INCOME TAX APPEAL No. - 2 of 2011 Appellant :- Chandrabhan Respondent :- Commissioner Of Income Tax-I Counsel for Appellant :- S.K.Garg,Ashish Bansal Counsel for Respondent :- C.S.C./Income Tax,Manu Ghildyal,R.K.Upadhyaya,S. Chopra Hon'ble Bharati Sapru,J. Hon'ble Rohit Ranjan Agarwal,J. (Per Hon'ble Rohit Ranjan Agarwal,J.) 1. This appeal under Section 260-A of Income Tax Act has been filed by assessee challenging order dated 13.10.2005 passed by Income Tax Appellate Tribunal, Agra Bench, Agra (hereinafter called as 'Tribunal'). 2. This appeal was admitted on 11.01.2011 on following question of law:- (I) Whether on true and correct interpretation of provisions of section 143(2), Tribunal was legally correct in holding that non-issuance/ non-service of notice thereunder, had no bearing on validity of Block assessment order dated 28.04.2000 as had been passed by Assessing Officer under Section 158BC read with section 143(3) of Act? (ii) Whether Tribunal was legally correct in holding that provisions related to service of notice under section 143(2) stood dispensed with, after assessee was given opportunity of being heard by issue of notice under various other sections, from time to time, which assessee had availed by his participation? 3. Brief facts of case are that assessee was intercepted by police and was found to be carrying silver jewellery in Maruti van weighing 242.507 kg. As assessee could not explain source of acquisition of silver ornaments, warrant of [2] INCOME TAX APPEAL No. - 2 of 2011 authorisation for requisition of same was issued under Section 132 of Income Tax Act (hereinafter called as 'Act') on 29.04.1998 by Commissioner of Income Tax, Agra. Assessing Officer issued and served notice under Section 158BC on assessee on 08.10.1998. Assessee filed return in Form 2B for block period on 23.07.1999. During course of block assessment proceedings, assessee initially surrendered 54 kg of silver ornament for taxation, same was revised to 75 kg and finally to 100 kg. Assessing Officer treated 102.54 kg of silver ornament as unexplained and balance as explained. value of unexplained silver jewellery ornaments was determined at Rs.4,33,907/-. said amount was taxed in assessment year 1999-2000. 4. Assessee had never filed return of income till action under Section 132 was taken on 29.04.1998. Assessee, thereafter, filed return of income on 18.05.1998 for assessment year 1994-95 to 1997-98, while return for assessment year 1998-99 was filed on 31.10.1998. assessee in all these return had disclosed income from business of silver ornament on labour basis. As returns of income had been filed after search, Assessing Officer, therefore, held that this income was undisclosed income of assessee and included same in assessment of undisclosed income for block period. Aggrieved by assessment order, assessee filed appeal which was partly allowed by Commissioner Income Tax (Appeals)- II, Agra on 11.12.2001. assessee challenged order of CIT (A) before Tribunal, which was partly allowed on 13.10.2005 and [3] INCOME TAX APPEAL No. - 2 of 2011 ground raised by assessee that Assessing Officer not having issued any notice under Section 143(2) of Act in block assessment which was mandatory, was turned down, and thus, present appeal. 5. Before proceeding, it would be necessary to have glance of provisions of Section 143(2) and Section 158BC of Act. 143. (1)..................... (2) Where return has been furnished under section 139, or in response to notice under sub-section (1) of section 142, Assessing Officer or prescribed income-tax authority, as case may be, if, considers it necessary or expedient to ensure that assessee has not understated income or has not computed excessive loss or has not under-paid tax in any manner, shall serve on assessee notice requiring him, on date to be specified therein, either to attend office of Assessing Officer or to produce, or cause to be produced before Assessing Officer any evidence on which assessee may rely in support of return: Provided that no notice under this sub-section shall be served on assessee after expiry of six months from end of financial year in which return is furnished.] (3)........................... 158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in case of any person, then, (a) Assessing Officer shall (i) ....... (ii) ......... (b) Assessing Officer shall proceed to determine undisclosed income of block period in manner laid down in section 158BB and provisions of section 142, sub-sections (2) and (3) of section 143, [section 144 and section 145] shall, so far as may be, apply; (c) ......... [4] INCOME TAX APPEAL No. - 2 of 2011 (d) ......... 6. Counsel for assessee submitted that Tribunal had wrongly held that full opportunity was afforded to assessee to substantiate his claim, thus, want of issue of notice under Section 143(2) of Act on part of Assessing Officer was only procedural error to be cured by suitable directions, and no prejudice was caused to assessee. 