SHRI RAI SINGH SIHAG,JAIPUR vs. INCOME TAX OFFICER, WARD-3-1, JAIPUR

ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of the ld. CIT(A)-1, Jaipur dated 13/07/2017 for the A.Y. 2007-08. Following grounds have been taken by the assessee:

2 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO Ganga Saran & Sons (P) Ltd. Vs. ITO 130 ITR 1 (SC) Bir Bahadur Gingh Sijwali Vs. De1/11 Amrik Singh Vs. ITO ward-1, Kapurthala, ITA No. 630(Asr)/2015.

3 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO That the learned Pr. CIT has grossly erred both in law and facts in granting approval u/ s 151 mechanically and without application of mind and there for sanction is not according to mandate of SC.

6. Explanation & Evidence not Appreciated :- That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in not appreciating explanation in respect of nature and source of bank deposit where the assessee has received gift from Grandfather Khayali Ram rejection of gift is based on no evidence. Interest levied u/s 234A, 234B and 234C That on the facts and in the circumstances of the case Ld. AO has grossly erred in law and facts in by confirming in charging interest u/s, 234(A), 234(B) & 234(C). That the appellant reserves his right to add, amend or alter the ground of appeal

on or before the date of appeal hearing.”

2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

4 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO 3. The brief facts of the case are that the proceedings U/s 147 of the Income Tax Act, 1961 (in short, the Act) were initiated for the year under consideration. Accordingly, after issuing statutory notices U/s 148 of the Act and after seeking reply of the assessee, addition U/s 68 of the Act of Rs. 10,53,700/- lacs were made on account of the fact that the amount of Rs. 10,53,700/- lacs were deposited in the bank account and the assessee had filed to explain the source of cash deposits.

4. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A) and the ld. CIT(A) after appreciating the entire facts and circumstances and considering the case of both the parties, dismissed the appeal.

6. All the grounds raised by the assessee are interrelated and interconnected and the assessee is basically aggrieved for initiating and confirming of reassessment proceedings initiated U/s 147 of the Act without issuance of notice U/s 143(2) of the Act. The same ground is raised in ground No. 2 of the appeal

5 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO and this is the legal ground. In this regard, the ld. AR has stated at bar that reassessment proceedings has been initiated without issuance of mandatory notices and the ld. CIT(A) has erred in law and facts in upholding assessment U/s 147 of the Act without issuing notice U/s 143(2) of the Act. Thus, the action of the A.O. is illegal, arbitrary and against the facts of the present case. In this regard, the ld AR has relied on the following decisions: (i) ACIT Vs Hotel Blue Moon 188 Taxman 113 (SC) (ii) Taxancore Diagnostice (P) Lt. Vs ACIT 390 ITR 167 (Kerala) (SC) 7. Whereas on the contrary, the ld. DR has vehemently supported the orders of the lower authorities.

6 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO “On perusal of the assessment records it is found that there was no notice u/s 143(2) was issued and also the same was not served upon the assessee. The assessment in this case was completed u/s 143(3)/147 of the I.T. Act, 1961 on 22/10/2014 at an income of Rs. 10,53,700/- by making addition of Rs. 10,53,700/-.” In this report, it has categorically been admitted by the ld. DR that on perusal of the assessment record, it was found that there was no notice U/s 143(2) was issued or served upon the assessee and thus the assessment was completed U/s 143(3)/147 of the Act on 22/10/2014 without issuance or service of notice U/s 143(2) of the Act. In this regard, we draw strength from the decision of this Bench in the case of Shri Ramakant Sharma Vs ITO in order dated 07/12/2020 and the findings of the Bench is reproduced below:

