In this case of COMMISSIONER OF INCOME TAX VERSUS LAXMAN DAS KHANDELWAL, an appeal was filed by the appellant in the Supreme Court challenging the judgment and final order dated 27.04.2018 passed by the High Court1 in Income Tax Appeal No.97 of 2018 and against the order dated 14.09.2018 in Review Petition No.1289 of 2018 arising from said Income Tax Appeal No.97 of 2018. In this case the assessee is an individual carrying a business of brokerage. Search and seizure operation was conducted under Section 132 of the Act of 1961 on 11.03.2010 at his residential premises.
The assessee submitted return of income on 24.08.2011, declaring total income of Rs.9,35,130/-. The assessment was completed under Section 143(3) read with Section 153(D) of 1961 Act. Rupees 9,09,110/- was added on account of unexplained cash under Section 69 of 1961 Act. Rs.15,09,672/- was added on account of unexplained jewellery. Rupees 45,00,000/- was added on account of unexplained hundies and Rs.29,53,631/- was added on account of unexplained cash receipts. Aggrieved, the assessee filed an appeal before the Commissioner Income Tax (Appeal).
The Commissioner of Income Tax (Appeal) deleted an amount of Rs.7,48,463/- holding that jewellery found in locker weighing 686.4 gms stood explained in view of circular No.1916 and further deleted the addition of Rs.29,23,98,117/- out of Rs.29,53,52,631/- holding that the correct approach would be to apply the peak formula to determine in such transaction which comes to Rs.29,54,514/- as on 05.03.2010. Aggrieved, Revenue filed an appeal. The Assessee filed cross objection on the ground of jurisdiction of Assessment Officer regarding non issue of notice under Section 143(2) of the Act of 1961. The Tribunal vide impugned order upheld the cross objection and quashed the entire reassessment proceedings on the finding that the same stood vitiated as the assessment Officer lacked jurisdiction in absence of notice under Section 143(2) of the act of 1961.
The Tribunal observed, “In conclusion, we find that there was no notice issued u/s 143(2) prior to the completion of assessment under section 143 (3) of the Act by the AO; that the year under consideration was beyond the scope of the provisions of Section 143A of the Act, it being the search year and not covered in the six year to the year of search as per the assessment scheme/procedure defined u/s 153A; that the AO has passed regular assessment u/s 143(3) of the Act; although the Id. CIT has mentioned the section as 143 r.w.s. 153A and that the department had not controverted these facts at the stage of hearing. It is noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non- issuance thereof is not a curable defect.
Even in case of block assessment u/s 158BC, it has been so held by the apex Court in the case of ‘ACIT v. Hotel Blue Moon, The Appellate Tribunal held, while affirming the decision of CIT (A) that non-issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142 and subsections (2) and (3) of Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the Revenue.
The Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted. Therefore the appellants filed an appeal in the Supreme Court, the court after hearing the case held “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 rendered 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. These Appeals are, therefore, dismissed. No costs.”