2013 (1) TMI 15 - HC - Income Tax

Period of limitation Block assessment Chapter XIV-B - Time limit for completion of block assessment - The assessee was also subjected to search on 19.1.1996 - Notice of assessment issued on 20.9.1996 - The assessment was made on 22.9.1997 - Revenue took the plea that the case of the assessee fell u/s 158BD - Assessee contended that case will be covered u/s 158BC Held that - When the limitation for completion of the assessment u/s 158BC is one year from the end of the month in which the last of the authorisation for search was executed and it having already expired. Decides in favour of assessee

Summary

Issues:
1. Interpretation of provisions under Section 158BC and Section 158BD of the Income Tax Act, 1961 for block assessment.
2. Determination of the correct time limitation for completion of block assessment based on the provisions of Section 158BE.

Analysis:

Issue 1: Interpretation of provisions under Section 158BC and Section 158BD
The case involved a question of law regarding the correct application of Sections 158BC and 158BD of the Income Tax Act, 1961. The appellant contested that the block assessment should have been made under Section 158BC due to the search conducted at their residence, while the Revenue argued that it fell under Section 158BD. The Tribunal upheld the Revenue's view based on evidence from a noting sheet dated 20.9.1996, indicating initiation under Section 158BD. Section 158BD applies when undisclosed income belongs to a person other than the one searched under Section 132, extending the procedural exercise to additional individuals not directly subjected to the search.

Issue 2: Determination of the correct time limitation under Section 158BE
Section 158BE specifies the time limits for completing assessments under Sections 158BC and 158BD. For cases under Section 158BC, the time limit is one year from the end of the month of search authorization execution before 1.1.1997, and two years after that date. In contrast, Section 158BD imposes a one-year limit from the end of the month of notice service for searches before 1.1.1997 and two years for later searches. In this case, as the search occurred on 19.1.1996, falling under Section 158BC, the correct limitation provision was Section 158BE(1)(a). Despite the notice being issued on 20.9.1996, the assessment was completed on 22.9.1997, exceeding the one-year limit. Consequently, the Tribunal's decision was set aside, and the tax case appeal was allowed, emphasizing the importance of adhering to statutory time limits for assessments under the Income Tax Act, 1961.

This judgment clarifies the nuanced application of provisions under the Income Tax Act, emphasizing the significance of correctly determining the appropriate sections for block assessments and adhering to prescribed time limits.