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TMI Blog2003 (8) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... the Statute on the powers of the Assessing Officer to proceed to make the assessment except to provide an opportunity, which is part of the natural justice. Since no prescribed procedure is provided in such situation, we are of the view that the Assessing Officer may issue any kind of notice to achieve the object of making the assessment. Therefore, where the assessee does not file the return in response to notice u/s 158BC(a) and the Assessing Officer wants to proceed to make assessment then no notice u/s 143(2) is required to be issued since filing of return is condition precedent for issue of such notice. In such situation, the procedure prescribed in section 144 would become applicable which provide for granting of an opportunity to the assessee. So, the only requirement is the compliance of rules of natural justice. However, if the Assessing Officer decides to wait for the return to be filed by the assessee then Assessing Officer is bound to issue notice u/s 143(2) after filing of the return. We are of the considered view that non-issuance of notice u/s 143(2) cannot render the block assessment as a nullity since foundation of such assessment is validly laid by issue of notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al disposal of the appeal on merit. X X X X Extracts X X X X X X X X Extracts X X X X ..... t was strongly pleaded that section 143(2), being mandatory, the Assessing Officer is bound to serve the notice before initiating the block assessment proceedings within the prescribed time limit. 4. Regarding the expression "so far as may be" used by the Legislature in clause (b) of section 158BC, he heavily relied on the judgment of Supreme Court in the case of R. Dalmia v. CIT [1999] 236 ITR 480 wherein the scope of such expression has been duly considered while construing the provisions of section 148. According to him, this judgment lays down that all procedural provisions relating to assessment in Chapter XIV should be applied. Since the Legislature has restricted to the provisions of sections 142, 143(2) and 144 for application to the block assessment proceedings, such provisions, being procedural in nature, must be fully applied. Hence, block assessment cannot be made without issuing notice under section 143(2) within the period of limitation. 5. Proceeding further, he relied on the Board Circular No. 717 dated 14-8-1995 reported. He drew our attention to page 98 where, vide clause 39.3(e), it has been explained that provisions of sections 142, 143(2) and 144 would apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment as null and void. 8. Proceeding further, it was contended and reiterated by him that after the filing of the return, the option is available to the Assessing Officer either to accept the return under section 143(1) or to make the assessment if not satisfied with the return. If the Assessing Officer opts to make the assessment after examining the books of account of the assessee then the only course open to the Assessing Officer is to exercise the option in accordance with the provisions of section 143(2). After 1-4-1989, such option can be exercised only within the time limit provided in the proviso to such section. According to him, the Legislature has clearly restricted the power of the Assessing Officer inasmuch as he cannot proceed to assess after the expiry of the time limit prescribed in the proviso to section 143(2). That means non compliance of such provisions would affect the jurisdiction of the Assessing Officer and consequently, assessment made without complying with such provisions would be without jurisdiction and null and void. In support of his above contention, he relied on the decision of Supreme Court in the case of Smt. Maneka Gandhi v. Union of India AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments of Mr. Garg. In addition, he drew our attention to the various provisions of Chapter XIVB to point out that such chapter contains substantive as well as procedural provisions. According to him, the provisions of sections 158B and 158BA are substantive provisions as held by the Tribunal in the case of Sou Vidya Madanlal Malani v. Asstt. CIT [2000] 74 ITD 341 (Pune) while the provisions of section 158BB are machinery provisions for computation of undisclosed income. He then referred to the provisions of section 158BC, which is in two parts, namely, (i) the provisions calling for the return; and (ii) the provisions empowering the Assessing Officer to proceed to determine the undisclosed income in accordance with the provisions of sections 142, 143(2) and 144. He then referred to the provisions of section 158BA which directs the Assessing Officer to proceed to assess the undisclosed income in accordance with the provisions of Chapter XIVB. In view of such provisions, it was argued by him that Assessing Officer was bound to follow the provisions of section 142, subsections (2) & (3) of section 143 and section 144 since such provisions are en grafted in section 158BC. