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Issues: (i) Whether issuance of a notice under Section 143(2) is mandatory prior to completion of assessment made pursuant to notice under Section 153A/153C; (ii) Whether the principles of natural justice were complied with in the impugned assessments; (iii) Whether reliance on a valuation report obtained by the investigating officer during search, without putting the report to the assessee for response, was permissible.
Issue (i): Whether issuance of notice under Section 143(2) is mandatory for assessments completed under Section 153A/153C.
Analysis: Section 158BC (erstwhile block assessment regime) contains an explicit reference to Sections 142 and 143(2)(3), whereas Section 153A only provides that the provisions of the Act shall, so far as may be, apply as if the return were filed under Section 139 and prescribes a specific notice under Section 153A(1)(a) to furnish returns. Precedents interpreting Section 153A (including Delhi, Punjab & Haryana and Kerala High Court decisions) have held that the language of Section 153A does not mandate issuance of a separate notice under Section 143(2) where procedural opportunity has been provided by other means (for example, questionnaires under Section 142(1)). The difference in statutory text between Section 158BC and Section 153A is material to the applicability of the specific requirement to issue a notice under Section 143(2).
Conclusion: In favour of Revenue. Issuance of a formal notice under Section 143(2) is not a mandatory precondition for completion of assessment under Section 153A/153C where procedural opportunity consistent with natural justice has been provided.
Issue (ii): Whether the principles of natural justice were satisfied in the impugned assessments.
Analysis: Procedural fairness requires that material relied upon to make additions be disclosed and the assessee given a real opportunity to respond. In the present matters centralisation occurred long after the search, notices under Section 153C were issued with short timeframes, questionnaires under Section 142(1) were issued and replies were filed, but the assessment orders recorded new incriminating material and valuation-based additions without giving specific show-cause opportunities on those particulars or adequate time to respond. The department provided scant explanation for proceeding at the fag end of limitation and did not thereafter seek further submissions before passing final orders.
Conclusion: In favour of Assessee. The assessments, as passed, violated principles of natural justice and are set aside for fresh consideration after affording proper opportunity.
Issue (iii): Whether reliance on a valuation report obtained by the investigating officer during or shortly after search was permissible without affording the assessee an opportunity to consider and respond to that report.
Analysis: Section 132(9D) permits an authorised officer to refer matters to a Valuation Officer and obtain a valuation report within specified timeframes. However, use of such a valuation report in assessment requires that the report be placed before the assessee and his full and complete response obtained before the report is used against him. In the present cases a valuation reference was made but the valuation material relied upon in assessments was not put to the assessee for adequate consideration and response prior to final adjudication.
Conclusion: In favour of Assessee. Relying on the valuation report without affording the assessee an opportunity to respond amounted to violation of natural justice; the assessments are to be reopened after affording such opportunity.
Final Conclusion: The impugned assessments are annulled to the extent they were completed without affording adequate opportunity on material and valuation reports relied upon; the matter is remitted for fresh decision by issuing fresh notices, affording full opportunity to the assessee and concluding assessments within the time directed by the Court.
Ratio Decidendi: Where Section 153A/153C does not expressly require issuance of a notice under Section 143(2), compliance with principles of natural justice may be satisfied by other pre-assessment opportunities (for example, questionnaires under Section 142(1)), but any material or valuation report intended to be used for making additions must be placed before the assessee and an opportunity to respond afforded before finalizing the assessment.
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