“11. We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. From perusal of the record, we noticed that the assessee had specifically raise this ground before the ld. CIT(A) and drawn attention to the fact that issuance of notice U/s 143(2) of the Act is a mandatory requirement. However, the ld. CIT(A) had rejected the said ground raised by the assessee by holding that the notice U/s 148 of the Act was issued by the A.O. to the assessee on 14/05/2012. The assessee was required to file his return of income within 30 days from the date of service of such 7 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO notice. The said notice was served upon the assessee on 07/08/2013 but the assessee had not filed any return of income within 30 days from the date of service of the said notice. As per ld. CIT(A), the A.O. had issued notice U/s 142(1) of the Act dated 25/11/2014 alongwith a detailed questionnaire wherein the details relating to property sold by the assesssee to Smt. Sharda Devi Khandelwal on 29/06/2006 were also sought. As per the records, on 23/01/2015, the assessee filed return of income declaring income at Rs. 75,690/- stating the same to be filed in response to notice dated 14/05/2013 issued U/s 148 of the Act. The ld. CIT(A) by referring to the facts of the case have concluded that since the notice U/s 148 of the Act was served upon the assessee on 07/08/2013 and the return in response to the said notice was required to be furnished within 30 days from the date of receipt of notice i.e. 7/08/2013. However, in the instant case, the return was furnished only on 23/01/2015 which was beyond statutory period of 30 days, therefore, it was considered as “non est” return and no cognizance was taken to the same. According to the ld. CIT(A), the purpose of issuance of notice U/s 143(2) of the Act was to provide an opportunity to the assessee to substantiate its return of income. Since the A.O. had already required the details U/s 142(1) of the Act and had issued show cause notice U/s 144 of the Act prior to filing of the alleged non est return of income on 23/01/2015, therefore, no prejudice was caused to the assessee by non issuance of notice U/s 143(2) of the Act.

8 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO Rajasthan High Court had concluded that issuance and service of notice U/s 143(2) of the Act was a mandatory requirement and was not a procedural requirement and completion of assessment without issuance of notice U/s 143(2) is fatal to the assessment. It has further been held by the Hon’ble High court that in case, any assessment is done without following the mandatory requirement U/s 143(2) then in that eventuality, it renders all the subsequent proceedings as invalid. We have gone through the above decision in detail and found that in the above judgment, specific substantial questions of law were framed which are as under: “Whether on the facts and in circumstances of the case the ITAT was right in quashing the reassessment proceeding u/s 147/144 {mistakenly mentioned 143(3)} for the reason of non issuance of notice u/s 143(2) wherein the assessee filed her return of income on 22/04/2014 which is 10 months 17 days beyond 05/7/2013 i.e. after expiry of 30 days’ time for service of notice on 6.6.2013 stipulated in the notice issued u/s 148?” On which a detailed finding has been recorded by the Hon’ble Jurisdictional High Court on the ground of issuance of notice U/s 143(2) as a mandatory requirement and therefore, concluded that completion of assessment without issuance of notice U/s 143(2) is fatal to assessment. Operative portion of the Hon’ble High court’s decision are reproduced below: "During the assessment proceedings in this case for the assessment year under consideration, the assessee or her authorized representative did not oppose that the notice u/s 143(2) of the income Tax Act, 1961 was not issued after filing return of income in response to the notice u/s 148 of the Income Tax Act, 1961. Therefore, under the provisions of Income Tax Act, 1961, the notice u/s 148 can't be issued......... Ld. CIT(A) confirmed the validity of assessment order so passed without issue of notice u/s 143(2) by observing that assessee had attended the hearing on several occasions and no objection was raised during the proceedings before the ld. AO, thus non issuance of notice u/s 143(2) of the Act would not make assessment order invalid. Ld. CIT(A) further held