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note two judgments i.e., in the case of Orissa State Warehousing Corpn. v. CIT [1999] 237 ITR 589 (SC) and Mohammad Ali Khan v. CWT [1997] 224 ITR 672 (SC). Therefore, it was strongly contended by him that provisions of section 139(4) cannot be invoked and applied to the belated returns in pursuance of notice under section 158BC. Therefore, where no valid return is filed under section 158BC, notice under section 143(2) is not required to be issued. It was also submitted by him that even assuming that notice under section 143(2) is to be issued in respect of belated returns then it would be impossible to issue such notice if the assessee chooses to file the return on the last day i.e., when the assessment is to be completed. According to him, compliance of notice under section 143(2) in such a situation could never have been intended by the Legislature. 12. Secondly, it was contended that Chapter XIVB is a special code for assessing the undisclosed income and does not contain the machinery provisions of its own. However, it has incorporated certain machinery provisions applicable to regular assessment for limited application inasmuch as the Legislature has used the expression "s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings. According to this decision, such provisions are to be applied only for the purpose of giving an opportunity to the assessee. The other decisions of the Tribunal relied upon by him are in the case of Action Electronics v. Dy. CIT [IT Appeal No. 5215 (Delhi) of 1996] and in the case of ITO v. Master Vishal D. Lagade [IT Appeal No. 633 (Pun e) of 2001]. 13. At this stage, he also distinguished the judgment of the Supreme Court in the case of R. Dalmia relied upon by the learned counsel for the assessee. It was argued by him that provisions of section 148, which were considered by the Hon'ble Supreme Court and the provisions of section 158BC are couched in different manner. He drew our attention to the language of section 148 and pointed out that there is a fiction to the effect that the return filed under section 148 shall be deemed to be return under section 139. So the words "so far as may be" were to be construed by the Apex Court in the light of such fiction. According to him, it is only because of this fiction it was held by the Supreme Court in that case that all the procedural requirements of regular assessment were to be applied. However, such fiction has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file the return voluntarily, he may be asked to file the return under section 142(1). On the other hand, under section 158BC, the Assessing Officer has to first issue notice to the assessee for filing of the return and it is only in response to such notice, the return is filed by the assessee. Secondly, once a return is filed under section 139(1) or 139(4) or 142(1), the Assessing Officer has an option either to accept the return filed under such provisions or if he is not satisfied with the correctness of such return, he may make the assessment after examining the books of the assessee and in the manner provided in section 143(3) after serving the notice under section 143(2). According to him, the Legislature has provided a bar for exercising such option in the form of time limit. Therefore, if the Assessing Officer opts to exercise the option to make assessment under section 143(3), then he has to exercise such option by serving notice within the time provided in section 143(2) but there is no such option available with the Assessing Officer while making the assessment under Chapter XIVB. He drew our attention to the provisions of section 158BC to point out that after the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practicable but rather impossible to complete the assessment in such a short period particularly when the Assessing Officer has to examine the enormous seized material. So, it was concluded by him in this regard by submitting that Assessing Officer can proceed to make the assessment immediately after the expiry of time limit for filing of the return under 'section 158BC even without issuing notice under section 143(2) where the assessee chooses not to file the return or to delay such return. Further, it was stated that there is no prescribed form for issuing the notice in order to proceed to make the assessment and, therefore, the Assessing Officer can even initiate the assessment proceedings by issuing questionnaire in respect of the seized material and asking the assessee to explain the same. 17. Regarding the Board circular relied upon by the learned counsel for the assessee, it was submitted by him that the circular uses the word "accordingly" which means according to the provisions of section 158BC. Hence, it was argued by him that no inference can be drawn from the said circular to the effect that provisions of section 143(2) are to be applied in its entirety. It was also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed any prejudice to the assessee. According to him, if such provisions are substantially complied with and no prejudice is caused to the assessee then the assessment cannot be declared null and void. Reliance was placed on the following judgments: (i) Pooran Mall & Sons's case (ii) Rachhpal Singh v. State of Punjab [2002] 6 SCC 462 (Paragraph 11 of the judgment) (iii) State of UP v. Harendra Arora [2001] 6 SCC 392 (iv) T.V. Usman's case. 20. Proceeding further, he invoked the doctrine of waiver/acquiescence. According to him, if the assessee participates in the proceedings initiated by the Assessing Officer then no stand can be taken by the assessee regarding non issuance of notice under section 143(2). In this connection, he