A.C.I.T., Circle - 36, Kolkata, Kolkata V. Ramesh Chandra Rathi, Kolkata

ITSSA 92/KOL/2008

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3683 (ITAT-KOLKATA)
• Duration Of Justice: 9 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-10-2016
• Assessment Year: misc
• Appeal Filed On: 12-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: P C NAYAK; K K KHEMKA
• Keywords: Search and seizure; Document seized; Opportunity of being heard; Non compliance; Procedural lapse; Assessment record; Block assessment; Revised return; Documents seized
• Section: 143(3); 142(1); 32; 145; 148; 132; 144; 10; 2; 15

Judgement Text

1 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM ] IT(SS)A NO.92/KOL/2008 BLOCK PERIOD 1991-92 TO 2000-01 A.C.I.T., CIRCLE-36, -VERSUS- SHRI RAMESH CHAND RATHI KOLKATA KOLKATA (PAN:AFMPR 0345 A) (APPELLANT) (RESPONDENT) C.O.NO.63/KOL/2008 (A/O IT(SS)A NO.92/KOL/2008) BLOCK PERIOD 01.04.1991 TO 24.11.1999 SHRI RAMESH CHAND RATHI -VERSUS- A.C.I.T., CIRCLE -36, KOLKATA KOLKATA (PAN:AFMPR 0345 A) (APPELLANT) (RESPONDENT) FOR THE DEPARTMENT : MD. USMAN, CIT(DR) FOR THE ASSESSEE: SHRI K.K.KHEMKA, ADVOCATE & SHRI P.C.NAYAK, AR DATE OF HEARING : 15.01.2018. DATE OF PRONOUNCEMENT : 02.02.2018. ORDER PER N.V.VASUDEVAN, JM: IT(SS)A.NO.92/KOL/2008 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 12.02.2008 OF C.I.T-(A)-XIII, KOLKATA RELATING TO BLOCK PERIOD 1991-92 TO 2000-01. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE VERY SAME ORDER. 2. THERE IS A DELAY OF 24 DAYS IN FILING THE APPEA L BY THE REVENUE. IT HAS BEEN EXPLAINED IN AN AFFIDAVIT FILED SHRI DEBASISH MAJUM DAR, ACIT, CIRCLE-6, KOLKATA THAT THE DELAY WAS DUE TO ADMINISTRATIVE AND PROCEDURAL DELAYS. WE ACCEPT THE REASONS GIVEN IN THE AFORESAID AFFIDAVIT AND CONDONE THE DE LAY IN FILING THE APPEAL BY THE REVENUE. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS THE PROPRIE TOR OF M/S DOLPHIN COURIER SERVICES. THERE WAS A SEARCH AND SEIZURE OPERATION CARRIED OUT BY THE REVENUE U/S 132 2 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 OF THE INCOME TAX ACT, 1961 (ACT) ON 24.11.1999 IN THE BUSINESS PREMISES OF THE ASSESSEE. PURSUANT TO THE SEARCH NOTICE U/S 158BC OF THE ACT WAS ISSUED CALLING UPON THE ASSESSEE TO FILE RETURN OF INCOME FOR THE BLOCK PERIOD 1991-92 TO 2000-01. THE ASSESSE DID NOT FILE RETURN IN RESPONSE TO THE NOTI CE U/S 158BC OF THE ACT. THE AO PROCEEDED TO FRAME THE ASSESSMENT U/S 144 R.W.S. 15 8BC OF THE ACT (BEST JUDGMENT OF ASSESSMENT). THE FOLLOWING WERE THE RELEVANT OBSERV ATIONS OF THE AO IN THE ORDER OF ASSESSMENT : A NOTICE U/S 158BC WAS ISSUED TO THE ASSESSEE TO F ILE RETURN FOR THE BLOCK PERIOD 1991-92 TO 2000-2001 IN THE PRESCRIBED FORM NO.2B W ITHIN STIPULATED TIME AFTER THE SERVICE OF THE NOTICE. BUT EVEN AFTER RECEIVING THE NOTICE, THE ASSESSEE DID NOT FILE ANY RETURN. THE A/R OF THE ASSESSEE REQUESTED FOR PROVIDING XEROX COPIES OF THE SEIZED BOOKS OF ACCOUNTS AND DOCUMENTS FOR FILI NG RETURN OF THE BLOCK PERIOD. ON THE REQUEST OF THE A/R XEROX COPIES OF THE BOOKS OF A/CS AND DOCUMENTS AND COPIES SEIZED DURING THE SEARCH AND SEIZURE OPERATI ON WERE SUPPLIED TO THE A/R OF THE ASSESSEE. SINCE THE ASSESSEE DID NOT FILE ANY R ETURN FOR