(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
1. All
these petitions have been heard together as it is an accepted
position that the issue involved is common. Special Civil Application
No. 6215 of 1999 has been taken as the lead matter and accordingly
detailed facts are taken from the said petition.
2. The
petitioner was a Firm comprised of four partners. The Firm continued
business up to 31.03.1992 i.e. the day on which the Firm was
dissolved. In the subsequent period, viz. previous year relevant to
Assessment Year 1993-94 certain transactions were carried out and
hence, a return of income in the status of Association of Persons
(AOP) declaring income of Rs.5,05,087/- came to be filed.
3. On
24.11.1995 search proceedings u/s. 132 of the Income Tax Act, 1961
(the Act) were carried out at the residential premises of three
erstwhile partners of the petitioner Firm. Certain loose papers were
found from the residence of one of the partners Mr. T.V.Sujan. The
said documents were seized and statement of Mr.Sujan was recorded.
An order u/s.158BD of the Act came to be made on 31.03.1997 for the
block period ending on 24.11.1995 in the status of AOP. The
assessment was made pursuant to return of income for the block period
filed on 03.03.1997 showing total undisclosed income at Rs.30 lacs.
The assessment was made after various details and explanation were
called for vide Notice dated 05.03.1997 to which a detailed reply
was filed on 12.03.1997. The assessment was framed on a total income
of Rs.40,50,900/- after taking approval of Commissioner of Income
Tax, Rajkot.
4. On
16.04.1999 Notice under section 148 of the Act came to be issued
seeking to reassess the income for the block period ending on
24.11.1995 by stating that the respondent had reason to believe that
the income for the block period ending on 24.11.1995 had escaped
assessment within the meaning of section 147 of the Act. The impugned
Notice further stated that the Notice was being issued after
obtaining necessary satisfaction of the Commissioner of Income Tax.
Thereafter correspondence ensued between some of the erstwhile
partners of the petitioner Firm and the respondent authority. Though
repeated letters were addressed by the partners asking for the
reasons recorded u/s. 148(2) of the Act, the same were not supplied.
Some of the partners also made a grievance that the Notice u/s.148 of
the Act had not been served upon them and they were not in receipt of
any Notice. The last such correspondence resting with communication
dated 28.07.1999 from the respondent authority to one of the
ex-partners wherein it is stated that it was not obligatory to
supply reasons recorded and the addressee was directed to file return
immediately. It is at this stage that the petitioner has approached
this Court challenging the impugned Notice issued u/s.148 of the Act.
5. The
principal issue raised in this petition and other cognate petitions
is whether it is open to the assessing authority to issue Notice u/s.
148 of the Act in respect of an assessment framed for a block period
under Chapter XIVB of the Act.
6. Learned
Senior Advocate Mr.S.N.Soparkar as well as Mr. K.H.Kazi, learned
Advocate appearing for the petitioners have been heard. The Revenue
was represented by Mr. M.R.Bhatt, learned Senior Standing Counsel.
7. On
behalf of the petitioners it was contended that section 147 of the
Act permits an Assessing Officer to reassess an income which has
escaped assessment ?Sfor any assessment year??. Emphasing
the language of the provision, it was contended that in case of a
?SBlock Period ?? the same is not in respect of any
assessment year and once the assessment of income is for the entire
block period the Assessing Officer can never form a belief that any
income chargeable to tax for any assessment year has escaped
assessment.
7.1 The
next contention was based on provisions of section 147 of the Act as
well as the Proviso to section 147 of the Act to submit that where
the limitation has been prescribed for issuance of Notice reckoned
from the end of a particular assessment year the scheme would fail
in case of assessment for the block period because it was not
possible to specify the assessment year from the end of which the
time limit could be computed.
7.2 Similarly
provisions of sections 151 & 153 of the Act were also pointed out
to reiterate submission that in a case where the sanction was
required as provided by section 151 of the Act, again same was from
the expiry of four years from the relevant assessment year and the
conditions could not be fulfilled. Similarly section 153 of the Act
also provided different period of limitation as against the
provisions of section 158BE of the Act which provides for time limit
for completion of block assessment.
7.3
Another contention was that the assessment framed under Chapter
XIV-B of the Act had to be framed after the final order was approved
by the Commissioner of Income Tax and a subordinate authority cannot
seek to re-open such assessment, as in the present case where the
impugned Notice has been issued by the Joint Commissioner of Income
Tax.
7.4 The
period of limitation prescribed under section 158BE of the Act was
less than the period of limitation prescribed under section 153 of
the Act and therefore also the scheme did not permit such an
exercise.
8. On
behalf of the respondent authority it was submitted that section
158BH of the Act specifically provided that save as otherwise
provided in Chapter XIV-B, all other provisions of the Act shall
apply to assessment made under Chapter XIV-B. It was therefore
contended that when one considered the definition of ?Sblock
period?? as provided in section 158B(a) of the Act, it was clear
that the said term covered the period comprising previous years
relevant to 10/6 assessment years preceding the previous year in
which the search was conducted u/s. 132 of the Act and therefore,
wherever the words ?Sassessment year?? appear in Chapter
XIV of the Act relating to Procedure for assessment the term block
period had to be read in place of assessment year to make the scheme
workable.
8.1 Referring
to sub-section (2) of section 158BA of the Act, it was submitted that
for the purpose of charging tax not only section 113 of the Act was
material but even section 4 had to be considered as laid down by the
Apex Court in the case of Commissioner of Income Tax
Vs. Suresh N. Gupta (2008) 297 ITR 322 (SC). It was
submitted that the Apex Court has considered the entire scheme of
Chapter XIV-B of the Act and come to the conclusion that computation
of undisclosed income had to be made u/s.158BB in the manner provided
in Chapter IV of the Act and therefore the said Chapter is not ruled
out by provisions of Chapter XIV-B of the Act. That the non-obstante
clause appearing in section 158BA of the Act had to be read in
juxtaposition with section 158BH of the Act. That the concepts of
?Sprevious year?? and ?Stotal income?? were
retained in Chapter XIV-B of the Act and therefore Chapter IV of the
Act cannot be ruled out from block assessment procedure. The
following extract from the Apex Court decision was read
and emphasized by the learned Counsel :
?S11 Reading of the
relevant provisions of Chapter XIV-B one finds that section 158BA
deals with assessment of 'undisclosed income' as a result of
search whereas computation of such income falls under section
158BB. The procedure for block assessment falls in section 158BC.
Section 158BA begins with a non obstante clause. It states that
nothing contained in any other provisions of the 1961 act, where
search is initiated after June 30, 1995, under section 132 or in
cases of requisition under section 132A after the cut off date, the
Assessing Officer shall proceed to assess the undisclosed income in
accordance with the provisions of Chapter XIV-B.
