2022 (3) TMI 1354 - HC - Income Tax

Assessment u/s 158BC - period of limitation - time limit prescribed in the statute for completion of block assessment in respect of persons other than the person on whom search was made - HELD THAT - Admittedly, based on the search and seizure operation conducted in the premises of one R.Ganesan, on 12.12.2002, the respondent issued the notice under section 158BD to the respondent / assessee only on 17.02.2005, requiring them to file return of income in respect of the sand quarrying business carrying by them in the capacity as AOP. As such, the notice issued after three years from the date of search as well as after completion of the assessment under section 158BC, is certainly beyond the time limit of two years as provided under section 158BE. Taking note of the same, the Tribunal rightly allowed the appeal filed by the respondent / assessee on the ground that the notice issued under section 158BD is barred by limitation. Though the learned counsel for the appellant /Revenue contended that there is no time limit prescribed in the statute for completion of block assessment in respect of persons other than the person on whom search was made and therefore, the notice issued under section 158BD of the Act by the Assessing Officer is valid, this court is not inclined to accept the same, as it is settled law that where limitation is not prescribed, action must be taken within reasonable period. This court is of the opinion that there is no question of law, much less substantial question of law, arising for consideration in this appeal. Hence, the tax case appeal filed by the Revenue stands dismissed.

Summary

Issues:
1. Validity of notice under section 158BD issued after the completion of assessment under section 158BC and beyond the time limit of two years.
2. Whether the notice under section 158BD is valid when no specific time limit is prescribed under the Income Tax Act.

Issue 1: Validity of Notice under Section 158BD

The case involved a search and seizure operation leading to the issuance of a notice under section 158BD to the respondent/assessee after three years from the date of search and after the completion of assessment under section 158BC. The Tribunal allowed the appeal on the ground that the notice was beyond the time limit of two years as provided under section 158BE. The court concurred with this decision, emphasizing that in the absence of a specific time limit, actions must be taken within a reasonable period. Referring to a Supreme Court decision, the court highlighted the need for actions to be taken within a reasonable timeframe. Additionally, a previous case judgment was cited to support the view that the notice under section 158BD should be issued within the two-year period provided for completing block assessments under section 158BE(1).

Issue 2: Validity of Notice under Section 158BD Without Prescribed Time Limit

The appellant/Revenue argued that since there is no time limit prescribed in the statute for completing block assessments concerning individuals other than the searched person, the notice under section 158BD was valid. However, the court disagreed with this argument, citing established legal principles. The court referenced a decision from the Hon'ble Supreme Court and a case judgment from the Delhi High Court to support the position that the Assessing Officer must complete the assessment and record satisfaction within the basic two-year period. The court concluded that the interpretation aligns with the intention of the legislature and ensures reasonable limitations on the Assessing Officer's jurisdiction, dismissing the appeal filed by the Revenue.

In conclusion, the High Court of Madras dismissed the tax case appeal, affirming that the notice under section 158BD was invalid due to being issued beyond the prescribed time limit and emphasizing the need for actions to be taken within a reasonable period. The court also rejected the argument that the notice was valid despite the absence of a specific time limit in the statute, citing legal precedents to support the requirement for assessments to be completed within the stipulated timeframe.