High Court of Delhi · Judgments and reasoned final orders
Sun Aero Ltd. v. Principal Commissioner of Income Tax
ITA 527/2017 ·
Mandatory requirement of issuing a notice under Section 143(2) within the statutory limitation period before framing a block assessment order under Section 158BC read with Section 158BD; annulment of block assessment order dated 29.11.2002 and ITAT order dated 20.09.2016 affecting a Rs. 21 crore addition under Section 45 read with Section 47(v).
1. FACTS OF THE CASE
Sun Aero Ltd., a subsidiary of Sun Air Hotels Ltd., entered into a development agreement transferring hotel development rights at Bangla Sahib Road, New Delhi for Rs. 21 crore in AY 1995-96, which had already been examined in regular assessment under Section 143(3). Pursuant to a search on a third party, block assessment proceedings under Section 158BC/158BD were initiated and a block assessment order dated 29.11.2002 was passed adding Rs. 21 crore without issuing any notice under Section 143(2). The ITAT by order dated 20.09.2016 in IT(SS)A No. 06/DEL/2004 reversed the CIT(A) and upheld the block assessment.
2. DISCUSSION BY THE COURT
Applying the Supreme Court decision in ACIT v. Hotel Blue Moon (2010) 3 SCC 259 and the Delhi High Court ruling in PCIT v. Silver Line (2016) 383 ITR 455, the Division Bench held that: (1) Issuance of a notice under Section 143(2) is mandatory for completing a block assessment under Section 158BC, is a jurisdictional requirement that can be raised before the Tribunal, and the record contained no evidence of any Section 143(2) notice having been issued; and (2) An issue already disclosed and adjudicated in regular assessment under Section 143(3) cannot be re-adjudicated as 'undisclosed income' in a block assessment under Section 158BC in the absence of seized incriminating material.
3. JUDICIAL DECISION
Deciding Question Nos. 1 and 2 in the affirmative and in favour of the assessee, the High Court allowed the appeal, quashed and set aside the block assessment order dated 29.11.2002 and the ITAT order dated 20.09.2016, and left Question No. 3 open.
4. OUTCOME
Assessee - Appeal allowed; block assessment order dated 29.11.2002 and ITAT order dated 20.09.2016 quashed.
5. AKHB REVIEW POINT
Both in Chapter XIV-B block assessments (Section 158BC) and regular scrutiny/search assessments, omission to issue a timely notice under Section 143(2) is an incurable jurisdictional defect under Hotel Blue Moon and Silver Line.
Source and verification
15-page official High Court of Delhi judgment PDF (DLHC012648912017_1_2026-07-08.pdf, 457,046 bytes).
Original PDF: 15 pages · SHA-256: bcb6d80511c203c0d8602602657e0cf7fd1d910b8140d37fb452a548b0fa85bb
Supplied source-reviewed note retained; original bytes and identity validation checked in this release. Substantive re-review is not claimed for this record.
Applies Sections 143(2), 158BC, and 158BD of the Income-tax Act, 1961. Income-tax Act, 2025 equivalence is not verified.
Full 15-page primary judgment PDF text read and verified page-by-page. Follows ACIT v. Hotel Blue Moon (2010) 3 SCC 259 (SC) and PCIT v. Silver Line (2016) 383 ITR 455 (Del).
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