2012 (7) TMI 527 - HC - Income Tax

Block assessment order as barred by limitation - applicability of Section 129 r.w.p. to Explanation 1 to Section 158 BE as questioned by Assessee - Held that - In present case the assessment proceedings were commenced only by the AO at Delhi by notice issued and thereafter there was no change in the incumbent of the office so as to attract the provisions of Section 129. In such a situation there is no scope for importing the proviso to Section 129 to extend the period of limitation. Even factually there is nothing on record to show that the assessee made any demand before the AO in Delhi that the previous proceedings if any should be reopened or that before any order of assessment is passed against her should be reheard - The assessment u/s 158BC ought to have completed on or before 30.06.2002 as per Section 158BE (1) (b) and though it was completed only on 30.07.2002 it is barred by limitation. The Tribunal has erroneously equated the notice issued u/s 158BC (a) to a notice issued u/s 148 to reopen an assessment and erred in further understanding the words the time taken in reopening the whole or any part of the proceeding appearing in clause (iii) of Explanation-1 to mean a reopening of the assessment under Section 148. With respect the reasoning appears to be convoluted and untenable. The reopening of the proceeding referred to in clause (iii) of Explanation-1 is the reopening of the proceedings for the assessment which have been completed in part by an earlier incumbent of office and not the reopening of the assessment under Section 148 - in favour of assessee.

Summary

Issues Involved:
1. Whether the block assessment order passed on 30th July 2002 is barred by limitation as per Section 129 read with proviso to Explanation 1 to Section 158BE of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Limitation Period for Block Assessment Order:
The primary issue in this case is whether the block assessment order dated 30th July 2002 is barred by limitation under Section 158BE of the Income Tax Act, 1961. The relevant facts are as follows:
- A search was conducted at the assessee's premises on 28.04.2000, concluding on 20.06.2000.
- The assessee's case was transferred from Bangalore to Delhi on 15.05.2002.
- A notice under Section 158BC was issued on 11.06.2002, and the block assessment was completed on 30.07.2002, determining an undisclosed income of Rs. 13,62,730/-.

The CIT (Appeals) initially rejected the assessee's plea of limitation, stating that the provisions of sub-clause (iii) of Explanation-1 to Section 158BE were applicable, thus extending the limitation period.

2. Tribunal's Decision on Limitation:
The Income Tax Appellate Tribunal (Tribunal) upheld the Revenue's contention that the block assessment order was within the limitation period, relying on the proviso to Section 129 and Explanation-1 (iii) to Section 158BE. The Tribunal reasoned that:
- The notice under Section 158BC is analogous to a notice under Section 148 for reopening an assessment.
- The time taken for reopening the proceedings should be added to the limitation period, not exceeding 60 days.

3. High Court's Analysis:
The High Court disagreed with the Tribunal's reasoning, providing a detailed analysis:
- Section 158BE(1)(b) mandates that the block assessment should be completed within two years from the end of the month in which the last search authorization was executed. In this case, the last authorization was executed on 26.06.2000, making the deadline 30.06.2002.
- Section 129 applies when there is a change of incumbent within the same jurisdiction, allowing the successor officer to continue proceedings from where the predecessor left off, provided the assessee is given an opportunity to be reheard.
- The High Court clarified that Section 129 and its proviso do not apply to cases of jurisdictional transfer under Section 127, as in the assessee's case.
- The Tribunal erroneously equated the notice under Section 158BC to a notice under Section 148, misunderstanding the legislative intent and the specific reference to the proviso to Section 129 in Explanation-1 (iii) to Section 158BE.

Conclusion:
The High Court concluded that the block assessment order dated 30.07.2002 was barred by limitation as per Section 158BE (1)(b) of the Act. The Tribunal's reliance on Explanation-1 (iii) to Section 158BE and Section 129 was misplaced. The substantial question of law was answered in the negative, in favor of the assessee, and the appeal was allowed with no order as to costs.