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TMI Blog2016 (12) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... nue and in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued in the name of Assessee Company? In other words, whether notice dated 12.12.1996 purported to have been issued by Assessing Authority under Section 158 BC can be said to be a legal and valid notice complying all the requirements of statute? (2) Whether notice under Section 158 BC is mandatory and want of valid notice under said provision would render block assessment illegal? (3) Whether defect of notice under Section 158 BC can be protected by taking recourse to Section 292 B of Act, 1961? (4) Whether notice under Section 143(2) for block assessment was mandatory and want of such notice would render block assessment illegal? (5) Whether Tribunal was justified in holding that notice under Section 158 BC is at par with notice under Section 148 of Act, 1961 and the law applicable to Section 148 can be made applicable to notice under Section 158 BC?" 6. Learned counsel for both the parties have advanced their submissions on the aforesaid questions of law. 7. Before adjudicating aforesaid substantial questions of law it would be appropriate to have a brief factual matrix of entire matter which may help us in arriving at a correct conclusion. 8. The assessee, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31,60,957 Balance undisclosed income NIL Addition Rs.89,38,128 only As has been discussed on page 40 of assessment order, the undisclosed investment in the stock as found on the date of search amounting to ₹ 21,99,000/- is treated as covered by the undisclosed business income of the assessee company. Keeping in view of these facts, the undisclosed income of the assessee for the block period is worked out as below:- Total undisclosed income as worked-out on page no.40 of the assessment order. Rs.2,18,77,745 Add: Unexplained introduction of cash as discussed above Rs.89,38,128 ₹ 3,08,15,873 Deduct: Addition on account of unexplained investment in the stock Rs.21,99,000 Rs.2,86,16,873" 12. Assessing Officer after considering material collected in search operations and recording statements of several persons, passed assessment order dated 30.09.1997 and worked-out undisclosed income for block period as under: "Asstt. Year 1993-94: Since the factory has been completed and used for the first time in the assessment year 1993-94, the undisclosed investment in the cost of construction of the factory is treated as undisclosed income u/s 69 of I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on specified points and after taking into account the relevant material which he has gathered. The assessment/reassessment made on escaped income with reference to Sections 147, 148 and 149 and scheme of special procedure for assessment in search cases under Chapter XIV-B is different. The object is different i.e. to tax income which has not already been taxed. When the matter is covered by assessment made in search and seizure cases and the provisions of Chapter XIV-B are applicable, Assessing Officer is obliged to serve a notice in conformity with the requirement of Section 158BC upon the person in whose case search has been conducted and in whose case Assessing Officer wants to make an assessment under the aforesaid Chapter. The requirement of a valid notice is must, being a jurisdictional issue and not mere procedural. The scheme of Act, 1961 shows that the moment a notice under Section 148 is served in the scheme of assessment of escaped income or notice under Section 158 BC is served in the scheme of assessment of undisclosed income in search cases, the already completed assessments or the assessment for the year for which income has escaped (where there is no search) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c previous years falling within the Block Period." 19. It consequently held that notice is vague and illegal and cannot be said to be a valid notice as required under Section 158BC. 20. When coming to third question formulated by Tribunal as noticed above, it held that purpose of notice under Section 158 BC is to complete block assessment in the cases where assessee is said to have undisclosed income on the basis of material found on search and seizure under Section 132 or books of account, other documents or assets are requisitioned under Section 132A and since this notice gives jurisdiction to Assessing Officer to proceed to make block assessment it is mandatory and has to be tested in same manner as requirement of notice under Section 148 itself has been tested time and again and held mandatory. 21. It, thus, answered all the three questions noted above holding that notice under Section 158 BC was bad in law, hence, block assessment made by Assessing Officer is without jurisdiction. 22. If view taken by Tribunal on the question of notice is sustained, there is no reason to proceed with the matter on other aspects and hence, we proceed to consider this aspect first, sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgement of Bombay High Court in Shirish Madhukar Dalvi Vs. Assistant Commissioner of Income Tax and others [(2006) 287 ITR 242 (Bom)], contending that it has been held therein that Section 148 is a substantive section while Section 158 BC is a procedural section and, therefore, rigour of Section 148 cannot be imported and applied when notice contemplated under Section 158 BC is considered. 26. The special nature of provisions made in Chapter XIV B has been considered in The Assistant Commissioner of Income Tax, Chennai Vs. A.R. Enterprises (2013) 3 SCC 196. It was held that Chapter XIV B is a self-contained code and gets attracted as a result of search proceedings initiated by Income Tax Authorities under Section 132 of Act notwithstanding any other provisions of Act except to the extent provided for in the chapter. 27. A Constitution Bench in Commissioner of Income Tax Vs. Vatika Township Private Limited (2015) 1 SCC 1 also echoed a similar view observing that provisions in Chapter XIVB laid down a special procedure for assessment of search cases with a view to combat tax evasion and also to expedite and simplify assessments in search cases. 28. A perusal of Section 158 BC m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n addition to regular assessment already done or to be done. Assessment for block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with Assessing Officer. Therefore, income assessable in block assessment under Chapter XIV B is the income not disclosed but found and determined as a result of search under Section 132. 31. With regard to notice, Section itself prescribes time limit minimum and maximum, look. Having said so Court very categorically said that by making notice issued under this Section, mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the Section is required to be served on the person who is found to be having undisclosed income. Form of notice is prescribed under Rule 12(1A) which in turn prescribes Form 2B for block return. Court further held that Section 158 BC(b) is a procedural provision for making a regular assessment applicable to block assessment as well. It provides for enquiry. Assessment and analysis of entire scheme of Section 158 BC indicates that after the return is filed, Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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