Issuance and service of incometax notice under Section 143(2) -- lack of actual service vitiates assessment proceedings

The issue concerns whether a notice under Section 143(2) must be actually served to be valid when proceedings to determine undisclosed income for a block period are initiated under Section 158BD. The court held that the statutory expression 'served' refers to actual receipt by the assessee; mere issuance within the limitation period without service does not validate proceedings. Because the notice was served beyond the prescribed period, the noncompliance was held to be fundamental and noncurable, vitiating the assessment proceedings initiated for the block period. Decision rendered against the revenue.

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Issues: Whether notice under Section 143(2) of the Income-tax Act, 1961 must be actually served upon the assessee within twelve months from the end of the month in which the block return was filed, and whether failure to effect such service within the period vitiates the assessment proceedings arising out of search and seizure.

Analysis: The appeals relate to block assessments where block returns were filed on 09.01.2001. The notice dated 29.01.2002 was issued within the twelve month period but was admittedly served on the assessees on 04.02.2002, after the expiry of the prescribed period. The statutory text of Section 143(2) uses the word "served" and earlier decisions hold that "issued" and "served" are distinct acts. Acceptance of issuance alone as compliance would permit antedating and defeat the legislative time-limit. Prior authoritative decisions have held that service within the period is required for assessments under Section 143(3) read with provisions dealing with undisclosed income arising from search.

Conclusion: The failure to serve the notice under Section 143(2) within the prescribed twelve month period vitiates the assessment proceedings. Issue answered in favour of the assessees and against the Revenue. All impugned appellate and assessment orders are set aside and the appeals are allowed.

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