2016 (12) TMI 1654 - HC - Income Tax

Block assessment order barred by limitation - purpose of limitation under section 158BE - whether the order of the assessment which has been passed on August 24, 2001 is time barred or not? - period is to be counted from the date on which the direction under section 142(2A) is served on the assessee and not from the date of issue of direction by the Assessing Officer under section 142(2A)? - Held that - It cannot be disputed that the period of exclusion will commence from the day on which the Assessing Officer gives a direction under section 142(2A) and would end on the day when the assessee furnishes such audit report. According to us, the date of issuance of the notice (i.e., January 18, 2001) is the day on which the Assessing Officer had taken a decision to get the books audited, when such decision is conveyed to the assessee then only it results into direction. A purpose of interpretation of clause (ii) above, read with the decision of the hon ble Supreme Court (supra) would mean, the date on which the decision/notice is served on the assessee. In that view of the matter, January 23, 2001 will be the crucial date from which the period to be excluded is to be reckoned, and therefore, the period which is required to be excluded in the period from January 23, 2001 to July 17, 2001 from January 18, 2001 to January 23, 2001 it was only decision, and not the direction. The learned Income-tax Appellate Tribunal has thus committed no error of law in holding the assessment order to be time barred. - Decided in favour of the assessee

Summary

Issues:
1. Interpretation of the period of limitation under section 158BE for block assessment.
2. Determination of whether the assessment order was time-barred based on the facts and provisions of the Income-tax Act.

Analysis:
1. The case involved a challenge by the Department against the Tribunal's decision partially allowing the appeal and dismissing the cross objections filed by the assessee. The substantial questions of law framed by the court pertained to the calculation of the limitation period under section 158BE and the validity of the block assessment order concerning undisclosed income found during a search operation.

2. The facts revealed that the search operation on the assessee and related parties led to the discovery of incriminating documents and valuables. Subsequently, notices were issued for block assessment, and the Assessing Officer directed the assessee to get the accounts audited under section 142(2A) of the Income-tax Act. The key contention revolved around the exclusion of time under Explanation 1 of section 158BE, particularly focusing on the interpretation of the term "direction" given by the Assessing Officer for audit purposes.

3. The Department argued that the assessment order passed after the audit report submission was within the statutory time limit. However, the court analyzed the provisions of section 158BE and the timeline of events to determine the crucial date for commencing the exclusion period. The court emphasized that the direction under section 142(2A) must be considered from the date it is served on the assessee, not merely when the decision is made by the Assessing Officer.

4. Referring to relevant case laws, the court clarified that the exclusion period for audit direction starts from the date of service on the assessee. Therefore, the exclusion period in this case ran from January 23, 2001, to July 17, 2001, rendering the assessment order passed on August 24, 2001, time-barred. Consequently, the court upheld the Tribunal's decision, ruling in favor of the assessee and dismissing the Department's appeal.

5. The judgment highlighted the importance of correctly interpreting statutory provisions for calculating limitation periods in block assessments. By emphasizing the service date of the audit direction on the assessee, the court ensured a fair application of the law in determining the timeliness of the assessment order. Ultimately, the court's decision favored the assessee, underscoring the significance of procedural compliance and legal interpretation in tax matters.