THAT BLOCK PERIOD IN RESPONSE TO NOTICE U/S 158BC OF THE I.T.ACT, 1961, THE NOTICE WAS ISSUED FIXING THE HEARING. BUT NONE APPEARED IN SPITE OF ISSUE OF NOTICE AND NO RETURN ALSO FILED IN SPITE OF SEVERAL REMINDERS. THEREFORE IT APPEARS THAT THE ASSESSEE IS NOT IN A POSITION TO EXPLAIN THE BOOKS OF A/CS, AND DOCUMENT S SEIZED FROM HIS GUWAHATI OFFICE. THEREFORE, I HAVE NO ALTERNATIVE BUT TO PRO CEED FOR COMPLETION OF THE ASSESSMENT ON THE BASIS OF SEIZED DOCUMENTS IN THE CASE OF THE ASSESSEE. 4. THE AO THEREAFTER PROCEEDED TO DETERMINE UNDISCL OSED INCOME OF THE BLOCK PERIOD AS FOLLOWS : THEREFORE, TOTAL CONCEALED INCOME OF THE ASSESSEE IS DETECTED DURING THE BLOCK PERIOD ON THE BASIS OF SEIZED DOCUMENTS AS DISCUSSE D ABOVE ARE AS FOLLOWS : AS PER SEIZED DOCUMENT IDENTIFICATION MARK AMOUNT ADDED SD-1 (PAGE NO. 1 TO 55) RS.980797/- SD-19 (PAGE NO.1 & 2) RS. 19226/- SD-2 (PAGE 38 TO 53) RS. 58500/- SD-2 (PAGE NO.12) RS.1025930/- SD-6 (PAGE NO. 1 TO 58) RS. 304848/- SD-18 (PAGE NO. 1 TO 62) RS.165000/- SD-20 (PAGE NO. 1 TO 30) RS.642647/- SD-22 (PAGE NO. 1 TO 182) RS.56627/- SD-25 (PAGE NO. 1 TO 145) RS. 53240/- SD-28 (PAGE NO. 1 TO 115) RS.196576/- 3 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 RS.3403391/- R/O RS.3403390/- THUS, AS STATED ABOVE THE TAX ON UNDISCLOSED INCOME OF RS.3403390/- @60% ARRIVED AT RS.2042034/-. CHARGE INTEREST U/S 158BFA (1) OF THE TAX ON UNDISCLOSED INCOME WHICH COMES TO RS.439030/-. PENALTY PROCEEDI NGS U/S 158BFA(2) IS INITIATED. THIS ORDER IS PREPARED U/S 158BC/144 OF THE I.T.ACT, IN PURSUANCE OF PROVISION OF SECTION 158BG. INITIATED PENALTY PROCE EDING U/S 158BFA(2). ISSUE COPY OF ORDER DEMAND NOTICE AND CHALLAN TO THE ASSE SSEE. 5. AGGRIEVED BY THE AFORESAID ORDER OF THE AO THE A SSESSEE HAS FILED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE HAS RAISED SPECI FIC GROUNDS OF APPEAL CHALLENGING THE VALIDITY OF THE ORDER OF ASSESSMENT PASSED U/S. 144 OF THE ACT AS ILLEGAL. GROUND NOS. 1 AND 2 READ AS FOLLOWS :- 1)THE ASSESSMENT U/S 158BC/144 OF THE ACT IS ARBIT RARY, BASED ON SURMISES, VITIATED BY IRREGULARITIES AND BAD IN LAW AS WELL A S ON FACTS. 2)THE CIT(A) DID NOT COMMIT ANY NON COMPLIANCE SO AS TO ENTAIL EXPARTE ASSESSMENT AND THE SAME IS WHOLLY UNWARRANTED AND V OID AB-INITIO. 6 BEFORE CIT(A), THE ASSESSEE DREW ATTENTION OF THE CIT(A) TO THE PROVISIONS OF SEC.144 OF THE ACT, WHICH READS THUS: SECTION 144: BEST JUDGEMENT ASSESSMENT. (1) IF ANY PERSON (A) FAILS TO MAKE THE RETURN REQUIRED UNDER SUB-SECTION (1) OF SECTION 139] AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB -SECTION (4) OR SUB-SECTION (5) OF THAT SECTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR FAILS TO COMPLY WITH A DIRECTION ISS UED UNDER SUB-SECTION (2A) OF THAT SECTION], OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, THE ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT ALL RE LEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, SHALL, AFTER GI VING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT OF THE TOTAL INCOME OR LOSS TO 4 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYA BLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESSMENT: PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY THE ASSESSI NG OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SHOW CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY THE ASSESSMENT SHOU LD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT: PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORTUNITY IN A CASE WHERE A NOTICE UNDER SUB-SECTION (1) OF SECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER THIS SECTION. 