2016 (8) TMI 214 - HC - Income Tax

Block assessment passed u/s.158BD r/w. Section 158BC - period of limitation - Held that - In the present case, the first Notice u/s.158BC of the Act was issued to the assessee on 17.10.1996, which was served upon the assessee on 04.11.1996. Therefore, assessment could have been framed latest by 30.11.1997. However, on 29.08.1997, the Assessing Officer withdrew the Notice issued u/s.158BC of the Act and issued a fresh Notice u/s.158BD of the Act on 29.08.1997. On 17.10.1996 the Notice issued u/s.158BC of the Act was a valid notice. However, the proceedings initiated on the basis of this Notice stood concluded on 29.08.1997, when the A.O. informed the assessee of having withdrawn the Notice u/s.158BC of the Act, meaning thereby, that the proceedings initiated on 17.10.1996 was valid for all intent and purposes but, stood concluded on 29.08.1997. Therefore, there was no question of reviving those proceedings by way of issuing a fresh Notice under any other Section of the Act. On this count also, there could not have been any assessment on 01.12.1997. Thus, the Revenue s claim that Notice u/s.158BD of the Act issued on 29.08.1997 was a valid Notice and that the consequential assessment framed on 24.12.1997 was within limitation cannot be accepted and is void ab initio being barred by time. Thus, the action of the A.O. of withdrawing the Notice u/s.158BC and issuing fresh Notice u/s.158BD of the Act is illegal and bad in law. There is no provision in the Act for initiating reassessment proceedings for block period, either u/s.147 or 158BC or 158BD of the Act. Therefore, both the actions of the Assessing Officer are illegal and bad in law. Tribunal was completely justified in holding that the block assessment passed u/s.158BD r/w. Section 158BC was barred by time and therefore, void ab initio. Thus, we answer the question in the affirmative, i.e. in favour of the assessee

Summary

Issues:
Validity of block assessment passed under Section 158BD r/w Section 158BC - Whether assessment was barred by time and void ab initio?

Analysis:
1. The case involved an appeal against the order passed by the Income Tax Appellate Tribunal, Ahmedabad, regarding the validity of a block assessment conducted under Section 158BD r/w Section 158BC of the Income Tax Act, 1961. The main issue raised was whether the assessment was barred by time and therefore void ab initio.

2. The search operation conducted under Section 132 of the Act resulted in certain incriminating documents being found, leading to the assessment being completed under Section 158BC(c) r/w Section 158BD and 158BA for the block period. The Assessing Officer issued a Notice u/s.158BC on 04.11.1996, which was later replaced by a Notice u/s.158BD. The assessment order was passed on 24.12.1997, with the A.O. claiming the assessment was completed within the time limit.

3. The assessee challenged the order before the Tribunal, arguing the validity of the Notice issued u/s.158BD. The Tribunal declared the assessment void ab initio, leading to the appeal by the Revenue.

4. The Revenue contended that the assessment was completed within the time limit and the A.O. followed the necessary procedures. On the other hand, the assessee argued that the assessment was illegal and time-barred, as the proceedings initiated under Section 158BC were concluded by the withdrawal of the Notice and subsequent issuance of a fresh Notice under Section 158BD.

5. The Court analyzed the provisions of Chapter XIVB of the Act, particularly Sections 158BC and 158BD, which govern block assessments and undisclosed income of other persons, respectively. It was noted that the Notice u/s.158BC is crucial for initiating assessment proceedings under Chapter XIVB.

6. The Court emphasized the importance of strict interpretation of fiscal statutes and examined the provisions of Sections 158BC, 158BD, and 158BE. It was observed that the first Notice u/s.158BC was issued within the time limit, but subsequent actions by the A.O. were deemed illegal and void ab initio.

7. Consequently, the Court held that the block assessment passed under Section 158BD r/w Section 158BC was barred by time and void ab initio. The appeal was decided in favor of the assessee, and the Tribunal's decision was upheld.