relied on the following judgments: (i) Vellayan Chettiar v. Government of the Province of Madras AIR 1947 PC 197 at p. 199 (referred to in Commissioner of Customs v. Vigro Steels [2002] 4 SCC 316) (ii) Vigro Steels' case (copy of judgment is enclosed) (iii) Chatturam v. CIT [1947] 15 ITR 302 (FC) (iv) State Bank of Patiala v. S.K. Sharma AIR 1996 SC 1669 (v) Pooran Mall & Sons' case (vi) P.V. Doshi v. CIT [1978] 113 ITR 22 (Guj.) (vii) Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, need not be repeated. He also relied on certain decisions and commentary regarding construction of statutes. Reference was made to 'law and practice of income tax' by Kanga & Palkiwala in the preposition that "one has to look merely at what is clearly stated. There is no room for any intendment. There is no presumption as to tax. Nothing is to be read into, nothing is to be implied. One can only look fairly at the language used". Then he referred to the judgment of the Supreme Court in the case of Reserve Bank of India v. Peerless General & Finance Investment Co. [1987] 1 SCC 424 for the preposition that interpretation must defined on the text and context. Reliance was also placed on the judgment of the Supreme Court in the case of K.P. Verghese v. ITO [1981] 131 ITR 597 for the preposition that Board circulars are binding on the department. 24. Accordingly it was argued that provisions of section 143(2) should be construed in literal sense. He also reiterated that the expression "so far as may be" has become meaningless since the Board in circular No. 717 dated 14-8-1995 had omitted to use such expression. He also relied upon the Allahabad High Court judgment in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the borrowed/engrafted provision. (iii) Clause (b) of section 158BC is clearly dissectible into two easily clearly identifiable parts. The first part mandates that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158 Bombay and the second part engrafts, or in other words, borrows the provisions of section 142, sub-sections (2) and (93) of section 143, sections 144 and 145 with the expression "So far as may be" intertwined in it. According to him if the return is filed, the Assessing Officer is bound to issue notice under section 143(2) within the time prescribed in the proviso. However, where return is not filed by the assessee, the Assessing Officer is not powerless and he is not supposed to wait for the return. He can invoke the provisions of section 142(1)(1) and direct the assessee to call for the return and thereafter complete the assessment in accordance with the section 143(2) of section 144(1)(b). (iv) Regarding the principle of referential legislation canvassed by learned DR in view of the Supreme Court judgment in the case of Ujagar Prints, it has been contended that nothing has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) which, for the benefit of this order, is being reproduced as under: Section 158BC "Where any search has been conducted under section 132 of books of account, other documents or assets are requisitioned under section 132A in the case of any person then,-- (a) (b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158 Bombay and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be apply." 27. The interpretation of the words "so far as may be" is in our opinion, no more res integra. Immediate reference can be made to the judgment of the Hon'ble Supreme Court in the case of Dr. Pratap Singh which has been heavily relied upon by the learned CIT DR. In that case, the Court had occasion to consider the provisions of section 37(2) of Foreign Exchange Regulation Act, 1973 (in short FERA) which provides that provisions of the Cr. PC relating to searches, shall so far as may be, apply to searches directed under section 37(1) of the said Act. It was contended by the appellant before the Apex Court that provisions of section 165 of the Cr. PC were incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 165 of the Code by the officer to be set out in the section. In order to give full meaning to the expression 'so far as may be' sub-section (2) of section 37 should be interpreted to mean that broadly the procedure relating to search as enacted in section 165 shall be followed. But if a deviation becomes necessary to carry out the purposes of the Act in which section 37(1) is incorporated, it would be permissible except that when challenged before a court of law, justification will have to be offered for the deviation. This view will give full play to the expression 'so far as may be'." 28. The above observations of Their Lordships clearly show that only the procedural requirements of section 165 of Cr. PC were intended to be complied with and not the substantive requirements. Recording of the reasons provided in section 165 of Cr. PC was a substantive provision and the condition precedent for carrying out a search but the same was held not necessarily to be followed while carrying out a search under section 37(2) of FERA because of the expression 'so far as may be' used by the Legislature. The search was held to be valid since there was sufficient material on record to ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1957 Act does not incorporate into the 1957 Act any specific provisions of the 1944 Act. It only declares generally that the provisions of the 1944 Act shall apply "so far as may be" this is to the extent necessary