9 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO that such mistake of ld. AO of non issue of notice u/s 143(2) is curable u/s 292BB of the Act. At this juncture, provisions of section 292BB of the Act are reproduced herewith for the sake of convenience: 292BB. Where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a ) not served upon him; or (b ) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.] In this regard, it is submitted that section 292BB provides that a notice shall be deemed to be served in a situation that assessee has cooperated/ attended / participated in assessment/ re assessment proceedings and no objection regarding non receipt of notice was filed during assessment stage. It is worth noticing here that section nowhere provides that "a notice required to be issued, shall be (6 of 13) [ITA-197/2018] deemed to be issued". Thus, it is evident that deeming provisions of section 292BB are with respect to notices issued but not served/ not served in time / not served in proper manner. It does not cure the defect so far as notice has not been issued at all. In this regard, it is further submitted that there are catena of judicial pronouncements, which hold that Omission to issue notice u/s 143(2), is not a procedural irregularity and the same is not curable. Further, ld. AO in the remand report dated 12/02/2016 (APB 15-18) has stated that return of income has been filed belatedly thus he not required to issue such notice mandatorily. Your honours would appreciate that it has nowhere been provided in the Act that AO shall be absolved with the requirement of issuing notice u/s 143(2) in the event of late filing of return. In fact, proviso to section 148 provides that notice u/s 143(2) can be issued at any time before completion of assessment. Thus, so far as return of income has 10 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO been filed, AO ought to have issued notice u/s 143(2), which has not been done in the instant case. In this regard, reliance is placed on: Assistant Commissioner of Income Tax v. Hotel Blue Moon 321 ITR 362 (SC) (Case laws Paper book pages 93-99) Search and Seizure -- Undisclosed Income Detected - Block Assessment -- Issue of Notice u/s 143(2) within prescribed time – Mandatory - Income Tax Act, 1961, ss. 132, 143(2), 158BA, 158BC, 158BH - CBDT Circular No. 717 Dated 14.08.1995.

Though in the above case, assessment was completed by ld.AO u/s 153A, without issuing notice u/s 143(2), the same is applicable to assessments completed under Act, irrespective of the fact under which section assessment is to be completed as legislature has provided for issuance of such notice before completion of assessment under whatever section it may be. CIT v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All) "10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from April 1, 2008. Section 292BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be (7 of 13) [ITA-197/2018] served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time ; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to section 292BB of the Act, however, carves out an exception to the effect that the section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdiction itself would be invalid.

11 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO In the same decision in CIT v. Salarpur Cold Storage (P.) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Asst. CIT v. Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under section 143(2) was mandatory. It was not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with". [2017] 390 ITR 167 (Ker) Travancore Diagnostics (P) Ltd. Vs. ACIT (Case laws Paper book pages 58-61) Reassessment- Notice- Validity- Reassessment can be made within time for regular assessment- Reassessment under section 147 read with section 143(3)- Condition precedent- Notice u/s 143(2) Omission to issue notice under section 143(2)- Deject not curable - Section 292BB not applicable- Reassessment not valid- Income Tax Act, 1961, ss. 143,147,292BB 336 ITR 678 - CIT V/s Rajeev Sharma (Allahabad) (Case laws Paper book pages 62-68) Reassessment - Procedure - Return in response to Notice u/s 148 - Assessing Officer (8 of 13) [ITA-197/2018] must apply his mind and issue Notice u/s 143(2) - Procedure must be followed strictly -- Income Tax Act, 1961, ss. 143, 148. It is further submitted that even if the return of income was filed after the issue of notice u/s 142(1), the Hon'ble Delhi court in the case of PCIT-08 vs. Shri Jai Shiv Shankar traders Pvt. Ltd. reported in 383 ITR 448 - (Delhi) (Case laws Paper book pages 29-31) has held that the issue of notice u/s 143(2) is not a procedural requirement and is mandatory and completion of assessment without issue of notice u/s 143(2) is fatal to the assessment. The Hon’ble Jurisdictional High Court had further held that issuance and service of notice U/s 143(2) of the Act is so mandatory in a reopen procedure for assessment proceedings. The operative portion of the Hon’ble High Court’s decision is reproduced below: “In this case, notice u/s 148 was issued on 30.03.2010, in response to which no return of income was filed. On 01.10.2010, Ld.AO issued notice u/s 143(2), which was duly served. Subsequently notices u/s 142(1) were also issued on certain occasions. Authorized representative of assessee, on 16.12.2010 presented and stated that return of income filed u/s 139 may be treated as furnished in response to notice u/s 148. Assessment was completed vide order dated 31.12.2010, in that situation also, the Hon'ble Court held that AO ought to have issued notice after 16.12.2010, in absence of which assessment was held invalid. In our case also, the return 12 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO was filed after the issue of notice u/s 142(1), thus is squarely covered by the decision of Hon'ble Delhi high court, as stated above. Further reliance is placed on the following: 323 ITR 249 - DIT V/s Society for Worldwide Inter Bank Financial Telecommunications (Delhi) (Case laws Paper book pages 49-50) Assessment - Enquiry - Notice - Only upon Examination of Return - Notice u/s 143(2) served upon assessee before filing of Return - Not valid - Assessment completed on basis of Notice invalid - Income Tax Act, 1961, s. 143(2) 90 DTR 289 - Saptha Giri Finance & Investments V/s ITO (Madras)

