2017 (3) TMI 1523 - HC - Income Tax

Procedure for block assessment - time limit entitled to file the return - Held that - Section 158BC mandates that the Assessing Officer is to serve a notice to such person requiring him to furnish a return in the prescribed form and verified in the manner stipulated. The Assessing Officer must, therefore, serve such a notice, without which an assessee would not be liable to file a return in respect of a block assessment. The assessee is also entitled, as a matter of right, to a period not less than 15 days to file such a return. The Assessing Officer does not have the power to curtail this period. Thus, even if a notice under Section 158BC(a) specifies a period less than 15 days, it would not affect an assessee s right to file a return after a period of 15 days. The present case falls under Section 158BC(a)(ii). In such a case, an assessee would be entitled to file the return within the outer limit prescribed in Section 158BC(a)(ii) namely 45 days. Thus, while it is mandatory for the Assessing Officer to serve a notice requiring the assessee to file a return under Section 158BC and the assessee is entitled to not less than 15 days to file the return, the section does not indicate that if the notice inadvertently prescribes a period less than 15 days, it is void. Much less does the section indicate that the entire block proceedings relating to the block assessment would be void on account thereof. - Decided in favour of the assessee.

Summary

Issues Involved:
1. Validity of notice issued under Section 158BC of the Income Tax Act, 1961.
2. Justification of the Tribunal in sustaining additions made by the Assessing Officer.
3. Legal sustainability of additions based on seized documents without corroborative evidence.
4. Justification of additions towards unrecorded sale receipts based on seized documents.
5. Tribunal's conclusion on sales being treated as income from undisclosed sources.
6. Treatment of seized documents as unrecorded sales.
7. Justification of addition towards undisclosed investment in stock.
8. Justification of addition towards undisclosed investment in factory premises.

Detailed Analysis:

1. Validity of Notice Issued Under Section 158BC:
The court examined whether the notice issued by the assessing officer to file the return within 15 days was correct in law. It was argued that the statutory requirement under the Act mandates a period of "not less than 15 days." The court referred to precedents, including the case of Venad Properties Private Limited vs. Commissioner of Income Tax, which emphasized that procedural compliance is essential. The court concluded that the notice issued was invalid as it did not comply with the statutory requirement.

2. Justification of the Tribunal in Sustaining Additions:
The court scrutinized whether the Tribunal was justified in sustaining all the additions made by the Assessing Officer. It was argued that the Assessing Officer employed his own method for working out the undisclosed income, ignoring the mandatory provisions of Section 158BC(b) and Section 158BB of the Act. The court found that the Tribunal's decision to sustain the additions without assigning proper reasons was not legally sustainable.

3. Legal Sustainability of Additions Based on Seized Documents:
The court assessed whether the Tribunal was justified in sustaining additions towards undisclosed income based on seized documents, treating them as conclusive proof without corroborative evidence. The court held that such conclusions were not legally sustainable as they lacked corroborative evidence.

4. Justification of Additions Towards Unrecorded Sale Receipts:
The court evaluated whether the Tribunal was justified in sustaining additions towards unrecorded sale receipts based on seized documents. It was argued that the entries in the seized documents were treated as conclusive proof without corroborative evidence. The court concluded that such additions were not legally sustainable.

5. Tribunal's Conclusion on Sales Being Treated as Income from Undisclosed Sources:
The court examined whether the Tribunal was right in holding that certain sales amounts belonged to the appellant assessee and sustaining the additions as income from undisclosed sources. The court found that the Tribunal's conclusion was not legally sustainable.

6. Treatment of Seized Documents as Unrecorded Sales:
The court assessed whether the Tribunal rightly treated the addition based on seized documents as unrecorded sales of the appellant assessee. It was argued that the documents did not belong to the assessee and were considered "dumb documents." The court concluded that such treatment was not legally sustainable.

7. Justification of Addition Towards Undisclosed Investment in Stock:
The court evaluated whether the Tribunal was justified in sustaining the addition towards undisclosed investment in stock. It was argued that the addition was based on incomplete material, estimation, surmises, and conjectures. The court found that such an addition was not legally sustainable in Block Assessment.

8. Justification of Addition Towards Undisclosed Investment in Factory Premises:
The court examined whether the Tribunal was justified in sustaining the addition towards undisclosed investment in factory premises based merely on the statement of the assessee without considering various replies, statements, and documents filed by the appellant assessee. The court concluded that such an addition was not legally sustainable.

Conclusion:
The court answered all the issues in favor of the assessee and against the department, allowing the appeal. The judgment emphasized the importance of adhering to statutory requirements and the need for corroborative evidence to sustain additions in income tax assessments.