Late Sri Seetharama Shetty rep by L R Satish Shetty V. The Assistant Commissioner of Income Tax Circle 2(1) Attavar, C.R. Building Annexe Mangalore

ITA/733/2008

AI Insights

This case involves an appeal by the assessee, represented by the legal heirs of Late Sri Seetharama Shetty, against the order of the Tribunal which had remanded the matter back to the Assessing Authority without addressing a crucial legal question. The primary legal issue was the non-issuance of a notice under Section 143(2) of the Income Tax Act, 1961, which the assessee argued invalidated the assessment for the block period from April 1, 1989, to October 29, 1999. The High Court of Karnataka, referencing a precedent set by the Supreme Court, held that the omission to issue this notice is a non-curable defect and mandatory for the validity of the assessment order.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 799264 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 14-07-2014
• Assessment Year: misc
• Other Referred Cases: PAI VINOD vs DEPUTY COMMISSIONER OF INCOME TAX (2013) 353 ITR 622 (Karn)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: A SHANKAR
• Keywords: Assessment Order; Block assessment; Jurisdiction; Mandatory provision; Non-issuance of notice
• Section: 143(2); 143(1); 158BC; 151; 142; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 14TH DAY OF JULY, 2014 PRESENT HON' BLE MR. JUSTICE N.KUMAR AND HON' BLE MR. JUSTICE B.MANOHAR ITA NO 733 OF 2008 A/W I.A.NO.1/2008 BETWEEN LATE SRI SEETHARAMA SHETTY REP BY L R SATISH SHETTY SEETHALAKSHMI COMPOUND KOMBETTU PUTTUR - 574 201 ... APPELLANT (By Sriyuths A SHANKAR & M LAVA - ADVS) AND THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1) ATTAVAR, C.R. BUILDING ANNEXE MANGALORE - 575 001. ... RESPONDENT (By Sri. K V ARAVIND – ADV.) THIS ITA IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 29-02-2008 PASSED IN IT(SS)A NO. 37/BNG/2003, FOR THE ASSESSMENT YEAR BLOCK PERIOD 1-4-1989 TO 29-10-1999, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, 2 II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE IT(SS)A NO. 37/BNG/2003,DATED 29-2- 2008 TO THE EXTENT OF THE GROUNDS AS URGED IN THIS APPEAL ANNEXURE 'A' IN THE INTEREST OF JUSTICE & EQUITY. I.A.NO.1/2008 IS FILED U/S.151 OF CPC BY THE APPELLANT PRAYING TO ALLOW THE APPLICATION AND PERMIT THE APPELLATN TO AMEND THE MEMORANDUM OF INCOME TAX APPEAL. THIS ITA AND APPLICATION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: ORDER ON I.A.1/2008 The assessee has filed an application for raising of an additional ground in the memorandum of appeal which was not raised earlier. 2. The additional ground now urged is. ‘Whether non-issuance of notice under Section 143(2) of the Income Tax Act, 1961 would invalidate the assessment relating to the block period and consequently assessment order passed on 31.10.2001?. 3. The said question is purely a question of law which is permitted to be raised. Accordingly, the 3 application is allowed. Additional ground is permitted to be raised. JUDGMENT This appeal is preferred by the assessee challenging the order passed by the Tribunal which has set aside the order passed by the lower authorities and remanded the matter back to the Assessing Authority for fresh consideration. However, the Tribunal has not gone into the aforesaid question of law. This Court in the case of PAI VINOD – VS – DEPUTY COMMISSIONER OF INCOME TAX reported in (2013) 353 ITR 622 (Karn) considering the aforesaid question and relying upon the judgment of the Apex court has held as under :- “Therefore, it is a clear omission on the part of the assessing authority to issue notice under section 143(2) is not a procedural irregularity. The same is not curable. Therefore, the requirement of notice under section 143(2) of the Act cannot be dispensed with. When the same is issued in respect of the block return filed, the Assessing officer 4 must necessarily issue notice under Section 143(1) of the Act within the time prescribed in the proviso to section 143(2) of the Act. Even for the purpose of Chapter XIV-B of the Act, for determination of the undisclosed income for the block assessment under the provisions of section 158BC, the provisions of section 142 and sub- sections (1) and (3) of section 143 are applicable. No assessments could be made without issuance of notice under section 143(2) of the Act where the Assessing Officer in repudiation of the return filed under section 158BC, proceeds to make an enquiry he has to necessarily follow the provisions of section 142, sub-section (2) and (3) of section 143. If there is violation of the mandatory provision then the assessment order passed is illegal and liable to be set aside. In the light of the law declared by the apex court the appeal filed by the assessee in I.T.A.No.818 of 2006 has to succeed and consequently the appeals preferred by the Revenue are liable to be dismissed The substantial questions of law in so far as limitation is concerned is answered in favour of the assessee and against the Revenue.” 2. In view of the aforesaid legal position, the entire proceedings initiated without notice under Section 5 143(2) of the Act vitiates the assessment order. In that view of the matter the question of deciding the case on merits would not arise as the very initiation of proceedings is without jurisdiction. Accordingly, we pass the following:- ORDER 1) The appeal is allowed. 2) The aforesaid substantial question of law is answered in favour of the assessee. 3) All the three orders i.e. the order passed by the Assessing Officer, Commissioner of Income Tax (Appeals) & the Tribunal are set aside. Sd/- JUDGE Sd/- JUDGE rs "