1. This appeal has been filed by the assessee against the order of CIT(A) passed in Appeal No. DEL/CIT-A2/2002-03/161 dt. 7th March, 2003 on as many as 16 grounds.
2. Ground Nos. 1 and 17 are general in nature hence no adjudication is required from our side.
3. Ground Nos. 2 to 6 relating to various legal issues as stated in the grounds of appeal filed by the assessee were not pressed by the learned Authorised Representative for the assessee before us; accordingly, the same are rejected as not pressed.
4. Ground No. 10 relates to confirmation of addition of Rs. 93,546 on account of commission earned by the assessee and ground No. 1 relates to confirmation of addition of Rs. 25,45.575 by the CIT(A) out of the total addition of Rs. 28,28,902 made by the AO as undisclosed income under Section 68 of the IT Act, 1961. Ground No. 12 relates to upholding of the addition of Rs. 9,75,000 by the CIT(A) relating to share application money and ground No. 13 pertains to confirmation of addition of Rs. 10,14,372 on account of alleged negative cash balance in the books of accounts of assessee. Ground No. 14 pertains to telescoping and ground No. 15 pertains to levy of surcharge and ground No. 16 pertains to levy of interest under Section 158BFA.5. Before us the learned Authorised Representative for the assessee contended that assessee's appeal may be disposed of merely on the legal issue i.e. since the statutory notice under Section 143(2) has not been issued against the assessee within the statutory allowable period, the assessment proceedings are liable to be quashed being null and void as involved in ground No. 7 of the appeal of the assessee and in case this issue is decided in favour of the assessee the other grounds Nos. from 8 to 16 may not be disposed of by the Tribunal.
6. In view of this submission of learned Authorised Representative for the assessee, now we propose to dispose of this appeal of the assessee on this very legal issue as involved in ground No. 7 of the appeal of the assessee which is stated as under: On the facts and circumstances of the case, the learned CIT(A) has erred in rejecting the contention of the appellant that in the absence of statutory notice under Section 143(2), much less within the statutory allowable period, the assessment proceedings are null and void and liable to be quashed.
7. Learned Authorised Representative for the assessee has submitted before us that in the instant case the Department has not issued any statutory notice under Section 143(2) of the IT Act, 1961 against the assessee within a statutory allowable period and so the assessment proceedings framed under Section 158BC are liable to be quashed.
(A) Smt. Bandana Gogoi v. CIT and Anr. wherein it was held that if the AO accepts the return filed, he may straightaway pass an order of assessment and determine the tax payable under Clause (c) of Section 158BC. Instead, if he proceeds to make an inquiry as provided in Section 142, he has to follow the provisions of Section 142 as well as the provisions of Sub-sections (2) and (3) of Section 143. Both the Clauses (i) and (identical issue on identical facts) of Sub-section (2) of Section 143 postulate scrutiny to ensure the correctness of the return. Under Chapter XIV, the powers of assessment under Sub-section (3) of Section 143 in determining the total income or loss could be invoked only after service of notices as contemplated under Clauses (i) and (identical issue on identical facts) of Sub-section (2). In the case of block assessment under Chapter XIV-B, where the AO does not proceed to make an assessment and determine the tax payable on the basis of the return filed in response to a notice under Section 158BC(a), he 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 AO proceeds to make an inquiry for the purpose of assessment, and determination of taxes payable after issuing notice under Section 142(1) as well.
In the instant case, the AO did not act upon the return filed in response to the notice issued under Section 158BC(a). He had issued a notice under Section 142(1). He had proceeded to make an inquiry.
This could not be done without a notice under Sub-section (2) of Section 143. The provisions of Sub-section (3) of Section 143 clearly show that the powers under this sub-section could be invoked only after service of notice under Sub-section (2). The words "so far as may be", will thus become mandatory where the AO proceeds to make an inquiry in repudiation of the return filed in response to a notice issued under Section 158BC. Similarly, application of the provisions of Section 142 and sub-search and seizure (2) and (3) of Section 143 will become directory where the AO does not embark upon an inquiry to determine the loss or profit reflected in the return filed. The defects crept in cannot be cured at this stage in view of the limitation provided in Section 143(2). The assessment order in the instant case thus suffers from both procedural and jurisdictional errors. The option left with the AO is to compute the income and levy taxes on the basis of the return filed by the assessee.
(B) In the case of Naresh Kumar Arora v. Asstt. CIT, CC-25, New Delhi IT(SS)A No. 46/Del/2005 wherein the Tribunal held that in view of the above categorical pronouncement of Hon'ble Gauhati High Court and in the light of the admitted factual position in the present case that no notice under Section 143(2) was issued to the assessee before framing the block assessment, we have no other option but to hold the block assessment framed is not valid in the eye of law. The same is accordingly quashed. The decision relied upon by the learned Departmental Representative in the case of Jai Prakash Singh (supra) was a case where some of the legal heirs were not served with a notice under Section 143(2). In such circumstances the Hon'ble Supreme Court held that it was a case of argumental and not nullity.
The facts of the present case stand on a different footing. The Special Bench decision in the case of Naval Kishore & Sons Jewellers (supra) which is contrary to the decision of the Hon'ble Gauhati High Court in the case of Bandana Gogoi (supra) cannot be followed in view of the decision of Hon'ble Gauhati High Court. We therefore quash the order of assessment. In view of the decision on this preliminary issue the other issues raised by the assessee and the Revenue in their appeals do" not call for any adjudication. In the result the appeal by the assessee is allowed while the appeal by Revenue is "dismissed.
(C) in the case of Tulika Mishra v. Jt CIT, IT(SS)A No. '81/Del/2003, the Tribunal held that 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 158BC cannot be upheld and the same is to be declared null and void. We order accordingly.Asstt. CIT v. R.P. Singh IT(SS)A No. 70/Del/2004 [reported at (2007) 111 TTJ (Del) 880-Ed.] wherein the Tribunal in para No. 20 held that in view of the above authority, the Tribunal Delhi Bench in the case of Smt. Tulika Mishra (supra) (to which both of us were parties), has quashed the assessment order on the ground that the notice under Section 143(2) was not served upon the assessee within the prescribed period. On this ground we have held the assessment order to be null and void in that case also because notice under Section 143(2) was not served upon the assessee within the prescribed period.
9. Hence on this ground also the assessment order is liable to be quashed. The same is accordingly quashed.
10. Before us the learned Departmental Representative for the Revenue after examining the assessment records brought by him submitted that there is no copy of the notice issued to the assessee under Section 143(2). He further submitted that neither there is any proof of issuance of notice under Section 143(2) nor there is any proof of service of the same upon the assessee.
11. From the above submissions of learned Departmental Representative for the Revenue, in the instant case, it stands admitted by the Revenue that no notice under Section 143(2) has been issued and served upon the assessee within 12 months from the end of the month in which the return has been filed by the assessee as provided under proviso to Section 143(2) of the Act.
12. Hence, respectfully following the ratio of decisions (supra), the block assessment framed by the AO is invalid in the eye of law and the same is accordingly quashed. Since we have decided this legal issue in favour of the assessee and against the Revenue, we do not consider it necessary to decide the remaining grounds, as raised by the assessee, on merits. The order of CIT(A) is set aside.