1. These cross-appeals, preferred by the assessee as well as the Revenue, are directed against the order of learned CIT (A) dated 2-1-2003 relating to the block period ending on 21-1-1997.
2. S/Shri S.K. Garg and Shri Sanjay Kumar appeared on behalf of the assessee whereas Shri Rajnish Kumar CIT DR represented the Revenue.
3. At the time of hearing the learned Counsel for the assessee submitted that preliminary legal issue raised in ground No. 2 should be considered first. The learned CIT DR also agreed for considering the preliminary ground first. Hence, we have heard the parties on ground No. 2 which is as under: Because the mandatory requirement of issuing notice under Section 143(2) having not been complied with, even though the appellant had duly filed the return in compliance with notice under Section 158 BC, the block assessment order is liable to be declared as null and void and the learned CIT (Appeals) has erred in law in holding that non-issuance of notice under Section 143(2) does not invalidate the block assessment order.
4. It may be pointed out that at the time of hearing on 19-3-07, while advancing arguments on this ground the leaned CIT DR requested for time to produce the assessment record for verifying the fact relating to issuance and service of notice Under Section 143(2). When the matter was heard today i.e. on 21-3-07, the learned CIT DR fairly conceded that there is no material on record to show that any notice was issued to the assessee Under Section 143(2).
5. In support of ground No. 2, the contention of the learned Counsel for the assessee was that issuance and service of notice Under Section 143(2) was a mandatory requirement for passing block assessment order Under Section 158BC. In support of this submission the learned Counsel placed reliance on the ratio of decision of Hon'ble Gauhati High court in the case of Smt. Bandana Gogoi v. CIT and Anr. .
6. In rejoinder, the learned CIT DR placed reliance on the order of Special Bench of the ITAT in the case of Naval Kishore 87 ITR 407 and submitted that reasons assigned by the Special Bench should be considered while deciding the issue.
7. The learned CIT DR, however, agreed that there is no contrary decision of any other High Court against the decision of Hon'ble Gauhati High Court in the case of Smt. Bandana Gogoi v. CIT and Anr.
(supra).
8. On going through the relevant material, it is found that the assessee had raised specific issue regarding validity of assessment order by pleading that since no notice Under Section 143(2) was issued, the assessment order has no legs to stand. On this issue, the learned CIT (Appeals) sought a remand report from the AO. The AO submitted the remand report on 6-6-01. A copy of this remand report has been placed in the paper book and is available at pages 111 to 113. On this issue, the submissions of the AO are as under: (B) The appellant's contentions that the AO cannot be said to have been validly vested with the jurisdiction as no notice under Section 143(2) was issued has no legs to stand on. The provision of Section 143(2) are essentially procedural in nature. Neither the Act nor the rules made thereunder anywhere prescribe a format for issuance of the notice. The jurisdiction was lawfully assumed by the Assessing Officer by duly issuing the questionnaire-cum/notice and the assessee took due cognizance thereof by furnishing the details, howsoever, incomplete and incorrect. Many of the transactions reflected in the accounts of the assessees of the group and other seized material and Bank accounts were entered into by them amongst themselves and also with the concerns owned or controlled by them.
It was in order to be fair to all the concerned persons that a consolidated questionnaire referring to all the seized material was issued to all the persons jointly.
9. On going through the above portion of the remand report of the AO it is clear that he has justified the validity of the assessment order even in absence of notice issued Under Section 143(2). He has not mentioned that notice Under Section 143(2) was issued and served upon the assessee.
10. In view of the above facts, it is clear that the department has not been able to establish that any notice Under Section 143(2) was issued and served upon the assessee during the course of assessment proceedings Under Section 158BC. As held in the case of Smt. Bandana Gogoi v. CIT and Anr. (supra), if the block assessment is not made on the basis of return filed then requirement of issuance of notice is mandatory and in absence of issuance and service of such notice, the assessment order cannot be held to be valid. The observations of the Hon'ble High Court are as under: Clause (b) of Section 158BC of the Income-tax Act, 1961, provides that the provisions of Section 142 as well as Sub-section (2) and (3) of Section 143 shall apply even in the case of a block assessment so far as may be. There is no dispute that in the case of assessment under Chapter XIV, a notice under Section 143(2) is mandatory where the Assessing Officer proceeds to make an inquiry as provided in Section 142. Similarly, the provision of Section 143(2) will be mandatorily applicable in the case of block assessment also where the Assessing Officer in repudiation of the return filed under Section 158BC (a) proceeds to make an inquiry in the proceedings under Chapter XIV-B. Once the power of inquiry under Section 142 is invoked, the Assessing Officer has no option but to follow the provisions of Section 143(2). The words "so far as may be", will thus become mandatory where the Assessing Officer proceeds to make an inquiry in repudiation of the return filed in response to a notice issued under Section 158BC. The circular issued by the Central Board of Director Taxes provides that a notice under Sub-section (2) of Section 143 ca(sic) be served on the assessee during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later. The circular further provides that the Assessing Officer must serve notice under Sub-section (2) on the assessee within this period if a case is picked up for scrutiny. It is further clarified that if a notice is not served under Section 143(2), the assessee can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. The clarification given by the Board has a binding effect on the Department. Hence in the case of block assessment under Chapter XIV-B, where the Assessing Officer does not proceed to make assessment and determine the tax payable on the basts of the return filed in response to a notice under Section 158BC(a), be has to follow the provisions of Sub-section (2) of Section 143, the requirement of a notice under Sub-section (2) of Section 143 cannot be dispensed with in a case where the Assessing Officer proceeds to make an inquiry for the purpose of assessment, and determination of taxes payable after issuing notice under Section 142(1) as well.
11. Since in the instant case it is virtually admitted by the Revenue that no notice Under Section 143(2) has been issued and served upon the assessee, the block assessment made Under Section 158-BC cannot be upheld and the same is to be declared null and void. We order accordingly.
12. In view of above, we are not required to dispose of the other grounds taken by the assessee in its appeal.
13. In the result, assessee's appeal stands allowed.
IT(SS) A No. 79/Del/03 (Revenue's appeal): 14. While deciding assessee's appeal being IT (SS) No. 81/Del/03, as above, we have quashed the assessment order passed by the AO Under Section 158BC by treating the same as null and void. In view of above, the present appeal preferred by the Revenue does not survive, the same having been rendered infructuous. Accordingly, Revenue's appeal stands dismissed.