RUPEE SOREN L/H OF SHIBU SOREN,NEW DELHI vs. ACIT CENTRAL CIRCLE 6, NEW DELHI

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ITSSA 100/DEL/1997Status: DisposedITAT Delhi21 August 202610 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment framed under Section 158BC of the Act is bad in law and therefore quashed. The core of the decision rests on the admitted fact that no notice under Section 143(2) of the Act was issued after the assessee filed its block return for the period April 1, 1986, to April 26, 1996, on March 20, 1997. The Tribunal referred to the Supreme Court's decision in CIT vs. Laxman Das Khandelwal, which clarified that Section 292BB of the Act, dealing with deemed valid notices, cures infirmities in the service of notice but does not cure the complete absence of a notice. Since no notice under Section 143(2) was ever issued by the department, the Tribunal found no reason to differ from the High Court and Tribunal's conclusions in that case. The Tribunal emphasized that while a notice under Section 143(2) was issued on February 11, 1997, this was prior to the filing of the block return, and the crucial requirement was a notice issued *after* the filing of the return. Consequently, the assessment framed in the absence of this post-return notice is void. As the assessment is quashed, all other pleadings have become academic.

What were the facts?

The assessee, Shibu Soren, is appealing an order dated April 29, 1997, passed by the ACIT, CC-6, New Delhi, under Section 158BC of the Income Tax Act, 1961, for the block period April 1, 1986, to April 26, 1996. A search and seizure operation on April 26, 1996, led to the transfer of jurisdiction. A notice under Section 158BC was issued on January 7, 1997. The assessee, having faced a CBI search, requested more time to file the return. Notices under Sections 142(1) and 143(2) were issued on February 11, 1997. The assessee filed the block return on March 20, 1997. The Assessing Officer then issued show cause notices and framed the block assessment order, assessing income at Rs. 1,16,38,824/-. The appeal is directly before the Tribunal as per the scheme for block assessments.

What were the issues?

1. Whether the block assessment framed under Section 158BC is without jurisdiction due to the absence of a notice under Section 143(2) of the Act after the filing of the block return? (Question of law) Assessee's Contention: The assessee argued that a notice under Section 143(2) is mandatory after the filing of the block return for framing a valid assessment. They relied on the Supreme Court decisions in ACIT vs. Hotel Blue Moon (321 ITR 362) and CIT vs. Laxman Das Khandelwal (417 ITR 325). The absence of such a notice renders the assessment null and void. Revenue's Contention: The revenue contended that a notice under Section 143(2) was issued along with a questionnaire under Section 142(1) on February 11, 1997, which was before the delayed return was filed. They argued that even if there was a procedural irregularity, the assessee's full participation in the assessment proceedings made it curable under Section 292B of the Act. They also referred to a Delhi High Court order in the assessee's own case, stating that Section 158BB(1) was attracted due to the non-filing of regular returns, making the block assessment valid. They further argued that the Assessing Officer granted multiple opportunities, and any violation of natural justice was due to the assessee's failure to avail them, citing State Bank of Patiala vs. S.K. Sharma.

Which sections of the Income-tax Act were involved?

Section 158BC,Section 143(2),Section 142(1),Section 144,Section 139(1),Section 158BB(1),Section 292B,Section 165,Section 142,Section 143,Section 158BH,Section 139

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’’ : NEW DELHI

For Appellant: Shri Salil Agarwal, Sr. Adv., Shri Shailesh Gupta, Shri Uma Shankar, Adv, & Shri Madhur, Adv. (VC)
For Respondent: Shri K. Hauthang, CIT(DR)
Hearing: 17.08.2026Pronounced: 21.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘F’’ : NEW DELHI)

BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SHRI SANJAY AWASTHI, HON’BLE ACCOUNTANT MEMBER IT(SS) A No. 100/Del/1997 Block Period : 1.04.1986 to 26.04.1996 Shibu Soren through VS. ACIT, CC-6, NEW DELHI Rupee Soren Legal Heir Of Shibu Soren) Vill-Nemra PO Barlanga PS Barlanga Jharkhand-829110 (PAN: ASNPS4286P) (Appellant) (Respondent) Appellant by : Shri Salil Agarwal, Sr. Adv., Shri Shailesh Gupta, CA, Shri Uma Shankar, Adv, & Shri Madhur Agarwal, Adv. (VC) Respondent by : Shri K. Hauthang, CIT(DR) Date of Hearing 17.08.2026 Date of Pronouncement 21.08.2026 ORDER PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the Assessee is arising out of the block assessment order framed by the ACIT, CC-6, Delhi for the block period 1.4.1986 to 26.4.1996 u/s. 158BC of the Income Tax Act, 1961 (hereinafter referred as Act) vide his order dated 29.4.1997. 2. The first issue in this appeal of the assessee is as regards to assumption of jurisdiction for farming of assessment u/s. 158BC without issuing notice u/s. 143(2) of the Act after filing of return of income for the block period in terms of

notice u/s. 158BC of the Act. For this assessee has raised the Ground No. 2 vide concise grounds of appeal, which reads as under:- “2. That the impugned assessment farmed by the learned Assistant Commissioner of Income Tax, Central Circle-6, is without jurisdiction as no notice u/s. 143(2) of the Income Tax Act, was issued and served after assessee had filed its return of undisclosed income in pursuance to notice issued u/s. 158BC of the Act.”

