2007 (9) TMI 336 - AT - Income Tax

Assessment of income of the block period - Invalid and without jurisdiction - Notice u/s 143(2) issued beyond a period of 12 months from the end of the month in which the block returns filed - Power Of the Tribunal to pass an order u/s 254 - HELD THAT - In view of the matter, it is difficult to hold, as has been strenuously argued before us by the ld DR, that the Hon'ble Bombay High Court's judgment in the case of Godavaridevi Saraf's 1977 (9) TMI 24 - BOMBAY HIGH COURT stands overruled by their Lordships' judgment in the case of Thana Electricity Supply Ltd. 1993 (4) TMI 37 - BOMBAY HIGH COURT The only way in which we can harmoniously interpret these judgments is that these decisions deal with two different issues and ratio decidendi of these decisions must be construed accordingly. Even if we are to assume that it is possible to interpret that Godavaridevi Saraf's decision stands overruled by judgment in the case of Thana Electricity Supply Ltd.'s case, one cannot be oblivious to the fact that an interpretation is indeed possible to the effect that even non-jurisdictional High Court's judgment, for the reasons set out, is binding on the Tribunal . This non-jurisdictional High Court's judgment is in favour of the assessee. Now, as held by the Hon'ble Supreme Court's judgment in the case of CIT vs. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT , when two interpretations are possible, one in favour of the assessee must be adopted. For this reason, in our humble understanding, the plea of the assessee deserves to be accepted. The issue is covered by a Special Bench decision in the case of Rahul Kumar Bajaj vs. ITO 1998 (12) TMI 115 - ITAT NAGPUR which holds that once the issue is decided on the question of jurisdiction, it is not necessary to address the merits of the matter as well. Respectfully following the Same, we reject the contention of the ld DR. We are not really concerned with as to what should be done in ideal situation, but, as at present and given the fact that the assessment itself is quashed, we see no need to address matters which are rendered academic in the present context. Thus, we are inclined to uphold the preliminary objection raised by the assessee. As rightly pointed by the learned counsel, Hon'ble Gauhati High Court in the case of Smt. Bandana Gogoi vs. CIT Anr. 2007 (1) TMI 110 - GAUHATI HIGH COURT held that when the AO does not issue notice u/s 143(2) within one year from the end of the month in which block return is filed, it cannot be open to him to start the scrutiny assessment proceedings after the end of that period. A view indeed seems possible that it is not necessary that each of the block assessment return must be subjected to the scrutiny of the AO. According to this school of thought, in the scheme of things as they exist today, assessment by scrutiny is an option available to the AO and it is not always required to be followed in all the block assessment cases. We, however, see no need to go into all these issues. Suffice to say that respectfully following the Hon'ble Gauhati High Court's judgment and having noted the position that notice u/s 143(2) was admittedly not issued within one year from the end of the month in which block assessment return was filed, we quash the assessment proceedings. In the result, appeal filed by the assessee is allowed. As far as the appeals filed by the AO are concerned, these appeals challenge the part relief granted by the CIT(A) to the assessee in respect of additions made by the AO. However, as we have quashed the very assessment proceedings, these grievances are only academic in nature. We dismiss these grievances as infructuous. In the result, the appeal filed by the AO is dismissed. To sum up, while the appeal filed by the assessee is allowed, the appeal filed by the AO is dismissed. It was so pronounced in the open Court upon conclusion of hearing of these appeals.

Summary

Issues Involved:
1. Validity of assessment proceedings due to delayed issuance of notice under Section 143(2).
2. Binding nature of non-jurisdictional High Court decisions on the Tribunal.
3. Necessity to decide all issues raised in the appeal when the preliminary issue is resolved.

Detailed Analysis:

1. Validity of Assessment Proceedings Due to Delayed Issuance of Notice Under Section 143(2):
The primary issue raised by the assessee was the invalidity of the assessment proceedings due to the notice under Section 143(2) being issued beyond the stipulated period of 12 months from the end of the month in which the block returns were filed. The assessee's counsel argued that this issue was covered by the judgment of the Hon'ble Gauhati High Court in the case of Smt. Bandana Gogoi vs. CIT & Anr., which held that if the AO does not issue the notice within the specified period, the scrutiny assessment proceedings cannot commence. The Tribunal upheld this objection, noting that there was no contrary decision by the jurisdictional High Court or any other High Court. The Tribunal emphasized the hierarchical judicial system, stating that the wisdom of the lower court must yield to the higher court, and thus, followed the Gauhati High Court's decision.

2. Binding Nature of Non-Jurisdictional High Court Decisions on the Tribunal:
The Departmental Representative contended that the decision of a non-jurisdictional High Court is not binding on the Tribunal, citing the Bombay High Court's judgment in the case of CIT vs. Thana Electricity Supply Ltd. However, the Tribunal referred to the Bombay High Court's earlier decision in CIT vs. Smt. Godavaridevi Saraf, which held that in the absence of a contrary decision by any other competent High Court, the Tribunal must respect the law laid down by a High Court, even if it is from a different state. The Tribunal concluded that the Thana Electricity Supply Ltd. case did not overrule the Godavaridevi Saraf case but dealt with whether a High Court decision is binding on another High Court. Therefore, the Tribunal decided to follow the Gauhati High Court's ruling, as it was favorable to the assessee and there was no jurisdictional High Court ruling to the contrary.

3. Necessity to Decide All Issues Raised in the Appeal When the Preliminary Issue is Resolved:
The Departmental Representative urged the Tribunal to decide all issues raised in the appeal, not just the preliminary issue. However, the Tribunal referred to a Special Bench decision in the case of Rahul Kumar Bajaj vs. ITO, which held that once the jurisdictional issue is decided, it is unnecessary to address the merits of the matter. The Tribunal followed this precedent, stating that since the assessment itself was quashed, addressing other issues would be academic and unnecessary.

Conclusion:
The Tribunal quashed the assessment proceedings due to the delayed issuance of notice under Section 143(2), following the Gauhati High Court's decision in Smt. Bandana Gogoi vs. CIT & Anr. Consequently, the appeal filed by the assessee was allowed, and the appeal filed by the AO was dismissed as infructuous. The Tribunal emphasized the importance of following higher judicial authority decisions, even if they are from non-jurisdictional High Courts, in the absence of contrary jurisdictional High Court rulings.