2013 (7) TMI 695 - HC - Income Tax

Undisclosed income - CIT made addition made on account of jewelry seized - Tribunal deleted addition holding that block period mentioned in assessment was incorrect - Held that - assets of silver jewellery/silver were requisitioned on 3.4.2000, but it came into possession of the authorized officer of the department on 16.02.2001, therefore, the block period would begin on 16.02.2001, and not on the date of issuance of notice under Section 132-A of the Act or on 3.4.2000, or on any previous date when the requisition was made - There was no error mentioning the block period in the notice, which can be held as invalid. We may also add here that even if a date of end of block period was wrongly mentioned, the provisions of Section 292-B would save the notice - Non mentioning of status of the assessee, would not invalidate the notice, as it was only a mistake, which was curable - Decided in favour of Revenue.

Summary

Issues Involved:
1. Validity of Tribunal's decision in light of Explanation-2 of sub-section 2 of Section 158 BC regarding the execution of the warrant.
2. Correctness of the Tribunal's decision to quash Block assessments based on defects in the notice issued under Section 158 BC and the applicability of Section 292-B to cure such defects.

Detailed Analysis:

Issue 1: Validity of Tribunal's Decision in Light of Explanation-2 of Sub-section 2 of Section 158 BC Regarding the Execution of the Warrant

The Tribunal found that the block period ended on 3.4.2000, the date of issuance of the summons under Section 132-A, rather than 16.02.2001, when the department received the assets. The Tribunal's interpretation was based on Explanation-2 (b) to Section 158 BE (2) (b), which states that the period of limitation for block assessment begins from the end of the month in which the notice is served or the date of actual receipt of assets by the authorized officer. The Tribunal deemed the notices void ab-initio, asserting that the block period should end on the date of issue of summons, not the date of execution.

Issue 2: Correctness of Tribunal's Decision to Quash Block Assessments Based on Defects in the Notice Issued under Section 158 BC and Applicability of Section 292-B to Cure Such Defects

The Tribunal invalidated the notices under Section 158 BC for several reasons:
- In Vinod Kumar's case, the block period was incorrectly mentioned.
- For other appellants, the notices lacked the status in which the return was required, incorrectly mentioned the block period, and did not comply with the mandatory requirement of providing a period "not being less than 15 days."

The Tribunal held these defects were not curable under Section 292-B, which aims to save proceedings from technical errors that do not affect the substance.

Court's Findings:

1. Interpretation of Block Period:
The Court held that the assets came into the hands of the AO on 16.02.2001, making the block period from 1.4.1990 to 16.2.2001 correct as per Explanation 2 (b) of Section 158 BE. The Tribunal's interpretation was found incorrect, and the block period should start from the date of actual receipt of assets.

2. Technical Defects and Section 292-B:
The Court found that even if there were errors in the notices, such as the incorrect block period or non-mentioning of status, these were curable under Section 292-B. The section is intended to prevent technicalities from defeating justice. The Court cited CIT Vs. M/s. Shyam Cold Storage, emphasizing that technical mistakes should not invalidate proceedings if they do not mislead the assessee.

3. Participation in Proceedings:
The Court noted that the assessee participated in the assessment proceedings without raising objections about the notice's validity, implying that the defects did not cause any prejudice.

Conclusion:
Both questions were decided in favor of the revenue. The Tribunal's decision was overturned, and the Income Tax Appeal was allowed. The Court emphasized that technical defects in notices, which do not mislead the assessee, are curable under Section 292-B, and the correct block period should be based on the actual receipt of assets by the authorized officer.