My post-search assessment under section 153A was completed without any notice under section 143(2). Does Hotel Blue Moon make that fatal?
No. The Delhi High Court held that there is no specific provision in the Act requiring an assessment under section 153A to be preceded by a notice under section 143(2). Hotel Blue Moon turned on clause (b) of section 158BC, which expressly applies sub-sections (2) and (3) of section 143 to a block assessment; section 153A contains no such provision. The words 'so far as may be' in clause (a) of section 153A(1) cannot be stretched to make a section 143(2) notice mandatory, because a specific notice is already required under that clause calling for the return. In any event the two detailed questionnaires issued here served the purpose. The appeal was dismissed.
Decided by the High Court (High Court of Delhi at New Delhi; A.K. Sikri J and M.L. Mehta J, judgment by M.L. Mehta J) on 2011-07-27, reported as ITA No. 271/2011, Delhi High Court, assessment year 2004-05. It bears on section 153A, section 153A(1)(a), section 143(2), section 158BC, section 69A, section 260A of the Income Tax Act 1961, in Search, Survey & Block Assessment and Assessment & Scrutiny matters.
This is the decision the department relies on whenever a section 153A assessment is challenged for want of a section 143(2) notice, and it is the necessary starting point for anyone raising that ground. Its reasoning is textual and narrow: section 158BC(b) expressly imported sub-sections (2) and (3) of section 143 into a block assessment, which is what made the notice mandatory in Hotel Blue Moon, and section 153A does no such thing. It also disposes of the argument built on the phrase 'so far as may be', on the footing that section 153A(1)(a) already prescribes its own notice. Alongside it the Court records its recent view in Madhya Bharat Energy Corporation that, absent a specific provision in section 147, a section 143(2) notice is not mandatory for a reassessment either. A practitioner should know that the section 143(2) point in search assessments is contested and has been argued differently elsewhere, but in Delhi this is the answer he will meet.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A search under section 132(1) was carried out at the assessee's residence and at his locker with Union Bank of India. Cash of Rs 22,500 and jewellery worth Rs 4,15,879 were found at the residence and jewellery worth Rs 2,77,703 in the locker. A notice under section 153A was issued, in response to which the assessee filed a return declaring income of Rs 90,080. Two questionnaires, dated 7 December 2007 and 27 December 2007, were issued and duly complied with, and after hearing the assessee the total income was computed at Rs 23,31,760 by an assessment order passed on 31 December 2007. Separately, cash of Rs 10,00,000 had been seized on 20 April 2003 by the Railway Police from Shri Rawat, an employee of the assessee, at Bhopal Railway Station; on first interrogation Rawat told the Thana Prabhari that the money belonged to the assessee, and the money was later taken over by the department under section 132A. That sum was added in the assessee's hands under section 69A. The assessee said it belonged to his nephew, Shri Sudhir Chadha, who had sent it for a property transaction with Rawat acting only as a carrier, and produced a copy of a recovery suit filed by the nephew. Before the Commissioner (Appeals) the assessee took an additional ground that the assessment was void for want of a notice under section 143(2). The Commissioner (Appeals) rejected both grounds, holding on the cash that the matter was still pending before the Railway Magistrate at Bhopal and that no acceptable explanation had been given for the employee's possession of the money. The Tribunal, by order dated 17 September 2010, upheld both findings, noting that the nephew's claim was made on 23 January 2008, after the assessment order, that he had not been produced for examination before the officer or offered for production before the appellate authorities, and that the claim was an afterthought lacking the ring of truth. The assessee appealed under section 260A.
Both issues were decided in favour of the Revenue and the appeal was dismissed. On the first, the Court held that there is no specific provision in the Act requiring an assessment made under section 153A to follow a notice under section 143(2). Section 153A(1) opens with a non obstante clause and clause (a) requires the officer to issue notice to the person searched or whose documents were requisitioned to furnish a return; that clause nowhere prescribes the issue of a notice under section 143(2). Since a specific notice is required under clause (a), no further notice under section 143(2) is contemplated for an assessment under section 153A, and the words 'so far as may be' cannot be stretched to make one mandatory. The Court added that no specific notice under section 143(2) was required where the notice under section 153A(1)(a) had already been given, and that in any event the two questionnaires were sufficient notice, asking the assessee to attend in person or through an authorised representative and to produce accounts, documents and any other evidence relied on in support of his return. On the second, the Court agreed with the concurrent findings of the Commissioner (Appeals) and the Tribunal that the nephew's claim to the Rs 10,00,000 was an afterthought made to accommodate the assessee.
