2008 (4) TMI 30 - SC - Income Tax

Block assessment - transfer of case to facilitate effective and coordinate investigation. An order was passed to that effect by the Chief Commissioner of Income Tax, Bangalore under Section 127(2) of the Act - petitioner's contention that the provisions of section 127 can not have any application in case of block assessment is not acceptation since by virtue of section 158BH, all the provisions of Income Tax Act are applicable to block assessment - appeal dismissed with cost.

Summary

Issues: Interpretation/application of Section 127 of the Income Tax Act in relation to Block Assessment.

Issue 1: Interpretation of Section 127 vis-`a-vis Block Assessment
The case involved a search conducted by Income Tax Department officers at the residence and business premises of the assessee, leading to a proposal to transfer the cases to facilitate coordinated investigation. The Assessing Officer issued a notice under Section 158BC for filing a return with undisclosed income for the block period. The High Court opined that Section 127 could be applied for block assessment, which was challenged by the petitioner. The petitioner argued that Section 127 did not apply to block assessment based on the definition in Chapter XIV-B of the Act.

Issue 2: Application of Section 127 for Block Assessment
The Additional Solicitor General supported the High Court's judgment, emphasizing the power of the Income Tax Department to conduct searches under Section 132 and the applicability of Chapter XIV-B in such cases. The definition of 'block period' in Section 158B was discussed, highlighting that it covers ten assessment years and the portion of the assessment year up to the search date. Chapter XIV-B provides a special procedure for block assessment, with Section 158BH stating that all other provisions of the Act apply to assessments under this chapter.

Issue 3: Power to Transfer Cases under Section 127
The judgment delved into the power of transfer under Section 127, which allows the Director General or Commissioner to transfer cases between Assessing Officers. The court emphasized that the order of transfer serves a larger public interest and is not limited to cases involving a single assessment year. The court cited a previous case to support the view that Section 127 fills the gap between different stages of block assessment, ensuring a smooth transfer of records for assessment purposes.

Conclusion
The Division Bench agreed that Section 127 can be applied to block assessments, considering the provisions of Chapter XIV-B and the overall scheme of the Income Tax Act. The court highlighted the importance of purposive construction in interpreting statutory provisions and concluded that the power under Section 127 extends to block assessments. Consequently, the appeals were dismissed, affirming the applicability of Section 127 in the context of block assessments.