Supreme Court’s decision in the case of Hotel Blue Moon

Court :
Supreme Court

Brief :
The Supreme Court on February 2, 2010 delivered a judgment in the case of Asstt. CIT v. Hotel Blue Moon [2010] 188 Taxman 113, [along with other 5 appeals heard together] against the Income-tax Department. The only issue for the determination of the Court was whether for the assessment of undisclosed income under the block assessment scheme prescribed under Chapter XIV-B of the Income-tax Act, 1961 (‘the Act’), [discontinued from June 1, 2003] issue of notice under section 143(2) of the Act within the prescribed time-limit was mandatory for assessing undisclosed income detected during search under section 132 of the Act. The Income-tax Department’s contention was that issue of such a notice was not an essential requirement in block assessment cases, while the assessees’ counsel argued that it is a pre-requisite for making the assessments under the block assessment scheme. The Tribunal held, while affirming the decision of the Commissioner (Appeals), that non-issue of notice under section 143(2) is only a procedural irregularity and the same is curable. The Guwahati High Court did not agree with the view of the Tribunal and decided that the provisions of sub-sections (2) and (3) of section 143 have mandatory application where the Assessing Officers in repudiation of return filed in response to notices issued under section 158BC(a) proceed to make inquiries. The Income-tax Department filed appeals before the Supreme Court, which have been disposed of by a common order by the Court.

Citation :
Supreme Court’s decision in the case of Hotel Blue Moon t.n. Pandey* The author in this article has examined ex- haustively the decision of the Supreme Court concerning procedure regarding assessments under the block assessment scheme under Chapter XIV-B of the Income-tax Act, 1961 (‘the Act’). The Court was required to interpret section 158BC(b) of the Act to decide whether issue of notice under section 143(2) of the Act was necessary before making assessment under section 158BB. The issue for consideration was whether the words ‘as far as may be’ could be considered as equivalent to ‘shall’ and, hence, such a notice was mandatory before completion of the assessment. The author has, for various reasons disagreed with the view of the Supreme Court and has suggested rectificatory action by filing a review petition before the Court/amendment operative from the date Chapter XIV-B was brought in the Act.