CIT V. MADAN LAL SAINI

ITA/468/2007

AI Insights

The case involves appeals by the Commissioner of Income Tax, Faridabad against Shri M.L. Saini concerning block assessment orders under the Income Tax Act, 1961. The primary legal issue was the applicability of the time limit for completing block assessments following a search and seizure operation. The Tribunal had annulled the assessment order on the grounds of it being barred by limitation. However, the High Court found that the assessment was within the prescribed time limit, considering the provisions of Section 158BH and Section 153(2A) of the Act, which allow for a fresh assessment order to be made within one year from the end of the financial year in which the order under Section 263 was passed.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 732468 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 04-04-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: URVASHI DHUGGA
• Keywords: Block assessment; Limitation; Search and seizure; Reconstructed files
• Section: 143(3); 263; 158BC; 260A; 153(2A); 158BE; 158BH

Judgement Text

"ITA No. 468 of 2007 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 468 of 2007 Date of Decision: 4.4.2011 Commissioner of Income Tax, Faridabad ....Appellant. Versus Shri M.L. Saini ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. 1. Since the Registry has not been able to send the file of ITA No. 468 of 2007 on account of the fire incident in the concerned Branch of the Court, learned counsel for the revenue has furnished photostat copies of the paper books which are taken on record and the same are treated as reconstructed files of the appeal. 2. This order shall dispose of ITA Nos. 468 of 2007 and 641 of 2008 as, according to the learned counsel, identical questions are involved in both the appeals. For brevity, the facts are being extracted from ITA No. 468 of 2007. 3. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 10.6.2006 passed by the Income Tax Appellate ITA No. 468 of 2007 -2- Tribunal, Delhi Bench “C”, New Delhi (hereinafter referred to as “the Tribunal”) in IT(SS) A. No. 228/Del/2004 for the block assessment period from 1.4.1989 to 31.3.1999, claiming the following substantial questions of law:- “(i) Whether, on the facts and in the circumstances of the case, the order of the Hon'ble ITAT is correct in annulling the order passed by the Assessing Officer u/s 158BC of the Income Tax Act, 1961 in compliance with the order u/s 263 passed by CIT? (ii) Without prejudice to ground No.1, on the facts and circumstances of the case, whether the Hon'ble ITAT is right in holding that the order passed by the Assessing Officer was passed beyond the time limit prescribed for completing assessment under Chapter XIV-B of the Income Tax Act due to non-applicability of Section 153 of the Income Tax Act in this case?” 4. Briefly stated, the facts necessary for adjudication of the appeal are that the assessee is a individual and has been deriving income from the business of sale and purchase of property. A search and seizure operation was carried out at the residential and business premises of the assessee on 12.3.1999. Original assessment under Section 158BC/143(3) of the Act was completed at an income of Rs.56,91,230/- on 31.3.2001. The said assessment order was set aside on 20.11.2001 by the Commissioner of Income Tax (CIT) under Section 263 of the Act. In pursuance of the order of the CIT, the Assessing Officer framed fresh assessment again at an income of Rs.56,91,230/- ITA No. 468 of 2007 -3- on 31.3.2003 against which the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT (A) allowed relief of Rs.29,74,579/- and directed the Assessing Officer to reconsider the certain issues vide order dated 31.3.2004. Dissatisfied with the order dated 31.3.2004, passed by the CIT(A), the assessee filed an appeal before the Tribunal who vide order dated 10.6.2006 allowed the appeal and annulled the order dated 31.3.2003 passed by the Assessing Officer on the ground that the assessment order passed by the Assessing Officer was barred by limitation. However, in the meantime, in pursuance of order dated 31.3.2004, the Assessing Officer passed another order on 28.6.2005 determining the taxable income for the block period at Rs.27,16,655/-. The present appeal has been preferred by the revenue challenging the order dated 10.6.2006 passed by the Tribunal. 5. We have heard learned counsel for the revenue. 6. The issue that arises for consideration in these appeals is whether the order passed by the Assessing Officer for the block assessment proceedings initiated in pursuance of the order passed by the CIT under Section 263 of the Act was within the time prescribed under the Act. 7. Learned counsel for the revenue submitted that the search and seizure operation was carried out on the premises of the assessee on 12.3.1999 and the block assessment was framed on 31.3.2001 which was within limitation in terms of Section 158BE of the Act. Further, the CIT in exercise of jurisdiction under Section 263 of the Act had passed an order on 20.11.2001 and in compliance thereto, the ITA No. 468 of 2007 -4- block assessment order was passed by the Assessing Officer on 31.3.2003. According to the learned counsel for the revenue in view of Section 158BH incorporated in Chapter XIV-B, the other provisions of the Act were applicable and the Assessing Officer was required to pass fresh assessment order within one year from the end of the financial year in which the order under Section 263 of the Act had been passed. Elaborating further, learned counsel submitted that accordingly, one year period was to be counted from 1.4.2002 and the block assessment framed on 31.3.2003 was, thus, within limitation. 8. We find substantial force in the submissions made by learned counsel for the revenue. 9. Section 158BE of the Act prescribes time limit of one year for completion of block assessment where the searches were initiated between Ist July, 1995 and 31st December, 1996, and a period of two years in cases of searches conducted after Ist January, 1997. However, in view of Section 158BH of the Act, all other provisions of the Act apply to block assessments made under Chapter XIV-B. This being an enabling provision makes all the provisions of the Act applicable to block assessment proceedings except as provided under the said Chapter. By virtue of the aforesaid provision, Section 263 of the Act being applicable, equally limitation for passing fresh assessment order in terms thereof under Section 153(2A) of the Act also applies. According to Section 153(2A) of the Act, a fresh assessment order may be made at any time before the expiry of one year from the end of the financial year in which the order under Section 263 of the Act is passed by the CIT. ITA No. 468 of 2007 -5- 10. Having crystalized the legal position as noticed above, we now advert to factual matrix in the present case. Admittedly, order under Section 263 of the Act was passed by the CIT on 11.11.2001 and accordingly, the end of the financial year, therefore, would be 31.3.2002. The period of limitation of one year in which fresh assessment order could be passed was to expire on 31.3.2003. Thus, the assessment order dated 31.3.2003 was within limitation. 11. The Tribunal had grossly erred in holding that for calculating limitation for passing block assessment order, the period as prescribed under Section 158BE of the Act was to be followed even where the CIT had initiated action under Section 263 of the Act. This interpretation adopted by the Tribunal cannot be accepted. 12. In view of the above, the appeals are allowed and the order dated 10.6.2006 passed by the Tribunal is set aside. The matter is remanded to the Tribunal for fresh decision on merits in accordance with law. (AJAY KUMAR MITTAL) JUDGE April 4, 2011 (ADARSH KUMAR GOEL) gbs JUDGE ITA No. 468 of 2007 -6- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 641 of 2008 Date of Decision: 4.4.2011 Commissioner of Income Tax, Faridabad ....Appellant. Versus Shri Madan Lal Saini ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see order of even date passed in ITA No. 468 of 2007 (Commissioner of Income Tax, Faridabad v. Shri M.L. Saini). (AJA Y KUMAR MITTAL) JUDGE April 4, 2011 (ADARSH KUMAR GOEL) gbs JUDGE "