2006 (2) TMI 580 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the assessment framed under sections 158BC(c), 158BD, and 144 of the Income-tax Act, 1961.
2. Validity of the notice issued under section 158BC read with section 158BD.
3. Applicability and rectifiability of procedural defects under section 292B.
4. Computation of undisclosed income and its protective assessment.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Framed Under Sections 158BC(c), 158BD, and 144:
The revenue challenged the order of the CIT(A) that canceled the assessment framed by the Assessing Officer (AO) under sections 158BC(c), 158BD, and 144. The assessment pertained to the block period from 1-4-1987 to 20-11-1997, following a search conducted at the premises of the assessee's son on 20-11-1997. The AO issued a notice under section 158BC(a) on 30-7-1998, which was served on the assessee on 5-8-1998. The assessee argued that since there was no search on him under section 132(1), the application of section 158BC was illegal. The CIT(A) had canceled the assessment, leading to the revenue's appeal.

2. Validity of the Notice Issued Under Section 158BC Read with Section 158BD:
The AO issued a notice under section 158BC read with section 158BD on 26-6-2000, served on 28-6-2000. The assessee contended that the proceedings were barred by time as the search was conducted on 20-11-1997, and the mandatory requirement of 15 days' time was not given. The AO clarified on 24-8-2000 that the assessment proceedings were under section 158BC(a) read with section 158BD, and the notice should be read accordingly in view of section 292B. The Tribunal noted that the assessee was aware of the proceedings and could not take shelter under technicalities.

3. Applicability and Rectifiability of Procedural Defects Under Section 292B:
The Tribunal considered whether the defect in the notice under section 158BC rendered the block assessment proceedings null and void and whether such a defect was rectifiable under section 292B. It was held that non-mentioning of section 158BD in the notice did not render the proceedings null and void and was rectifiable under section 292B. The Tribunal referred to judicial pronouncements, including the Special Bench decision in Smt. Mahesh Kumari Batra v. Joint CIT, supporting the rectifiability of procedural defects.

4. Computation of Undisclosed Income and Its Protective Assessment:
During the search at the residence of the assessee's son, certain documents and assets were found, leading to the computation of undisclosed income. The AO computed the undisclosed income for different financial years, including amounts for Philips Stereo, Microwave oven, loans, and gifts. The Tribunal noted that the assessee was aware of the proceedings and had received the notice under section 158BC(a) on 5-8-1998. The Tribunal held that the whole proceedings could not be nullified due to technical defects, and the assessee could not take shelter under technicalities.

Conclusion:
The Tribunal reversed the stand of the CIT(A) and allowed the appeal of the revenue. It was held that the assessment proceedings were valid, and the procedural defects were rectifiable under section 292B. The assessee's arguments based on technicalities were rejected, and the computation of undisclosed income was upheld.