12 Relying on section
158BA(1) the assessee claims that Chapter XIV-B is a special
procedure for assessment of cases; that it constitutes a
self-contained mechanism and, hence, it falls outside the scope of
section 4(1) of the 1961 Act, particularly when section 4(1) imposes
a charge on the ?Stotal income?? and not on the undisclosed
income and, particularly when section 158BA(2) is an independent
charging section in contrast to section 4(1) of the 1961 Act, which
imposes a charge on the 'total income' of the previous year.
According to the assessee, the charge under section 158BA(2) is on
the 'block period' and not on the total income of the 'previous
year'. Therefore, according to the assessee, Chapter XIV-B is a
self-contained mechanism.
13 As stated above, these
arguments advanced on behalf of the assessee have no merit. Section
158B defines 'block period' to mean the period comprising the
previous years relevant to 10/6 assessment years preceding the
previous year in which the search was conducted under section 132.
It also includes the period up to the date of commencement of such
search or date of requisition. Under section 4, the subject of
charge is the income of the previous year and not the income of the
assessment year. Thus, tax is levied on the actual income of the
previous year. Each 'previous year' is a distinct unit of time for
the purposes of assessment. However, when we come to section 158BA,
we find that Parliament has taken the block period to mean the
period comprising previous years relevant to 10/6 assessment years
preceding the previous year in which the search is conducted. In
other words, Parliament has in search cases expanded the unit of
time for block assessment purposes from 1 year to 10/6 previous
years. However, it is important to note that the unit of time
remains constant. It is open to Parliament to treat the unit of time
as one year in normal assessment cases and, at the same time, it is
also open to Parliament to treat 10/6 previous years as a unit of
time for the block assessment period. The important thing to be
noted is that the block assessment computation in section 158BB
does not exclude the concept of 'previous years' as well as the
concept of 'total income'. Those concepts are retained. Further, we
need to examine the scheme of Chapter XIV-B. The said Chapter has
three parts consisting of assessment, computation and procedure for
making block assessment. Assessment of undisclosed income as a
result of search stands covered by section 158BA whereas computation
of undisclosed income of the block period falls in section 158BB
and procedure for block assessment falls in section 158BC. In this
case, we are mainly concerned with computation of undisclosed
income under section 158BB(1). This section incorporates the
principle of aggregation of total income of the previous years
falling within the block period computed in accordance with the
provisions of Chapter IV. The important thing to be noted is that the
computation has to be done even under section 158BB of 'undisclosed
income' in the manner provided for in Chapter IV of the 1961 Act
which deals with ?Scomputation of total income??. Chapter IV deals
with computation in cases of normal assessment. Chapter IV is not
ruled out by the provisions of Chapter XIV-B. In this connection, we
may also take note of section 158BH which deals with application of
other provisions of the 1961 act to the block assessment procedure
in Chapter XIV-B. Section 158BH makes it clear that save as
otherwise provided in Chapter XIV-B, all other provisions of the
1961 Act shall equally apply to block assessment. Therefore, one has
to read the non obstante clause in section 158BA in juxtaposition
with section 158BH. Keeping in mind the provisions of section 158BB
and keeping in mind the Chapter XIV-B, we are of the view that
Chapter IV is not ruled out from block assessment procedure and,
therefore, one has to read section 158BB with section 4 of the 1961
Act.
14 There is one more fact
which needs to be noted. A bare reading of the provisions of
section 158BA and section 158BB indicates that the searches conducted
by the Department are an important means of unearthing black
money. However, undisclosed income has to be related to the
different years in which the income was earned. The essence of the
block assessment procedure, therefore, is a separate single
assessment of undisclosed income, detected as a result of a search.
This separate assessment is in addition to normal or regular
assessment covering the same period. A separate return is a
pre-requisite for making a 'block-assessment'. However, in the
matter of computation, the principle of aggregation of total
incomes, is inbuilt into section 158BB. We have to subtract one
aggregate from the other. Further, while applying the principle of
aggregation of the total incomes, computation is required to be
done in accordance with the provisions of Chapter IV. Therefore, in
our view, section 4 has to be read with section 158BB. That
section is not ruled out by section 158BB. If section 4 has to be
read with section 158BB for computing undisclosed income then the
provisions of the relevant Finance Act have got to be read into the
block assessment scheme under Chapter XIV-B, even prior to June
1,2002.
15. Under section 158BB,
there is the theory of 'block period'. It is based on 'the
principle of aggregation of total incomes'. Under that section, the
first aggregate to be computed is the total income of the previous
years falling within the block period including returned/assessed
incomes as per regular returns and regular assessments. The second
aggregate to be computed is the aggregate of the total
incomes/losses of the previous years determined in terms of clauses
(a) to (f) of section 158BB(1). The difference between the first
aggregate and the second aggregate is described in section 158B(b)
as the 'undisclosed income' to be taxed under the provisions of
section 113 of the 1961 Act at the special rates prescribed.
Further, clause (a) of the Explanation to section 158BB clarifies
that the total income/loss of each previous years shall, for the
purpose of aggregation, be taken as the total income or loss
computed in accordance with the provisions of Chapter IV without
giving effect to set off of brought forward losses under Chapter VI
or unabsorbed depreciation under section 32(2) of the 1961 Act.
Hence, one has to read section 158BB with section 4 of the 1961 Act.
There is no conflict between the computation machinery under
Chapter XIV-B and normal computation machinery under Chapter IV.
This is the importance behind enactment of section 158BH which inter
alia states that if there is no conflict between the provisions of
Chapter XIV-B and any other provisions of the 1961 act, then the
latter will operate. There is a fallacy in the argument of the
assessee that the concepts of 'total income' and 'previous year' are
given a go by in Chapter XIV-B. The above analysis of section
158BB indicates that both the concepts are retained in Chapter
XIV-B. The only difference is that section 4 of the 1961 Act charges
the total income of a person of one single previous year (unit of
assessment) whereas section 158BA(2) levies a charge on the income
of a person for the block period of previous years relevant to 10/6
assessment years. In our view, the words 'block period', as defined
in section 158B(a), comprises previous years relevant to 10/6
assessment years as one unit of time for the purposes of assessment.
As stated above, the object behind the enactment of Chapter XIV-B is
to assess and compute 'undisclosed incomes' relatable to different
accounting years in which the income is earned. Therefore, if the
block period comprising of previous years relevant to 10/6
assessment years is treated by Parliament as one unit of time for
assessment purposes, one has to correlate 'undisclosed income' to
each of the years in which income was earned by the assessee. It is
true that under Chapter XIV-B, computation of regular income and
computation of undisclosed income has to be worked out separately.
