2015 (2) TMI 679 - HC - Income Tax

Block assessment - Scope and effect of sections 158BC and 158BD - Held that - The Supreme Court in Asst. CIT v. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA clearly specifies that section 158BC prescribes the procedure for making block assessment of the searched person and section 158BD enables assessment of any person, other than the searched person. In this case, we have no hesitation to hold that searched person is M/s. Harbour Syndicate and, therefore, as far as M/s. Harbour Syndicate is concerned, the Assessing Officer was justified in issuing notice under section 158BC and in respect of V. H. Yahiya, the Assessing Officer was justified in issuing notice under section 158BD. The question of law raised in this regard is answered in favour of the Revenue. In the light of the above discussion, we are of the view that the order of remittance by the Tribunal is justified though not for the reasons stated in the Tribunal's order. The Assessing Officer was justified in invoking sections 158BC and 158BD in the respective cases and, therefore, the matter requires to be considered on the merits by the Commissioner of Income- tax (Appeals). Having formed such an opinion, these appeals are liable to be dismissed and, accordingly, we dismiss the appeals.

Issues Involved:
1. Validity of search and seizure operations under Section 132 of the Income-tax Act, 1961.
2. Correctness of invoking Section 158BC versus Section 158BD for block assessment.
3. Legality of the assessment orders and the procedure followed.
4. Interpretation and application of Sections 158BC and 158BD.

Detailed Analysis:

1. Validity of Search and Seizure Operations:
The search was conducted under Section 132 of the Income-tax Act, 1961, at the business premises of M/s. Harbour Syndicate, resulting in the seizure of documents showing undisclosed income. The search led to the issuance of notices under Section 158BD to the assessee, Mr. V. H. Yahiya, and the completion of assessments under Sections 158BD, 158BC, and 144 of the Act. The court found that the search was validly conducted as per the provisions of Section 132, which allows the authorized officer to search any building, place, vessel, vehicle, or aircraft where there is reason to suspect that books of account, documents, money, bullion, etc., are kept.

2. Correctness of Invoking Section 158BC versus Section 158BD:
The main contention was whether the Assessing Officer should have proceeded under Section 158BC or Section 158BD for making the block assessment. The court held that Section 158BC is applicable to the person searched, which in this case was M/s. Harbour Syndicate. Section 158BD is to be invoked for any other person whose undisclosed income is found during the search. Hence, the Assessing Officer was justified in issuing notice under Section 158BC to M/s. Harbour Syndicate and under Section 158BD to Mr. V. H. Yahiya. The court relied on the Supreme Court judgment in Manish Maheshwari v. Asst. CIT, which clarified that Section 158BD applies to persons other than the one searched.

3. Legality of the Assessment Orders and Procedure Followed:
The assessment orders were challenged on the grounds of being illegal and barred by limitation. The court observed that the assessments under Section 158BC should have been completed within two years from September 30, 2000. Since the block assessment was completed only on June 26, 2003, it was found to be barred by limitation. However, the Tribunal had remitted the matter back to the Commissioner of Income-tax (Appeals) for reconsideration on the merits, including the question of limitation.

4. Interpretation and Application of Sections 158BC and 158BD:
The court extensively discussed the interpretation of Sections 158BC and 158BD. Section 158BC prescribes the procedure for making block assessments of the searched person, while Section 158BD enables the assessment of any person other than the searched person. The court clarified that the person searched under Section 158BC is M/s. Harbour Syndicate, and the undisclosed income of Mr. V. H. Yahiya should be assessed under Section 158BD. The court emphasized that the procedure followed by the Assessing Officer was correct and that the remand by the Tribunal was justified for reconsideration on the merits.

Conclusion:
The court concluded that the Assessing Officer was justified in invoking Sections 158BC and 158BD in the respective cases. The appeals were dismissed, and the matter was remanded back to the Commissioner of Income-tax (Appeals) for consideration on the merits. The court upheld the Tribunal's decision to remand the matter for reconsideration, though not for the reasons stated by the Tribunal. The legality of the search and seizure operations and the subsequent assessments were affirmed, with the court providing clarity on the application of Sections 158BC and 158BD.

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