Invalid block assessment order due to late notice issuance under Section 143(2). Appeal allowed, costs not awarded.

The court held that the block assessment order under Section 158BC(c) was invalid as the notice under Section 143(2) was issued beyond the prescribed period of limitation. Consequently, the impugned order was set aside, and the appeal was allowed with no order as to costs.

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Issues Involved:
1. Validity of notice under Section 143(2) of the Income Tax Act, 1961 issued beyond the prescribed period of limitation.
2. Whether the block assessment order dated 30.07.2004 was barred by limitation if the notice under Section 143(2) was issued within time.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 143(2):
The court examined whether the notice under Section 143(2) of the Income Tax Act, 1961, was issued within the prescribed period of limitation. The notice under Section 158BC was served on the assessee on 03.12.2001, and the assessee filed the return on 31.12.2002. According to the appellant, the notice under Section 143(2) should have been issued by 31.12.2003, but it was issued on 05.07.2004. The appellant argued that the issuance of a notice under Section 143(2) is mandatory and must be within the prescribed period as per the Supreme Court's decision in Hotel Blue Moon. The court agreed, stating that the notice under Section 143(2) is mandatory and must be served within the prescribed time. Failure to do so renders the block assessment order invalid.

2. Limitation Period for Block Assessment Order:
The court addressed whether the block assessment order dated 30.07.2004 was barred by limitation. The respondent argued that the period between the filing of an application before the Settlement Commission (10.01.2003) and the receipt of the order rejecting it (03.06.2004) should be excluded from the limitation period as per Explanation 1 to Section 158BE. The appellant countered, citing the Supreme Court's decision in Hindustan Bulk Carriers, that the filing of an application before the Settlement Commission does not bar the Assessing Officer from proceeding with the assessment. The court agreed with the appellant, stating that the filing of a settlement application does not stay the assessment proceedings, and the Assessing Officer could have issued the notice under Section 143(2) within the prescribed time.

Statutory Provisions and Case Law:
The court examined various statutory provisions, including Sections 143(2), 153, 158BC, and 158BE, and relevant case law. The court reiterated that the notice under Section 143(2) is mandatory for block assessments and must be served within the prescribed time. The court also clarified that the exclusion of time under Explanation 1 to Section 158BE applies only to the period for passing the assessment order, not for issuing the notice under Section 143(2).

Conclusion:
The court concluded that since the notice under Section 143(2) was issued beyond the prescribed period of limitation, the block assessment order under Section 158BC(c) was invalid. Consequently, the court did not need to address the second issue. The impugned order was set aside, and the appeal was allowed with no order as to costs.

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