9911796707
TMI Blog1998 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Special Civil Application No. 1148 of 1998, and both the sides have referred to the papers produced therein. It was pointed out that all these matters contained identical points except that in the writ petitions other than Special Civil Applications Nos. 1148 of 1998 and 1153 of 1998, no grounds were given by the Assessing Officer for proceeding with the regular assessment under section 143(2) in connection with the returns of income submitted by the assessees for the assessment year 1995-96. Since common points have been raised and argued together in this group of petitions, they are being disposed of by this common judgment and order. According to the petitioners, a search and seizure operation was carried out from December 1, 1995, and concluded on January 6, 1996, and the block assessment under Chapter XIV-B of the said Act was made for the block period from April 1, 1985, till January 6, 1996. In those proceedings, the total income of the assessee for the said period was worked out in accordance with the provisions of section 158BB of the Act and after giving credit for the amount disclosed, the assessment order was made as per annexure "B" to the petitioner, calling up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission, etc., does not disturb the figure of undisclosed income of the block period. According to the Revenue, there are no two assessments for the same year since the block assessment is for the undisclosed income for the block period and not for any specific year while the regular assessment is for the total income of the specific year. Reliance is placed in support of these contentions raised in the affidavit-in-reply, on the Budget Speech of the Minister of Finance for 1995-96, Notes on Clauses and the Central Board of Direct Taxes Circular No. 717, dated August 14, 1995, all of which are reproduced in the affidavit-in-reply. The Department has also contended that the assessees had taken up a ground before the Income-tax Appellate Tribunal in appeal filed against the order of block assessment that certain additions made therein were not covered under "undisclosed income" and that the disallowance could have been decided in the regular assessment proceedings of the assessment year 1995-96. Learned counsel appearing for the petitioners in this group of petitions strongly contended that the Assessing Officer had no jurisdiction to make any assessment order in respect of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Learned counsel heavily relied upon the decision of the Punjab and Haryana High Court in the case of Raja Ram Kulwant Rai v. Asst. CIT [1997] 227 ITR 187 and the decision of the Kerala High Court in the case of N. T. John v. CIT [1997] 228 ITR 314, in support of his submissions. Learned counsel repeatedly emphasised that in order to maintain uniformity, even if the court found itself not in agreement with these decisions of the other High Courts, they ought to be followed. In support of this contention, he relied upon the decision of this court in CIT v. Sarabhai Sons Ltd. [1983] 143 ITR 473, and also on the decision of this court in CIT v. Deepak Family Trust (No. 1) [1995] 211 ITR 575. Learned counsel appearing for the Revenue argued that Chapter XIV-B of the said Act was devised to assess the undisclosed income and did not affect the regular assessments or the orders of the appellate or revisional authorities or the changes made pursuant to the orders of the court. It was contended that section 158BB provided for computation of undisclosed income for the block period, and computation of aggregate total income of the previous years falling within that block period was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is referred to as "the authorised officer" and he can carry on search in any building, place, vessel or aircraft where he has reason to suspect that the books of account or documents or the assets which the assessee will not or would not produce, are kept. In the process he can break open any lock and search any person. Under sub-clause (iii) of section 132(1)(b), such authorised officer can seize any such books of account, other documents or the assets mentioned therein found as a result of such search. He can place marks of identification on the books of account or other documents and make a note or inventory of such assets. Under sub-section (4) of section 132, the authorised officer may, during the course of his search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents or other assets mentioned therein and any statement made by such person during such examination may thereafter be used in evidence in any proceedings under the Act. We have referred to the provisions of section 132(1) to section 132(4) in detail because the very basis of application of the special procedure for assessment of search cases under C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income" in section 158B(b) includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such asset, entry or other document or transaction representing wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act. It, therefore, follows that what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income. From the provisions of section 158BA(1), it would appear that the Assessing Officer can proceed to assess the undisclosed income only if a search is initiated under section 132 of the Act by the authorised officer. The total undisclosed income relating to the block period is to be charged to tax at the higher rate of 60 per cent. presently specified in section 113 of the Act after such undisclosed income is assessed in accordance with the provisions of this Chapter by the Assessing Officer as income of the "block period" as defined in section 158B(a) of the Act. This has to be done "irrespective of the previous year or years to which such income relates and irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year was within the block period. There is yet another important indication to show that the assessment of undisclosed income is altogether a different matter from the regular assessments. Under section 158BB of the Act, for computing the undisclosed income of the block period, the Assessing Officer has to compute the total income of the relevant previous years on the basis of the evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. The evidence found as a result of search or requisition would be the evidence that has been gathered by the authorised officer under sections 132 and 132A of the Act. This would also include the statements recorded by the authorised officer during the course of search and seizure under section 132(4) of the Act which empowers him to record the statement of any person in possession of such assets or books of account or documents on oath and which can be used in evidence in any proceeding under the Act. The evidence so gathered by the authorised officer under section 132 along with other material seized, marked, or inventoried, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(3) of the Act. Under section 158BB(1), read with section 158BC of the Act, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed in the normal regular assessment under section 143(3), where the Assessing Officer makes an enquiry to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner and on the basis of the evidence produced by the assessee, the evidence obtained on the specific points and all relevant material which he has gathered assesses the total income or loss and determines the sum payable thereon as per that assessment. This exercise under section 143(2) and (3) for regular assessment stands in contrast to the exercise of the Assessing Officer under section 158BB read with section 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted by the authorised officer under section 132 of the Act. Therefore, there is no merit in the contention raised on behalf of the petitioners that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular assessment is to be served within the time-frame of twelve months from the end of the month in which the return is furnished. Therefore, where there is a pending regular assessment for