Is a notice under s.143(2) a jurisdictional precondition, or merely a procedural step the Assessing Officer can skip?
The Revenue argued that in a block assessment under Chapter XIV-B the words 'so far as may be' in s.158BC(b) made the s.143(2) notice optional. The Supreme Court rejected this and held that where the Assessing Officer repudiates the return and proceeds to enquire, the s.143(2) notice must be issued within the prescribed time. Omission to issue it is not a curable procedural irregularity.
Decided by the Supreme Court (Supreme Court of India — H.L. Dattu and S.H. Kapadia, JJ. (judgment delivered by H.L. Dattu, J.)) on 2010-02-02, reported as (2010) 321 ITR 362 (SC); [2010] 188 Taxman 113 (SC); 2010 (2) TMI 1 (SC); Civil Appeal No. 1198 of 2010 (arising out of SLP(C) No. 22973 of 2007), heard with Civil Appeal Nos. 1199-1203 of 2010. It bears on section 143(2), section 158BC, section 142 of the Income Tax Act 1961, in Assessment & Scrutiny and Search, Survey & Block Assessment matters.
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A search under s.132 was carried out and the assessee filed a block return under s.158BC(a). The Assessing Officer did not accept the return and framed a block assessment of undisclosed income without ever issuing a notice under s.143(2). The CIT(A) and the Tribunal treated the omission as a curable procedural irregularity. The Gauhati High Court disagreed and held the notice mandatory, and the Revenue appealed to the Supreme Court along with connected matters.
Where the Assessing Officer, in repudiation of the return filed under s.158BC(a), proceeds to make an enquiry, he must follow s.142 and sub-sections (2) and (3) of s.143. The issue of notice under s.143(2) within the prescribed period is mandatory for an assessment under s.143(3) read with s.158BC, and its omission is not a procedural irregularity capable of being cured. CBDT Circular No. 717 dated 14 August 1995, which said as much, is binding on the Department.
The expression 'so far as may be' in s.158BC(b) governs the manner of application of the machinery provisions, not the power to dispense with them altogether. Section 143(2) is the assessee's only statutory opportunity to meet the officer's proposed departure from the return, so it goes to the officer's authority to make an assessment rather than to the form of the order. A notice is required only when the officer proposes to reject or go behind the return; if the return is accepted as filed, no notice is needed, which is why the section is expressed in that conditional way. Because the Board's own circular directed officers to issue the notice, the Department could not argue the opposite before the Court.
In our view, where the 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.
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Handle my notice → Ask a CA on WhatsAppThe Revenue argued that in a block assessment under Chapter XIV-B the words 'so far as may be' in s.158BC(b) made the s.143(2) notice optional. The Supreme Court rejected this and held that where the Assessing Officer repudiates the return and proceeds to enquire, the s.143(2) notice must be issued within the prescribed time. Omission to issue it is not a curable procedural irregularity. This was decided by the Supreme Court (Supreme Court of India — H.L. Dattu and S.H. Kapadia, JJ. (judgment delivered by H.L. Dattu, J.)) and bears on section 143(2), section 158BC, section 142 of the Income Tax Act 1961. It is reported as (2010) 321 ITR 362 (SC); [2010] 188 Taxman 113 (SC); 2010 (2) TMI 1 (SC); Civil Appeal No. 1198 of 2010 (arising out of SLP(C) No. 22973 of 2007), heard with Civil Appeal Nos. 1199-1203 of 2010. If it applies to you, the first step is this: Before arguing merits, obtain the assessment record and check the date of issue (not merely of service) of the s.143(2) notice against the statutory outer date.