However, to arrive at the figure of undisclosed income, the said
parallel calculations have to converge in order to work out the
difference between the first and the second aggregates of the total
incomes/losses of the previous year, in which undisclosed income is
taxed under section 113. Therefore, in our view, the concept of a
charge on the 'total income' of the previous year under the 1961
Act is retained even under Chapter XIV-B. Therefore, section 158BB
which deals with computation of undisclosed income of the block
period has to be read with computation of total income under Chapter
IV of the 1961 Act.?? (emphasis
supplied)
9. In
rejoinder, the learned Counsel appearing for the petitioner has
placed reliance on decision of High Court of Rajasthan in the case
of Commissioner of Income Tax Vs. Ramesh Chand Soni
(2005) 194 CTR (Raj) 84. It was reiterated that section
158BE of the Act was a complete code on the subject of prescribing
and computing limitation for the purpose of completing block
assessment and hence other provisions of the Act, like section 153 of
the Act, had to be necessarily excluded.
10. When
Chapter XIV-B was introduced the Memorandum Explaining the
Provisions in the Finance Bill,1995 stated the purpose and the object
for introducing the said chapter in following terms :
?SSPECIAL PROCEDURE FOR
ASSESSMENT OF SEARCH CASES.
Searches conducted by the
Income-tax Department are important means of unearthing black money.
However, under the present scheme, valuable time is lost in trying to
relate the undisclosed incomes to the different years. Tax evaders
generally manage to divert the focus to procedural and legal issues
and often invent new evidence to explain undisclosed income. By the
time search-related assessments are completed, the effect of the
search is considerably diluted. Legal battles continue for many
years to decide which income is assessable in which assessment
year. No finality is reached and the seized assets remain with the
Department for a long time.
In order to make the
procedure of assessment of search cases cost-effective efficient and
meaningful, it is proposed to introduce a new scheme of assessment
of undisclosed income determined as a result of search under
section 132 or requisition under section 132A. Under this scheme,
the undisclosed income detected as a result of any search initiated,
or requisition made, after 30-6-1995, shall be assessed separately as
income of a block of years. Where the previous year has not ended or
the due date for filing a return of income for any previous year has
not expired, the income recorded on or before the date of the search
or requisition in the books of account or other documents, maintained
in the normal course, relating to such previous years shall not be
included in the block??
11. Therefore,
this is a pointer to the fact that undisclosed income, in other
words, the income which has not been disclosed and which has not been
taxed, has to be assessed by adopting a special procedure. The
special procedure has been evolved to save valuable time which is
otherwise lost in the process of co-relating the undisclosed income
to different assessment years by obviating the legal battles
involving issues of procedure and interpretation of law. The
legislature found it necessary to arrive at a cost effective,
efficient and meaningful procedure to avoid litigations which
continue for many years to decide which income, or part of income, is
assessable in which assessment year. The entire present controversy
has to be considered and the submissions appreciated in light of the
aforesaid legislative intent.
12. Chapter
XIV-B of the Act lays down a SPECIAL PROCEDURE FOR ASSESSMENT OF
SEARCH CASES. The legislative history of the said Chapter, inclusive
of all relevant amendments till date, may be borne in mind to
appreciate the controversy. The said Chapter was inserted by the
Finance Act, 1995. The scope and effect of the said Chapter has been
explained by Central Board of Direct Taxes (CBDT) by issuing Circular
No. 717 dated 14.08.1995. The relevant extract of the said Circular
reads as under :
?SSpecial Procedure for
assessment of search cases.- 39.1 Searches conducted by the
Income-tax Department are important means for unearthing black
money. However, under the present scheme, valuable time is lost in
trying to relate the undisclosed incomes to the different years.
Tax-evaders generally manage to divert the focus to procedural and
legal issues and often invent new evidence to explain undisclosed
income. By the time search-related assessments are completed, the
effect of the search is considerably diluted. Legal battles continue
for many years to decide which income is assessable in which
assessment year. No finality is reached and the seized assets remain
with the Department for a long time.
39.2. In order to make the
procedure of assessment of search cases cost-effective, efficient and
meaningful, a new scheme has been introduced for the assessment of
undisclosed income determined as a result of search under section 132
or requisition under section 132A. Under this scheme, the
undisclosed income detected as a result of any search initiated, or
requisition made, after 30-6-1995 shall be assessed separately as
income of a block of years. Where the previous year has not ended
or the due date for filing a return of income for any previous year
has not expired, the income or the transaction recorded on or before
the date of the search or requisition in the books of account or
other documents maintained in the normal course of business relating
to such previous years shall not be included in the block assessment.
39.3. The salient features of
this scheme are as under:-
(a) Block period. - The
undisclosed income of a person shall be assessed as the income of the
block period consisting of a period of 10 previous years, preceding
the previous year in which the search was conducted or the books of
accounts, assets, etc. were requisitioned. The period of the current
year upto the date of the search will also form part of the block
period.
(b) Undisclosed income.- The
undisclosed income has been defined in clause (b) of section 158B.
The term 'undisclosed income' includes any money, bullion, jewellery
or other valuable article or thing or any income based on any entry
in the books of account or other documents or transactions where
such money, bullion, jewellery, valuable article, thing, entry in
the books of account or other document or transaction represents
wholly or partly income or property which has not been or would not
have been disclosed for the purposes of this Act.
(ii) The undisclosed income
of the block period, therefore, shall be aggregate of the total
income of the previous years falling within the block period,
computed on the basis of evidence found as a result of search and
such other enquiries as the assessing officer may make and such
other materials or information as are available with him, as reduced
by the aggregate of the total income, or as increased by the losses
returned/determined earlier in respect of such previous years.
(iii) Where assessments under
section 143, 144 or 147 have been concluded or determination of
income has been made under section 143(1A) or 143(1B), the same
will be reduced for determining the undisclosed income.
(iv) Where returns of income
have been filed under any sub-section of section 139 or in response
to a Notice issued under section 142(1) or under section 148 but
assessments have not been made till the date of search, the incomes
disclosed in such returns of income shall be reduced for computing
the undisclosed income.
(v) In a case where due date
for filing a return of income has expired but no return of income
has been filed there will be no reduction of any amount for
determining the undisclosed income stated above.
(vi) Where the previous year
has not ended or the date of filing the return of income under
section 139(1) for any previous year has not expired, the income
determined on the basis of transactions recorded on or before the
date of search in the books of account or other documents maintained
in the normal course relating to such previous years shall be
reduced.
(vii) However, in a case where
undisclosed income has been determined in any earlier block
assessment, the same will be reduced from the total income for
determining the undisclosed income.
(viii) Where any order of
settlement under section 245D has been passed by the Settlement
Commission, the income determined in such order shall be reduced
accordingly.
(ix) It may again be
emphasised that the use of the words 'such previous years' shows
that the exercise shall be restricted to years in respect of which
the undisclosed income has been found and need not be undertaken
for all the 10 years comprised in the block period.
(c) Applicability of the
provisions.- The special procedure for assessment of search cases as
prescribed in Chapter XIVB shall apply in cases where search is
initiated under section 132 or a requisition is made under section
132A after 30th June, 1995. Proceedings under section
132(5) or 132(7) will no longer be necessary for searches initiated
on or after 1st July,1995. Proceedings under section
132(5) or 132(7) will however, be required where initial search was
conducted prior to 1st July,1995 irrespective of the last
search or consequential searches which may have continued and
concluded on or after that date i.e. 1st July, 1995.
