COMMISSIONER OF INCOME TAXversusLAXMAN DAS KHANDELWAL

24                       [2019]
              SUPREME COURT     10 S.C.R. 24
                             REPORTS                     [2019] 10 S.C.R.


A                   COMMISSIONER OF INCOME TAX
                                       v.
                      LAXMAN DAS KHANDELWAL
                     (Civil Appeal Nos. 6261-62 of 2019)
B                             AUGUST 13, 2019
          [UDAY UMESH LALIT AND VINEET SARAN, JJ.]
           Income Tax Act, 1961: s. 143(2) – Absence of notice u/s.
     143(2) – However, assessee participated in the assessment
     proceedings – Effect of, on re-assessment proceedings – Impact of
C
     s. 292 BB – Held: Section 292BB shows that if the assessee has
     participated in the proceedings it shall be deemed that any notice
     which is required to be served upon was duly served and the assessee
     would be precluded from taking any objections that the notice was
     not served upon him; or not served upon him in time; or served
D    upon him in an improper manner – 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 –
     However, the Section does not save complete absence of notice –
     For s. 292BB to apply, the notice must have emanated from the
     department – It is only the infirmities in the manner of service of
E
     notice that the Section seeks to cure – On facts, since no notice u/s.
     143(2) was ever issued by the Department, the High Court and the
     tribunal rightly quashed the reassessment proceedings since the same
     stood vitiated as the Assessment Officer lacked jurisdiction in the
     absence of notice u/s. 143(2) of the Act.
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           Dismissing the appeals, the Court
           HELD: A closer look at Section 292BB of the Income Tax
     Act, 1961 shows that if the assessee has participated in the
     proceedings it shall be deemed that any notice which is required
     to be served upon was duly served and the assessee would be
G    precluded from taking any objections that the notice was not
     served upon him; or not served upon him in time; or served
     upon him in an improper manner. According to Section 292BB, if


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     COMMISSIONER OF INCOME TAX v. LAXMAN DAS                          25
                   KHANDELWAL

the assessee had participated in the proceedings, by way of legal      A
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
                                                                       B
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. Since the facts on record are clear that
no notice under Section 143(2) of the Act was ever issued by the       C
Department, the findings rendered by the High Court and the
Tribunal and the conclusion arrived at that the reassessment
proceedings are quashed since the same stood vitiated as
the Assessment Officer lacked jurisdiction in the absence
of notice u/s.143(2) of the Act, were correct. [Para 7, 9, 10, 3]
                                                                       D
[29-F; 30-C-E]
      ACIT v. Hotel Blue Moon (2010) 321 ITR 362 ; Assistant
      Commissioner of Income Tax and Another v. Hotel Blue
      Moon (2010) 3 SCC 259 : [2010] 2 SCR 282 - referred
      to.
                                                                       E
                      Case Law Reference
(2010) 321 ITR 362             referred to            Para 3
[2010] 2 SCR 282               referred to            Para 4
      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6261-           F
6262 of 2019.
      From the final Judgment and Order dated 27.04.2018 and
14.09.2018 of the High Court of Madhya Pradesh at Gwalior in ITA
No.97 of 2018 and RP No.1289 of 2018 respectively.
     Mahabir Singh, Sr. Adv., S.A. Haseeb, Ms. Swati Gildyal, Vikas    G
Bansal, Mrs. Anil Katiyar, Advs. for the Appellant.
     Ankit Vijaywargiya, Aditya Verma, Shrey Patnaik, Advs. for the
Respondent.

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26               SUPREME COURT REPORTS                       [2019] 10 S.C.R.


A             The Judgment of the Court was delivered by
              UDAY UMESH LALIT, J.
              1. Delay condoned. Leave granted.
           2. These Appeals are directed against the judgment and final order
B    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.
          3. The relevant facts leading to the filing of aforementioned Income
     Tax Appeal No.97 of 2018 before the High Court, as culled out from the
C    judgment and order dated 27.04.2018 presently under appeal are as under:-
              “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
D             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
E             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
F             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
G             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
     1
H        High Court of Madhya Pradesh at Gwalior
        COMMISSIONER OF INCOME TAX v. LAXMAN DAS                                27
           KHANDELWAL [UDAY UMESH LALIT, J. ]

         jurisdiction in absence of notice under Section 143(2) of the act of   A
         1961. The Tribunal observed:
            “17. 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       B
            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       C
            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         D
            in the case of ‘ACIT v. Hotel Blue Moon’ (2010) 321 ITR 362
            (Supra).”
       4. In said appeal arising from the decision of the Income Tax
Appellate Tribunal (‘the Tribunal’, for short), the issue that arose before
the High Court was the effect of absence of notice under Section 143(2)         E
of the Income Tax Act, 1961 (‘the Act’, for short). The Respondent-
Assessee relied upon the decision of this Court in Assistant
Commissioner of Income Tax and Another vs. Hotel Blue Moon2.
On the other hand, reliance was placed by the Appellant on the provisions
of Section 292BB of the Act to submit that the Respondent having
participated in the proceedings, the defect, if any, stood completely cured.    F

       5. At the outset, it must be stated that out of two questions of law
that arose for consideration in Hotel Blue Moon’s case2 the first question
was whether notice under Section 143(2) would be mandatory for the
purpose of making the assessment under Section 143(3) of the Act. It
was observed:-                                                                  G
         “3. 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. In the appeal filed
2
    (2010) 3 SCC 259                                                            H
28      SUPREME COURT REPORTS                          [2019] 10 S.C.R.


