Gujarat High Court
Principal Commissioner Of Income Tax … vs Rameshkumar Kanaiyalal Patel on 30 June, 2026
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/179/2025 ORDER DATED: 30/06/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 179 of 2025
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PRINCIPAL COMMISSIONER OF INCOME TAX (PCIT)-3
Versus
RAMESHKUMAR KANAIYALAL PATEL
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Appearance:
AADITYA D BHATT(8580) for the Appellant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 30/06/2026
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. This Tax Appeal is filed under Section 260A of the
Income Tax Act, 1961 (for short ‘the Act’) by the appellant-
revenue proposing the following substantial questions of law
arising from the order dated 19.09.2024 passed by the Income
Tax Appellate Tribunal, Ahmedabad “SMC” Bench (for short
‘the Tribunal’) in ITA No. 208/Ahd/2024 for the Assessment
Year (A.Y) : 2017-18:
“A. Whether on the facts and circumstances of the case and
in law, the ITAT has erred in allowing the appeal of the
assessee on technical grounds that the notice u/s. 143(2) was
not issued within prescribed time limit without appreciating
that the provision of section 292BB of the IT Act is attracted
in the given facts and circumstances of the case so as to
make the assessment valid?
B. Whether on the facts and circumstances of the case and in
law, the ITAT has erred in not appreciating that the even
though notice u/s. 143(2) of the IT Act was issued belatedly
on 07.11.2019 but before the completion of assessment andPage 1 of 11
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the issue was not challenged by assessee during assessment
proceedings, such defect can be cured under the provision of
section 292BB of the IT Act relying upon the decision of
Hon’ble Supreme Court in case of CIT Vs. Laxmandas
Khandelwal [2019] wherein the Hon’ble Apex Court held that
if there is any issue or infirmity in relation to the service of
notice, the same can be cured under the provision of section
292BB of the IT Act?”
2. The brief facts of the case are as under:
2.1 On the basis of the information received from SHO,
Jaipur Police Station that cash of Rs. 23,00,000/- was seized
from two persons namely Shri Rameshbhai and Shri Kaushik
Patel on 15.12.2016, notice under Section 148 of the Act was
issued to the assessee on 23.01.2019 after obtaining the
approval. In response to the notice, the assessee filed Return
of Income on 22.03.2019 declaring a total income of
Rs.22,51,140/-.
2.2 Reasons recorded were provided to the assessee on
7.11.2019 and notice under Section 143(2) of the Act was also
issued on 7.11.2019. Thereafter, notice under Section 142(1)
of the Act read with Section 129 of the Act along with the
questionnaire was also issued on 7.11.2019. A final show
cause notice dated 2.12.2019 was issued to the assessee,
proposing to make an assessment under Section 144 of the
Act, which was duly served upon the assessee.
2.3 In response to the said show-cause notice, the assessee
furnished the details. After considering the same, the
Assessing Officer passed Assessment order dated 12.12.2019Page 2 of 11
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under Section 143(3) of the Act read with Section 147 of the
Act and made an addition of Rs. 20 lakh under Section 69A of
the Act.
3. Being aggrieved by the Assessment Order, the assessee
filed appeal before Commissioner of Income Tax (Appeals) [for
short ‘the CIT(A)’], which was dismissed vide order dated
26.12.2023.
4. The assessee preferred an appeal before the Tribunal
raising the following grounds:
“1. The Ld. Assessing Officer & Ld. Commissioner Officer has
erred in law as well as on facts in charging interest under
Section 234B of the Act.
2. The Ld. Assessing Officer & Ld. Commissioner Officer has
erred in law as well as on facts in charging interest under
Section 234C of the Act.
3. The notice under Section 143(2) has been issued on
08.11.2019 when the return has been filed for the F. Y. 2016-
17 on 22.03.2019. the Ld. Assessing Officer has erred in
facts as well as law in framing assessment without
issuing notice under Section 143(2) of the Act.”
5. The Tribunal, taking into consideration the ground No.3
that Notice under Section 143(2) of the Act was issued beyond
the period of six months, which is mandatory requirement,
therefore, held that the assessment order is null and void ab
initio and allowed the appeal filed by the assessee by
observing as under:
“7. Heard both the parties and perused all the relevant
material available on record. As regards the notice under
Section 143(2) of the Act, it has been categorically mentioned
in the statute that the Assessing Officer shall serve on the
assessee a notice requiring him on the date to be specifiedPage 3 of 11
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therein either to attend the Office of the Assessing Officer or
to produce or cause to be produced before the Assessing
Officer any evidence on which the assessee may rely in
support of the return, provided that notice under Sub-section
shall be served on the assessee after the expiry of six months
from the end of the Financial Year in which the return is
furnished. In the present case, return was furnished by the
assessee in response to the notice under Section 148 of the
Act on 22.03.2019 as mentioned in paragraph no.2 of the
Assessment Order. Thus, the statutory notice to be issued
under Section 143(2) has to be by 30th September, 2019.
