LexASSISTANT COMMISSIONER OF INCOME TAX AND ANR. versus M/S. HOTEL BLUE MOON
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A B [201 OJ 2 S.C.R. 282 ASSISTANT COMMISSIONER OF INCOME TAX AND ANR. v. M/S. HOTEL BLUE MOON (Civil Appeal No. 1198 of 2010 ) FEBRUARY 2, 2010 [S.H. KAPADIA AND H.L. DATTU, JJ.] Income Tax Act, 1961: s.143(2) - Issuance of notice on C assessee under s. 143(2) for block assessment proceedings - Requirement of - Held: Is mandatory. The question which arose for consideration in these appeals was whether service of notice on the assessee 0 under Section 143(2) of the Income Tax Act, 1961 within the prescribed period of time for framing the block assessment under Chapter XIV-B is mandatory for assessing the undisclosed income detected during search conducted under Section 132 of the Act. E Dismissing the appeals, the Court HELD: 1.1. Chapter XIV-B of the Income Tax Act, 19'61 provides for an assessment of the undisclosed income unearthed as a result of search without affecting F the regular assessment made or to be made. Search is the sine qua non for the Block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling G in the block period. The special procedure of Chapter XIV-B is not intended to be substitute for regular assessment. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence H 282 ASSISTANT COMMISSIONER OF INCOME TAX AND 283 ANR. v. MIS. HOTEL BLUE MOON found as a result of search or requisition of books of A accounts or documents and such other materials or information as are available with the assessing officer. Therefore, the income assessable in Block assessment under Chapter XIV-B is the income not disclosed but found and determined as the result of search under B Section 132 or requisition under Section 132A of the Act. [Para 12] (292-B-E] 1.2. Section 158 BC stipulates that the Chapter XIV- B would have application where search has been effected under Section 132 or on requisition of books of C accounts, other documents or assets under Section 132A. By making the notice issued under this Section mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the Section is required to be served on the person who is found to be having D undisclosed income. The Section itself prescribes the time limit of 15 d·ays for compliance. In respect of searches on or after 1.1.1997, the time limit may be given up to 45 days instead of 15 days for compliance. Such notice is prescribed under Rule 12(1A). Section 158 BC(b) E is a procedural provision for making a regular assessment applicable to Block assessment as well. ·Section 158 BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the F Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply." An analysis of· this sub section indicates that, after the return is filed, this clause enables G the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). H 284 SUPREME COURT REPORTS [2010] 2 S.C.R. A The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. B Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to c the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158- BC, notice under Section 143(2) should be issued within 0 one year from the date of filing of block return. Omission on the part of
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