Reassessment -- Validity - Absence of notice u/s 143(2) - In completing the assessment u/s 148, compliance of the procedure laid down under ss. 142 and 143(2) is mandatory- Once the admitted fact that beyond notice u/s 142(1), there was no notice issued u/s 143(2) and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to s. 148, there was total failure on the part of the Revenue from complying with the procedure (9 of 13) [ITA-197/2018] laid down u/s 143(2) which is mandatory -- In the absence of notice u/s 143(2), reassessment could not be held to be validly made. The facts of that case were that a notice under section 148 of the Act was issued to the assessee seeking to reopen the assessment for the assessment year 2000-01. However, the assessee did not file a return and therefore a notice was issued to it under section 142(1) of the Act. Pursuant thereto, the assessee appeared before the Assessing Officer and stated that the original return filed should be treated as a return filed in response to the notice under section 148 of the Act. The High Court observed that if thereafter, the Assessing Officer found that there were problems with the return which required explanation by the assessee then the Assessing Officer ought to have followed up with a notice under section 143(2) of the Act. It was observed that: "Merely because the matter was discussed with the assessee and the signature is affixed, it does not mean the rest of the procedure of notice under section 143(3) of the Act was complied with or that on placing the objection the assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued under section 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued under section 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the Assessing Officer has the duty of issuing the notice under section 143(3) to 13 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO lead on to the passing of the assessment. In the circumstances, with no notice issued under section 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued under section 143(2) of the Act." Recently Jaipur bench of ITAT in the case of Cameron (Singapore) Pte Ltd Vs. ADIT in vide orders dt. 27/7/2017 held that where notice u/s 143(2) is not served upon the assessee within the stipulated time period, the consequent order passed cannot be sustained. In that case though the notice u/s 143(2) was issued but the same was not served upon the assessee within the (10 of 13) [ITA-197/2018] stipulated time period however, in our case the notice u/s 143(2) was never served upon the assessee. The Hon'ble ITAT Delhi bench in the case of DR. S.B. KALIDHAR Vs. ITO in ITA No. 1082/Del/2016 dated 27.11.2017 has given a finding in favour of the assessee, by placing reliance on the decision of the Hon'ble ITAT, SMC-2, Delhi Bench dated 16.10.2015 passed in ITA Nos. 4171- 4175/Del/2015 ((AY 2003-04) in the case of Ms. Meenakshi Aggarwal vs. ITO & Ors(Case laws paper book pages 7-9) in which reliance was placed on the decision of the Hon'ble ITAT, 'C' Bench, Bangalore dated 10.10.2014 in the case of Shri GN Mohan Raju vs. ITO passed in ITA No. 242 & 243(Bang)2013, wherein it was held as under: "7. This brings us to the crux of the issue i.e. whether notices under section 143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified U/s 143(2) of the Act. That issue of a notice u/s 143(2) of the Act, is mandatory even in a re- assessment proceeding initiated u/s 148 of the Act has been clearly laid down by the Hon'ble Delhi High Court in the case of M/s Alpine Electronics Asia PTE Ltd., (supra). Hon'ble Delhi High Court had reached this conclusion after considering the decision of the Hon'ble Apex Court in the case of Hotel Blue Moon (supra). At para-24 of the judgment their Lordship has held that Section 143(2) was applicable to a proceedings u/s 147/148 also, since proviso to section 148 of the Act, granted certain specific liberties to the revenue, with regard to extension of time for serving such notices. No doubt, Hon'ble Madras High Court in the case of Areva T and D India Ltd., (supra) had held that issue of notice u/s 143(2) was procedural in nature. However, Co-ordinate Bench in the case of M/s Amit Software Technologies Pvt. Ltd., (supra) after considering the decision of the Hon'ble Madras High Court as well as Delhi High Court had held that Section 143(2)of the Act, was a mandatory requirement and not a procedural one.