But, in the same paragraph of the Assessment Order, the
notice under Section 143(2) of the Act was issued on
07.11.2019 which was delayed by more than one month and
thus the statutory limit was not adhered by the Assessing
Officer as per the provisions of Section 143(2) of the Act. The
decision of Hon’ble Supreme Court in case of Hotel Blue
Moon as well as the decisions of Hon’ble Gujarat High Court
in case of Nirali Specific Family Trust and Jignesh
Bhagwandas Patel which are applicable in the present case to
the extent that the statutory limit prescribed was not
followed by the Assessing Officer. Thus, ground no.3 filed by
the assessee is allowed.”
The assessment itself is null and void ab initio.
6. The Tribunal arrived at the findings of fact that the
Assessing Officer was required to issue notice under Section
143(2) of the Act on or before 30.09.2019 but in the
assessment order it is stated by the Assessing Officer that
Notice under Section 143(2) of the Act was issued on
7.11.2019, which was delay by more than one month. It would
therefore be germane to refer to the provision of Section
143(2) of the Act which reads as under:
“Section 143(2) of The Income Tax Act, 1961
Where a return has been furnished under section 139, or
in response to a notice under sub-section (1) of section
142, the Assessing Officer or the prescribed income-taxPage 4 of 11
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authority, as the case may be, if, considers it necessary
or expedient to ensure that the assessee has not
understated the income or has not computed excessive
loss or has not under-paid the tax in any manner, shall
serve on the assessee a notice requiring him, on a date
to be specified therein, either to attend the office of the
Assessing Officer or to produce, or cause to be produced
before the Assessing Officer any evidence on which the
assessee may rely in support of the return:
Provided that no notice under this sub-section shall be
served on the assessee after the expiry of [three] months
from the end of the financial year in which the return is
furnished.”
7. The Hon’ble Supreme Court in the case of Assistant
Commissioner of Income Tax vs. Hotel Blue Moon,
reported in 2010 (3) SCC 259, while considering the similar
issue has held as under:
“4. The High Court, disagreeing with the Tribunal, held, that
the provisions of Section 142 and sub-sections (2) and (3) of
Section 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 Article 136, and
the same was granted, and hence this appeal.”
“7. The only question that arises for our consideration in this
batch of appeals is, whether service of notice on the assessee
under Section 143(2) within the prescribed period of time is a
pre-requisite for framing the block assessment under Chapter
XIV-B of the Income Tax Act. 1961-
8. Chapter XVI-B prescribes the special procedure for making
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the assessment of search cases.
9. Section 158 B defines “undisclosed income”, and “block
period” which are the two basic factors for framing the block
assessments.
10. Section 158 BA is an enabling section, empowering the
assessing officer, to assess “undisclosed income as a result of
search initiated or requisition made after June 30, 1995, in
accordance with the provisions of this Chapter and tax the
same at the fixed rate specified in Section 113. Section 158
BB provides the methodology for computation of undisclosed
income of the block period. Section 158 BC prescribes the
procedure for making the Block assessment of the searched
person. Section 158 BD enables assessment of any person,
other than the searched person. Section 158 BE sets the time
limits for completion of the Block assessments. Section 158
BF provides for immunity from levy of interest under Sections
234A, 2348 and 234C and penalties under Section 271(1)(C),
271A and 2718. Section 158 BFA provides for levy of interest
and penalty in cases of search on or after January 1, 1997.
Section 158 BG specifies the authorities competent to make
the block assessment. Section 158 BH provides for
application of all the other provisions of this Act, except those
as provided in Chapter XIV-B. Section 158 BI provides for
abolition of the scheme in cases of search after 31.5.2003.
11. The scheme of Block assessment has been explained by
Central Board of Direct Taxes in paragraph 39.3 of Circular
No.717 dated 14th August, 1995 ([1995] 215 ITR.70). We
may only notice clause (e) of the circular which provides for
the procedure for making Block assessment. Omitting what is
not necessary for the purpose of this case, clause (e) is
extracted and it reads as under:
“(e) Procedure for making block assessment: (i) The
Assessing Officer shall serve a notice on such person
requiring him to furnish within such time, not being less than
15 days, as may be specified in the notice, a return in the
prescribed form and verified in the same manner as a return
under clause (i) of sub-section(1) of section 142 setting forth
his total income including undisclosed income for the block
period. The officer shall proceed to determine the
undisclosed income of the block period and the provisions of
section 142, sub-sections (2) and (3) of section 143 and
section 144 shall apply accordingly.”