(ii) The order of assessment
for the block period shall be passed within one year from the end of
the month in which last of the search warrants is executed. Though
the term execution has not been defined in Chapter XIVB, it will take
its usual meaning which means the date on which the search has been
completed. Where consequential searches or requisitions have been
made, the period of limitation of one year shall start from the end
of the month in which the last of such consequential operations were
concluded.
(iii) The assessment order
for the block period shall be passed by an assessing officer not
below the rank of Assistant Commissioner of Income-tax with the
prior approval of the Commissioner of Income-tax.??
assessment.- 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 varied in the same manner as a return under
clause (1) 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 provisions of section 142, sub-section (2) and (3)
of section 143 and section 144 shall apply accordingly. The assessing
officer shall not be required to issue any Notice under section
148 for the purpose of proceedings under this Chapter. Though the
block period can be extended upto 10 years in a case where the
assessee has not disclosed undisclosed income in any one or more of
the previous years in the block periods and the assessing officer
also does not find any material indicating undisclosed income in any
one or more of the previous years comprised in the block period, it
will not be necessary to do the exercise of computing the
undisclosed income for the relevant years and the exercise may be
limited to the years in respect of which the undisclosed income has
been found. On determination of the undisclosed income of the block
period, the assessing officer shall issue an order of assessment and
determine the demand payable by him on the basis of such
assessment. The assets seized in the course of search or taken
possession of as a result of requisition under section 132A shall be
retained to the extent necessary and shall be dealt with in the
manner laid down under section 132B.
(ii) In computing the
undisclosed income for the block period, the provisions of sections
68, 69, 69A, 69B and 69C shall, mutatis mutandis apply and the term
'financial year' mentioned in these sections shall be taken to mean
the relevant financial years falling within block period.
(iii) Before the adoption of
uniform previous year the assessees were allowed to have any
accounting period as their previous year. In working out the block
period, therefore, there may be cases in which a part of a
particular financial year may go beyond the block period or during
the transitional period of switching over from the old system to
uniform previous year part of a financial year may not fall in the
previous year covered in the block period. In such cases, the '10
previous years preceding the previous year in which the search has
been initiated' shall be taken as the previous years relevant to the
10 assessment years immediately preceding the year relevant to the
previous year in which the search has taken place irrespective of the
fact whether the assessments for all these assessments years have
already been made or not. For example, when a search has taken place
on 11-7-1995, the block of 10 previous years shall be block relevant
to assessment years 1986-87 to 1995-96 plus the period upto date of
search i.e. from 1-4-1995 to 11-7-1995.
(iv) Where the assessee
offers no explanation about the nature of source of acquisition of
certain assets or the explanation offered by him is not, in the
opinion of the Assessing Officer, satisfactory, the value of such
assets may be deemed to be income of the relevant previous year as
mentioned in section 158BB(2). The onus of proving to the
satisfaction of the assessing officer that any undisclosed assets
including the income from undisclosed property has already been
disclosed in any return of income filed by the assessee before the
initiation of the search shall be on the assessee.??
12.1
Subsequently by the Finance (No.2) Act, 1996 certain amendments in
Chapter XIV-B of the Act came to be made with retrospective effect
from 01.07.1995 i.e. the date on which Chapter XIV-B of the Act was
made effective. The scope and effect of the amendments have been
explained by CBDT vide Circular No. 762 dated 18.02.1998. The
relevant extract reads as under :
?SRationalisation of special
procedure for assessment of search cases.- 50.1 The Finance Act, 1995
introduced a new scheme of assessment of undisclosed income
determined as a result of search. Under this scheme, the undisclosed
income detected as a result of a search initiated after 30-6-1995 is
assessed separately as the income of a designated period (block)
consisting of ten previous years prior to the previous years in
which the search was conducted and also the period of the current
previous year upto the date of search. The undisclosed income is
taxed at a flat rate of 60 per cent.??
xxx
xxx xxx xxx
?S(b) Assessment procedure
(i) The authority competent to
made the block assessment has been laid down in section 158BG of
the Income-tax Act. As per this section, the order of assessment for
the block period shall be passed by an Assessing Officer not below
the rank of an Assistant Commissioner.
(ii) The time limit for
completion of block assessment is prescribed in section 158BE of the
Income-tax Act. As per this section, the order under section 158BC
shall be passed within one year from the end of the month in which
the last of the authorisations for search under section 132 or for
requisition under section 132A, as the case may be, was executed.
(iii) In order to facilitate
the assessment process, and to ensure that the investigation is
carried to its logical conclusion in a focused manner section 2(7A)
of the Act has been amended to include the Assistant Director of
Income-tax within the meaning of ?SAssessing Officer??, enabling
him to discharge the assessment functions also. As a corollary to
this, section 158BG has also been amended to provide that the block
assessment order shall be passed after obtaining the approval of the
Director of Income-tax in cases where the ADIT (Inv.) acts as the
Assessing Officer.
(iv) The amendments will take
effect from 1st October, 1996.
(c) Definition of 'block
period'
(i) Under section 158B(a), the
block period has been defined to include ten previous years
preceding the previous year in which the search was conducted under
section 132. Before the adoption of the uniform previous year,
assessees were allowed to have any accounting period as the previous
year under section 3 of the Income-tax Act. Consequently, the block
period would be different in different cases depending upon the
previous years adopted by the assessees before
1-4-1989.
(ii) In view of this, the Act
amends the definition of block period as consisting of previous years
relevant to ten assessment years. This will make the block period
uniform in case of all assessees.
(iii) The amendment will take
effect retrospectively from 1st July,1995.??
12.2
Again by the Finance (No.2) Act, 1998 certain further amendments
were made in Chapter XIV-B of the Act and the same have been
explained by CBDT vide Circular No. 772 dated 23.12.1998. The
relevant extract reads as under :
?S53. Clarificatory
amendments in procedure for block assessment.-53.1 To set at rest
the controversy as to whether block assessment subsumes the regular
assessments or is independent of the latter, the Act has inserted an
Explanation after sub-section (2) of section 158BA of the Income-tax
Act clarifying that assessments completed under Chapter XIV-B shall
be in addition to regular assessments in respect of each previous
year included in the block period. Further, undisclosed income
relating to the block period shall not include the income assessed
in regular assessment. Similarly income in regular assessment shall
not include the income of the block period assessed in block
assessment.
53.2 To settle the
controversy regarding meaning of the word 'execution' while
calculating the period of limitation in section 158BE of the
Income-tax Act, the Act has inserted a new clarificatory
Explanation. An authorisation is deemed to have been executed in the
case of search on the conclusion of search as recorded in the last
panchnama drawn in relation to any person in whose case the warrant
of authorisation has been issued. In regard to requisition under
section 132A of the Income-tax Act, the authorisation would be deemed
to have been executed on actual receipt of books of account or other
documents or assets by the authorised officer.
