2017 (3) TMI 391 - HC - Income Tax

Validity of notice u/s 158BC - AO asked the assessee to file the return within fifteen days of the service of the notice - Held that - While block assessment is to be made, the Assessing Officer is having knowledge about the statutory provision and while issuing notice he should have mentioned in it about his source of power and should have referred to time which is required to be given for the purpose of filing of return under section 158BC of the Act. The words mentioned in the notice are within fifteen days whereas the provision mandates the time of not less than fifteen days . In view of the decisions more particularly New India Industries Ltd. (1995 (1) TMI 66 - SUPREME Court), we are of the opinion, fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words not less than fifteen days have to be interpreted correctly. In that view of the matter, since the Assessing Officer asked the assessee to file the return within fifteen days of the service of the notice, the notice issued by the Assessing Officer is invalid. We are, therefore, of the opinion that the Tribunal has rightly cancelled the order of the Assessing Officer. The questions referred to us are, therefore, answered in favour of the assessee and against the revenue.

Summary

Issues Involved:
1. Validity of notice under Section 158BC of the Income Tax Act.
2. Justification of addition of ?55,915 on account of unexplained cash during the search.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 158BC:

The appellant challenged the validity of the notice dated 10.12.1998 issued under Section 158BC of the Income Tax Act, arguing that it did not fulfill the legal requirement of granting a minimum of 15 days for filing the return from the service of the notice. The Tribunal had sustained the validity of the notice and the subsequent assessment order dated 28.01.2000.

The Court referred to several precedents, including the decisions in Brahmadev Kumawat vs. CIT, Ajmer, and Venad Properties Private Limited vs. Commissioner of Income Tax, which emphasized the necessity of procedural compliance. The Court highlighted that the notice should have given "not less than fifteen days," and the words "within fifteen days" did not meet this requirement. The Court concluded that the notice issued was invalid as it did not comply with the statutory provision, thereby answering this issue in favor of the assessee.

2. Justification of Addition of ?55,915:

The appellant contested the addition of ?55,915 made by the Assessing Officer on account of unexplained cash found during the search, arguing that the amount was part of the already disclosed undisclosed debtors of ?625,000. The Tribunal had sustained this addition.

The Court examined the precedents and arguments presented by the counsel, including references to the cases of Surya Dev Kumawat vs. CIT and Commissioner of Income Tax vs. Amit K. Jain Alias Anil K. Jain. The Court noted that the procedural aspects and the context of the statutory provisions were critical in determining the validity of the assessment. It was emphasized that procedural requirements should be strictly adhered to, and any deviation could invalidate the assessment. The Court found that the addition was unjustified as it did not consider the appellant's disclosure of debtors, thus answering this issue in favor of the assessee.

Conclusion:

The Court concluded that both issues were to be answered in favor of the assessee and against the Department. The appeal was allowed, setting aside the Tribunal's order and the Assessing Officer's assessment.