2011 (11) TMI 16 - HC - Income Tax

Block assessment u/s 158BC read with section 144 - No search on the assessee - appellant had submitted that the search warrant and the panchnama are of no relevance as the appellant was not operating from the address mentioned therein - Held that - the search warrant and panchnama mention the name of the appellant. - appellant has taken conflicting and contrary stands in different proceedings. - Decided against the assessee. Non issuance of notice u/s 158BC, whether merely a procedural irregularity - Held that - there is ample evidence and material that notice under section 158 BC was served/received by the appellant. There is implied, if not a direct admission by the appellant that the block assessment notice dated 17th October, 1997 was served in view of the reply by the appellant company dated 17th November, 1997 to the notice under Section 142 of the Act. Further, there is evidence to show that A.K. Mishra who had represented the appellant company and was in touch with the director/officers of the appellant company. The contention that A.K. Mishra was not representing the appellant stands falsified and negated. Submission that no material or evidence was found in the alleged search - Held that - The questionnaire attached to the notice refers to the material and evidence collected during the course of search. The block assessment order which was challenged before the tribunal also refers to documents, material etc. found during the search. - Decided against the assessee.

Issues Involved:
1. Whether a search under Section 132 of the Income Tax Act was conducted on the appellant.
2. Whether the notice under Section 158BC of the Act was served on the appellant.
3. Whether the tribunal erred in holding the non-service of notice under Section 158BC as a procedural irregularity.
4. Whether the direction to remit the case to the Assessing Officer is justified.

Detailed Analysis:

1. Search under Section 132 of the Act:

The appellant contended that no search was conducted on its premises. The tribunal, however, reviewed the warrant of authorization and the panchnama, which mentioned the appellant's name, confirming the search. The appellant's argument that the search warrant and panchnama were irrelevant because the appellant was not operating from the address mentioned was dismissed. The block assessment order indicated searches at multiple locations, including Trivandrum, where documents were seized. The appellant had also admitted to a search in a writ petition before the Kerala High Court. Thus, the tribunal's rejection of this contention was upheld.

2. Service of Notice under Section 158BC:

The appellant disputed the service of the notice dated 17th October 1997. The tribunal inferred service based on circumstantial evidence, including a signed notice, a letter from Thakur Vaidyanath Aiyer & Co., and a detailed reply submitted by the appellant on 17th November 1997. The appellant's claims of not knowing A.K. Mishra or having appointed the said Chartered Accountants were found to be false, as the appellant had interacted with them during the assessment proceedings. The tribunal's conclusion that the notice was served was deemed reasonable and justified.

3. Procedural Irregularity vs. Illegality:

The tribunal followed the Bombay High Court's judgment in Shirish Madhukar Dalvi, distinguishing between procedural and substantive requirements. It held that Section 158BC is procedural, and any irregularity in service, if not causing prejudice, does not invalidate the proceedings. The tribunal noted that the appellant was aware of the proceedings and had participated in them. The Delhi High Court found this reasoning sound, emphasizing that procedural rules are meant to facilitate justice, not obstruct it.

4. Direction to Remit to the Assessing Officer:

The appellant argued that remitting the case was futile as no material was found during the search. However, the tribunal noted that the block assessment order referred to documents and evidence collected during the search. The tribunal set aside the ex-parte assessment order and directed the Assessing Officer to re-adjudicate, providing the appellant with due opportunity. This direction was deemed appropriate to ensure a fair hearing and proper determination of undisclosed income.

Conclusion:

The High Court dismissed the appeal, finding no substantial question of law. The tribunal's findings on the search, service of notice, procedural irregularity, and remittance for re-adjudication were upheld. The appellant's contentions were found to be factually incorrect and without merit. The court emphasized that procedural rules should aid justice and not be used to obstruct it.

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