53.3 The above amendments
will take effect retrospectively from 1st July, 1995 and
will, accordingly, apply in relation to the assessment year 1996-97
and subsequent years??.
12.3
The Finance Act, 2001 carried out certain amendments in Chapter XIV-B
of the Act. But the said amendments were made effective from
01.06.2001. The relevant extract of CBDT Circular No. 14/2001-04
dated 12.12.2001 reads as under :
?S69. Rationalising the
block period-69.1 Under the existing provisions contained in clause
(a) of section 158B of the Income-tax Act relating to assessment in
cases of search or requisition, 'block period' means the previous
years relevant to ten assessment years preceding the previous year
in which the search was conducted under section 132 or any
requisition was made under section 132A, and includes, in the year
in which the search was conducted or requisition was made, the period
up to the date of commencement of such search or as the case may be,
the date of such requisition.
69.2 In line with the
amendment proposed in section 149, to reduce the maximum time period
for issue of Notice under section 148 for initiating reassessment
proceedings., etc., from ten years to six years, the Act has amended
the definition of 'block period' to mean the period comprising the
previous years relevant to six assessment years preceding the
previous year in which the search was conducted or any requisition
was made and including the period up to the date of commencement of
such search, or as the case may be, the date of such requisition, in
the year of search or requisition.
69.3
The amendment takes effect from 1st June,2001, and will
apply in relation to searches initiated or requisitions made on or
after that date??.
12.4
The last amendment came to be made by the Finance Act,2002 which has
been explained in Circular No.8/2002 dated 27.08.2002. The relevant
extract of the said Circular reads as under :
?S61.
Rationalisation of the provisions of Chapter XIV-B relating to block
assessments in caes of search and requisiton. - 61.1 The existing
provisions contained in Chapter XIV-B of the Income-tax Act provide
for a single assessment of undisclosed income of a block period of
six years, in case of search under section 132 or requisition under
section 132A and lay down the manner in which such income is to be
computed, and the interest or penalty which may be levied in certain
circumstances.
Some appellate authorities have held that income which can be
included in the block assessment is only such income which is
directly evidenced by material found during the search and does
not include income which has been discovered on the basis of
post-search inquiries made during the block assessment proceedings.
This is contrary to the intention that any undisclosed income
discovered as a result of search is to be included in the block
assessment as long as such income has been detected as a result of
evidence gathered during the search.
61.3.2
The Finance Act,2002, has amended section 158BB to clarify that the
block assessment of undisclosed income is to be based on the evidence
found in the search and material or information gathered in
post-search inquiries made on the basis of evidence found in the
search.??
xxx
xxx xxx xxx
?S61.9
These amendments take effect retrospectively from 1st day
of July,1995 and accordingly apply to block assessments in cases of
search under section 132 or requisition under section 132A made on
or after 1st day of July, 1995.[Sections 64,65 and 66]
13. Thus,
Chapter XIV-B, as the heading suggests, lays down a special procedure
for assessment of search cases. Under this scheme, any undisclosed
income which comes to light as a consequence of search u/s. 132 of
the Act shall be assessed separately as income of a block of
specified years. The assessment for the block period is to be made by
an officer not below the rank of Assistant Commissioner of Income
Tax with the prior approval of the Commissioner of Income Tax. The
assessment is of the income of the block period consisting of
previous years relevant to 10/6 assessment years preceding previous
year in which the search was conducted u/s. 132 of the Act, and
includes, in the year in which the search was conducted, the period
upto the date of commencement of such search. The salient features of
the block assessment scheme for determining undisclosed income can
be stated thus :-
[a] A
single Notice is required to be issued u/s. 158BC of the Act for the
entire block period of 10/6 years going backward from the year of
search, plus the broken period of the year of search ending on the
date of search. This saves the Assessing Officer from being required
to obtain prior approval of the higher authorities for initiation of
assessment/reassessment proceedings for past years falling within the
block period.
[b] Under
the first Proviso below clause (a) of section 158BC of the Act it is
provided that no Notice u/s. 148 of the Act is required to be issued
for the purpose of proceeding under Chapter XIV-B of the Act.
[c] The
order of assessment would be a consolidated order for the entire
block period obviating need for multiple assessments for each of the
assessment years included in the block period.
[d] The
definition of block period indicates that what is material is, to
constitute the block period, the specified 10/6 years i.e. preceding
the previous year in which search was conducted and includes
remainder period up to the date of search. In other words the term
block period does not have any nexus with any particular assessment
year.
(e) The
assessment for the block period has to be framed within one year/two
years from the end of the month in which the last of the
authorisations for search u/s. 132 of the Act was executed. The
authorisation is deemed to have been executed on the conclusion of
search as recorded in the last panchnama drawn in relation to any
person in whose case the warrant of authorisation has been issued.
[f] For
completing block assessment in the case of other person referred to
in section 158BD of the Act the period of limitation will be
similarly one year/two years from the end of the month in which the
Notice under Chapter XIV-B of the Act was served on such other
person.
14. Chapter
XIV of the Act, in juxtaposition, provides for PROCEDURE FOR
ASSESSMENT. The salient features, as are necessary for the present,
may be stated.
[a]
Section 147 of the Act deals with Income escaping assessment. An
Assessing Officer may assess or reassess any income chargeable to
tax which has escaped assessment ?Sfor any
assessment year?? if the Assessing Officer has reason to
believe that such income has escaped assessment. The power to assess
or reassess such income and also any other income which is liable to
tax and has escaped assessment is subject to provisions of sections
148 to 153 of the Act. Under section 147 of the Act, the Assessing
Officer is empowered not only to assess or reassess income which has
escaped assessment but also recompute the loss or depreciation
allowance or any other allowance, as the case may be. Explanation 2
to section 147 of the Act lays down three classes of cases wherein it
shall also be deemed to be a case where the income chargeable to tax
has escaped assessment. Proviso to section 147 of the Act stipulates
that no reassessment proceedings shall be commenced after the expiry
of four years from the end of the relevant assessment year in a case
where assessment has been framed u/s. 143(3) of the Act or u/s. 147
of the Act for the relevant assessment year, unless income has
escaped assessment for such assessment year by reason of failure or
omission to either file return u/s. 139 of the Act, or in response to
Notice u/s.142(1) or section 148 of the Act, or to disclose fully and
truly all material facts necessary for the assessment of that
assessment year.
[b] Under
section 148 of the Act, the Assessing Officer is required to serve on
the assessee a Notice requiring the assessee to furnish within the
prescribed period a return of income, but even before issuing such
Notice u/s. 148 of the Act, the Assessing Officer is mandated under
sub-section (2) of section 148 of the Act to record reasons. The
return of income which an Assessing Officer may call for from an
assessee is in relation to income which has escaped assessment, for
which an assessee is assessable under the Act during the previous
year corresponding to the relevant assessment year.