7. THE CONTENTION OF THE ASSESSEE BEFORE CIT(A) WA S THAT BEFORE PROCEEDING TO FRAME ASSESSMENT U/S 144 OF THE ACT, THERE SHOULD HAVE BE EN (A) FAILURE TO FILE THE RETURN OF INCOME AS REQUIRED U/S 139(1) OF THE ACT OR (B) FAI LURE TO COMPLY WITH ALL THE TERMS OF A NOTICE U/S.142(1)OR (C) HAVING MADE A RETURN BUT FAILS TO COMPLY WITH THE TERMS OF NOTICE U/S.143(2). UNDER THE FIRST PROVISO TO SECT ION 144 OF THE ACT, BEFORE PROCEEDING TO MAKE THE BEST JUDGEMENT MENTIONED IN SECTION 144 (1), THE AO HAS TO SERVE A NOTICE CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY T HE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT. UNDER THE SE COND PROVISO, NO SUCH NOTICE IS NECESSARY TO ISSUE NOTICE U/S 142(1) OF THE ACT PRI OR TO MAKING OF AN ASSESSMENT. 8. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THA T BEFORE CIT(A) THAT NO NOTICE U/S 142(1) WAS ISSUED AND SERVED ON THE ASSESSEE A ND THEREFORE THE FIRST PROVISO U/S 144(1) OF THE ACT WOULD BE APPLICABLE. THE AO HAD T O ISSUE A SHOW CAUSE NOTICE BEFORE PROCEEDING TO FRAME A BEST JUDGMENT. THE ASSESSEE D ID NOT RECEIVE ANY SUCH NOTICE AND THEREFORE ORDER U/S 144 OF THE ACT DESERVES TO BE Q UASHED. 9. ON THE ABOVE SUBMISSION THE CIT(A) TOOK THE FOL LOWING VIEW WHICH ARE AS FOLLOWS :- . THE FIRST TWO GROUND OF APPEAL OF THE ASSESSEE IS THAT NOTICE U/S 158BD IS ILLEGAL. AS THE WARRANT IS IN THE NAME OF PROPRIETO RSHIP CONCERN OF MR R.C. RATHI A 158BC ASSESSMENT IS TO BE COMPLETED IN THE HANDS OF MR. R.C. RATHI. THE NOTICE ISSUED BY THE A.O. IS NOT CLEAR, AS THE EXAC T SYNTAX IN THE NOTICE IS 158,BC/BD. 5 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 DECISION: AS THERE IS NO CLARITY IN THE NOTICE BUT THE FACT REMAINS THAT 158BC APPEARS IN THE NOTICE, I HOLD THAT THIS NOTICE IS T O BE TAKEN AS 158BC NOTICE AND CONSEQUENT ASSESSMENT DONE BY THE A.O. REGARDING TH E BLOCK ASSESSMENT IS TO BE . TAKEN AS 158BC ASSESSMENT. B.. ONE OF THE REASON ON THE SAME ISSUE IS NO 142(1 ) NOTICE ,HAS BEEN ISSUED IN THE COURSE OF ASSESSMENT. VERIFICATION OF THE ASSESSMENT RECORDS ALSO SHOWS THAT ASSESSMENT/ORDER SHEET SHOWN NO 142(1) NOTICE HAS BEEN ISSUED. NOR ANY ACKOWLEDGMENT ABOUT SERVICE OF NOTICE U/S 142(1) WA S-PRODUCED BY A.O. BEFORE ME. NOR FOUND IN THE ASSESSMENT RECORDS PROD UCED BEFORE ME. THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE ON THIS SCORE. DECISION: HOWEVER, I STILL HOLD IT AS PROCEDURAL DE FECT ON THE PART OF THE DEPTT AND COULD NOT VITIATE THE ASSESSMENT PROCEEDING. 10. WHEN THIS APPEAL WAS TAKEN UP FOR HEARING, THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE SPECIFIC GROUNDS RAISED IN TH E CROSS OBJECTION. GROUND NO.2 IN THE CROSS OBJECTION READS AS FOLLOWS :- 2A.FOR THAT THE LD. CIT(A) ERRED IN LAW & ON FACTS IN CONFIRMING PROCEEDINGS U/S 158BC/BD. THE ENTIRE PROCEEDINGS ARE VOID ABINI TIO WRONG, ILLEGAL, TIME BARRED, BAD IN LAW & ON FACTS. 