2008 (1) TMI 338 - HC - Income Tax

Explanation 2 to Section 158BE inserted w.e.f. July 1, 1995 Block assessment since the assets had been received by the concerned officer on June 5, 1997, the period of one year had to be computed from that date assessment order had been passed on November 13, 1997, which was clearly within the period of one year likewise, at that time Dt. CIT was the competent authority to grant previous consent for the assessment u/s 158BG, as it then existed assessment order was valid

Summary

Issues:
Challenge to block assessment being barred by time under Section 158BE and explanation 2
Validity of authorization for search operation under Section 158BE

Analysis:
1. The appeal by the Revenue challenged the judgment of the Income Tax Appellate Tribunal accepting the appeal of the assessee and holding the block assessment to be barred by time under Section 158BE. The Tribunal found that the service of authorization under Section 132A fell between 1.7.1995 to 31.12.1996. The assessment order was passed on 13.11.97, which was argued to be barred by time. The Tribunal held that the assessment was indeed barred by time and that the subsequent law could not validate an order already barred by limitation, citing a judgment of the Supreme Court. The authorization issue was also raised, contending that the Dy. Commissioner had delegated the power to grant previous approval, but this stand could not be substantiated by the Revenue. The Tribunal allowed the appeal of the assessee based on these grounds.

2. The Revenue contended that the judgment in a specific Supreme Court case was not applicable to the present case as the amendment was expressly made retrospective. They argued that the amendment to Section 158BE with the second Explanation deemed the authorization to have been executed on the actual receipt of assets, which occurred on 5.6.1997. They further argued that the provisions of Section 158BG also supported their stance regarding the authorization and previous approval. Despite notice served to the assessee, no appearance was made on their behalf.

3. The High Court considered the submissions of the Revenue, the relevant Supreme Court judgment, and the provisions of the Act and Finance Act. Referring to the Supreme Court judgment, the High Court highlighted the requirement for words to expressly provide or imply retrospective operation. They analyzed the language of the amending provision in the Finance Act, which left no doubt that the legislature amended the provision with retrospective effect from 1st July 1995. The High Court also distinguished between the limitation periods under different clauses of Section 158BE, emphasizing the retrospective effect of the added Explanation 2. They concluded that the assessment order fell within the period of one year based on the deemed date of authorization execution and the competent authority for previous consent.

4. Ultimately, the High Court set aside the impugned orders, restored the assessment order, and answered the questions framed in favor of the Revenue and against the assessee. The appeal by the Revenue was allowed based on the retrospective effect of the Explanation 2 and the proper calculation of the limitation period from the date of asset receipt.