A search under s.132 was carried out and the assessee filed a block return under s.158BC(a). The Assessing Officer did not accept the return and framed a block assessment of undisclosed income without ever issuing a notice under s.143(2). The CIT(A) and the Tribunal treated the omission as a curable procedural irregularity. The Gauhati High Court disagreed and held the notice mandatory, and the Revenue appealed to the Supreme Court along with connected matters. The matter was decided on 2010-02-02 by the Supreme Court (Supreme Court of India — H.L. Dattu and S.H. Kapadia, JJ. (judgment delivered by H.L. Dattu, J.)). On those facts the Supreme Court held as follows. Where the Assessing Officer, in repudiation of the return filed under s.158BC(a), proceeds to make an enquiry, he must follow s.142 and sub-sections (2) and (3) of s.143. The issue of notice under s.143(2) within the prescribed period is mandatory for an assessment under s.143(3) read with s.158BC, and its omission is not a procedural irregularity capable of being cured. CBDT Circular No. 717 dated 14 August 1995, which said as much, is binding on the Department.
The expression 'so far as may be' in s.158BC(b) governs the manner of application of the machinery provisions, not the power to dispense with them altogether. Section 143(2) is the assessee's only statutory opportunity to meet the officer's proposed departure from the return, so it goes to the officer's authority to make an assessment rather than to the form of the order. A notice is required only when the officer proposes to reject or go behind the return; if the return is accepted as filed, no notice is needed, which is why the section is expressed in that conditional way. Because the Board's own circular directed officers to issue the notice, the Department could not argue the opposite before the Court. In the words reproduced by the source cited on this page: "In our view, where the 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."
It was decided by the Supreme Court on 2010-02-02 and is reported as (2010) 321 ITR 362 (SC); [2010] 188 Taxman 113 (SC); 2010 (2) TMI 1 (SC); Civil Appeal No. 1198 of 2010 (arising out of SLP(C) No. 22973 of 2007), heard with Civil Appeal Nos. 1199-1203 of 2010. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 143(2), section 158BC, section 142, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Where the Assessing Officer, in repudiation of the return filed under s.158BC(a), proceeds to make an enquiry, he must follow s.142 and sub-sections (2) and (3) of s.143. The issue of notice under s.143(2) within the prescribed period is mandatory for an assessment under s.143(3) read with s.158BC, and its omission is not a procedural irregularity capable of being cured. CBDT Circular No. 717 dated 14 August 1995, which said as much, is binding on the Department. It arises in Assessment & Scrutiny and Search, Survey & Block Assessment matters, on section 143(2), section 158BC, section 142 of the Income Tax Act 1961, and was decided by Supreme Court of India — H.L. Dattu and S.H. Kapadia, JJ. (judgment delivered by H.L. Dattu, J.). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take the point as a jurisdictional ground; it can be raised for the first time before the Tribunal as a pure question of law. Ask for the despatch register / ITBA generation log to prove the notice was never issued, rather than relying on the assessee's non-receipt. Distinguish 'non-issue' from 'non-service' expressly, because s.292BB only reaches the latter. In search matters, check which assessment regime applies (Chapter XIV-B before 1 June 2003; s.153A/153C for a search initiated up to 31 March 2021; ss.147 to 151 in their pre-Finance (No. 2) Act 2024 form, by s.152(3), for a search initiated between 1 April 2021 and 31 August 2024; the revived block regime from 1 September 2024) before assuming the same rule applies.
Still good law. Separate check: the ratio has been carried forward and applied to reassessments, and the Supreme Court in CIT v Laxman Das Khandelwal (2019) held complete absence of a s.143(2) notice is not cured by s.292BB. Several High Courts have, however, declined to extend Hotel Blue Moon to assessments under s.153A/153C, treating the notice as not mandatory there. That finding was checked against a published source, which is linked on this page, on 2026-08-19. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Where the Assessing Officer, in repudiation of the return filed under s.158BC(a), proceeds to make an enquiry, he must follow s.142 and sub-sections (2) and (3) of s.143. The issue of notice under s.143(2) within the prescribed period is mandatory for an assessment under s.143(3) read with s.158BC, and its omission is not a procedural irregularity capable of being cured. CBDT Circular No. 717 dated 14 August 1995, which said as much, is binding on the Department.
TaxSphere, “ACIT v Hotel Blue Moon”, https://taxnotice.vittsphere.com/caselaw/case/acit-v-hotel-blue-moon-143-2-mandatory/ (validity last checked 2026-08-19)
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