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12. 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
period. The special procedure of Chapter XIV-B is intended to
provide a mode of assessment of undisclosed income, which
has been detected as a result of search. It is not intended to
be substitute for regular assessment. Its scope and ambit is
limited in that sense to materials unearthed during search. It
is in addition to the regular assessment already done or to be
done. The assessment for the block period can only be done
on the basis of evidence found as a result of search or
requisition of books of accounts or documents and such other
materials or information as are available with the assessing
officer. Therefore, the income assessable in Block assessment
under Chapter XIV-B is the income not disclosed but found
and determined as the result of search under Section 132 or
requisition under Section 132A of the Act.
13. Section 158 BC stipulates that the Chapter would have
application where search has been effected under Section
132 or on requisition of books of accounts, other documents
or assets under Section 132A. By making the notice issued
under this Section mandatory, it makes such notice the very
foundation for jurisdiction. Such notice under the Section is
required to be served on the person who is found to be
having undisclosed income. The Section itself prescribes the
time limit of 15 days for compliance. In respect of searches
on or after 1.1.1997, the time limit may be given up to 45
days instead of 15 days for compliance. Such notice is
prescribed under Rule 12(1A) which in turn prescribes Form
28 for block return.
14. Section 158 BC(b) is a procedural provision for making a
regular assessment applicable to Block assessment as well.
Section 158 BC(c) would require the assessing officer to
compute the income as well as tax on completion of the
proceedings to be made. Section 158 BC(d) would authorise
the assessing officer to apply the assets seized in the same
manner as are applied under Section 1328.
15. We may now revert back to Section 158 BC(b) which is
the material provision which requires our consideration.
Section 158 BC(b) provides for enquiry and assessment. The
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said provision reads “that the assessing officer shall proceed
to determine the undisclosed income of the Block period in
the manner laid down in Section 158 BB and the provisions of
Section 142, sub-section (2) and (3) of Section 143, Section
144 and Section 145 shall, so far as may be, apply. An
analysis of this sub section indicates that, after the return is
filed, this clause enables the assessing officer to complete the
assessment by following the procedure like issue of notice
under Sections 143(2)/142 and complete the assessment
under Section 143(3). This Section does not provide for
accepting the return as provided under Section 143(i)(a). The
assessing officer has to complete the assessment under
Section 143(3) only. In case of default in not filing the return
or not complying with the notice under Sections 143(2)/142,
the assessing officer is authorized to complete the
assessment ex-parte under Section 144. Clause (b) of Section
158 BC by referring to Section 143(2) and (3) would appear
to imply that the provisions of Section 143(1) are excluded.
But Section 143(2) itself becomes necessary only where it
becomes necessary to check the return, so that where block
return conforms to the undisclosed income inferred by the
authorities, there is no reason, why the authorities should
issue notice under Section 143(2). However, if an assessment
is to be completed under Section 143(3) read with Section
158-BC, notice under Section 143(2) should be issued within
one year from the date of filing of block return. Omission on
the part of the assessing authority to issue notice under
Section 143(2) cannot be a procedural irregularity and the
same is not curable and, therefore, the requirement of notice
under Section 143(2) cannot be dispensed with. The other
important feature that requires to be noticed is that the
Section 158 BC(b) specifically refers to some of the
provisions of the Act which requires to be followed by the
assessing officer while completing the block assessments
under Chapter XIV-B of the Act. This legislation is by
incorporation. This Section even speaks of sub- sections
which are to be followed by the assessing officer. Had the
intention of the legislature was to exclude the provisions of
Chapter XIV of the Act, the legislature would have or could
have indicated that also. A reading of the provision would
clearly indicate, in our opinion, if the assessing officer, if for
any reason, repudiates the return filed by the assessee in
response to notice under Section 158 BC(a), the assessing
officer must necessarily issue notice under Section 143(2) of
the Act within the time prescribed in the proviso to Section
143(2) of the Act. Where the legislature intended to exclude
certain provisions from the ambit of Section 158 BC(b) it has
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done so specifically. Thus, when Section 158 BC(b)
specifically refers to applicability of the proviso thereto
cannot be exclude. We may also notice here itself that the
clarification given by CBDT In its circular No.717 dated 14th
August, 1995, has a binding effect on the department, but not
on the Court. This circular clarifies the requirement of law in