On the notice point the Court proceeded by comparing the two search regimes. Hotel Blue Moon v DCIT, (2010) 321 ITR 362, held that where an assessment is to be completed under section 143(3) read with section 158BC, a notice under section 143(2) must be issued and the omission is not a curable procedural irregularity. But that holding rested on the text of clause (b) of section 158BC, which expressly provides that the officer shall determine the undisclosed income of the block period in the manner laid down in section 158BB and that the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall so far as may be apply. Section 153A contains no equivalent, so the ratio of Hotel Blue Moon does not travel to it. The Court then dealt with the assessee's other authorities. Lunar Diamond Ltd, Vardhman Estates and Bhan Textiles concerned the requirement of service of notice within a prescribed time and were beside the point. Pawan Gupta concerned the mandatory issue of a section 143(2) notice in a regular assessment and in a block assessment, not an assessment under section 153A. Raj Kumar Chawla was a Tribunal decision that the proviso to section 143(2) must be complied with where a return filed under section 148 is to be scrutinised, and the Court noted that it had recently held in CIT v Madhya Bharat Energy Corporation, ITA No. 950/08 decided on 11 July 2011, that in the absence of a specific provision in section 147 the issue of a notice under section 143(2) is not mandatory. R. Dalmia v CIT, (1999) 236 ITR 480, on which the assessee relied for the proposition that in making assessments and reassessments under section 147 the procedure in the provisions after section 139 must be followed, was held to have been primarily about the applicability of section 144B and section 153 to assessments under sections 147 and 148, and not a decision laying down the law on the mandatory issue of a notice under section 143(2). On the cash, the Court adopted the reasoning of the authorities below: the money was seized on 20 April 2003 and the employee then said it belonged to the assessee; the nephew's claim came on 23 January 2008, almost five years later and only after the assessment order of 31 December 2007; no step had been taken in the intervening years; the nephew was never produced for examination and no proposal to produce him was made at any stage; no details of the land said to be under purchase were furnished; and no plausible explanation was given for the employee's possession of the cash.
The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court held that there is no specific provision in the Act requiring an assessment under section 153A to be preceded by a notice under section 143(2). Hotel Blue Moon turned on clause (b) of section 158BC, which expressly applies sub-sections (2) and (3) of section 143 to a block assessment; section 153A contains no such provision. The words 'so far as may be' in clause (a) of section 153A(1) cannot be stretched to make a section 143(2) notice mandatory, because a specific notice is already required under that clause calling for the return. In any event the two detailed questionnaires issued here served the purpose. The appeal was dismissed. This was decided by the High Court (High Court of Delhi at New Delhi; A.K. Sikri J and M.L. Mehta J, judgment by M.L. Mehta J) and bears on section 153A, section 153A(1)(a), section 143(2), section 158BC, section 69A, section 260A of the Income Tax Act 1961. It is reported as ITA No. 271/2011, Delhi High Court, assessment year 2004-05. This is the decision the department relies on whenever a section 153A assessment is challenged for want of a section 143(2) notice, and it is the necessary starting point for anyone raising that ground. Its reasoning is textual and narrow: section 158BC(b) expressly imported sub-sections (2) and (3) of section 143 into a block assessment, which is what made the notice mandatory in Hotel Blue Moon, and section 153A does no such thing. It also disposes of the argument built on the phrase 'so far as may be', on the footing that section 153A(1)(a) already prescribes its own notice. Alongside it the Court records its recent view in Madhya Bharat Energy Corporation that, absent a specific provision in section 147, a section 143(2) notice is not mandatory for a reassessment either. A practitioner should know that the section 143(2) point in search assessments is contested and has been argued differently elsewhere, but in Delhi this is the answer he will meet. If it applies to you, the first step is this: Do not build a section 153A challenge on the absence of a section 143(2) notice alone; on this reasoning the notice under section 153A(1)(a) is the notice the statute requires.
