M/S HOTEL BLUE MOON vs. COMMISIONER OF INCOME TAX

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ITA/41/2004HC GauhatiGAHC01015826200408 February 20071 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal held that the provisions of Section 142 and sub-sections (2) and (3) of Section 143 have mandatory application in cases where the Assessing Officer, in repudiation of a return filed in response to a notice under Section 158BC(a), proceeds to make an inquiry. The Tribunal found that defects arising in such a scenario cannot be cured at a later stage due to the limitation provided in Section 143(2). The Court noted that the question of mandatory application of notice under Section 143(3) was decided in favor of the appellant in a previous appeal (ITA No. 40/2004). Consequently, the Tribunal held that Question 1 is answered in favor of the appellant and against the revenue. In view of this decision on Question 1, the Tribunal held that Question 2 does not arise. The appeal was allowed, and the impugned orders were set aside.

What were the facts?

This Indian ITAT judgment concerns an appeal filed by the assessee against an order passed by the revenue. The assessment year(s) are not explicitly stated. The core of the dispute revolves around the issuance of a notice under Section 143(3) of the Income Tax Act, 1961, and subsequent additions made under Section 68. The procedural history indicates that the appeal was admitted to be heard on substantial questions of law. The matter arises from a block assessment following search and seizure operations.

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether the issuance of a notice under Section 143(3) of the Income Tax Act, 1961, within the prescribed time limit for making an assessment under the same section is mandatory? 2. Whether, in light of the findings of the Commissioner of Income Tax (Appeals), additions made under Section 68 of the Income Tax Act, 1961, should be deleted or set aside? The assessee, through Dr. A.K. Saraf, argued that for Question 1, a similar issue was decided by the same Court in ITA No. 40/2004, holding that Sections 142 and 143(2) and (3) have mandatory application when the Assessing Officer makes an inquiry in repudiation of a return filed in response to a notice under Section 158BC(a). The assessee contended that defects cannot be cured due to the limitation in Section 143(2). The assessee clarified that this applies to block assessments, not individual assessments, and the present case pertains to a block assessment. For Question 2, the assessee argued that it does not arise if Question 1 is answered in their favor. The revenue, through Mr. U. Bhuyan, did not record any specific arguments for either question.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 142,Section 143(2),Section 158BC(a),Section 68

AI-generated summary — verify with the full judgment below

ITA 41/2004 BEFORE HON’BLE MR JUSTICE P.G.AGARWAL HON’BLE JUSTICE MRS. A HAZARIKA Heard Dr.A.K.Saraf, learned Senior Counsel for the appellant and Mr. U.B huyan, learned counsel appearing for the Respondent Revenue. The pressent appeal was admitted to be heard on the following substantia l question of law:- \(1) Whether on the facts and in circumstances of the case the issuan ce of notice u/s 143(3) of the Income Tax Act, 1961 within the prescribed time l imit for the purpose of making the asessment under Section 143(3) of the Income Tax Act, 1961 is mandatory ? and (2) Whether, on the facts and in the circumstances of the case and i n view of the undisputed findings arrived at by the Commissioner of Income Tax ( Appeals), the additions made u/s 68 of the Income Tax Act, 1961 should be delete d or set aside?\ Dr. Saraf has submitted that so far the question No.1 is concerned, it c ame up for consideration before this Court in ITA No.40/2004 and this Court vide order dated 09.01.2007 held that the provisions of Section 142 and sub-section (2) and (3) of Section 143 will have mandatory application in a case where the Assessing Officer in repudiation of the return filed in response to a notice iss ued under Section 158BC(a) proceeds to make an inquiry. The defects crept in can not be cured at this stage in view of the limitation provided in Section 143(2). It may be mentioned here that in the appeal, the question was recasted b y the court. Dr. Saraf has further submitted that limitation will apply in case of Block Assessment only and so far individual assessment is concerned there is no dispute in the matter, and it is not the subject matter in this case. In the present case, the qeustion is regarding Block Assessment arising out of certain search and seizure. The question is, therefore, answered in favour of the appell ant and against the revenue. It is submitted that in view of the decision in Question No.1, the secon d question does not arise. We hold accordingly.

The appeal is allowed. The impugned orders passed by the authority conce rned stands set aside.

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