[c]
Section 149(1) of the Act prescribes time limit for issuance of
Notice u/s. 148 of the Act, again for the relevant assessment year;
in either of the clauses (a) or (b) the period that is prescribed
is from the end of the relevant assessment year. Similarly under
sub-section (3) if the reassessment is proposed in case of a person
treated as an Agent of a non-resident, notice u/s.148 of the Act
cannot be issued after the expiry of prescribed period from the end
of the relevant assessment year.
[d] Similarly
section 151 of the Act provides for sanction for issue of Notice and
there also the concept of relevant assessment year and the limitation
from the end of the relevant assessment year has been laid down.
[e] Section
153 of the Act which provides for time limit for completion of
assessments and reassessments, provides under sub-section (2), the
limitation period of one year from the end of the financial year in
which the notice u/s. 148 was served for making
assessment/reassessment u/s. 147 of the Act.
15. In
the aforesaid circumstances, when one considers the entire scheme
relating to procedure for assessment/reassessment as laid down in
the group of sections from section 147 to section 153 of the Act and
compares the same with special procedure for assessment of search
cases under Chapter XIV-B of the Act it becomes apparent that the
normal procedure laid down in Chapter XIV of the Act has been given a
go bye when Chapter XIV-B of the Act itself lays down that the said
Chapter provides for a special procedure for assessment of search
cases. The stand of revenue that section 158BH of the Act permits
all other previsions of the Act to apply to assessment made under
Chapter XIV-B of the Act does not merit acceptance.
16. Section
158BH of the Act begins with the words ?SSave as
otherwise provided in this Chapter ....??. Therefore,
before going to any other provision of the Act one has to consider
whether any provision has been made in Chapter XIV-B which is
dealing with the assessment of undisclosed income so as to warrant
exclusion of other provisions of the Act. Not only this, the Chapter
heading indicates that the Chapter is relatable to a distinct self
contained procedure for assessment of search cases, and when one
considers the relevant provisions of the Chapter this becomes
abundantly clear.
17. As
great emphasis has been laid on section 158BH of the Act, one may
consider the same. The said provision reads as under :
?SApplication
of other provisions of this Act.
158BH.
Save as otherwise provided in this Chapter, all other provisions
of this Act shall apply to assessment made under this chapter.??
On a
plain reading it becomes apparent that once a provision has been made
for assessment under Chapter XIV-B of the Act no other provision of
the Act shall be applicable, but if there is no provision made in
Chapter XIV-B of the Act all other provisions of the Act shall apply
to assessment made under Chapter XIV-B of the Act. The section does
not stipulate application of other provisions of the Act to an
assessment to be made under Chapter XIV-B of the Act, but requires
applicability of other provisions of the Act to an assessment
already made under Chapter XIV-B of the Act. The said provision, by
adopting the principle of incorporation, provides for applicability
of other provisions of the Act to an assessment which is already made
to ensure that the machinery provisions, like provisions for recovery
etc., have not to be engrafted in Chapter XIV-B of the Act.
18. Under
section 158B of the Act ?SBlock period??
and ?SUndisclosed income?? have been
defined. Section 158BA of the Act opens with nonobstante clause and
provides that in a case of search initiated after 30.06.1995 the
Assessing Officer shall proceed to assess the undisclosed income in
accordance with provisions of Chapter XIV-B of the Act,
notwithstanding anything contained in any other provisions of the
Act. Therefore, provisions of section 158BA(1) of the Act have to be
read in conjunction with section 158BH of the Act. The legislature
has provided a special procedure for assessment of search cases and
assessment has to be framed in accordance with the provisions of
Chapter XIV-B of the Act. On a harmonious reading of both sections
158BA and section 158BH of the Act it becomes clear that only where a
provision is not made in Chapter XIV-B of the Act providing for a
special procedure for assessment will other provisions of the Act be
made applicable.
19. Section
158BB of the Act provides for modality of computation of undisclosed
income of the block period. Such undisclosed income of the block
period has to be the aggregate of the total income of the previous
years falling within the block period. If the different aggregates
which are provided for in clauses '(a)' to '(f)' are seen, it becomes
clear that the computation of undisclosed income is first made in
accordance with the provisions of the Act, thereafter reduction or
increase as is provided in different clauses has to be made, and the
Explanation indicates the exceptions. Clause (f) under sub-section
(1) of section 158BB of the Act provides for reducing the aggregate
total income computed for the block period by the aggregate of the
total income, in case where assessment for undisclosed income had
been made earlier under clause (c) of section 158BC, on the basis of
such assessment. In other words, it only means that where previous
assessment has been framed under Chapter XIV-B of the Act the
aggregate of such total income assessed for the block period in case
of a search where block period is a different block period from the
earlier block period, while assessing for a subsequent block period,
such earlier aggregate has to be deducted. When this provision is
read in context of section 158BC, more particularly the first Proviso
thereunder, it becomes clear that the legislature does not intend to
reopen a block assessment. Any such interpretation would run counter
to the legislative intent as noted hereinbefore from the
contemporaneous exposition through the Memorandum Explaining the
Finance Bill as well as various Circulars issued by CBDT explaining
different amendments.
20. Section
158BC of the Act itself indicates that where legislature wanted to
incorporate other provisions of the Act a specific mention has been
made, when a provision has been made for adopting Sections 142, 143,
144 & 145 of the Act. Contra, where legislature does not want a
provision, not falling within Chapter XIV-B of the Act, to be
resorted to the two Provisos under clause (a) of section 158BC of
the Act have specifically made this clear. The First Proviso
stipulates that no notice u/s. 148 is required to be issued for the
purpose of proceeding under Chapter XIV-B of the Act. The Second
Proviso stipulates that no person, who has already furnished a return
u/s. 158BC(a) of the Act, shall be entitled to file a revised return
as provided for in section 139(5) of the Act. Thus, these provisions
are inherent indicators in the special procedure scheme to show that
section 158BH of the Act has limited application.