The aforesaid concise ground no. 2 of appeal is mentioned in Assessee’s Paper Book-I at Page No. 40. 3. The brief facts of the case are that a search and seizure operation u/s. 132 of the Act was conducted on 26.4.1996 at Punjab National Bank, Nauroji Nagar, New Delhi in respect of FDR No. 195/Spl FDR 2000 & FDR No. 194 and SB A/c No. 18914 & 19100 held by the assessee individually or jointly. Consequently, jurisdiction of the assessee was transferred to ACIT, CC-6, New Delhi under CIT, Delhi Central-I Charge w.e.f. 04.12.1996 vide order u/s. 127 of the Act dated 2.12.1996. Accordingly, notice u/s. 158BC of the Act dated 7.1.1997 was issued and served on the assessee on 8.1.1997 asking the assessee to file return of income in Form No. 2B for the block period 1.4.1986 to 26.4.1996. The assessee submitted a letter dated 24.1.1997 submitting that the entire documents have been seized by the CBI during search on 7.9.1996 and 8.9.1996 and stated that since he is yet to obtain the copy of documents from CBI and he is not in a position to furnish the return of income as requested. The Assessing Officer i.e. ACIT, CC-6, New Delhi issued notices u/s. 142(1) and 143(2) of the Act dated 11.2.1997 and served on the assessee on 12.2.1997 requiring the assessee to furnish information on various orders mentioned in the notices. The assessee after obtaining the details and documents from CBI prepared the return of income and return of income in Form 12B for the block period 1.4.1986 to 2.12.1996 was filed on 20.3.1997. Thereafter

the Assessing Officer started the assessment proceedings by issuing show cause notice on 2.4.1997. Thereafter, another show cause notice dated 3.4.1997 was issued asking the assessee as to why assessment be not framed u/s. 144 of the Act. The Assessing Officer finally framed assessment u/s. 158BC of the Act dated 29.4.1997 by assessing the income for the block period at Rs. 1,16,38,824/-. 3.1 Aggrieved, assessee preferred before the Tribunal (this is the scheme of search assessment started in 1995 where block assessment orders passed by the Assessing Officer are directly challenged before the Tribunal). 4. The assessee before the Tribunal first time raised elaborate grounds running into 14 pages containing 79 grounds of appeal. The assessee also raised jurisdictional vide ground no. 6 which read as under:- “6. That the initiation of proceedings under Chapter XIV-B and completion thereof vide order dated 29.4.1997, are without satisfying the mandatory requirement of the aforesaid chapter and without fulfilling the pre-conditions for initiation and making of the order of assessment and is bad on facts and thus unsustainable in law.”

5.

The assessee revised its ground which are enclosed in Assessee’s Paper Book-I and the relevant ground no. 2 has already been reproduced above, which involves jurisdictional issue that no block period can be framed in the absence of notice u/s. 143(2) of the Act. 6. Now before us, Ld. Counsel for the assessee reiterated the above facts and argued that only one notice u/s. 143(2) of the Act dated 11.2.1997 which was received by the assessee on 12.2.1997 was issued and served on the assessee before filing of return of income. The assessee filed its block assessment return for the block period 1.4.1986 to 26.4.1996 on 20.3.1997. The Assessing Officer issued notice u/s. 158 BC of the Act requiring the assessee to file its block return dated 7.1.1997. Since the documents were seized by the CBI during search on 7.9.1996

