2004 (6) TMI 235 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under Section 158BC of the IT Act, 1961.
2. Correctness of the block period mentioned in the notices.
3. Mentioning of the status of the assessees in the notices.
4. Compliance with the mandatory period of "not being less than 15 days" for furnishing returns.

Detailed Analysis:

1. Validity of Notices Issued Under Section 158BC:
The core issue revolves around the validity of the notices issued under Section 158BC of the IT Act, 1961. The Tribunal examined whether the notices were in accordance with the provisions of the Act. The Tribunal held that the notices were invalid due to several defects, including incorrect block periods, lack of status specification, and non-compliance with the mandatory period for furnishing returns. The Tribunal emphasized that the issuance and service of a valid notice under Section 158BC are substantive requirements, not mere procedural formalities. This aligns with the principle that a valid notice is a condition precedent for the AO to assume jurisdiction to make an assessment of the block period.

2. Correctness of the Block Period Mentioned in the Notices:
The Tribunal scrutinized the correctness of the block period mentioned in the notices. According to Section 158B(a), the block period should end on the date of the issuance of the summons under Section 132A. The Tribunal concluded that the block period in the present cases should have ended on 3rd April 2000, when the summons were issued, not on 16th February 2001, when the goods were delivered to the IT authorities. This incorrect mentioning of the block period rendered the notices invalid.

3. Mentioning of the Status of the Assessees in the Notices:
The Tribunal found that the notices issued to four of the assessees did not specify the status in which the returns of undisclosed income were to be furnished. This omission contravened the requirements of Section 158BC, which mandates clear specification of the status of the person for whom the notice is issued. The Tribunal held that this defect made the notices invalid, as the status of the assessee is a condition precedent for the initiation of assessment proceedings for the block period.

4. Compliance with the Mandatory Period of "Not Being Less Than 15 Days" for Furnishing Returns:
The Tribunal examined whether the notices complied with the mandatory period of "not being less than 15 days" for furnishing the returns of undisclosed income. The notices required the assessees to furnish the returns "within 15 days," which the Tribunal found to be a curtailment of the mandatory period. The Tribunal referred to various judicial precedents, including the decisions of the Hon'ble Supreme Court and High Courts, which distinguished between "not being less than 15 days" and "within 15 days." The Tribunal concluded that the term "not being less than 15 days" means the period should go beyond 15 days, and requiring the returns to be furnished "within 15 days" did not meet this requirement. This non-compliance rendered the notices invalid.

Conclusion:
The Tribunal concluded that the notices issued under Section 158BC in the cases of all five assessees were invalid and bad in law due to the following reasons:
1. Incorrect block period mentioned in the notices.
2. Non-mentioning of the status in which the returns were to be furnished.
3. Non-compliance with the mandatory period of "not being less than 15 days."

As a result, the assessments of the block period framed on 12th October 2001 were held to be bad in law and void ab initio, and the Tribunal quashed the assessments. The appeals of all five assessees were allowed.