Law:

Section:

Section 158BC, read with section 143(2), of the Income-tax Act, 1961 - Block assessment in search cases - Procedure for - Whether for determination of undisclosed income for a block period under provisions of section 158BC, provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment can be made without issuing notice under section 143(2) - Held, yes - Whether, therefore, where Assessing Officer, for any reason, repudiates return filed by assessee in response to notice under section 158BC(a), he must necessarily issue a notice under section 143(2) within time prescribed in proviso to section 143(2) - Held, yes FACTS The point raised for determination was, whether the issue of notice under section 143(2) within the prescribed time for the purpose of block assessment under Chapter XIV-B is mandatory for assessing undisclosed income detected during search conducted under section 132. According to the department, issue of a notice under section 143(2) is not essential requirement in the block assessment under Chapter XIV-B. However, according to the assessee, service of notice on the assessee under section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B. The appellate Tribunal held that non-issue of a notice under section 143(2) is only a procedural irregularity and the same is curable. On appeal, the High Court, disagreeing with the Tribunal, held that the provisions of section 142 and sub-sections (2) and (3) of section 143 would have mandatory application in a case where the Assessing Officer in repudiation of return filed in response to a notice issued under section 158BC(a) proceeds to make an inquiry. On the revenue's appeal to the Supreme Court : HELD Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block…

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