and 8.9.1996, assessee was not having complete documents relating to the assessee’s income for the block period and hence, he was not in position to furnish the return of income for the period within the time allowed i.e. 16 days. The assessee after obtaining the documents from the CBI as well as Income Tax Department on 14.3.1997. Consequently, assessee filed block return on 20.3.1997. Ld. Counsel for the assessee now stated that for framing of block assessment, the mandatory condition is to issue notice u/s. 143(2) of the Act. Ld. Counsel for the assessee relied on the decision of the Hon’ble Supreme Court in the case of ACIT vs. Hotel Blue Moon 321 ITR 362 (SC) by referring para 15 of the said decision and also relied upon the decision of the Hon’ble Apex Court in the case of CIT vs. Laxman Das Khandelwal 417 ITR 325. 6.1 In view of above, ld. Counsel for the assessee stated that once there is no notice u/s. 143(2), after filing of block return the assessment framed is without jurisdiction and is null and void. 7. On the other hand, Ld. CIT(DR) has submitted that as per records, it reveals that Assessing Officer issued notice u/s. 143(2) alongwith a detailed questionnaire under section 142(1) on 11.2.1997, well in advance of the delayed return filed by the assessee on 20.3.1997. Even assuming any procedural irregularity regarding the sequence of time, the assessee fully participated in the assessment proceedings, rendering any such technicality curable under section 292B of the Act. Assessing Officer issued show cause notice u/s. 144 on 3.4.1997, further ensuring that no substantive prejudice was caused to the assessee. It was informed that Hon’ble Delhi High Court in its remand order in the present case has already held that since the individual assessees had not filed their regular returns under section 139(1), the provisions of Section 158BB(1) were squarely attracted, rendering the block assessment proceedings completely valid. As regards violation of natural justice is concerned, it was submitted that Assessing Officer granted multiple opportunities,

but assessee failed to avail. In this regard, he relied upon the decision of the Hon’ble Supreme Court in the case of State Bank of Patiala and others vs. S.K. Sharma. The next argument by the CIT(DR) is that the Hon’ble Delhi High Court in assessee’s own case has considered the consequences of not filing return of income u/s. 139(1) of the Act and made observations whether the regular assessment was actually made or not is not uniformly correct and would depend upon the facts whether the due date of filing of return u/s. 139(1) of the Act has expired, but no return of income has been filed. But the Hon’ble Delhi High Court has given this finding in the context of the factual matrix of the case whether the income the regular assessment represents undisclosed income or not. 8. We have heard the rival contentions and gone through the facts and circumstance of the case and the precedents relied during the course of hearing. Admittedly, no notice u/s. 143(2) of the Act was issued after assessee filed his return of income in Form No. 2B for the block period 1.4.1986 to 26.4.1996 on 20.3.1997. It is a fact that original notice u/s. 143(2) of the Act was issued much prior to filing of block return by the assessee on 11.2.1997. 9. First of all, we deal with the arguments made by the CIT(DR) that Hon’ble Delhi High Court in assessee’s own case while remanding the matter has already held that since the individual assessee has not filed his regular return u./s 139(1) of the Act, the provision of section 158BB(1) were squarely attracted rendering the block period assessment proceedings completely valid. Here CIT(DR) is under misconception because Hon’ble Delhi High Court has dealt with the issue whether the regular income can be the part of the block assessment as undisclosed and Hon’ble Delhi High Court has made a reference that, in the given case, depending upon the factual matrix it could represent undisclosed income and further nature and source of money on how it was earned, explanation offered etc. would also take a considerable difference whether the same is to be assessed as income or

not. Hon’ble Delhi High Court has never adjudicated the issue of assumption of jurisdiction by the Assessing Officer u/s. 143(2) of the Act for framing the block assessment u/s. 158BC of the Act. This issue is not more res integra and settled by the Hon’ble Supreme Court of India in the case of ACIT vs. Hotel Blue Moon (Supra) wherein, the Hon’ble Court held that where Assessing Officer, for any reason, repudiates filed return in response to notice u/s. 158BC(a) he must necessarily issue notice u/s. 143(2) of the Act within the due date prescribed in proviso to section 143(2) of the Act. This has been answered by the Hon’ble Supreme Court from para 15 to 17 as under:-

“15) 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 Section 144. 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 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. 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 6

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 exclude. 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. 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 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. 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 "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."

16) 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. 17) Section 158 BH provides for application of the other provisions of the Act. It reads : "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.” 10. Further, the Hon’ble Supreme Court in the case of CIT vs. Laxman Das Khandelwal (Supra) has held as under:-

6.

The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:- “292BB. Notice deemed to be valid in certain circumstances. – Where an assessee has appeared in any proceeding or cooperated 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.”

7.

A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections 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. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer. On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid. 8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Blue Moon’s case2. The issue that however needs to be considered is the impact of Section 292BB of the Act. 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. 10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, the findings recorded by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.”

11.

In terms of above and in view of the admitted position that no notice u/s. 143(2) was issued after filing of block return for the block period 1.4.1986 to 26.4.1996, the assessment in the absence of the same cannot be framed. Hence, assessment framed u/s 158BC in the absence of notice u/s. 143(2) is bad in law and thus the same is quashed. Since we have quashed the assessment, as aforesaid, the other pleadings have become academic. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 21.08.2026.

Sd/- Sd/-

(SANJAY AWASTHI) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT SRBhatnagar Date: 21-08-2026 Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT Assistant Registrar, ITAT, Delhi Bench

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