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2009 (5) TMI 474 - HC - Income TaxSearch and Seizure- A search conducted in the B Group of companies the assessee a Hindu undivided family as one of the group companies filed a block return for the period 1986-87 to 1996-97 showing undisclosed income of Rs. 60 lakhs. The assessment was completed under section 158BC of the Act. An appeal was preferred by the assessee and the Tribunal allowed the appeal in part and the Assessing officer revised the income by an order. Thereafter the Assessing officer found that in the case of another group company for the same block period the Tribunal had observed that some of the documents seized pertained to the assessee. The Assessing officer added a sum of Rs. 13, 66, 715 to the undisclosed income of the assessee for the block period revising the amount to Rs. 38, 04, 570. The Tribunal deleted the addition made by the Assessing officer. Held that- the addition of Rs. 13, 66, 715 to the undisclosed income of the assessee for the block period could have been made only by giving a notice under section 148 of the Act and no such notice having been given the provisions of section 153 of the Act would operate as a legal bar for any such notice to the assessee. The provisiond of section 147/ 147 will apply. Dismiss the appeal.
Issues Involved:
1. Legality of the addition of undisclosed income without following the provisions of Section 148. 2. Applicability of Section 147/148 to block assessments under Chapter XIV-B of the Income-tax Act, 1961. 3. Interpretation of the provisions of Sections 153 and 158BE regarding the limitation period for reopening block assessments. Detailed Analysis: 1. Legality of the Addition of Undisclosed Income Without Following Section 148: The respondent-assessee contended that the addition of Rs. 13,66,715 was made without following the provisions of Section 148 of the Act. The Tribunal concluded that the Assessing Officer failed to initiate proceedings in terms of Section 153 read with Explanation 3, which necessitated a notice under Section 148. Since no such notice was given, the addition was deemed unsustainable in law and directed to be deleted. 2. Applicability of Section 147/148 to Block Assessments Under Chapter XIV-B: The Tribunal found that the addition could only be made by giving a notice under Section 148, and no such notice was issued. The court discussed the judgment of the Gujarat High Court in Cargo Clearing Agency (Gujarat) v. Joint CIT, which held that Section 147/148 does not apply to block assessments under Chapter XIV-B. However, the court disagreed with this view, relying on the Supreme Court's judgment in CIT v. Suresh N. Gupta, which stated that the provisions of Chapter XIV-B do not exclude the application of other provisions of the Act unless there is a conflict. The court concluded that Section 147/148 applies to block assessments under Chapter XIV-B. 3. Interpretation of Sections 153 and 158BE Regarding Limitation Period: The Tribunal's finding that the provisions of Section 153 read with Explanation 3 were not followed was deemed unnecessary to be addressed, as the primary issue was the lack of notice under Section 148. The court noted that the limitation period for issuing notice under Section 148 was not raised before the Tribunal and hence did not delve into it. However, the court clarified that the period of limitation for reopening block assessments should be understood in the context of the separate period provided by Section 158BE for completion of block assessments. The court concluded that the provisions of Chapter XIV prescribing the period of limitation for reopening assessments apply to assessments under Chapter XIV-B. Conclusion: The court dismissed the appeal of the Revenue, holding that the provisions of Section 147/148 apply to assessments for a block period under Chapter XIV-B of the Act. The addition of Rs. 13,66,715 was unsustainable as it was made without issuing a notice under Section 148. The court disagreed with the Gujarat High Court's view that Section 147/148 does not apply to block assessments, relying on the Supreme Court's interpretation that other provisions of the Act apply unless there is a conflict.
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