14 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO Once notice u/s 148 of the Act, issued to the assessee required it to file a return within 30 days from the date of service of such notice. There is no provision in the Act, which would allow an AO to treat the return which was already subject to a processing u/s 143(1) of (11 of 13) [ITA- 197/2018] the IT Act, as a return filed pursuant to a notice subsequently issued u/s 148 of the Act. However, once an assessee itself declare before the AO that his earlier return could be treated as filed pursuant to notice u/s 148 of the IT Act, three results can follow. Assessing Officer can either say no, this will not be accepted, you have to file a fresh return or he can say that 30 days time period being over I will not take cognizance of your request or he has to accept the request of the assessee and treat the earlier returns as one filed pursuant to the notice u/s 148 of the IT Act. In the former two scenarios, AO has to follow the procedure set out for a best of judgment assessment and cannot make an assessment under section 143(3). On the other hand, if the AO chose to accept assessee's request, he can indeed make an assessment under section 143(3). In the case before us, assessments were completed under section 143(3) read with section 147. Or in other words AO accepted the request of the assessee. This in turn makes it obligatory to issue notice u/s 143(2) after the request by the assessee to treat his earlier return as filed in pursuance to notices u/s 148 of the IT Act was received. This request, in the given case, has been made only on 05- 10-2010. Any issue of notice prior to that date cannot be treated as a notice on a return jiled by the assessee pursuant to a notice u/s 148 of the Act. Or in other words, there was no valid issue of notice u/s 143(2) of the IT Act, and the assessments were done without following the mandatory requirement u/s 143(2) of the IT Act. This in our opinion, render the subsequent proceedings all invalid" In view of above judicial pronouncements, it is submitted that so far as assessee furnished return of income u/s 148, Ld.AO was duty bound to issue notice u/s 143(2) of the Act. And the non-issuance of notice u/s 143(2) was not a procedural error which could have been corrected in the wake of deeming provisions of sec 292BB of the Act. Thus, in the case of assessee, since no notice was issued u/s 143(2), it is prayed that assessment completed u/s 143(3)/ 147 deserves to be Quashed.

6. On the other hand, the ld DR has relied on the orders of the authorities below and pleaded that the order of the ld. CIT(A) may be sustained.

15 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO "No notice under Section 143(2) of the Act was issued to the Assessee after 16th December 2010, the date on which the Assessee informed the AO that the return originally filed should be treated as the return filed pursuant to the notice under Section 148 of the Act. (Para 12) The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2013) 90 DTR 289 (Mad). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. However, the Assessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act. Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. (Para 17) As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of "service" of notice was concerned and not with regard to failure to "issue" notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re- assessment order, cannot be condoned by referring to Section 292BB of the Act. (Para18)

The resultant position was that as far as the present case was concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, was fatal to the order of re- assessment. (Para 19) Consequently, there (13 of 13) [ITA-197/2018] was no legal infirmity in the impugned order of the ITAT. No substantial question of law arises. The appeal was dismissed." (Para 20) Thus, the facts of the assessee's case are similar to the facts of the case involved in the decision of the Hon'ble Delhi High Court wherein it has been categorically held that the issue of notice U/s 143(2) in reassessment proceedings, prior to finalizing re-assessment order, cannot be condoned by referring to Section 292BB and is fatal to the order of re- assessment. Respectfully following the same, we hereby set aside the order of the to 4 of the assessee's appeal.

