Civil Appeal Nos. \u2026\u2026\u2026\u2026of 2019 @ SLP (Civil) Nos\u2026\u2026\u2026\u2026\u2026\u2026.of 2019 @
\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
\n1
\nReportable
\nIN THE SUPREME COURT OF INDIA
\nCIVIL APPELLATE JURISDICTION
\nCIVIL APPEAL Nos.6261-6262 OF 2019
\n(Arising out of Special Leave Petition (Civil) Nos.19320-19321 of 2019)
\n(Arising out of Special Leave Petition (Civil)D.No.7708 of 2019)
\nCOMMISSIONER OF INCOME TAX \u2026Appellant
\nVERSUS
\nLAXMAN DAS KHANDELWAL \u2026Respondent
\nJ U D G M E N T
\nUday Umesh Lalit, J.
\n1. Delay condoned. Leave granted.
\n2. These Appeals are directed against the judgment and final order
\ndated 27.04.2018 passed by the High Court1 in Income Tax Appeal No.97
\nof 2018 and against the order dated 14.09.2018 in Review Petition
\nNo.1289 of 2018 arising from said Income Tax Appeal No.97 of 2018.
\n1 High Court of Madhya Pradesh at Gwalior
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\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
\n2
\n3. The relevant facts leading to the filing of aforementioned Income
\nTax Appeal No.97 of 2018 before the High Court, as culled out from the
\njudgment and order dated 27.04.2018 presently under appeal are as under:-
\n\u201cThe assessee is an individual carrying a business of
\nbrokerage. Search and seizure operation was
\nconducted under Section 132 of the Act of 1961 on
\n11.03.2010 at his residential premises. The assessee
\nsubmitted return of income on 24.08.2011, declaring
\ntotal income of Rs.9,35,130\/-. The assessment was
\ncompleted under Section 143(3) read with Section
\n153(D) of 1961 Act. Rupees 9,09,110\/- was added on
\naccount of unexplained cash under Section 69 of 1961
\nAct. Rs.15,09,672\/- was added on account of
\nunexplained jewellery. Rupees 45,00,000\/- was added
\non account of unexplained hundies and Rs.29,53,631\/-
\nwas added on account of unexplained cash receipts.
\nAggrieved, the assessee filed an appeal before the
\nCommissioner Income Tax (Appeal). The
\nCommissioner of Income Tax (Appeal) deleted an
\namount of Rs.7,48,463\/- holding that jewellery found
\nin locker weighing 686.4 gms stood explained in view
\nof circular No.1916 and further deleted the addition of
\nRs.29,23,98,117\/- out of Rs.29,53,52,631\/- holding
\nthat the correct approach would be to apply the peak
\nformula to determine in such transaction which comes
\nto Rs.29,54,514\/- as on 05.03.2010.
\nAggrieved, Revenue filed an appeal. The Assessee
\nfiled cross objection on the ground of jurisdiction of
\nAssessment Officer regarding non issue of notice
\nunder Section 143(2) of the Act of 1961. The
\nTribunal vide impugned order upheld the cross
\nobjection and quashed the entire reassessment
\nproceedings on the finding that the same stood
\nvitiated as the assessment Officer lacked jurisdiction
\nin absence of notice under Section 143(2) of the act of
\n1961. The Tribunal observed:
\n\u201c17. In conclusion, we find that there was
\nno notice issued u\/s 143(2) prior to the
\ncompletion of assessment under section
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\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
\n3
\n143 (3) of the Act by the AO; that the year
\nunder consideration was beyond the scope
\nof the provisions of Section 143A of the
\nAct, it being the search year and not
\ncovered in the six year to the year of search
\nas per the assessment scheme\/procedure
\ndefined u\/s 153A; that the AO has passed
\nregular assessment u\/s 143(3) of the Act;
\nalthough the Id. CIT has mentioned the
\nsection as 143 r.w.s. 153A and that the
\ndepartment had not controverted these
\nfacts at the stage of hearing. It is noted
\nthat issue of notice u\/s 143(2) for
\ncompletion of regular assessment in the
\ncase of the assessee was a statutory
\nrequirement as per the provisions of the
\nAct and non issuance thereof is not a
\ncurable defect. Even in case of block
\nassessment u\/s 158BC, it has been so held
\nby the apex Court in the case of \u2018ACIT v.
\nHotel Blue Moon\u2019 (2010) 321 ITR 362
\n(Supra).\u201d
\n4. In said appeal arising from the decision of the Income Tax
\nAppellate Tribunal (\u2018the Tribunal\u2019, for short), the issue that arose before
\nthe High Court was the effect of absence of notice under Section 143(2) of
\nthe Income Tax Act, 1961 (\u2018the Act\u2019, for short). The Respondent-Assessee
\nrelied upon the decision of this Court in Assistant Commissioner of Income
\nTax and Another vs. Hotel Blue Moon2. On the other hand, reliance was
\nplaced by the Appellant on the provisions of Section 292BB of the Act to
\nsubmit that the Respondent having participated in the proceedings, the
\ndefect, if any, stood completely cured.
