2011 (12) TMI 596 - AT - Income Tax

Limitation in passing the order u/s 158BD - Held that - Issue of notice u/s 158BD after two years from the date of completion of the assessment in respect of the person against whom search was carried out is barred by limitation. Thus the block assessment order passed against the assessee u/s 158BD is barred by limitation.

Summary

Issues involved:
- Limitation in passing the order under section 158BD of the Income Tax Act.

Detailed Analysis:
The appeal was filed by the revenue against the order of CIT(A)-IV, Kochi for the block period 1989-90 to 1998-99, with the assessee filing a cross objection against the same order. The main issue raised by the assessee in the cross objection was the limitation in passing the order under section 158BD of the Act. The representative for the assessee argued that the notice under section 158BD was served after more than two years from the completion of the assessment in the case of the person searched, which rendered the block assessment proceedings invalid. On the other hand, the Departmental Representative contended that there was no prescribed time limit for issuing notice under section 158BD, and as long as the delay was not due to the assessing officer, the assessment order was valid.

Upon considering the submissions and perusing the material, the Tribunal noted that while there was no specific time limit prescribed for issuing notice under section 158BD, the assessing officer was required to do so within a reasonable period after the completion of the assessment in the case of the person searched. Referring to section 132(9A) of the Act, the Tribunal highlighted the obligation for the officer conducting the search to examine the seized material within 60 days and hand it over to the relevant assessing officer. The Tribunal emphasized that the finality of the proceedings should not be taken lightly and that the assessing officer must issue the notice within a reasonable time frame. The Tribunal cited a previous ruling by a Five Member Bench of the Tribunal in Delhi, which emphasized the interlinking of sections 158BC and 158BD, stating that the provisions must be scrupulously followed to determine undisclosed income and the person to whom it belongs.

Further, the Tribunal referred to another observation by the Special Bench regarding the time limit for completion of block assessment under section 158BE, highlighting that the finding as to the person to whom the undisclosed income belongs must be given within the specified time frame. Failure to provide such a finding would oust the provisions of section 158BD. The Tribunal also stressed the importance of recording satisfaction under section 158BD and concluded that issuing a notice under section 158BD after two years from the completion of the assessment of the person searched would be barred by limitation. The Tribunal cited similar views taken by other benches and the Gujarat High Court to support its decision.

Consequently, the Tribunal held that the block assessment order passed against the assessee under section 158BD was barred by limitation and quashed the same. As a result, it was deemed unnecessary to delve into the merits of the revenue's contentions, leading to the dismissal of the revenue's appeal and the allowance of the assessee's cross objection.