A    by the assessee before the Gauhati High Court, the following two
     questions of law were raised for consideration and decision of the
     High Court, they were:
        “(1) Whether on the facts and in circumstances of the case
        the issuance of notice under Section 143(3) of the Income Tax
B       Act, 1961 within the prescribed time-limit for the purpose of
        making the assessment under Section 143(3) of the Income
        Tax Act, 1961 is mandatory? And
        (2) Whether, on the facts and in the circumstances of the case
        and in view of the undisputed findings arrived at by the
C       Commissioner of Income Tax (Appeals), the additions made
        under Section 68 of the Income Tax Act, 1961 should be deleted
        or set aside?”
     4. The High Court, disagreeing with the Tribunal, held, that the
     provisions of Section 142 and sub-sections (2) and (3) of Section
D    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
E    Article 136, and the same was granted, and hence this appeal.
                        …        …                      …
     13. The only question that arises for our consideration in this batch
     of appeals is: whether service of notice on the assessee under
F    Section 143(2) within the prescribed period of time is a prerequisite
     for framing the block assessment under Chapter XIV-B of the
     Income Tax Act, 1961?
                        …        …                …
     27. The case of the Revenue is that the expression “so far as
G    may be, apply” indicates that it is not expected to follow the
     provisions of Section 142, sub-sections (2) and (3) of Section 143
     strictly for the purpose of block assessments. We do not agree
     with the submissions of the learned counsel for the Revenue, since
     we do not see any reason to restrict the scope and meaning of the
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     COMMISSIONER OF INCOME TAX v. LAXMAN DAS                                 29
        KHANDELWAL [UDAY UMESH LALIT, J. ]

      expression “so far as may be, apply”. In our view, where the            A
      assessing officer in repudiation of the return filed under Section
      158-BC(a) proceeds to make an enquiry, he has necessarily to
      follow the provisions of Section 142, sub-sections (2) and (3) of
      Section 143.”
      6. The question, however, remains whether Section 292BB which           B
came into effect on and from 01.04.2008 has effected any change. Said
Section 292BB is to the following effect:-
      “292BB. Notice deemed to be valid in certain
      circumstances. – Where an assessee has appeared in any
      proceeding or cooperated in any inquiry relating to an assessment       C
      or reassessment, it shall be deemed that any notice under any
      provision of this Act, which is required to be served upon him, has
      been duly served upon him in time in accordance with the provisions
      of this Act and such assessee shall be precluded from taking any
      objection in any proceeding or inquiry under this Act that the notice
      was –                                                                   D
      (a) Not served upon him; or
      (b) Not served upon him in time; or
      (c) Served upon him in an improper manner:
      Provided that nothing contained in this section shall apply where
      the assessee has raised such objection before the completion of         E
      such assessment or reassessment.”
       7. A closer look at Section 292BB shows that if the assessee has
participated in the proceedings it shall be deemed that any notice which
is required to be served upon was duly served and the assessee would
be precluded from taking any objections that the notice was (a) not           F
served upon him; or (b) not served upon him in time; or (c) served upon
him in an improper manner. According to Mr. Mahabir Singh, learned
Senior Advocate, since the Respondent had participated in the
proceedings, the provisions of Section 292BB would be a complete
answer.                                                                       G
      On the other hand, Mr. Ankit Vijaywargia, learned Advocate,
appearing for the Respondent submitted that the notice under Section
143(2) of the Act was never issued which was evident from the orders

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30                SUPREME COURT REPORTS                       [2019] 10 S.C.R.


A    passed on record as well as the stand taken by the Appellant in the
     memo of appeal. It was further submitted that issuance of notice under
     Section 143(2) of the Act being prerequisite, in the absence of such
     notice, the entire proceedings would be invalid.
             8. The law on the point as regards applicability of the requirement
B    of notice under Section 143(2) of the Act is quite clear from the decision
     in Blue Moon’s case2. The issue that however needs to be considered
     is the impact of Section 292BB of the Act.
            9. According to Section 292BB of the Act, if the assessee had
     participated in the proceedings, by way of legal fiction, notice would be
C    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
D    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.
            10. 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
E    at were correct. We, therefore, see no reason to take a different view
     in the matter.
             11. These Appeals are, therefore, dismissed. No costs.


F    Nidhi Jain                                                  Appeals dismissed.




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