7. He further submitted that notice under Section 143(2) of Act was mandatory in block assessment proceedings held under Section 158BC of Act and non-issuance of such notice goes to root of case. He relied upon decision of Apex Court in Assistant Commissioner of Income-Tax and another vs. Hotel Blue Moon, [2010] 321 ITR 362 (SC). Relevant portion relied upon is extracted below:- We may now revert back to section 158BC(b) which is material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. said provision reads "that assessing officer shall proceed to determine undisclosed income of block period in manner laid down in Section 158BB and provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply." analysis of this sub-section indicates that, after return is filed, this clause enables Assessing Officer to complete assessment by following procedure like issue of notice under Sections 143(2)/142 and complete assessment under Section 143(3). This section does not provide for accepting return as provided under Section 143(1)(a). Assessing Officer has to complete assessment under section 143(3) only. In case of default in not filing return or not complying with notice under Sections 143(2)/142, Assessing Officer is authorized to complete assessment ex parte under Section 144. Clause (b) of Section 158BC by referring to Section 143(2) and (3) would appear to imply that provisions of section 143(1) are [5] INCOME TAX APPEAL No. - 2 of 2011 excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check return, so that where block return conforms to undisclosed income inferred by authorities, there is no reason, why authorities should issue notice under Section 143(2). However, if 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 date of filing of block return. Omission on part of assessing authority to issue notice under Section 143(2) cannot be procedural irregularity and same is not curable and, therefore, requirement of notice under Section 143(2) cannot be dispensed with. other important feature that requires to be noticed is that Section 158BC(b) specifically refers to some of provisions of Act which requires to be followed by Assessing Officer while completing block assessments under Chapter XIV-B of Act. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by Assessing Officer. Had intention of Legislature been to exclude provisions of Chapter XIV of Act, Legislature would have or could have indicated that also. reading of provision would clearly indicate, in our opinion, if Assessing Officer, if for any reason, repudiates return filed by assessee in response to notice under Section 158BC(a), Assessing Officer must necessarily issue notice under Section 143(2) of Act within time prescribed in proviso to Section 143(2) of Act. Where Legislature intended to exclude certain provisions from ambit of section 158BC(b) it has done so specifically. Thus, when section 158BC(b) specifically refers to applicability of proviso thereto it cannot be excluded. We may also notice here itself that clarification given by Central Board of Direct Taxes in its circular No.717 dated August 14, 1995, has binding effect on Department, but not on court. This circular clarifies requirement of law in respect of service of notice under sub-section (2) of section 143 of Act. Accordingly, we conclude that even for purpose of Chapter XIV-B of Act, for determination of undisclosed income for block period under provisions of section 158BC, provisions of Section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of Act. [6] INCOME TAX APPEAL No. - 2 of 2011 8. He further relied upon decision of Division Bench of this Court in case of Virendra Dev Dixit vs. Assistant Commissioner of Income-Tax (2010) 41 DTR (All.) 43. 9. Per contra, counsel for Revenue submitted that in proceedings under Section 158BC, there is no requirement of notice to be issued under Section 143(2), as issuance of notice in block assessment under Section 158BC is separately prescribed. He also submitted that in case of search and seizure under Section 132 and in case of requisition of books of accounts under Section 132-A, Assessing Officer is left with no discretion but to proceed with block assessment and procedure has been prescribed in Chapter XIV-B of Act, while in ordinary assessment proceedings as envisaged under Chapter XIV of Act, notice under Section 143(2) is essential for production of material by assessee. 10. We have heard Sri Ashish Bansal, learned counsel for appellant-assessee and Sri Manu Ghildyal, learned counsel for Revenue and perused material on record. 11. question under consideration is as to whether issuance of notice under Section 143(2) is mandatory for making assessment under Section 158BC. issue involved is no more res-integra and is covered by decision of Apex Court in case of Assistant Commissioner of Income-Tax and another vs. Hotel Blue Moon (supra), which has been followed by Division Bench of this Court in case of Virendra Dev Dixit (supra). 12. Counsel for Revenue very fairly conceded that [7] INCOME TAX APPEAL No. - 2 of 2011 matter stands covered by decision of Apex Court in case of Hotel Blue Moon (supra). 13. After having considered case and perusal of record, we are of view that case of assessee is covered by decision of Apex Court in case of Assistant Commissioner of Income-Tax and another vs. Hotel Blue Moon (supra), as Assessing Officer did not issue notice as contemplated under Section 143(2) of Act in block assessment proceedings under Section 158BC, which was mandatory and non service thereof is fatal. 14. order of Tribunal dated 13.10.2005 as far as non- issuance of notice under Section 143(2) of Act is set aside. 15. appeal is allowed. question of law, therefore, is answered in favour of assessee and against Revenue. Order Date :- 21.8.2019 V.S.Singh Chandrabhan v. Commissioner of Income-tax-I