2012 (1) TMI 356 - AT - Income Tax

Summary

Issues involved: Appeal against block assessment orders, validity of notice u/s 158BD, time limit for issuing notice u/s 158BD.

Validity of Notice u/s 158BD: The issue raised in the cross objections pertains to the validity of the block assessment order. The ld. senior counsel argued that there was a significant delay in issuing the notice u/s 158BD to the present assesses after completion of the assessment in respect of the person searched. Referring to a judgment, it was contended that notices issued after the expiry of three years are barred by limitation. On the other hand, the ld. DR argued that no specific time limit is prescribed for issuing notice u/s 158BD for a person other than the searched person, and as long as the delay cannot be attributed to the assessing officer, the assessment order is valid. The Tribunal observed that while there is no fixed time limit under the Income-tax Act for issuing such notice, the assessing officer must do so within a reasonable period. It was noted that the issue of notice u/s 158BD after three years from the completion of assessment in the searched person's case is beyond a reasonable period. Citing precedents and the scheme of the Act, the Tribunal held that the block assessment order passed against the assessee u/s 158BD is barred by limitation, and accordingly, quashed the same.

Precedents and Observations: The Tribunal referred to a judgment by a Five Member Bench at Delhi and highlighted the interconnection between sections 158BD and 158BC, emphasizing the need for a judicious satisfaction before invoking section 158BD. It was noted that the provisions of section 158BE set a time limit for completion of block assessment, and the absence of a finding as to the person to whom the undisclosed income belongs within this time frame ousts the applicability of section 158BD. The Tribunal also cited decisions by other benches and the Gujarat High Court supporting the view that issuing notice u/s 158BD after the prescribed period is barred by limitation.

Conclusion: In conclusion, the Tribunal dismissed the revenue appeals and allowed the cross objections of the assessee, holding that the block assessment order passed u/s 158BD was barred by limitation and therefore quashed.