2B.. FOR THAT THE ENTIRE PROCEEDINGS IX] S 158 BC O F I. T. ACT IN BAD-IN-LAW ON FACTS FOR WANT OF , SING NATURES' OF THE ASSESSING OFFICER ON THE 'ORDER SHEET' OF THE CASE. 2C. FOR THAT THE LD. CIT(A) ERRED IN LAW & ON FACT S IN CONFIRMING ORDER U/S144 OF THE 1. T. ACT FOR WANT OF STATUTORY NOTICE U/S 1 42(1) OF THE 1. T. ACT. 2D. FOR THAT LD. CIT(A) ERRED IN LAW & ON FACTS IN IGNORING THE FACT THAT APPROVAL' OF THE 'EXPARTE' ORDER BY LD. JCIT, RANG E-6, WAS NOT PROPER & VALID APPROVAL U / S 158 OF THE I. T. ACT. 11. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AND LD. COUNSEL FOR THE ASSESSE ON THE PRELIMINARY ISSUE OF VALIDITY OF ORDER OF ASSES SMENT PASSED U/S 158BC READ WITH SECTION 144 OF THE ACT. IT IS CLEAR FROM THE ORDER OF CIT(A) THAT NOTICE U/S 142(1) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE. THE REVENUE HAS NOT CHALLENGED THIS FINDING OF THE CIT(A). NEVERTHELESS THE LD. DR DRE W OUR ATTENTION TO PAGE NO.316 OF 6 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 THE ASSESSEES PAPER BOOK WHICH IS A RECORD OF PROC EEDINGS BEFORE AO CONTAINING ORDER SHEET ENTRIES OF THE AO MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS. IN AN AFFIDAVIT FILED BEFORE THE TRIBUNAL, THE AO HAS STA TED THAT THE ORIGINAL ORDER SHEET ENTRY IS NOT AVAILABLE IN THE ASSESSMENT RECORDS. THE ORD ER SHEET ENTRY DATED 05.01.2001 READS AS FOLLOWS : 5.01.2001 NO BLOCK RETURN FILED, THE NOTICE U/S 14 2(1) CALLING FOR BOOKS OF A/CS, BANK STATEMENT AND CLARIFICATION OF SEIZED DOCUMENT S ALONG WITH COPY OF A/CS. 12. AS WE HAVE ALREADY STATED THERE IS NO EVIDENCE ON RECORD TO SHOW THAT NOTICE U/S 142(1) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE. IT IS ALSO SEEN FROM THE ORDER SHEET ENTRY THAT THE ORDER SHEET ENTRY DATED 05.01.2011 AND 16.05.2001 HAVE NOT BEEN SIGNED BY THE AO. THEREFORE THE ORDER SHEET E NTRY DATED 5.1.2001 DOES NOT SHOW THAT NOTICE U/S.142(1) WAS ISSUED OR SERVED ON THE ASSESSEE. THE REVENUE IN ITS GROUNDS OF APPEAL HAS ALSO NOT CHOSEN TO CHALLENGE THE FINDINGS OF THE CIT(A) THAT NO NOTICE U/S.142(1) WAS ISSUED OR SERVED ON THE ASSES SEE BY THE AO BEFORE COMPLETING THE ASSESSMENT. 13. THE LD. DR DREW OUR ATTENTION TO PAGE 5 OF THE ASSESSEES PAPER BOOK WHEREIN A COPY OF THE NOTICE U/S.142(1) DATED 05.01.2001 IS P LACED. THE CONTENTION OF THE LD. DR IS THAT THE ASSESSEE HAS HIMSELF FILED THE AFORESAI D NOTICE IN ITS PAPER BOOK AND THERE FORE IT SHOULD BE PRESUMED THAT THE ASSESSEE WAS SE RVED WITH THE NOTICE US/ 142(1) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT COPY OF THE NOTICE PLACED IN PAGE-5 AND 5A OF THE ASSESEES PAPER BOOK WAS A COP Y WHICH WAS FILED BY THE AO ALONG WITH THE REMAND REPORT DATED 01.02.2008 BEFO RE CIT(A) AND THAT COPY WAS FILED BY THE ASSESSEE IN THE PAPER BOOK. IT WAS SUBMITTED BY HIM THAT THE AFORESAID NOTICE WAS NOT SERVED ON THE ASSESSEE NOR IS THERE ANY EVI DENCE ON RECORD TO SHOW THAT THE SAID NOTICE WAS ISSUED BY THE AO. 14. AS WE HAVE ALREADY STATED THE AO HAS FILED AN A FFIDAVIT BEFORE THE TRIBUNAL REGARDING THE NON AVAILABILITY OF THE ORIGINAL ORDE R SHEET ENTRIES CONTAINING THE ENTRY DATED 5.1.2001. WE ARE OF THE VIEW THAT IN THE