one of the previous years falling in the block period for which the proceedings under Chapter XIV-B are commenced as a result of search under section 132, there is nothing that would prevent the Assessing Officer to proceed with and complete the regular assessment of such previous year in the regular assessment, before the block assessment of undisclosed income is made. There would be no warrant for withholding the regular assessment which is pending for the previous year falling in the block period. The assessment of undisclosed income of a block period is, thus, different from the regular assessment of the total income of a previous regular assessment year and both can operate together. The block assessment procedure is not intended to have the effect of excluding the regular assessments that may be pending. The block assessment targets the area of undisclosed income that was not disclosed and would not be disclosed, while the regular assessment is to assess the total income or loss of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions may have the effect of disturbing the assessment made by the Assessing Officer. The provisions of sub-sections (1) and (2) of section 153, prescribing the time limit for making orders of assessment do not apply to assessments, reassessments or recomputations made in consequence of or to give effect to any finding or direction contained in an order made under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference as laid down in section 153(3)(ii) of the Act. Obviously, therefore, the regular assessment already made will have to be brought in tune with such orders or may even have to be done de novo, if so ordered, in which event it would amount to a regular assessment still pending. For example under section 251, the Commissioner of Income-tax (Appeals) may confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment. The Tribunal has, in deciding appeals, wide powers to pass orders thereon as it thinks fit, as provided in section 254(1). After decision on the questions of law by the High Court or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x determined on the basis of such assessment. An assessee who had not disclosed and did not intend to disclose income or property, which fact is detected in the search, cannot acquire immunity from being assessed to still other income or property which did not come to surface as his undisclosed income from the evidence found and material available at the time of the block assessment, but is now found by virtue of the enquiry made under section 143(2)(iii) of the Act for regular assessment showing that the assessee had understated the income or had computed excessive loss or underpaid tax even after taking into account the fact that his undisclosed income for the block period was separately assessed and taxed at the higher rate of 60 per cent. was charged thereon. The immunity from levy of penalties attached to the undisclosed income determined in the block assessment have no relevance to the levy of interest and penalties that may follow the regular assessment in respect of understatement of income or computation of excessive loss made by the assessee, which are not relatable to the undisclosed income determined and taxed in the separate proceedings. The essence of the special pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example, in the communication dated February 20, 1998, placed on record in Special Civil Application No. 1148 of 1998), these parties were not located at the addresses given by the assessees, it cannot be said that it was incumbent upon the Assessing Officer to give reasons as to why he was issuing the notices under section 143(2) of the Act. No such requirement of furnishing grounds which prompted the Assessing Officer to issue notice under section 143(2) for making the regular assessment can be imposed in the absence of any such provision. The only requirement for issuance of the notice under section 143(2) for calling upon the assessee to attend office and produce evidence in support of the returns is that the Assessing Officer should consider it necessary or expedient to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. There is no need to give any reasons or grounds for proceeding with such regular assessment and the requirement of section 147 of there being reason to believe that any income chargeable to tax has escaped assessment, can never be read into the provisions of section 143(2) unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the newly introduced Chapter XIV-B. Once an assessment is framed qua a particular year falling within the block period of ten years then, no other assessment under any other provisions of the Act can be framed. It was then observed that the income of the assessment years 1988-89 and 1989-90 did not remain to be determined after determination of yearwise income and pending assessments of those years stood merged in the collective assessment under section 158BC(c) of the Act. Once the income of the assessment years 1988-89 and 1989-90 has been determined taking into account the income already assessed and concealed income which includes the years in question, no assessment remained to be framed. We must say, with utmost respect, that we are not able to discern any reasons for the propositions laid down in Raja Ram Kulwant Rai's case [1997] 227 ITR 187 (P H), and for the reasons which we have given hereinabove, we find it impossible to accept the proposition that the jurisdiction of the Assessing Officer to proceed with the regular assessment is taken away where that previous year falls in the block period of assessment of undisclosed income, or that all pending assessments st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sarabhai Sons Ltd. [1983] 143 ITR 473, that there is a longstanding practice of following the views of other High Courts, even if this High Court was of a different view on the point. It was pointed out from the said decision that the High Court had followed the decision of the Bombay High Court in Maneklal Chunilal and Sons Ltd. v. CIT [1953] 24 ITR 375, in which it was held that in conformity with the uniform policy which had been laid down in income-tax matters, whatever the view of the High Court may be, we must accept the view taken by another High Court on the interpretation of the section of a statute, which is an all-India statute. It was observed that even though this court may be persuaded to take a different view, it was not inclined to do so in view of the settled practice. It was noticed by the High Court that there was a long-standing practice under which the assessees had been given relief (under section 80J) to the extent of the capital employed and not proportionate relief to the extent of six per cent. per annum in a case where the new industrial undertaking has worked only a part of the year as was contended for on behalf of the Revenue. The High Court has nowhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be reduced to simply matching the colours of the case at hand against the colours of many sample cases spread out upon its desk and accept the sample nearest in shade as the applicable rule. The system of law cannot be evolved by such mechanical process and no judge of a High Court worthy of his office, views the function of his place so narrowly. If that were all there was to our calling there will be little of intellectual interest about it. The choice of a path for us cannot be made so blind and unintelligent, to be followed without a survey of the route which has been travelled and of the place where it would lead. Necessarily therefore, reasons that are given in the decisions of other High Courts relied upon for the petitioners, which have great persuasive value as precedent are required to be considered and the consequences are to be noted and if it becomes impossible to agree with them, or if there are no reasons at all and only announcements of legal precepts, the court would be free to give its reasons, which may not coincide with the conclusions reached in the persuasive precedent relied upon. The decisions of any High Court are after all not intended to be "gag ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