and practical for the purposes of 1957 Act as well" 30. The perusal of the above observations shows that there is distinction between legislation where provisions of an earlier Act are incorporated by pen and ink and the legislation where provisions of an earlier Act are incorporated but are merely referred to. In the case of former, the provisions so incorporated become integral part of the Statute and are to be literally applied while in the latter case, the provisions referred to are not to be applied literally. It further holds that in the latter case if the legislation uses the expression 'so far as may be' then the provisions of the earlier Act referred to are to be applied to the extent possible and practical. That means that the provisions referred to cannot be applied literally i.e., in its entirety as contended on behalf of the assessee. 31. If the ratio of the above judgments are applied to the provisions of clause (b) of section 158BC, then we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a return under section 139. As a necessary corollary, Their Lordships held that procedure provided under section 144B was applicable to such return. On the other hand, the judgment in R. Dalmia's case, is not contrary to the ratio laid down by the Apex Court in the case of Dr. Pratap Singh or in the case of Ujagar Singh. It will be useful to refer to the following observations appearing at page 487 of 236 ITR: "It was submitted on behalf of the assessee that the provisions of section 144B were not applicable to assessments and reassessments under section 147 because section 144B stated that it applied only to "an assessment to be made under sub-section (3) of section 143". The submission cannot be accepted because the words we have quoted from section 148 cannot be ignored. A notice having been issued under section 148, the procedure set out in the sections subsequent to section 139 has to be followed 'so far as may be'. Section 144B is a procedural provision. It fits into the procedural scheme as hereinbefore noted and, therefore, it cannot be excluded by reason of the use of the words 'so far as may be'. Nor is there any other good reason to exclude it from the procedure to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be appropriate to consider the scheme of section 143(2) with reference to the scheme of section 158BC. The perusal of section 143(2) shows that it confers powers on the Assessing Officer to proceed to make assessment of the total income of an assessee if he considers that it is necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner. The use of the word 'if' by the Legislature clearly shows that the power to assess is optional and the Assessing Officer need not proceed to assess-in each and every case. If he opts to exercise such powers then such exercise must be made within the period prescribed by the proviso to this section. So, in our opinion, the proviso is attached to such power/jurisdiction of the Assessing Officer to proceed to assess that is what the learned counsel for assessee has vehemently argued by submitting that by insertion of Proviso w.e.f. 1-4-1989, the jurisdiction of Assessing Officer has been effected. However, the mode for exercise of such power is through the issue of notice under section 143(2). In view of above discussion, we are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed inasmuch as it is the settled legal position that special provisions override the general provisions. The view which has been taken by us can be illustrated by pointing out that section 142 has also been made applicable to block assessment proceeding but such provisions cannot be applied for asking the assessee to file the return since specific provisions have been made by the Legislature in this regard by enacting clause (a) of section 158BC. Perhaps, because of such reasons, the Legislature has used the expression "so far as may be". 38. In view of the above discussions, we are of the view that only the procedural part of section 143(2) can be applied to block assessment proceedings and consequently, provisions of section 143(2) cannot be applied for invoking the power/jurisdiction to proceed to assess the undisclosed income which directly flows from the provisions of section 158BA read with section 158BC(b). Hence, the proviso to section 143(2), which is part of jurisdictional aspect, as also contended by the assessee's counsel, would be inapplicable to block assessment proceedings. Accordingly, only that portion of section 143(2) would apply which provides for serving of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue the notice before proceeding to assess. For the similar reason, if no return is filed in response to notice under section 158BC, the question of issuing such notice would not rise. However, difficulty arise when the learned CIT/DR contends that the belated return should be treated as non nest/invalid and, therefore, should be ignored. According to him, the notice under section 143(2) is not required to be issued where the assessee files the return under section 158BC after the expiry of the period specified in the notice issued under section 158BC. We are unable to accept such contention since it is not supported by any logic or judicial pronouncement. Once a notice under section 158BC(1) is issued by the Assessing Officer, the assessee is under obligation to file the return. There may be various