21. Time
limit for completion of block assessment has been provided in
section 158BE of the Act. It indicates that the same has to be
within one year/two years from the end of the month in which the last
of the authorisations for search under section 132 of the Act was
executed etc. For the present, it is not necessary to refer to the
other provisions of the said section. However, Explanation 2 as
appearing in section 158BE of the Act gives an indication as to what
would be the date on which an authorisation shall be deemed to have
been executed. Under clauses (a) and (b) of Explanation 2 different
points of time have been specified. But in no case, can one envisage
the applicability of period of limitation prescribed under section
153 of the Act for completion of assessments and reassessments. The
Revenue cannot contend that for the purpose of reassessing the so
called escaped undisclosed income revenue will resort to the
limitation under section 153 of the Act, because undisclosed income
has to be assessed in the manner provided and by adopting the
procedure provided in Chapter XIV-B of the Act. Nor is it possible to
resort to limitation under section 158BE of the Act because the said
period of limitation has already expired. At the cost of repetition
in this context one has to refer to the language employed in section
158BA of the Act where there is a positive mandate to the Assessing
Officer to assess the undisclosed income in accordance with the
provisions of Chapter XIV-B of the Act, notwithstanding anything
contained in any other provisions of the Act. As against that
section 158BH states that except as otherwise provided in Chapter
XIV-B of the Act, all other provisions of the Act shall apply to
assessment made under Chapter. Therefore, once period of limitation
has been prescribed under section 158BE of the Act the time limit for
completion of assessment of undisclosed income has to be as provided
under the said section. If the contention of revenue is accepted
section 158BE becomes unworkable. The limitation prescribed from the
date of last of the authorizations, or in case of requisition
under section 132A of the Act, has already expired. This is one more
inherent pointer which flows on a conjoint reading of the provisions
of Chapter XIV-B of the Act to indicate that legislature does not
intend to reopen assessments completed under Chapter XIV-B of the Act
assessing the undisclosed income by adopting the special procedure
provided in the said Chapter.
22. There
is one more aspect of the matter. Entire Chapter XIV-B of the Act
relates to assessment of search cases, viz., undisclosed income found
as a result of search. One cannot envisage escapement of undisclosed
income once a search has taken place and material recovered, on
processing of which undisclosed income is brought to tax. Section 147
of the Act itself indicates that the same is in relation to income
escaping assessment and applies in a case where either income
chargeable to tax has escaped assessment by virtue of either non
disclosure by way of non filing of return, or non disclosure by way
of omission to disclose fully and truly all material facts for the
purpose of assessment, or processing of material already available on
record, if the same is within stipulated period of limitation.
Therefore, to contend that undisclosed income has escaped assessment
despite an assessment having been framed under Chapter XIV-B of the
Act by adopting the special procedure prescribed by the said Chapter
is to contend what is inherently not possible. It cannot be a case of
non filing of return considering the provisions of section 158BC of
the Act. It cannot be a case of non disclosure of material facts
considering the fact that everything which was undisclosed has
already been unearthed at the time of search and the definition of
?Sundisclosed income?? itself indicates that not only what
has been seized or recovered, but even income or property which has
not been or would not have been disclosed for the purpose of the Act
has been roped in. Furthermore, section 158BB of the Act also
provides for not only for requisition of Books of Accounts or other
documents, but on the basis of evidence found as a result of search
and such other materials or information as are available with the
Assessing Officer, undisclosed income of the block period shall be
computed. Therefore, even if, assuming for the sake of argument, some
income has not been disclosed in the return furnished under section
158BC of the Act, the Assessing Officer is bound to assess all
undisclosed income after processing the entire material available
with Assessing Officer. The Assessing Officer cannot be heard to
state that undisclosed income has escaped assessment because the
officer failed to apply his mind to the material available on
record, there being no lack of disclosure.
23. The
last of the amendments made by Finance Act,2002 as explained in CBDT
Circular No. 8/02 dated 27.08.2002 further goes to support the stand
of the petitioners. The legislature has provided that the block
assessment of undisclosed income is to be based not only on the
evidence found at the time of search, but also on the basis of
material and information gathered during the inquiries made after
the search proceedings. However, on the basis of evidence found
during the search proceedings certain further inquiries are
undertaken by the Assessing Officer resulting in collection of
material or information gathered during such inquiries. The
assessment for the block period shall also include computation of
such income as a consequence of such inquiries. Thus, there would
be no scope for any income escaping or remaining undisclosed when the
special procedure laid down by Chapter XIV-B of the Act is resorted
to. The contention, on behalf of the Revenue, that there might be
income which might have yet escaped assessment from the block
assessment cannot be accepted because the scheme itself provides for
bringing to tax all undisclosed income, whether recovered during the
course of search proceedings or recovered in the course of post
search inquiries made on the basis of material collected during
search. Hence, the legislative intent is clear. Once a block
assessment is framed the same is final unless and until disturbed in
an appropriate proceeding taken before the higher forum.
24. The
provisions of Chapter XIV-B of the Act, more particularly section
158BG of the Act provides for a situation where no order of
assessment for the block period shall be passed without the
previous approval of either the Commissioner or Director (as the case
may be) in respect of search cases. In other words, not only the
Assessing Officer cannot be an officer below the rank of an
Assistant Commissioner etc., but the order of assessment framed is
scrutinised by the highest officer in the hierarchy to ensure that :
(1) no undisclosed income escapes assessment, and (2) there is no
high pitched assessment, only for the sake of making an assessment.
It would not be open to Revenue to contend that despite material
being available on record the same escaped scrutiny at the hands of
two officers, one of them being a superior officer in the hierarchy.
25. As
already noted hereinbefore, the entire scheme for bringing to tax
income which has escaped assessment under sections 147 to 153 of the
Act specifically relates to a specific assessment year and different
time limits are provided at different stages which are all
inter-linked and commence from the end of the relevant assessment
year. The definition of ?Sassessment year?? as provided in
section 2(g) of the Act means the period of 12 months commencing on
the first day of April every year. This definition cannot by any
stretch of imagination be made applicable to the term ?Sblock
period?? which has been defined by section 158B(a) of the
Act. On a plain reading the concept of block period cannot take
within its fold the meaning of an assessment year. Similarly the term
?Sassessment year?? by its very definition, cannot be read
to mean ?Sblock period??.
26. In
light of this specific distinction in the statutory scheme brought
about by specific definitions of the two terms, ?Sassessment
year?? and ?Sblock period??, the submission on behalf
of Revenue that the term ?Sassessment year??, wheresoever it
appears in the group of sections 147 to 153 of the Act, be
substituted by the term ?Sblock period?? cannot be accepted,
because on a plain reading of the said provisions, viz., section 147
to section 153 of the Act, the entire scheme becomes unworkable. The
principles of interpretation also do not permit such an exercise.
27. It is
well settled that a Court is not empowered to either add words to a
statute or substitute words while interpreting a provision. The
Court can only read and interpret the language employed by the
statute. Only in the event of a provision not conveying the intended
meaning, in other words, a plain reading resulting in absurd
situation, can the Court import words to make sense out of the
provision. However, at the same time, even a purposive
interpretation does not permit the Court to substitute the statutory
language unless and until the provision as it stands would not result
in the provision being workable. If the language of the statute is
capable of a plain meaning without doing violence to the language,
it is not open to add any words therein so as to give meaning which
one or the other side thinks to be more appropriate.
