2017 (1) TMI 807 - HC - Income Tax

Validity of Block assessment u/s 158BC - whether was barred by limitation - authorization for requisition u/s 132A - Held that - The assessment order was to be completed within one year from the end of the month i.e. on or before 31.8.2001. The Tribunal records that in the present case, block assessment order was passed on 29.8.2002, which was well beyond the period of one year, as the stipulated period of limitation in the present case would be one year as is provided under Section 158BE (1) (a) of the Act. The Tribunal, therefore, rightly came to conclusion that the assessment order passed on 29.8.2002, was not a valid assessment as it was beyond the period of one year and barred by limitation. Consequently, it was quashed. The contention of the department that last requisition was sent on 15.6.1999 and served upon CBI on 21.6.1999, so, case will fall within the ambit of Section 158BE (1) (a) of the Act and limitation will be of two years since the date of execution of the requisition is not acceptable because when first requisition dated 11.9.1995 was pending and no further material came to the notice of the department, so, there was no occasion for issuing second requisition on 15.6.1999. - Decided in favour of assessee

Summary

Issues:
1. Interpretation of the limitation period under Section 158BE of the Income Tax Act, 1961 for block assessment.
2. Validity of the block assessment order passed after the stipulated period of limitation.

Analysis:
1. The case involved an Income Tax appeal against the Tribunal's order dated 09.03.2007 for the block period ending on 21.08.2000. The main issue was the interpretation of the limitation period under Section 158BE of the Income Tax Act, specifically whether the assessment order dated 29.08.2002 was barred by limitation. The Tribunal held that the order was not valid as it was passed after the stipulated period of limitation, quashing the assessment order based on the timeline of requisition execution and completion of assessment.

2. The facts of the case revolved around a search and seizure operation by the CBI in connection with hawala transactions. The Income Tax Department issued authorizations for requisition under Section 132A of the I.T. Act, with the last requisition dated 15.06.1999. The key contention was whether this authorization extended the limitation period to two years under Section 158BE (1) (b) or if it fell within the one-year limitation period under Section 158BE (1) (a) due to the earlier requisition on 11.09.1995.

3. The Department argued that the requisition dated 15.06.1999 extended the limitation period to two years, but the Tribunal disagreed, emphasizing that the assessment order must be completed within one year from the end of the month in which the requisition was executed. As the assessment order was passed on 29.08.2002, beyond the one-year limit, it was deemed invalid and barred by limitation. The Court upheld the Tribunal's decision, confirming that the assessment order was not valid due to exceeding the stipulated period of limitation.

4. The Court referenced a previous case to explain the meaning of 'requisition,' highlighting that actual possession of documents must be delivered on a specific date. Since the documents were handed over to the Income Tax Department on 21.08.2000, it was clear that the assessment order passed on 29.08.2002 was beyond the permissible timeframe. Consequently, the Tribunal's decision was deemed correct, and the appeal was dismissed in favor of the assessee and against the department.

5. In conclusion, the High Court affirmed the Tribunal's ruling, answering the questions of law in favor of the assessee. The appeal was dismissed, emphasizing the importance of adhering to the statutory limitation periods for block assessments under the Income Tax Act, 1961.