LIG HT OF THE AFFIDAVIT FILED BY THE AO BEFORE THE TRIBUNAL REGARDING NON AVAILABILITY OF O RDER SHEET ENTRIES AND IN THE LIGHT OF 7 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 CLEAR FINDINGS OF CIT(A) IN HIS ORDER THAT NO NOTIC E U/S 142(1) OF THE ACT WAS ISSUED OR SERVED ON THE ASSESSEE BY THE AO, THE CONTENTION OF THE ASSESSEE THAT NO NOTICE U/S 142(1) OF THE ACT WAS ISSUED OR SERVED ON THE ASSES SEE HAS TO BE ACCEPTED. THE QUESTION THEREFORE THAT ARISES FOR CONSIDERATION IS WHAT IS THE EFFECT OF THE NON ISSUE OF SERVICE OF NOTICE U/S 142(1) OF THE ACT? 15. WE HAVE ALREADY SEEN THAT BEFORE MAKING THE BES T JUDGMENT U/S144(1) OF THE ACT, THE AO HAS TO SPECIFICALLY CALL UPON THE ASSES SEE BY A NOTICE TO SHOW CAUSE AS TO WHY THE BEST JUDGMENT SHOULD NOT BE MADE. THIS IS A REQUIREMENT OF THE FIRST PROVISO TO SECTION 144(1) OF THE ACT. ADMITTEDLY NO SUCH NO TICE WAS EITHER ISSUED OR SERVED ON THE ASSESSEE. SUCH NOTICE MAY NOT BE REQUIRED IF A NOTICE U/S 142(1) OF THE ACT HAS ALREADY BEEN SERVED ON THE ASSESSEE. THIS IS AS PER THE SECOND PROVISO TO SECTION 144(1) OF THE ACT. IN THIS CASE, AS WE HAVE ALREADY SEEN, NO NOTICE U/S 142(1) OF THE ACT WAS EITHER ISSUE OR SERVED ON THE ASSESSEE. UNDER S ECTION 158BH OF THE ACT THE PROVISION OF CHAPTER-XIV-B NAMELY BLOCK ASSESSMENT PROCEEDINGS IN SEARCH CASES, IT IS LAID DOWN THAT THE OTHER PROVISION OF THE ACT WI LL APPLY, EXCEPT OTHERWISE PROVIDED IN CHAPTER XIVB. THEREFORE FOR MAKING AN ASSESSMENT U./S 158BC OF THE ACT R.W.S. 144 OF THE ACT, THE REQUIREMENTS LAID DOWN IN SEC.144 O F THE ACT WILL HAVE TO BE SATISFIED. 16. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTE NTION TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS HOTEL BLUE MO ON 321 ITR 362 (SC). IN THE AFORESAID DECISION THE QUESTION THAT AROSE FOR CONS IDERATION BEFORE THE HONBLE SUPREME COURT WAS AS TO WHETHER ISSUE OF NOTICE U/S 143(2) OF THE ACT IS MANDATORY BEFORE MAKING THE ASSESSMENT U/S 158BC R;W.S. 143( 3) OF THE ACT. THE HONBLE SUPREME COURT HELD AS FOLLOWS :- IF THE ASSESSING, FOR ANY REASON, REPUDIATES THE R ETURN FILED BY AN ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 158BC (A) OF THE I NCOME TAX ACT, 1961 RELATING TO A BLOCK ASSESSMENT, THE ASSESSING OFFICER MUST N ECESSARILY ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE TIME PRESCRIBE D IN THE PROVISO TO SECTION 143(2). BY MAKING THE ISSUE OF NOTICE MANDATORY, SECTI ON 158BC, DEALING WITH ASSESSMENTS, MAKES SUCH NOTICE THE VERY FOUNDATION FOR JURISDICTION. SUCH NOTICE IS REQUIRED TO BE SERVED ON THE PERSON WHO IS FOUND TO HAVE UNDISCLOSED INCOME. 8 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 SECTION 158BC PROVIDES FOR ENQUIRY AND ASS ESSMENT. AFTER THE RETURN IS FILED, CLAUSE (B) OF SECTION 158BC PROVIDES THAT TH E ASSESSING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND 'THE PROVISIONS OF S ECTION 142, SUB-SECTIONS (2) AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS MAY BE, APPLY. THIS INDICATES THAT THIS CLAUSE ENABLES THE ASSESSI NG OFFICER, AFTER THE RETURN IS FILED, TO COMPLETE THE ASSESSMENT UNDER SECTION 143 (2) BY FOLLOWING THE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTION 143(2)/142. THIS DOES NOT PROVIDE