A search under section 132(1) was carried out at the assessee's residence and at his locker with Union Bank of India. Cash of Rs 22,500 and jewellery worth Rs 4,15,879 were found at the residence and jewellery worth Rs 2,77,703 in the locker. A notice under section 153A was issued, in response to which the assessee filed a return declaring income of Rs 90,080. Two questionnaires, dated 7 December 2007 and 27 December 2007, were issued and duly complied with, and after hearing the assessee the total income was computed at Rs 23,31,760 by an assessment order passed on 31 December 2007. Separately, cash of Rs 10,00,000 had been seized on 20 April 2003 by the Railway Police from Shri Rawat, an employee of the assessee, at Bhopal Railway Station; on first interrogation Rawat told the Thana Prabhari that the money belonged to the assessee, and the money was later taken over by the department under section 132A. That sum was added in the assessee's hands under section 69A. The assessee said it belonged to his nephew, Shri Sudhir Chadha, who had sent it for a property transaction with Rawat acting only as a carrier, and produced a copy of a recovery suit filed by the nephew. Before the Commissioner (Appeals) the assessee took an additional ground that the assessment was void for want of a notice under section 143(2). The Commissioner (Appeals) rejected both grounds, holding on the cash that the matter was still pending before the Railway Magistrate at Bhopal and that no acceptable explanation had been given for the employee's possession of the money. The Tribunal, by order dated 17 September 2010, upheld both findings, noting that the nephew's claim was made on 23 January 2008, after the assessment order, that he had not been produced for examination before the officer or offered for production before the appellate authorities, and that the claim was an afterthought lacking the ring of truth. The assessee appealed under section 260A. The matter was decided on 2011-07-27 by the High Court (High Court of Delhi at New Delhi; A.K. Sikri J and M.L. Mehta J, judgment by M.L. Mehta J). On those facts the High Court held as follows. Both issues were decided in favour of the Revenue and the appeal was dismissed. On the first, the Court held that there is no specific provision in the Act requiring an assessment made under section 153A to follow a notice under section 143(2). Section 153A(1) opens with a non obstante clause and clause (a) requires the officer to issue notice to the person searched or whose documents were requisitioned to furnish a return; that clause nowhere prescribes the issue of a notice under section 143(2). Since a specific notice is required under clause (a), no further notice under section 143(2) is contemplated for an assessment under section 153A, and the words 'so far as may be' cannot be stretched to make one mandatory. The Court added that no specific notice under section 143(2) was required where the notice under section 153A(1)(a) had already been given, and that in any event the two questionnaires were sufficient notice, asking the assessee to attend in person or through an authorised representative and to produce accounts, documents and any other evidence relied on in support of his return. On the second, the Court agreed with the concurrent findings of the Commissioner (Appeals) and the Tribunal that the nephew's claim to the Rs 10,00,000 was an afterthought made to accommodate the assessee.
On the notice point the Court proceeded by comparing the two search regimes. Hotel Blue Moon v DCIT, (2010) 321 ITR 362, held that where an assessment is to be completed under section 143(3) read with section 158BC, a notice under section 143(2) must be issued and the omission is not a curable procedural irregularity. But that holding rested on the text of clause (b) of section 158BC, which expressly provides that the officer shall determine the undisclosed income of the block period in the manner laid down in section 158BB and that the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall so far as may be apply. Section 153A contains no equivalent, so the ratio of Hotel Blue Moon does not travel to it. The Court then dealt with the assessee's other authorities. Lunar Diamond Ltd, Vardhman Estates and Bhan Textiles concerned the requirement of service of notice within a prescribed time and were beside the point. Pawan Gupta concerned the mandatory issue of a section 143(2) notice in a regular assessment and in a block assessment, not an assessment under section 153A. Raj Kumar Chawla was a Tribunal decision that the proviso to section 143(2) must be complied with where a return filed under section 148 is to be scrutinised, and the Court noted that it had recently held in CIT v Madhya Bharat Energy Corporation, ITA No. 950/08 decided on 11 July 2011, that in the absence of a specific provision in section 147 the issue of a notice under section 143(2) is not mandatory. R. Dalmia v CIT, (1999) 236 ITR 480, on which the assessee relied for the proposition that in making assessments and reassessments under section 147 the procedure in the provisions after section 139 must be followed, was held to have been primarily about the applicability of section 144B and section 153 to assessments under sections 147 and 148, and not a decision laying down the law on the mandatory issue of a notice under section 143(2). On the cash, the Court adopted the reasoning of the authorities below: the money was seized on 20 April 2003 and the employee then said it belonged to the assessee; the nephew's claim came on 23 January 2008, almost five years later and only after the assessment order of 31 December 2007; no step had been taken in the intervening years; the nephew was never produced for examination and no proposal to produce him was made at any stage; no details of the land said to be under purchase were furnished; and no plausible explanation was given for the employee's possession of the cash. In the words reproduced by the source cited on this page: "The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A"
It was decided by the High Court on 2011-07-27 and is reported as ITA No. 271/2011, Delhi High Court, assessment year 2004-05. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 153A, section 153A(1)(a), section 143(2), section 158BC, section 69A, section 260A, 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 helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. Both issues were decided in favour of the Revenue and the appeal was dismissed. On the first, the Court held that there is no specific provision in the Act requiring an assessment made under section 153A to follow a notice under section 143(2). Section 153A(1) opens with a non obstante clause and clause (a) requires the officer to issue notice to the person searched or whose documents were requisitioned to furnish a return; that clause nowhere prescribes the issue of a notice under section 143(2). Since a specific notice is required under clause (a), no further notice under section 143(2) is contemplated for an assessment under section 153A, and the words 'so far as may be' cannot be stretched to make one mandatory. The Court added that no specific notice under section 143(2) was required where the notice under section 153A(1)(a) had already been given, and that in any event the two questionnaires were sufficient notice, asking the assessee to attend in person or through an authorised representative and to produce accounts, documents and any other evidence relied on in support of his return. On the second, the Court agreed with the concurrent findings of the Commissioner (Appeals) and the Tribunal that the nephew's claim to the Rs 10,00,000 was an afterthought made to accommodate the assessee. It arises in Search, Survey & Block Assessment and Assessment & Scrutiny matters, on section 153A, section 153A(1)(a), section 143(2), section 158BC, section 69A, section 260A of the Income Tax Act 1961, and was decided by High Court of Delhi at New Delhi; A.K. Sikri J and M.L. Mehta J, judgment by M.L. Mehta 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. If you take the point, distinguish Hotel Blue Moon carefully rather than citing it flatly, because the Court's answer is that section 158BC(b) expressly imported section 143(2) and section 153A does not. Check what the officer actually issued: detailed questionnaires calling for accounts and evidence were treated here as giving the assessee the opportunity section 143(2) contemplates. Where cash is seized from an employee and a third party claims it, make the claim immediately and produce the claimant for examination; a claim made five years later, after the assessment order, was held to be an afterthought.
