2004 (11) TMI 273 - AT - Income Tax

Summary

Issues Involved:
1. Legality and validity of the assessment order under section 158BC.
2. Premature issuance of notice under section 158BC.
3. Lack of mention of block period in the notice.
4. Absence of CIT's approval in the assessment order.

Issue-Wise Detailed Analysis:

1. Legality and Validity of the Assessment Order:
The appeal challenges the assessment order passed under section 158BC(c) of the IT Act for the block period 1986-87 to 1995-96 and 1996-97 up to the date of search. The appellant argued that the assessment order dated 15th July 1998 was illegal and invalid due to various reasons, including being passed after the limitation period and without proper requisition of seized materials. The Tribunal noted that the assessment should have been made up to the date the final requisition was made by the Department, but in this case, the notice was issued before the conclusion of the requisition of the assets, making the assessment order ab initio illegal, invalid, and bad in law.

2. Premature Issuance of Notice under Section 158BC:
The notice under section 158BC was issued on 12th January 1996, before the search was concluded on 1st May 1996. The Tribunal found this premature issuance of notice to be illegal as no block period was mentioned in the notice, and the search was not yet concluded. Consequently, the return of income filed on 31st March 1996 was based on a premature notice, making the assessment order invalid.

3. Lack of Mention of Block Period in the Notice:
The notice issued under section 158BC did not specify the block period, which is a requirement under the IT Act. The Tribunal observed that the assessment order mentioned the block period as "1986-87 to 1995-96 and 1996-97 up to the date of search," which was incorrect. The block period should have been restricted to the date of final requisition of assets or documents. This omission further rendered the assessment order illegal.

4. Absence of CIT's Approval in the Assessment Order:
The assessment order did not mention the approval of the CIT, which is a necessary requirement. The Tribunal noted that the order was passed without the CIT's approval, making it illegal. The Tribunal referred to a letter from the Asstt. CIT, Investigation, Gwalior, which indicated that the CIT's approval was obtained after the High Court extended the period for submission of returns. However, the assessment order was completed based on a return filed in response to a premature notice, further invalidating the order.

Conclusion:
The Tribunal quashed the block assessment order, declaring it void ab initio due to the premature issuance of notice, lack of mention of the block period, and absence of CIT's approval. The Tribunal did not comment on the merits of the undisclosed income, allowing the appellant to approach the Tribunal for a decision on merits if higher courts reverse the Tribunal's order.