ACCEPTING THE RETURN AS PROVIDED UNDER SECTION 143(1)(A) : THE OF FICER HAS TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) ONLY. IF AN ASSESSM ENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 158BC, NOTICE UNDE R SECTION) 43(2) SHOULD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF T HE BLOCK RETURN. OMISSION ON THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECT ION 143 (2) CANNOT BE A PROCEDURAL IRREGULARITY AND IS NOT CURABLE. THEREFO RE THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. 17. THE LD. COUNSEL SUBMITTED THAT THOUGH THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS WITH REGARD TO THE NECESSITY OF NOTICE U/ ;S 143(2) OF THE ACT, THE HONBLE SUPREME COURT HAS ALSO MADE A REFERENCE TO THE PROV ISION U/S 142 OF THE ACT AND HAS HELD THAT HIS SUBMISSION WAS THAT THE ABSENCE OF NO TICE U/S 142(1) OF THE ACT WILL ALSO RENDER THE ORDER OF ASSESSMENT NULLITY AS HELD BY T HE HONBLE SUPREME COURT. IN THE CASE OF HOTEL BLUE MOON (SUPRA). 18. THE LD. DR FURTHER SUBMITTED THAT THE OBSERVATI ONS OF THE HONBLE SUPREME COURT WITH REGARD TO THE PROVISION OF SECTION 142 O F THE ACT ARE ONLY ARBITRARY AND SHOULD NOT BE APPLIED FOR NON ISSUE OR NON SERVICE OF NOTICE U/S 142(1) OF THE ACT AND HAVE COME TO THE CONCLUSION THAT ORDER OF ASSESSMEN T U/S 158BC OF THE ACT IS NOT VALID FOR WANT OF SERVICE OF NOTICE U/S 142(1) OF THE ACT . THE LEARNED DR SUBMITTED THAT THE NOTICE U/S.158BC ITSELF SERVES THE PURPOSE OF SEC.1 42(1) NOTICE AND THEREFORE THE 2 ND PROVISO TO SEC.144(1) WOULD APPLY IN THE PRESENT CA SE. ACCORDING TO HIM THEREFORE THE ORDER U/S.144 OF THE ACT WAS RIGHTLY PASSED BY THE AO. 19. WE HAVE CONSIDERED HIS SUBMISSION AND ARE OF T HE VIEW THAT THE SAME IS WITHOUT ANY MERIT. SEC.158BC(B) CLEARLY CONTEMPLATES APPLI CABILITY OF PROVISIONS OF SEC.142 9 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 OF THE ACT FOR FRAMING A ORDER OF ASSESSMENT UNDER SEC.158BC OF THE ACT UNDER CHAPTER XIV B OF THE ACT. THE PROVISIONS OF SEC.15 8BC READS THUS: SEC.158BC PROCEDURE FOR BLOCK ASSESSMENT WHERE ANY SEARCH HAS BEEN CONDUCTED UNDER SECTION 1 32 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER S ECTION 132A, IN THE CASE OF ANY PERSON, THEN, (A) THE ASSESSING OFFICER SHALL (I) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCO UNTS OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED AFTER THE 30TH DAY OF J UNE, 1995, BUT BEFORE THE 1ST DAY OF JANUARY, 1997, SERVE A NOTICE TO SUC H PERSON REQUIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEING LESS THAN FIF TEEN DAYS; (II) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACC OUNTS OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED ON OR AFTER T HE 1ST DAY OF JANUARY, 1997, SERVE A NOTICE TO SUCH PERSON REQUIRING HIM T O FURNISH WITHIN SUCH TIME NOT BEING LESS THAN FIFTEEN DAYS BUT NOT MORE THAN FORTY FIVE DAYS, AS MAY BE SPECIFIED IN THE NOTICE A RETURN IN THE P RESCRIBED 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 THE UNDISC LOSED INCOME FOR THE BLOCK PERIOD: PROVIDED THAT NO NOTICE UNDER SECTION 148 IS REQUIRED TO BE ISSUED FOR THE PURPOSE OF PROCEEDING UNDER THIS CHAPTER: PROVIDED FURTHER THAT A PERSON WHO HAS FURNISHED A RETURN U NDER