2003 (3) TMI 278 - AT - Income Tax

Summary

Issues Involved:

1. Applicability of Section 249(4) of the Income-tax Act, 1961, to first appeals before the Tribunal under Section 253(1)(b).

Issue-wise Detailed Analysis:

Background and Context:

The primary issue before the Special Bench was to determine whether the provisions of Section 249(4) of the Income-tax Act, 1961, are applicable to first appeals filed before the Tribunal under Section 253(1)(b). This question arose due to divergent opinions among different Benches of the Tribunal.

Legal Framework:

Chapter XIV-B, inserted by the Finance Act, 1995, with effect from July 1, 1995, introduced a special procedure for the assessment of search cases. Section 158BG specified the authority competent to make the block assessment, requiring approval from higher authorities based on the period of search initiation. Consequently, Section 253(1)(b) was introduced, allowing an assessee to appeal directly to the Tribunal against an order passed under Section 158BC(c) within 30 days.

Arguments and Submissions:

The appellant's counsel argued that Section 249(4) pertains specifically to appeals before the CIT (Appeals) and does not extend to the Tribunal. They emphasized that the words "this Chapter" in Section 249(4) refer to Part A of Chapter XX, dealing with appeals to the CIT (Appeals), and not to Part B, which pertains to appeals to the Tribunal. The counsel highlighted the harshness of requiring payment of taxes on returned income in block assessments, where the Department often possesses seized assets.

The Department's representative contended that the words "this Chapter" should be interpreted to include all parts of Chapter XX, making Section 249(4) applicable to first appeals before the Tribunal as well. They argued for a harmonious construction of the entire Chapter XX as an integrated code.

Tribunal's Analysis and Findings:

1. Independent Operation of Parts A and B of Chapter XX:
The Tribunal opined that Parts A and B of Chapter XX are independent and operate in different spheres, dealing with appeals at different forums. The provisions of Section 249(4) are specific to appeals before the CIT (Appeals) and do not extend to appeals before the Tribunal.

2. Legislative Intent:
The Tribunal noted that the legislative intent behind introducing Section 253(1)(b) was to address the hierarchical setup in the Income-tax Department, allowing direct appeals to the Tribunal for block assessments. The absence of a provision similar to Section 249(4) in Part B of Chapter XX indicated that the legislature did not intend to impose the same requirement for appeals to the Tribunal.

3. Practical Considerations:
The Tribunal acknowledged the practical difficulties and harshness of requiring payment of taxes on returned income in block assessments, where the Department often holds seized assets. This further supported the view that Section 249(4) should not apply to first appeals before the Tribunal.

Conclusion:

The Tribunal concluded that the provisions of Section 249(4) are not applicable to first appeals filed before the Tribunal against block assessment orders under Section 253(1)(b). The opinion of the Special Bench was returned to the Division Bench for further proceedings on the merits of the appeal.