8. Since we have quashed the reassessment proceedings, therefore, there is no need to to 9 of the appeal.

16 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO 5. In our considered opinion, the tribunal is bound by the decision of Delhi High Court in the case of Pr. CIT vs. Jai Shiv Shankar Traders Pvt. Ltd. reported in 383 ITR 448 (Delhi) and has rightly followed the same, which is not challenged.

17) The scheme of Block assessment has been explained by Central Board of Direct Taxes in paragraph 39.3 of Circular No.717 dated 14th August, 1995 ([1995] 215 ITR.70). We may only notice clause (e) of the circular which provides for the procedure for making Block assessment. Omitting what is not necessary for the purpose of this case, clause (e) is extracted and it reads as under :-

"39.3(e) Procedure for making block assessment: (i) The Assessing Officer shall serve a notice on such person requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section(1) of section 142 setting forth his total income including undisclosed income for the block period. The officer shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall apply accordingly." 18) Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting 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 in the block period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. 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 found as a result of search or requisition of books of 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 Section 132 or requisition under Section 132A of the Act.

18 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO 19) Section 158 BC stipulates that the Chapter would have application where search has been effected under Section 132 or on requisition of books of 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 undisclosed income. The Section itself prescribes the time limit of 15 days 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) which in turn prescribes Form 2B for block return.

20) Section 158 BC(b) is a procedural provision for making a regular assessment applicable to Block assessment as well. Section 158 BC(c) would require the assessing officer to compute the income as well as tax on completion of the proceedings to be made. Section 158 BC(d) would authorise the assessing officer to apply the assets seized in the same manner as are applied under Section 132B.

21) We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. 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 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 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). 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 Section144. 22) 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 the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an 19 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO assessment is to be completed under Section 143(3) read with Section 158- BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. 23) The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158 BC(b) specifically refers to applicability of the proviso thereto cannot be excluded. 24) We may also notice here itself that the clarification given by CBDT in its circular No.717 dated 14th August, 1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of Section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of the Act. 25) However, it is contended by Sri Shekhar, learned counsel for the department that in view of the expression "So far as may be" in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh's case [1985] 155 ITR 166(SC). In this case, the Court has observed that 20 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO “12 Section 37(2) provides that "the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible.”

26) The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression "as far as practicable" has stated "28. without anything more the expression `as far as possible' will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied."

27) The case of the revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of Section 142, sub-sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143. 28) Section 158 BH provides for application of the other provisions of the Act. It reads : "”158-BH- Application of other provisions of this Act.- Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter."

This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes Section 142 and sub-sections (2) and (3) of Section 143.

21 ITA 441/JP/2019_ Shri Rai Singh Sihag Vs ITO 29) On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court. 30) The result is that the appeals fail and are dismissed. No order as to costs.” Even the Coordinate Bench of the ITAT Jaipur Bench in the case of Cameron (Singapore) Pts Ltd. Vs ADIT in vide order dated 27/07/2017 had held that if notice U/s 143(2) of the Act is not served upon the assessee within the stipulated time period, the consequent order passed cannot be sustained. All the above mentioned judgements bring us to the crux of the matter, that issuance and service of notice U/s 143(2) of the Act is not a procedural requirement it is a mandatory one and the conclusion of the assessment without issuance of notice U/s 143(2) is fatal to the assessment. Although in the impugned order, ld. CIT(A) has mentioned that the A.O. had issued notice to the assessee dated 23/12/2014 U/s 144 of the Act. However, the said notice was U/s 142(1)/144 of the Act, wherein the A.O. had provided last opportunity to the assessee to appear before him. Hence, it is a case of complete absence of notice U/s 143(2) of the Act which is an uncurable defect.