITAT's judgment, set it aside, and allowed the present Tax Appeal in favor of the appellant.4. In conclusion, the Court's detailed analysis centered on the legal interpretation of the statutory notice requirement under Section 143(2) in the context of block assessments under Section 158BC. The judgment underscored the significance of adhering to procedural requirements and established legal principles, ultimately leading to the appellant's success in challenging the ITAT's decision. The Court's decision provided clarity on the essential procedural aspects of block assessments, ensuring the proper application of the Income Tax Act's provisions and upholding the rule of law in tax matters.