Assessment made on the basis of time barred notice u/s 143(2) is not legal

RELEVANT PARAGRAPH

5. Section 158BC(b) provides that where any search has been conducted u/s. 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply. One of the important questions raised in this appeal is whether the proviso to section 143(2) applies to the block assessment also. In other words is it incumbent upon the AO to issue notice u/s 143(2) within the prescribed period of twelve months from the end of the month in which the block return is filed?

8. As against the above view in favour of the assessee that the issuance of notice within the time prescribed under proviso to section 143(2) is a mandatory requirement for framing of block assessment, a contrary view also came to be

expressed by some judicial forums. The stand of the Revenue remained that the proviso to section 143(2) did not apply to the block assessment proceedings inasmuch as clause (b) of section 158BC included the words “so far as may be” in the context of applicability of section 143(2) and hence even if no notice was issued within twelve months from the end of the month in which the return was furnished, the assessment proceedings could validly go on. Eventually this issue has been recently set to rest by the Honourable Apex court in the case of ACIT Vs. Hotel Blue moon [2010-TIOL-08- SC-IT]. The facts of the case are that search action was taken against that assessee u/s.132 of the Act. Whereas the assessee argued that issuance of notice u/s. 143(2) of the Act within the prescribed time for the purpose of block assessment was mandatory for the assessing authority, the department took a view that the notice u/s.143(2) was not an essential requirement in the block assessment. The Tribunal affirmed the decision of the CIT(A) that non-issuance of notice u/s.143(2) was only a procedural irregularity and the same was curable. The Honourable Gauhati High Court did not concur with the view expressed by the Tribunal that the issuance of notice u/s.143(2) within the prescribed time limit was not an essential requirement for the purposes of making block assessment. The Revenue took up the matter before the Honourable Supreme Court. Vide judgement dated 2.2.2010, the Honourable Apex Court has held that if an assessment is to be completed u/s.143(3) r.w.s. 158BC, notice u/s.143(2) should be issued within one year from the end of the month in which block return is filed. It has further been held that the omission on the part of the assessing authority to issue notice u/s.143(2) cannot be a procedural irregularity and the same is not curable. With the advent of this judgement from the Honourable Summit Court, now it becomes unambiguous that the provisions of section 143(2) are applicable to the block assessment. Since issuance of notice u/s 143(2) is an essential requirement for making block assessment, such notice has necessarily to be issued with the time prescribed under proviso to section 143(2). Thus the service of notice within a period of twelve months from the end of month in which return is filed is sine qua non for proceeding with the block assessment. If no notice is issued u/s.143(2) within the prescribed period, the Assessing Officer will have to accept the returned income and he cannot be allowed to go ahead with the assessment. If an assessment, in contravention of the provisions of proviso to section 143(2), is made, the same will be a nullity and not an irregular assessment.

9. Adverting to the facts of the instant case it is found as an undisputed fact that the assessee filed its return for the block period on 15.5.2000. Going by the mandate of proviso to section 143(2), notice u/s.143(2) could have been validly issued on or before 31.5.2001. If the Revenue’s contention is accepted that notice u/s.143(2) issued on 16.5.2000 was served upon the assessee through registered post, then of course such notice will be in time and no infirmity can be found in the block assessment order on this count. If however the view point of the assessee is accepted that the notice u/s.143(2) was issued for the first time on 24.12.2001, then such a notice would be time barred. Now we need to examine if any notice u/s.143(2) dated 16.5.2000 was issued and served on the assessee. The Revenue’s view point is that notice u/s.143(2) dated 16.5.2000 was issued and served on the assessee by registered post acknowledgement due. In support of this claim the Revenue has placed on record a copy of Postal Department acknowledgement at pages 6 and 7 of the paper book. On the perusal of these two pages it is found that the name of the assessee is mentioned against Sl.no.A-715. On the right side of this

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