2007 (3) TMI 304 - AT - Income Tax

Block Assessment in search case - Whether the defect in the notice u/s 158BC which gave less than 15 days' to the assessee to file the return affects the validity of the assessment so that it should be annulled or quashed or whether it is a mere procedural irregularity which can be cured, with the result that the assessment may only be set aside to be reframed after curing the defect? - HELD THAT - We find that section 158BC in no uncertain terms requires an Assessing Officer to serve a notice to searched person requiring him to furnish a return of income for the Block Period within such time not being less than 15 days, as may be specified in the notice. Legislatures do not enact anything in the statute without any intent or purpose. Hence, it cannot be held that the statutory provision specified in the Act for notice of a minimum period of 15 days for filing of the return is without any intent or purpose. Thus, in our considered opinion a notice served under section 158BC allowing a period less than the statutory specified time period of clear 15 days is in breach of the specific provision made in this respect in the statute and that such a defective notice cannot be held to be in substance and effect in conformity with or according to the intent of the Act. Further, such a defect is also not merely inconsequential technicality. When we examine the provisions of section 158BFA(1) it is observed that an assessee is liable to pay interest for a period which is determined with reference to the time allowed in the notice under section 158BC of the Act and thus, a short period allowed in the notice affects the liability of an assessee. On service of such a defective notice u/s 158BC, a procedural irregularity has taken place which can be cured by serving a valid notice. It have been vehemently argued before us that the Assessing Officer cannot complete the Block Assessment without service of a valid notice u/s 158BC of the Act and we are in full agreement with the said proposition. As the Assessing Officer had the jurisdiction to make the Block Assessment, and after the bestowing of jurisdiction on him, a procedural irregularity has taken place, it is open to him to correct the procedural irregularity and then complete the block assessment. Hence, we also find ourselves in agreement with the contention of the learned D/R that in such a case the assessment should be set aside for being redone de novo from the stage where irregularity had occurred and the assessment proceedings cannot be declared null and void. We set aside the impugned order and restore the matter to the file of the Assessing Officer for passing the order de novo after issuing a valid notice u/s 158BC in accordance with the law. In view of our decision to set aside the entire assessment for reframing of the same afresh as per law, at this stage we refrain from adjudicating the other issues raised in the appeals under consideration on merit. In the result, the appeals filed by the assessee are allowed for the statistical purposes.

Issues Involved:
1. Validity of the notice under section 158BC with less than 15 days for filing the return.
2. Consequences of procedural defects in the notice.
3. Jurisdiction to assess under Chapter XIV-B.

Detailed Analysis:

1. Validity of the Notice Under Section 158BC:
The primary issue was whether a notice under section 158BC that provided less than the statutory 15 days for the assessee to file the return affects the validity of the assessment. The Tribunal noted that section 158BC mandates a minimum of 15 days for filing the return. The appellant argued that failing to provide this period invalidates the entire assessment, making it a nullity.

2. Procedural Defects in the Notice:
The Tribunal examined whether the defect in the notice was a mere procedural irregularity or a fundamental flaw. It was argued that the defect could be cured and did not necessarily invalidate the assessment. The Tribunal referenced section 292B, which states that a notice shall not be invalid due to a mistake, defect, or omission if it is in substance and effect in conformity with the Act's intent and purpose.

3. Jurisdiction to Assess Under Chapter XIV-B:
The Tribunal analyzed whether the jurisdiction to assess under Chapter XIV-B is conferred by the issuance of a notice under section 158BC or by the occurrence of a search under section 132. It was determined that section 158BA confers jurisdiction to assess undisclosed income following a search, and the notice under section 158BC is procedural, not jurisdictional.

Conclusion:

Validity of the Notice:
The Tribunal concluded that the notice under section 158BC issued with less than 15 days for filing the return was defective. However, this defect was procedural and curable, not rendering the assessment null and void.

Procedural Defects:
The Tribunal held that the procedural defect in the notice did not invalidate the assessment but required the proceedings to be set aside and redone after curing the defect. The defect was not merely a technicality but a significant procedural irregularity.

Jurisdiction:
The Tribunal clarified that jurisdiction to assess under Chapter XIV-B is conferred by section 158BA upon the occurrence of a search, not by the issuance of a notice under section 158BC. The notice under section 158BC is procedural and serves to initiate the assessment process.

Order:
The Tribunal set aside the impugned order and restored the matter to the Assessing Officer to issue a valid notice under section 158BC and complete the assessment afresh in accordance with the law. The appeals were allowed for statistical purposes.

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