valid reasons for not filing the return in time. There is no provision for extension of time. Further, there may be a case where the assessee is not provided with the copies of the seized material. In such cases, it would be impossible for the assessee to file the return. On the other hand, the Legislature recognizes such belated return inasmuch as section 158BF A provides for levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndition precedent for issue of such notice. In such situation, the procedure prescribed in section 144 would become applicable which provide for granting of an opportunity to the assessee. So, the only requirement is the compliance of rules of natural justice. However, if the Assessing Officer decides to wait for the return to be filed by the assessee then Assessing Officer is bound to issue notice under section 143(2) after filing of the return. 43. However, there may be a situation where abnormal delay is made by the assessee in filing the return and the Assessing Officer also might not have started the procedure for assessment. In such cases, notice under section 143(2) is required to be issued and served but on the facts of the case if the Assessing Officer intends to deviate from such procedure on the ground that issuance of such notice is not possible or practical. Then justification for deviation will have to be offered by the Assessing Officer. 44. In view of the above discussion, it is held that - (i) provisions of section 143(2) are not applicable in its entirety to block assessment proceedings but are applicable to the extent possible (ii) proviso to such section is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to refer to the test laid down by the Justice Coleridge in Holmes v. Russell [1841] 9 DOWL 487 which reads as under:-- "It is difficult sometimes to distinguish between the irregularity and a nullity; but the safest role is to determine what is irregularity and what is nullity is to see whether the party can waive the objection; if he can waive it, it amount to an irregularity, if he cannot, it is a nullity." 48. According to "words and phrases" (permanent addition), irregularity has been defined "want of adherence to some prescribed rule or mode of proceeding" whereas nullity is "vide Act or an Act having no legal force or validity". So the safest rule of distinction is whether a party can waive the objection. If he can waive, it amount to irregularity and if he cannot then it is nullity. This view has been approved by the Hon'ble Supreme Court in the case of Krishan Lal v. CIT(A) of J&K [1994] 4 SC 422 at page 432. 49. In view of the legal position mentioned above, we are of the considered view that non-issuance of notice under section 143(2) cannot render the block assessment as a nullity since foundation of such assessment is validly laid by issue of notice by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceeding. The omission to issue a notice under section 23(2) merely prevents the Income-tax Officer from making an assessment order under section 23(3), and after he rectifies the omission by issuing that notice he can proceed further to the next stage, that is, to exercise the power of completing the assessment under section 23(3). All these are steps within the overall jurisdiction vested in the Income-tax Officer over the entire assessment proceeding. We are of definite opinion that the failure of the Income-tax Officer to issue a notice under section 23(2) does not call for an order by the Appellate Assistant Commissioner annulling the assessment. The Appellate Assistant Commissioner was right in merely setting aside the assessment." 51. The earlier judgment of Allahabad High Court in the case of Rajmani Devi relied upon by the learned counsel for the assessee is quite distinguishable and does not advance the case of the assessee. In this case, it is nowhere laid down that non issuance of notice under section 23(2) of 1922 Act would render the assessment as null and void. What has been held is that notice under section 23(2) is mandatory and the Assessing Officer is bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54. Before parting with his issue we would like to refer to two judgments of Hon'ble Supreme Court. First case is Guduthur Bros. v. ITO [1960] 40 ITR 298. In that case penalty under section 28(1)(a) of 1922 Act was levied without affording an opportunity to the assessee. The AAC set aside the said order of penalty and directed the Assessing Officer to refund the penalty amount. Thereafter, the Assessing Officer issued a further notice to provide an opportunity to the assessee to show cause as to why penalty be not imposed. The said notice was challenged by way of writ before the High Court. The petition was dismissed. On appeal to Supreme Court, it was held that denial of opportunity to the assessee vitiated the order of the penalty by irregularity, which supervened not at the initial stage but during the course of it. Hence such irregularity could be corrected by issuing another notice. The second judgment of Supreme Court is reported as Supdt. of Central Excise v. Partap Rai [1978] 114 ITR 231 wherein it has been held as under:-- "Whenever an order is struck down as invalid being in violation of the principle of natural justice there is no final decision of the cause and fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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