2018 (11) TMI 1330 - HC - Income Tax

Block assessment validity - AO justification in issuing notice u/s 158BC after a period of more than five years - reasonable period - assessment barred by limitation - whether the time for completion of assessment should have been calculated from the date of the direction of the appellate authority as alleged? - Held that - It is true that there is no time limit fixed for issuance of notice under Section 158BD of the Act in respect of persons other than searched. But, the Tribunal was right in observing that it would not mean that the proceedings could be delayed unreasonably. Involvement of the sons of Raghunathan was already found by the AO, as is evident from Annexure-A order and it is on that basis that the first appellate authority had, at the first instance, vide Annexure-B order cancelled the assessment with a direction. It was, therefore, essential that the AO should have taken the proceedings under Section 158BD within a reasonable time, and a period of three years for issuance of notice and seven years for completing block assessment is definitely not a reasonable time. We find, absolutely, no illegality in the order of the Tribunal. The question of law is answered in favour of the assessee.

Summary

Issues:
1. Appeal challenging the order of the Income Tax Appellate Tribunal
2. Assessment pertaining to block period from 1.4.1989 to 27.7.1993
3. Validity of the assessment order under Section 158BC read with Section 158BD
4. Calculation of time limit for completion of assessment

Analysis:

1. The Revenue appealed against the order of the Income Tax Appellate Tribunal concerning the block assessment for the period from 1.4.1989 to 27.7.1993. The Tribunal, relying on a previous decision, held that the assessments against the assessees were time-barred. The Revenue contended that the time limit should be calculated from the date of the direction of the appellate authority, not the original assessment order.

2. The main issue for consideration was whether the assessment order passed by the Assessing Officer (AO) under Section 158BC read with Section 158BD was barred by limitation. The search was conducted on 27.7.1999, and the block assessment was completed on 31.7.2001. Notices were issued to the assessees on various dates, leading to a delay in the completion of the assessment process.

3. The assessees argued that there were significant delays in the issuance of notices and completion of the block assessment, rendering the proceedings time-barred. The Revenue, on the other hand, contended that there was no specific time limit for issuing notices under Section 158BD for persons other than the searched individual.

4. The Court observed that while there was no fixed time limit for issuing notices under Section 158BD for persons other than the searched individual, unreasonable delays in the assessment process should be avoided. The Tribunal's decision to consider the delays in the present case as unreasonable was upheld, leading to the dismissal of the Revenue's appeals. The Court found no illegality in the Tribunal's order and ruled in favor of the assessees.

In conclusion, the High Court of Kerala dismissed the Revenue's appeals, upholding the Tribunal's decision that the assessment orders were time-barred due to unreasonable delays in the completion of the block assessment process.