2005 (3) TMI 714 - AT - Income Tax

Block assessment in search cases, Return of income, etc., not to be invalid on certain grounds

Summary

Issues:
Validity of assessment order based on time limit under section 158BE of the Income-tax Act, 1961.

Analysis:
The judgment involves two appeals by husband and wife assessees challenging the assessment order under section 158BD of the IT Act. The case originated from a search and seizure action involving M/s. Samyukata Foundation (P.) Ltd., where undisclosed investments were discovered. The assessees received notices under sections 158BC and 158BD, with the latter being acknowledged on 13-8-1996. The assessees filed their income returns on 10-9-1996 admitting undisclosed income. The Assessing Officer made various additions to the return income in the assessment dated 27-8-1997.

The main contention raised by the assessees was the validity of the assessment order based on the time limit prescribed under section 158BE. The argument focused on the limitation clause stipulating completion of block assessment within one year from the date of notice under section 158BD. The Department argued that the assessment was timely and could be rectified under section 292B of the IT Act.

The Tribunal analyzed the timeline of notices issued, starting with a notice under section 158BC on 8-7-1996, followed by a letter on 9-8-1996 clarifying it as a notice under section 158BD. The Tribunal emphasized that the starting point of limitation was the date of the original notice, 8-7-1996, not the clarificatory letter. It concluded that the assessment framed on 27-8-1997 was beyond the permissible time limit, rendering it invalid.

The Tribunal held that the assessment order was null and void due to being time-barred, quashing it for both assessees. It refrained from addressing the merits of additions made in the assessment order, deeming them academic given the nullification of the assessment. The judgment highlighted the importance of strict adherence to time limits in block assessments and emphasized that procedural mistakes could not be rectified under section 292B of the IT Act.

In summary, the Tribunal allowed the appeals of the assessees, declaring the assessment order invalid due to exceeding the prescribed time limit under section 158BE of the Income-tax Act, 1961.