THIS CLAUSE SHALL NOT BE ENTITLED TO FILE A REVISED RETURN; (B) THE ASSESSING OFFICER SHALL PROCEED TO DETERMIN E THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142, SUB-SECTIONS (2) AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS MAY BE, APPLY; (C) THE ASSESSING OFFICER, ON DETERMINATION OF THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN ACCORDANCE WITH THIS CHAPTER, SHALL PASS AN ORDER OF ASSESSMENT AND DETERMINE THE TAX PAYABLE BY HIM ON THE BASIS O F SUCH ASSESSMENT; (D) THE ASSETS SEIZED UNDER SECTION 132 OR REQUISIT IONED UNDER SECTION 132A SHALL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 132B. 10 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 20. IT IS THUS CLEAR THAT NOTICE U/S.158BC OF THE ACT WILL NOT BE SUFFICIENT COMPLIANCE OR SUBSTITUTE FOR ISSUE OF NOTICE U/S.142 OF THE AC T. NON COMPLIANCE OF TERMS OF A NOTICE U/S.142(1) OF THE ACT HAS CONSEQUENCES SET O UT IN SEC.144 OF THE ACT. THEREFORE THE 1 ST PROVISO TO SEC.144(1) OF THE ACT CONTEMPLATES SERV ICE OF A SPECIFIC NOTICE BRINING TO THE NOTICE OF THE ASSESSEE THE CONSEQUEN CES OF NON COMPLIANCE WITH THE TERMS OF THE NOTICE U/S.142(1) OF THE ACT. THE 2 ND PROVISO TO SEC.144(1) PROVIDES THAT THE 1 ST PROVISO TO SEC.144(1) WILL NOT APPLY IF A NOTICE U /S.142(1) WAS ALREADY SERVED ON THE ASSESSEE. THIS IS BECAUSE IN THE FORM OF NO TICE U/S.142(1) OF THE ACT, THERE IS A SPECIFIC CLAUSE WHICH SAYS THAT FAILURE TO COMPLY W ITH THE SAID NOTICE WILL RESULT IN AN EX-PARTE ASSESSMENT BEING PASSED. 21. A READING OF THE HONBLE SUPREME COURTS DECISI ON IN THE CASE OF HOTEL BLUE MOON (SUPRA) CLEARLY SHOWS THAT THOUGH THE ISSUE BE FORE THE HONBLE SUPREME COURT WAS WITH REGARD TO THE EFFECT OF NON ISSUE OF SERVI CE OF NOTICE U/S 142(3) OF THE ACT ON THE ORDER OF ASSESSMENT PASSED U/S 158BC OF THE ACT THE HONBLE SUPREME COURT HAS EXAMINED THE PROCEDURAL REQUIREMENT FOR FRAMING THE ASSESSMENT U/S 158BC OF THE ACT. THIS WILL BE CLEAR FROM THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT :- WE MAY NOW REVERT BACK TO SECTION 158BC(B) WHICH I S THE MATERIAL PROVISION WHICH REQUIRES OUR CONSIDERATION. SECTION 158BC(B) PROVIDES FOR ENQUIRY AND ASSESSMENT. THE SAID PROVISION READS 'THAT THE ASSE SSING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIO D IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142, SU B-SECTIONS (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 ASSES SMENT BY FOLLOWING THE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTION, 143(2 )/142 AND COMPLETE THE ASSESSMENT SECTION 143(3). THIS SECTION DOES RIOT PROVIDE FOR ACCEPTING THE RETURN AS PROVIDED UNDER SECTION 143(1)(A). THE ASS ESSING OFFICER HAS TO COMPL.ETE THE ASSESSMENT UNDER SECTION 143(3) ONLY. IN CASE OF DEFAULT IN NOT FILING THE RETURN OR NOT COMPLYING WITH THE NOTICE UNDER SECTION 143(2)/142, THE ASSESSING OFFICER IS AUTHORIZED TO COMPLETE THE ASS ESSMENT EX PARTE UNDER SECTION 144. CLAUSE (B) OF SECTION 158BC BY REFERRING TO SE CTION 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 BECOM ES 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 AUT HORITIES SHOULD ISSUE NOTICE 11 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 UNDER SECTION 143(4). HOWEVER, IF