\n2 (2010) 3 SCC 259
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\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
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\n5. At the outset, it must be stated that out of two questions of law that
\narose for consideration in Hotel Blue Moon\u2019s case2 the first question was
\nwhether notice under Section 143(2) would be mandatory for the purpose
\nof making the assessment under Section 143(3) of the Act. It was
\nobserved:-
\n\u201c3. The Appellate Tribunal held, while affirming the
\ndecision of CIT (A) that non-issue of notice under
\nSection 143(2) is only a procedural irregularity and
\nthe same is curable. In the appeal filed by the assessee
\nbefore the Gauhati High Court, the following two
\nquestions of law were raised for consideration and
\ndecision of the High Court, they were:
\n\u201c(1) Whether on the facts and in
\ncircumstances of the case the issuance of
\nnotice under Section 143(3) of the Income
\nTax Act, 1961 within the prescribed timelimit
\nfor the purpose of making the
\nassessment under Section 143(3) of the
\nIncome Tax Act, 1961 is mandatory? And
\n(2) Whether, on the facts and in the
\ncircumstances of the case and in view of the
\nundisputed findings arrived at by the
\nCommissioner of Income Tax (Appeals), the
\nadditions made under Section 68 of the
\nIncome Tax Act, 1961 should be deleted or
\nset aside?\u201d
\n4. The High Court, disagreeing with the Tribunal,
\nheld, that the provisions of Section 142 and subsections
\n(2) and (3) of Section 143 will have
\nmandatory application in a case where the assessing
\nofficer in repudiation of return filed in response to a
\nnotice issued under Section 158-BC(a) proceeds to
\nmake an inquiry. Accordingly, the High Court
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\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
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\nanswered the question of law framed in affirmative
\nand in favour of the appellant and against the
\nRevenue. The Revenue thereafter applied to this Court
\nfor special leave under Article 136, and the same was
\ngranted, and hence this appeal.
\n\u2026 \u2026 \u2026
\n13. The only question that arises for our consideration
\nin this batch of appeals is: whether service of notice
\non the assessee under Section 143(2) within the
\nprescribed period of time is a prerequisite for framing
\nthe block assessment under Chapter XIV-B of the
\nIncome Tax Act, 1961?
\n\u2026 \u2026 \u2026
\n27. The case of the Revenue is that the expression \u201cso
\nfar as may be, apply\u201d indicates that it is not expected
\nto follow the provisions of Section 142, sub-sections
\n(2) and (3) of Section 143 strictly for the purpose of
\nblock assessments. We do not agree with the
\nsubmissions of the learned counsel for the Revenue,
\nsince we do not see any reason to restrict the scope
\nand meaning of the expression \u201cso far as may be,
\napply\u201d. In our view, where the assessing officer in
\nrepudiation of the return filed under Section 158-
\nBC(a) proceeds to make an enquiry, he has
\nnecessarily to follow the provisions of Section 142,
\nsub-sections (2) and (3) of Section 143.\u201d
\n6. The question, however, remains whether Section 292BB which
\ncame into effect on and from 01.04.2008 has effected any change. Said
\nSection 292BB is to the following effect:-
\n\u201c292BB. Notice deemed to be valid in certain
\ncircumstances. \u2013 Where an assessee has appeared in
\nany proceeding or cooperated in any inquiry relating
\nto an assessment or reassessment, it shall be deemed
\nthat any notice under any provision of this Act, which
\nis required to be served upon him, has been duly
\nserved upon him in time in accordance with the
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\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
\n6
\nprovisions of this Act and such assessee shall be
\nprecluded from taking any objection in any
\nproceeding or inquiry under this Act that the notice
\nwas \u2013
\n(a) Not served upon him; or
\n(b) Not served upon him in time; or
\n(c) Served upon him in an improper manner:
\nProvided that nothing contained in this section shall
\napply where the assessee has raised such objection
\nbefore the completion of such assessment or
\nreassessment.\u201d
\n7. A closer look at Section 292BB shows that if the assessee has
\nparticipated in the proceedings it shall be deemed that any notice which is
\nrequired to be served upon was duly served and the assessee would be
\nprecluded from taking any objections that the notice was (a) not served
\nupon him; or (b) not served upon him in time; or (c) served upon him in an
\nimproper manner. According to Mr. Mahabir Singh, learned Senior
\nAdvocate, since the Respondent had participated in the proceedings, the
\nprovisions of Section 292BB would be a complete answer.
\nOn the other hand, Mr. Ankit Vijaywargia, learned Advocate,
\nappearing for the Respondent submitted that the notice under Section
\n143(2) of the Act was never issued which was evident from the orders
\npassed on record as well as the stand taken by the Appellant in the memo
\nof appeal. It was further submitted that issuance of notice under Section
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\nSLP(C)No.Diary No. 7708 of 2019
\nCommissioner of Income Tax vs. Laxman Das Khandelwal
\n7
\n143(2) of the Act being prerequisite, in the absence of such notice, the
\nentire proceedings would be invalid.
\n8. The law on the point as regards applicability of the requirement of
\nnotice under Section 143(2) of the Act is quite clear from the decision in
\nBlue Moon\u2019s case2. The issue that however needs to be considered is the
\nimpact of Section 292BB of the Act.
\n9. According to Section 292BB of the Act, if the assessee had
\nparticipated in the proceedings, by way of legal fiction, notice would be
\ndeemed to be valid even if there be infractions as detailed in said Section.
\nThe scope of the provision is to make service of notice having certain
\ninfirmities to be proper and valid if there was requisite participation on part
\nof the assessee. It is, however, to be noted that the Section does not save
\ncomplete absence of notice. For Section 292BB to apply, the notice must
\nhave emanated from the department. It is only the infirmities in the
\nmanner of service of notice that the Section seeks to cure. The Section is
\nnot intended to cure complete absence of notice itself.
\n10. Since the facts on record are clear that no notice under Section
\n143(2) of the Act was ever issued by the Department, the findings rendered
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\nCommissioner of Income Tax vs. Laxman Das Khandelwal
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\nby the High Court and the Tribunal and the conclusion arrived at were
\ncorrect. We, therefore, see no reason to take a different view in the matter.
\n11. These Appeals are, therefore, dismissed. No costs.
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..J.
\n[Uday Umesh Lalit]
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..J.
\n[Vineet Saran]
\nNew Delhi;
\nAugust 13, 2019.<\/p>\n","protected":false},"excerpt":{"rendered":"
According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.<\/p>\n