Still good law. A reportable Division Bench judgment of 27 July 2011, distinguishing Hotel Blue Moon v DCIT, (2010) 321 ITR 362, on the text of section 158BC(b). The source page records that it has been cited in 96 later matters, which were not read in this session, so it is not known how far later decisions have followed or distinguished it. The requirement of a notice under section 143(2) in search and reassessment proceedings has been litigated extensively since, including on the effect of section 292BB, and that later line was not surveyed here; nor was any appeal against this judgment checked. Date scope: by the closing limb of s.153A(1) that section reaches only a search initiated, or a requisition made, after 31 May 2003 and on or before 31 March 2021, and s.153C is excluded by its own sub-section (3) from any search initiated on or after 1 April 2021, so this entry is authority for a search within that window and says nothing about a later one — a search initiated between 1 April 2021 and 31 August 2024 is governed instead, by force of s.152(3), by ss.147 to 151 as they stood immediately before the Finance (No. 2) Act 2024, and a search initiated on or after 1 September 2024 by the substituted Chapter XIV-B. No source could be cited for that finding. 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.
The judgment does not deal with section 292BB, which is the provision that now governs the consequence of a defective or unserved notice where the assessee has participated, and which was on the statute book for years after 2008. It does not say whether the Court's conclusion would differ if no questionnaires had been issued, since it gives that as an additional reason. The employee's name appears as Dalbar Singh Rawat in one paragraph and Dilbar Singh Rawat in another, and the extract of the Commissioner (Appeals)' order records the confirmed addition as Rs 10,000 where the figure throughout is Rs 10,00,000. The addition of the seized cash is described as made under section 69A, but the judgment does not discuss the ingredients of that section or the effect of the pending proceeding before the Railway Magistrate beyond noting that it was pending. The batch line gave the sections as 153A, 153A(1)(a), 143(2), 158BC and 147, which matches; sections 69A and 260A also appear. The Tribunal's order of 17 September 2010 and the decisions cited were not read in this session beyond the passages this judgment sets out. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both issues were decided in favour of the Revenue and the appeal was dismissed. On the first, the Court held that there is no specific provision in the Act requiring an assessment made under section 153A to follow a notice under section 143(2). Section 153A(1) opens with a non obstante clause and clause (a) requires the officer to issue notice to the person searched or whose documents were requisitioned to furnish a return; that clause nowhere prescribes the issue of a notice under section 143(2). Since a specific notice is required under clause (a), no further notice under section 143(2) is contemplated for an assessment under section 153A, and the words 'so far as may be' cannot be stretched to make one mandatory. The Court added that no specific notice under section 143(2) was required where the notice under section 153A(1)(a) had already been given, and that in any event the two questionnaires were sufficient notice, asking the assessee to attend in person or through an authorised representative and to produce accounts, documents and any other evidence relied on in support of his return. On the second, the Court agreed with the concurrent findings of the Commissioner (Appeals) and the Tribunal that the nephew's claim to the Rs 10,00,000 was an afterthought made to accommodate the assessee.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Is a notice under s.143(2) a jurisdictional precondition, or merely a procedural step the Assessing Officer can skip?
Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
No s.143(2) notice was issued at all. Does s.292BB save the assessment?
You gave particulars, paid by cheque and got a confirmation. Has the burden shifted?