28. In
the present case none of the exceptional contingencies exist. As
already noticed, on a plain reading it becomes discernible that there
are two separate streams of procedure provided by the legislature :
(1) under Chapter XIV of the Act which provides for ?SPROCEDURE FOR
ASSESSMENT??, and (2) under Chapter XIV-B of the Act which provides
for ?SA SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES??. Only
in the event the special procedure for assessment has not provided
for some procedure for assessment can one refer to the procedure
under Chapter XIV of the Act. Therefore, the interpretation sought to
be placed by Revenue on the provisions of the Act so as to read in
the term ?Sblock period?? for the purpose of invoking and
applying sections 147 to 153 of the Act cannot be countenanced.
Neither does a plain reading of the provisions permit such an
exercise, nor is there any lacuna in the provisions which is required
to be filled up.
29. In
Chapter XIV-B of the Act the only place where one finds the use of
the term 'assessment year?? is in the definition of the term
'block period'. This itself indicates that if the 'block
period' was equivalent to 'assessment year' the
definition of block period would not have provided that 'block
period' means period comprising previous years relevant to 10/6
assessment years. To put it differently, reference to the number of
assessment years is only a means, a measure to indicate and specify
the period of previous years which would comprise block period.
Revenue, therefore, cannot contend successfully that wherever the
term 'assessment year' is used in the group of Sections from
Section 147 to 153 of the Act the said term has to be replaced by the
term 'block period'. Furthermore, the amendment which is
retrospectively made in the definition of the block period by The
Finance (No.2) Act, 1996, itself indicates that originally the term
block period meant as consisting of 10 previous years prior to the
previous year in which the search was conducted and also the period
of current previous year up to the date of search, but, before
adoption of uniform previous year, in case of different assesses,
'block period' would be different depending on the accounting
period adopted in terms of section 3 of the Act. To obviate this
situation the definition of block period was amended. This
becomes clear from Circular No. 762 dated 18.02.1998 issued by CBDT
extracted hereinbefore.
30. The
Apex Court decision on which great emphasis has been placed on
behalf of Revenue in fact goes to support the view adopted in the
present case. The controversy before the Apex Court was in relation
to the rate of tax which was to be applied to the undisclosed income
assessed in terms of Chapter XIV-B of the Act. The Apex Court itself
has observed, as can be seen from the portion wherein emphasis is
supplied by this Court, that the Supreme Court was concerned mainly
with computation of undisclosed income under section 158BB(1) of the
Act. This Court has already noticed that section 158BH of the Act
provides for invoking other machinery provisions to an assessment
made under Chapter XIV-B of the Act and does not require other
provisions of the Act to be applied to a block assessment to be made
under Chapter XIV-B of the Act.
31. The
Apex Court decision also provides for a harmonious construction on
the basis of reading of the mode of computation provided in Chapter
IV of the Act and provided under Chapter XIV-B of the Act by stating
that section 158BH interalia provides that other provisions of the
Act shall apply if there is no conflict between the provisions of
Chapter XIV-B of the Act and other provisions of the Act. This
becomes clear from the extracted portion wherein emphasis has been
supplied. To put it differently, in a situation where there is a
conflict between the provisions of block assessment procedure
prescribed under Chapter XIV-B of the Act and other provisions of the
Act, it will be the special procedure prescribed under Chapter XIV-B
of the Act which has to prevail.
32. As
already noticed hereinbefore, the entire scheme under Chapter XIV of
the Act, more particularly from Sections 147 to 153 of the Act
pertaining to reassessment, and the special procedure for assessing
the undisclosed income of the block period under Chapter XIV-B of the
Act are not only separate and distinct from each other, but if an
effort is made to incorporate the scheme under Chapter XIV of the
Act for the purpose of assessment of the block period there is a
conflict between the provisions which becomes apparent on a plain
reading. In the circumstances, as per established rules of
interpretation, unless and until a plain reading of the two streams
of assessment procedure does not result in the procedures being
independently workable, only then the question of resolving the
conflict would arise. But to the contrary, in the present case, in
light of provisions of section 158BH of the Act, once there is a
conflict between the two streams of procedure, as laid down by the
Apex Court, provisions of Chapter XIV-B of the Act shall prevail and
have primacy.
33. Thus
viewed from any angle, the stand of Revenue does not merit
acceptance. Once assessment has been framed under section 158BA of
the Act in relation to undisclosed income for the block period as a
result of search there is no question of the Assessing Officer
issuing notice under section 148 of the Act for reopening such
assessment as the said concept is abhorrent to the special scheme of
assessment of undisclosed income for block period. At the cost of
repetition it is required to be stated and emphasised that the
first Proviso under section 158BC(a) of the Act specifically provides
that no notice under section 148 of the Act is required to be issued
for the purpose of proceeding under Chapter XIV-B of the Act.
34. In
the circumstances, impugned notice dated 16.04.1999 under Section
148 of the Act cannot be upheld and is hereby quashed and set aside.
In the view that the Court has adopted it has not been found
necessary to go into the facts of the case and examine whether the
reasons recorded by the respondent authority are germane or not as
the matter has been decided only on the point of absence of
jurisdiction in a case of block assessment.
SPECIAL
CIVIL APPLICATION No. 4380 OF 1999.
35. This
petition challenges notice dated 22.04.1999 issued under section
148 of the Act for the block period 1985-86 to 22.09.1995. It is an
accepted position between the parties that the contentions of both
the sides are identical to those raised in Special Civil Application
No. 6215 of 1999 in the case of Kapurchand Kakaram Bansal Vs. Dy.
(now Joint) Commissioner of Income-tax.
35.1
Hence, for the reasons recorded in judgment of even date in Special
Civil Application No. 6215 of 1999 impugned notice dated 22.04.1999
is hereby quashed and set aside.
SPECIAL
CIVIL APPLICATION No. 4387 OF 1999.
36. This
petition challenges notice dated 22.04.1999 issued under section 148
of the Act for the block period 1985-86 to 22.09.1995. It is an
accepted position between the parties that the contentions of both
the sides are identical to those raised in Special Civil Application
No. 6215 of 1999 in the case of Kapurchand Kakaram Bansal Vs. Dy.
(now Joint) Commissioner of Income-tax.
36.1
Hence, for the reasons recorded in judgment of even date in Special
Civil Application No. 6215 of 1999 impugned notice dated 22.04.1999
is hereby quashed and set aside.
SPECIAL
CIVIL APPLICATION No. 919 OF 2000.
37. This
petition challenges notice dated 22.02.1999 issued under section 148
of the Act for the block period 1985-86 to 16.11.1995. It is an
accepted position between the parties that the contentions of both
the sides are identical to those raised in Special Civil Application
No. 6215 of 1999 in the case of Kapurchand Kakaram Bansal Vs. Dy.
(now Joint) Commissioner of Income-tax.
37.1
Hence, for the reasons recorded in judgment of even date in Special
Civil Application No. 6215 of 1999 impugned notice dated 22.04.1999
is hereby quashed and set aside.
38. In
light of what is stated hereinbefore each of the petitions is allowed
accordingly. Rule made absolute in each of the petitions in the
aforesaid terms with no order as to costs.
Sd/-
Sd/-
(D.A.