Issuance of notice under section 143(2) is not mandatory before making an assessment under section 153A

The ITAT Mumbai in the case of Sumanlata Bansal( PAN- AAHPB0141N) vs. the Assistant Commissioner of Income Tax, Central Circle 8 Mumbai, ITA nos. 525 to 530 relating to the assessment years 1999-2000 to 2005-2006 held that issue of notice under section 143(2) is not mandatory before making an assessment under section 153A of the Income Tax Act.

The bench of J. Dev Darshan Sud (retired) as third member passed the aforesaid judgment. As there were differences of opinion between the two members of the Tribunal regarding the issues involved in the case, the case was referred to the third member for judgment.

Date of hearing:

The hearing was concluded on 18.5.15

Date of order:

Date of pronouncement: 20.5.2015

Date of publication: 22.5.2015

Pleaders engaged in the case:

For the appellant: Sri Hiro Rai
For the respondent: Sri S.D. Srivastava, Sr. CIT-DR

Issues raised before the Tribunal:

Two main issues were raised by the two members before the third member of the Tribunal.
1. Whether the provisions of section 153A of the Income Tax Act makes it mandatory to issue notice under section 143(2) of the Act;
2. Whether non-issuance of a notice under Section 143(2) of the Act is only an irregularity which could be cured.

The Learned Principal Commissioner of income Tax also framed another issue for adjudication which was whether issuance of notice under section 143(2) is mandatory for acquiring jurisdiction in making an assessment under section 153A of the Act.

Arguments of both the sides:

The learned counsel appearing on behalf of the appellant submitted that a simple reading of the statute states that a notice under section 143(2) of the Act is an essential condition to proceed further. The learned counsel relied upon a number of judgments of the Apex Court as well as that of the jurisdictional High Court. The Learned counsel for the assessee placed reliance on the judgment of the Hon’ble Apex Court in the case of Hotel Blue Moon v. DCIT 321 ITR 362 (SC) wherein it was held that the where an assessment requires to be completed under section 143(3) read with section 158BC of the Act, notice under section 143 (2) has to be issued and any failure on the part of the department to do so is not a procedural irregularity and the same cannot be cured. Such failure makes the assessment void.

The learned counsel appearing on behalf of the respondent stated that the aforesaid judgment was relating to Section 158BC. It was contended that Clause (b) of Section 158BC provides that the Assessing Officer shall proceed to determine the undisclosed income in the process which has been laid down in section 158BB and the provisions of Section 142, Section 143(2) and (3), Section 144 and Section 145 shall apply. However, it is not the position under section 153A. The learned counsel argued that the principle laid down in the case of Hotel Blue Moon was not applicable to the facts of the instant case.

The learned counsel appearing on behalf of the respondent placed reliance on the decision of the Delhi High Court in Ashok Chaddha vs. ITO, 2011, 337 ITR 399(Delhi). In the said case similar issue was raised before the Delhi High Court that whether issue notice under section 143(2) of the Act was mandatory in case of making an assessment under section 153A of the Act. The issue was answered by the High Court against the assessee.

The learned counsel appearing on behalf of the appellant contended that the said judgment controverts the principle laid down in the case of Hotel Blue Moon.

The judgment:

It was observed that Section 153A provides for the procedure for assessment relating to search or requisition. The section provides for issuance of notice to the person searched as per Section 132 or where documents are sought for under Section 132(A) of the Act to furnish a return of income. It nowhere mandates issuance of notice under Section 143(2).

The Learned counsel for the appellant contended that it is mandatory to issue notice under Section 143(2) as the return filed in response to notice under Section 153A should be treated as a return under Section 139. The words “so far as may be” as it appears in clause (a) of sub section (1) of Section 153A cannot be interpreted that the issue of notice under Section 143(2) is mandatory for an assessment under Section 153A. The words “so far as may be” cannot be construed to the extent of mandatory issue of notice.

As it was observed, a notice was required to be issued under sub-section (1) of Section 153A of the Act for asking the persons searched or requisitioned to file a return. As such, no further notice under Section 143(2) could be contemplated for assessment under Section 153A.

In view of the above, it was finally held that assessment proceedings under section 153(A) of the Act cannot be held as null and void only on the ground of non-issuance of notice under Section 143(2) of the Act for the reason that such provisions are not attracted to proceedings under section 153A of the Act.