AN ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH, SECTION 158BC, NOTICE UNDER SECTI ON 143(2) SHOULD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF BLOCK RE TURN. OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTI ON 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT B E DISPENSED WITH. ACCORDINGLY, WE CONCLUDE THAT EVEN FOR THE PURPOSE OF CHAPTER-XIV-B OF THE ACT, FOR THE DETERMINATION OF UNDISCLOSED INCOME FO R A BLOCK PERIOD UNDER THE PROVISIONS OF SECTION 158BC, THE PROVISIONS OF SECT ION 142 AND SUB-SECTIONS (2) AND (3) OF SECTION 143 ARE APPLICABLE AND NO ASSESS MENT COULD BE MADE WITHOUT ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT. (IN BOLD LETTERS FOR EMPHASIS) 22. IT IS THUS CLEAR THAT THE PROVISION TO SECTION 142 OF THE ACT ALSO REQUIRES TO BE COMPLIED BY THE AO WHILE FRAMING THE ASSESSMENT U/S 158BC OF THE ACT. NON ISSUE AND NON SERVICE OF NOTICE U/S 142(1) AS WELL AS IN THE FIRST PROVISO U/S 144(1) CANNOT BE REGARDED AS PROCEDURAL IRREGULARITY WHICH IS CURABL E. THEREFORE THE EFFECT OF SUCH IRREGULARITY WOULD BE THAT THE ASSESSMENT WILL HAVE TO BE HELD TO BE NOT VALID IN LAW AND IS LIABLE TO BE ANNULLED. NON COMPLIANCE WITH T HE AFORESAID REQUIREMENT WHICH CONFER THE JURISDICTION OF THE AO WOULD RENDER THE ORDER PASSED BY THE AO AS INVALID IN LAW AND SUCH ORDER OF ASSESSMENT IS LIABLE TO BE ANNULLED. WE ALSO FIND SUPPORT FROM THE AFORESAID CONCLUSIONS FROM THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF MOHINI DEVI MALPANI VS ITO 77 ITR 67 4 (CAL). 23. FOR THE REASONS GIVEN ABOVE WE HOLD THAT THE O RDER U/S 158BC OF THE ACT IS BAD IN LAW AND LIABLE TO BE ANNULLED. IN PARTICULAR, WE AR E OF THE VIEW THAT THE STATUTORY REQUIREMENT OF FRAMING THE ASSESSMENT U/S 144 OF TH E ACT HAVE NOT BEEN COMPLIED WITH AS CONTENDED BY THE ASSESSEE IN GROUND NO.2AC OF TH E CROSS OBJECTION. FOR THE REASONS GIVEN ABOVE WE ANNUL THE ORDER OF ASSESSMENT. 24. ONE OF THE ARGUMENT OF THE LEARNED DR WAS THAT THE OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON (SUPRA ), IN SO FAR AS IT RELATES TO SEC.142 OF THE ACT, ARE ONLY OBITER DICTUM AND THER EFORE SHOULD NOT BE REGARDED AS JUDICIAL PRECEDENT. WE ARE UNABLE TO AGREE WITH TH IS ARGUMENT. EVEN ASSUMING THE 12 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01 OBSERVATIONS OF THE HONBLE SUPREME COURT ARE OBITE R DICTUM, YET THE SAME HAS A BINDING FORCE AS FAR AS THE TRIBUNAL IS CONCERNED. 25. IN VIEW OF THE AFORESAID CONCLUSION ON THE PREL IMINARY ISSUE WE ARE OF THE VIEW THAT THE ISSUES RAISED BY THE REVENUE IN ITS APPEAL AND OTHER ISSUE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION DO NOT REQUIRE ANY CONSIDERA TION. 26. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED WHILE THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 02.02.2018. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02.02.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI RAMESH CHAND RATHI, 26, BURTOLLA STREET, KOL KATA-700007. 2 A.C.I.T., CIRCLE-36, KOLKATA. 3. C.I.T.(A)-XIII, KOLKATA 4. C.I.T .-XII, KOLKATA.. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES 13 IT(SS)A.NO.92/KOL/2008 & C.O.63/KOL/2008 SHRI RAMES H CHAND RATHI BLOCK PERIOD 1991-92 TO 2000- 01