Case Note & Summary
The case involves an appeal by the Commissioner of Income Tax against the judgment of the Madhya Pradesh High Court which upheld the Income Tax Appellate Tribunal's order quashing the assessment proceedings against the respondent-assessee, Laxman Das Khandelwal. The assessee, an individual carrying on brokerage business, was subjected to a search and seizure operation under Section 132 of the Income Tax Act, 1961 on 11.03.2010. He filed a return of income on 24.08.2011 declaring total income of Rs.9,35,130/-. The Assessing Officer completed the assessment under Section 143(3) read with Section 153D, making various additions including unexplained cash, jewellery, hundies, and cash receipts. On appeal, the Commissioner of Income Tax (Appeals) partially deleted some additions. The Revenue appealed, and the assessee filed a cross-objection challenging the jurisdiction of the Assessing Officer on the ground of non-issuance of notice under Section 143(2). The Tribunal upheld the cross-objection and quashed the entire reassessment proceedings, holding that the assessment was vitiated due to lack of notice under Section 143(2). The High Court affirmed this decision. The Revenue appealed to the Supreme Court, arguing that the assessee had participated in the proceedings and that Section 292BB of the Act cured any defect in service of notice. The Supreme Court examined the decision in ACIT v. Hotel Blue Moon, which held that notice under Section 143(2) is mandatory for assessment under Section 143(3). The Court then analyzed Section 292BB, which deems notice valid if the assessee has appeared or cooperated, but only cures infirmities in service, not complete absence of notice. Since the facts clearly showed that no notice under Section 143(2) was ever issued by the Department, the Court held that Section 292BB could not save the proceedings. The Supreme Court dismissed the appeals, affirming the High Court's decision that the assessment was invalid due to non-issuance of mandatory notice.
Headnote
A) Income Tax - Mandatory Notice under Section 143(2) - Section 143(3) Assessment - The issue was whether issuance of notice under Section 143(2) is mandatory for making assessment under Section 143(3) of the Income Tax Act, 1961. The Supreme Court in ACIT v. Hotel Blue Moon held that such notice is mandatory and non-issuance is not a curable defect. (Paras 5-6) B) Income Tax - Section 292BB - Scope - Deemed Validity of Notice - Section 292BB of the Income Tax Act, 1961 provides that if an assessee has appeared or cooperated, any notice required to be served shall be deemed valid. However, the Supreme Court held that Section 292BB does not cure complete absence of notice; it only cures infirmities in service. Since no notice under Section 143(2) was issued, the assessment was invalid. (Paras 6-10) C) Income Tax - Search Assessment - Notice under Section 143(2) - The assessee was subjected to search under Section 132. The Assessing Officer completed assessment under Section 143(3) read with Section 153D without issuing notice under Section 143(2). The Tribunal and High Court quashed the assessment. The Supreme Court upheld, holding that absence of notice vitiates the proceedings. (Paras 3-4, 10)
Issue of Consideration
Whether the absence of notice under Section 143(2) of the Income Tax Act, 1961 renders the assessment proceedings invalid, and whether Section 292BB cures such defect when the assessee participated in the proceedings.
Final Decision
The Supreme Court dismissed the appeals, affirming the High Court's judgment that the assessment proceedings were invalid due to non-issuance of notice under Section 143(2) of the Income Tax Act, 1961. No costs.
Law Points
- Notice under Section 143(2) of the Income Tax Act
- 1961 is mandatory for assessment under Section 143(3)
- Section 292BB does not cure complete absence of notice
- participation in proceedings does not validate proceedings if no notice was issued
