2017 (3) TMI 978 - HC - Income Tax

High Court invalidates block assessment for lack of notice under section 143(2)

The High Court of Patna ruled in a case challenging a Commissioner's order in a block assessment matter under the Income-tax Act, 1961. The issue centered ... Block assessment - finding was recorded by CIT-A that notice u/s 143(2) was not issued, and that the judgment in Asst. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] is per incuriam in view of the judgment reported in Govt. of A. P. v. J. B. Educational Society [2005 (2) TMI 824 - Supreme Court Of India ] and State of Punjab v. Shamlal Murari [1975 (10) TMI 105 - SUPREME COURT] - Held that:- In Hotel Blue Moon (supra), it is categorically held that the block assessment cannot be framed until notice under section 143(2) has been served upon the assessee. Since the Commissioner of Income-tax (Appeals) has recorded a finding that notice was not served, therefore, in view of the judgment in Hotel Blue Moon's case (supra), an order of assessment could not have been passed. The reasoning given by the learned Commissioner that the judgment is per incuriam is based upon two Supreme Court judgments. The said finding is not tenable. Neither of the judgments refers/deals with the case of block assessment and of not serving a notice under section 143(2) which issue was raised and decided in Hotel Blue Moon's case (supra). In view of the judgment in Hotel Blue Moon's case (supra), the learned Commissioner, Income-tax (Appeals) has committed grave illegality in holding that such judgment is per incuriam. The order passed by the learned Commissioner of Income-tax (Appeals) is set aside. Issues:Challenge to order by Commissioner, Income-tax (Appeals) in a block assessment case regarding the issuance of notice under section 143(2) of the Income-tax Act, 1961.Analysis:The judgment delivered by the High Court of Patna pertained to a writ application challenging an order by the Commissioner, Income-tax (Appeals) in a block assessment case. The core issue revolved around the non-issuance of a notice under section 143(2) of the Income-tax Act, 1961. The Commissioner had concluded that the judgment in Hotel Blue Moon case, which mandated the service of such notice before framing a block assessment, was per incuriam. However, the High Court disagreed with this reasoning.The High Court referred to the Hotel Blue Moon case, emphasizing that block assessment cannot be conducted without serving the requisite notice under section 143(2) to the assessee. Since the Commissioner had found that such a notice was not served, the assessment order was deemed invalid based on the principles established in the Hotel Blue Moon judgment.The High Court scrutinized the Commissioner's argument that the Hotel Blue Moon judgment was per incuriam due to references to other Supreme Court judgments. The Court deemed this reasoning untenable, highlighting that the cited judgments did not address the specific issue of block assessment and non-service of notice under section 143(2) as elucidated in the Hotel Blue Moon case.Consequently, the High Court concluded that the Commissioner of Income-tax (Appeals) had erred in considering the Hotel Blue Moon judgment as per incuriam. The writ petition challenging the Commissioner's order was allowed, and the order was set aside by the High Court. This decision reaffirmed the significance of complying with the procedural requirements, including the issuance of notice under section 143(2) for block assessments under the Income-tax Act, 1961.