respect of service of notice under sub-section (2) of Section
143 of the Act. Accordingly, we conclude even for the
purpose of Chapter XIV-B of the Act, for the determination of
undisclosed income for a block period under the provisions of
Section 158 BC, the provisions of Section 142 and sub-
sections (2) and (3) of Section 143 are applicable and no
assessment could be made without issuing notice under
Section 143(2) of the Act. However, it is contended by Sri
Shekhar, learned counsel for the department that in view of
the expression “So far as may be in Section 153 BC(b), the
issue of notice is not mandatory but optional and are to be
applied to the extent practicable. In support of that
contention, the learned counsel has relied on the observation
made by this Court in Dr. Pratap Singh’s case [1985] 155 ITR
166(SC). In this case, the Court has observed that Section
37(2) provides that the provisions of the Code relating to
searches, shall so far as may be, apply to searches directed
under Section 37(2), Reading the two sections together it
merely means that the methodology prescribed for carrying
out the search provided in Section 165 has to be generally
followed. The expression “so far as may be has always been
construed to mean that those provisions may be generally
followed to the extent possible. The learned counsel for the
respondent has brought to our notice the observations made
by this Court in the case of Maganlal V/s. Jaiswal Industries,
Neemach and Ors., [(1989) 4 SCC 344], wherein this Court
while dealing with the scope and import of the expression ‘as
far as practicable has stated “without anything more the
expression as far as possible’ will mean that the manner
provided in the code for attachment or sale of property in
execution of a decree shall be applicable in its entirety except
such provision therein which may not be practicable to be
applied.”
16. The case of the revenue is that the expression ‘so far as
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
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and meaning of the expression ‘so far as may be apply’. 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.
17. Section 158 BH provides for application of the other
provisions of the Act. It reads: “Save as otherwise provided in
this Chapter, all the other provisions of this Act shall apply to
assessment made under this Chapter.” This is an enabling
provision, which makes all the provisions of the Act, save as
otherwise provided, applicable for proceedings for block
assessment. The provisions which are specifically included
are those which are available in Chapter XIV-B of the Act,
which includes Section 142 and sub-sections (2) and (3) of
Section 143.
18. On a consideration of the provisions of Chapter XIV-B of
the Act, we are in agreement with the reasoning and the
conclusion reached by the High Court.
19. The result is that the appeals fail and are dismissed. No
order as to costs.”
8. This Court by following the decision of Hon’ble Apex
Court in the case of Hotel Blue Moon (supra), in case of
Commissioner of Income Tax-III vs. Nirali Specific
Family Trust, reported in 2016 SCC OnLine Guj 105 has
held as under:
“2. This was on the basis th at counsel for the Revenue had
pointed out that in Tax Appeal No. 151/2006, similar question
is being considered by the High Court. We have called for the
judgement of the High Court dated 11.12.2014 in the said
appeal from perusal of which it appears that the question in
the said appeal arose in the background of the service of
notice under section 143(2) of the Income Tax Act, 1961, and
not regarding non issuance of the notice altogether. The
Bench remanded the proceedings for fresh consideration by
CIT(Appeals).
3. In the present case, however, we notice that CIT (Appeals)
as well as the Tribunal had annulled the assessment
proceedings on the ground that no notice under section
143(2) of the Act was ever issued. This issue is now squarelyPage 10 of 11
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covered by the judgement of Supreme Court in case of
Assistant Commissioner of Income-tax v. Hotel Blue Moon
reported in (2010) 321 ITR 362 (SC). Though this judgement
was rendered in the background of block assessment,
nevertheless, it was observed that for any assessment under
section 143(3) of the Act, notice under section 143(2) within
the time limit would be essential. It was held that omission on
part of the assessing authority to issue notice under section
143(2) cannot be a procedural irregularity and is not curable
and dispensable.
4. When notice under section 143(2) was not issued at all and
the question is not of one of the date of service of notice
within time prescribed or otherwise, the Government in our
opinion committed no error.
5. Tax appeals are therefore, dismissed.
9. In view of the aforesaid dictum of law and in view of the
fact that the Notice under Section 143(2) of the Act was not
issued within the prescribed period, the Tribunal was justified
in holding that the assessment itself becomes null and void ab-
initio.
10. Therefore, in view of the above settled legal position, we
are of the opinion that no question of law much less any
substantial question of law arises from the impugned order of
the Tribunal.
The Appeal being devoid of any merit is accordingly
dismissed.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
SAJ GEORGE
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