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Issues Involved: The judgment involves the legality of a search conducted under section 132 of the Income-tax Act, 1961, and the applicability of Chapter XIV-B for assessment of undisclosed income resulting from the search.
Search and Seizure Procedure: The search conducted on February 23, 1996, falls under Chapter XIV-B inserted in the Income-tax Act, 1961, by the Finance Act, 1995, which provides a special procedure for assessment of search cases. Section 158BA mandates assessment of undisclosed income following a search u/s 132. The search in this case being post-June 30, 1995, Chapter XIV-B applies, contrary to the earlier provisions. Retrospective Operation: Chapter XIV-B does not have retrospective operation, as clarified by the definition of "block period" u/s 158B, covering ten previous years preceding the search year. The assessment year 1993-94 falls within this block period, making the special procedure under Chapter XIV-B applicable for that year. Assessment Order: An interim assessment order for the year 1993-94 was passed but kept in abeyance. The Department initiated proceedings u/s 158BC for block assessment, necessitating the quashing of the interim assessment order to avoid conflicting assessments. The court allowed the first prayer of quashing the interim assessment order, as the Department had already issued a notice u/s 158BC for the block period, including the year 1993-94. This judgment clarifies the application of Chapter XIV-B for post-1995 searches, the non-retrospective nature of the special procedure, and the necessity to align assessments with block assessment proceedings u/s 158BC to avoid duplication and ensure procedural compliance.
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