Mondaq: Kerala: Wednesday, May 07, 2014.
While the
above can be treated as a secondary question, one more question which arose
before the Hon'ble High Court of Kerala in a recent case of R Romi Vs.
Commissioner of Income Tax, Thiruvananthapuram reported in 2014-
TOIL-424-HC-KERALA-IT was whether a block assessment can be completed without
issuing a notice u/s 143[2] of the Indian Income Tax Act. Briefing down the
facts of the case, pursuant to a search U/s 132 of the Income Tax Act, 1961,
the assesse was assessed U/s 143(3) of Income Tax Act read with Section 158BC,
for the block period of almost ten years commencing from 01.04.1985 to
15.09.1995. Notice under Section 158BC was issued to the Assessee on 25.06.1996.
The Assessee filed a NIL return of income and subsequently the AO passed an
order U/s 143(3) read with Section 158 BC determining the total undisclosed
income at Rs. 9, 55, 380/- and demanding income tax of Rs. 5, 73, 228/-.
PROCEEDINGS
BEFORE THE TRIBUNAL:
On appeal
before the Tribunal it was contended by the Assessee that since no notice U/s
143(2) was issued, the entire assessment should have been set aside. However
the Tribunal was of the view that the Assessee was subjected to search in the
year 1995 and the appeal was being head afresh in 2013, therefore the
possibility of misplacing the 143(2) notice cannot be ruled out in this span of
almost 18 years. It was also observed that the Assessee did not urge this legal
issue at the time of filing the appeal before the Tribunal, but urged for the
first time before us after a lapse of considerable years. The Tribunal reduced
the addition to a limited extent.
PROCEEDINGS
BEFORE THE HIGH COURT OF KERALA:
Aggrieved
with the order of the Tribunal, the Assessee had appealed with the Hon'ble High
Court of Kerala wherein he produced a document based on the Right to
Information Act, which suggests that no such notice was issued. The Hon'ble
Court also requested the standing counsel of the Department to verify the
correctness of the information received in the RTI to which the counsel fairly
submitted that the information was correct and no notice was issued under
Section 143(2).
The two main
questions which arose are reiterated below:
1.
Whether
block assessment could have been completed without issuing notice under Section
143(2) of the Income Tax Act and whether such omission would be a procedural
irregularity or is curable?
2.
Whether
document obtained under Right to Information Act for establishing the non
issuance of notice u/s 143(2) can be accepted as evidence, although there has
been a lapse of 18 years since the search was first conducted.
After going
through the Section 143(2) of the Act and relying on the judgment of Assistant
Commissioner of Income Tax & Anr. V, Hotel Blue Moon, reported in [2010]
321 ITR 362, the Court came to the conclusion that there was no dispute that in
order to make an assessment under Section 143(3) read with Section 158 BC,
notice should be issued U/s 143(2) and omission to issue such a notice is not a
procedural irregularity and is not curable.
Further, as
it was also accepted by the Department that no such notice was issued, the
Hon'ble High Court allowed the appeal in favor of the Assessee and set aside
the order of the Tribunal and the Assessing officer.
CONCLUSION:
Looking at
the recent judgment above, the two queries raised above are solved in favor of
the Assessee being, a block assessment cannot be completed without issuing a
notice under Section 143(2) and further that the document obtained under Right
to Information Act would be avail evidence even if there has been a lapse of 18
years since the first search was conducted.
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