Dr. (Mrs.) Kamal Agarwal, Lucknow V. Asstt. Commissioner of Income Tax, Lucknow

ITA 1361/LKW/1997

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83260 (ITAT-LUCKNOW)
• Duration Of Justice: 16 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-08-2014
• Assessment Year: misc
• Appeal Filed On: 27-10-1997
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK MISHRA
• Assessee Lawyers: S K GARG; P K KAPOOR
• Keywords: Gift; Principle of natural justice; Procedural lapse; Block assessment
• Section: 143(3); 145; 132; 144; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 1361/LKW/1997 BLOCK PERIOD : 1.4.1986 TO 25.9.1996 DR (MRS). KAMAL AGRAWAL A - 26, NIRA LA NAGAR LUCKNOW V. ACIT CIRCLE 2(1) LUCKNOW (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. S. K. GARG, ADVOCATE & SHRI. P. K. KAPOOR, C.A. RESPONDENT BY: SHRI. VIVEK MISHRA, CIT (DR) DATE OF HEARING: 07 0 8 2014 DATE OF PRONOUNCEMENT: 21 0 8 2014 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE BLOCK ASSESSMENT FRAMED BY THE ASSESSING OFFICER UNDER SECTION 158BC OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'), INTER ALIA, ON THE FOLLOWIN G GROUNDS: - 1 . BECAUSE THERE EXISTED NO MATERIAL, NOR SUCH MATERIAL HAS BEEN SHOWN TO HAVE EXISTED EVEN DURING THE EXTENSIVE ASSESSMENT PROCEEDINGS, WHICH COULD LEAD TO THE FORMATION OF BELIEF THAT THE APPELLANT'S CASE FELL WITHIN ANY OF THE THREE CONDITIONS UNDER SECTION 132 (1), SO AS TO ISSUE WARRANT OF AUTHORISATION FOR CARRYING SEARCH OPERATIONS IN HER CASE. 2 . BECAUSE THERE WAS INHERENT LACK OF JURISDICTION IN INITIATING SEARCH PROCEEDINGS UNDER SECTION 132 (1) AND THE ORDER DATED 29.09.1997 PASSED IN PURSU ANCE THEREOF STAND WHOLLY PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : VITIATED, AS BEING WITHOUT JURISDICTION. 3 . BECAUSE IN ANY CASE AND WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN FOREGOING GROUND, THE NOTICE UNDER SECTION 158BC WHEREBY JURISDICTION HAD BEEN ASSUMED BY THE LEARNED ASSESSING OFFI CER, TO PASS IMPUGNED ASSESSMENT ORDER WAS WHOLLY ILLEGAL AS BEING VAGUE AND INFIRM FOR VARIOUS REASONS AND THE ASSESSMENT ORDER MADE I N PURSUANCE THEREOF IS WHOLLY ILLEGAL AND UNJUSTIFIED. 4 . BECAUSE IN ANY CASE THE IMPUGNED ORDER CANNOT BE SAID TO HAVE B EEN PASSED WITH THE 'APPROVAL' OF THE LEARNED C.I.T., AS ENVISAGED IN SECTION 158BC OF THE INCOME - TAX ACT, 1961. WITHOUT PREJUDICE T O THE AFORESAID 5. BECAU SE THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN COMPUTING THE INCOME OF TH E APPELLANT FOR THE BLOCK PERIOD COMMENCING FROM 1.4.1986 TO 25.9.1996, AT RS.24,54,043 AS PER THE BREAK - UP GIVEN HEREIN BELOW : - ASSESSMENT YEAR TOTAL INCOME 1987 - 88 50,546/ 1988 - 89 38, 206/ 1989 - 90 2, 30, 413/ 1990 - 91 2,37,711/ 1991 - 92 3,27,643/ 1992 - 93 1,93,269/ 1993 - 94 1, 41,52 4/ 1994 - 95 2,47,538/ 1995 - 96 2,73,664/ 199 6 - 97 6,26,182/ 1997 - 98 87,347/ 24,54,043/ - PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : AND ON THAT BASIS IN WORKING OUT THE UNDISCLOS ED INCOME FOR BEING SUBJECTED TO BLOCK ASSESSMENT UNDER SECTION 158BC, AT RS 13,62,940/ - . 6 . BECAUSE THE COMPUTATION OF INCOME FOR DIFFERENT YEARS FALLING IN 'BLOCK PERIOD' IS BASED ON NON - APPRECIATION/NON - CONSIDERATION OF RELEVANT MATERIAL/EVIDENCE AS HA VE BEEN PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME STAND WHOLLY VITIATED IN LAW AS WELL AS ON FACTS AND THE ASSESSMENTS A WHOLE IS DISPUTED. 7.1 BECAUSE THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE SOURCES OF CASH A M OUNTING TO R S 1,99,750/ - AS RECOVERED ON OPERATION OF LOCKER WITH ALLAHABAD BANK, CHOW BRANCH, LUCKNOW REMAINED UNEXPLAINED AND IN TREATING THE SAME AS UNDISCLOSED INCOME OF THE APPELLANT, FOR BEING SUBJECTED TO BLOCK ASSESSMENT UNDER SECTION 158 BC OF THE I. T. ACT, 1961. 7.2 BECAUSE THE CASH IN QUESTION BELONGED TO (A) RS . 1,59,750 : TO SMT. SHREE GOYAL, MOTHER OF THE APPELLANT; AND (B) RS.40,000 : TO KM . GARIMA AGARWAL, DAUGHTER OF THE APPELLANT AND SOURCES OF THE SAME WERE FULLY VERIFIABLE FROM THEIR RESPECTIVE INCOME TAX RECORDS/ OTHER DETAILS AS HAD BEEN PLACED ON RECORD DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS. 7.3 BECAUSE SMT. SHREE GOYAL (TO WHOM CASH AMOUNTING TO RS. 1,59,750 BELONG) HAD DULY APP EARED BEFORE THE ASSESSING OFFICER AND WITH REFERENCE TO THE SOURCES AVAILABLE TO HER, SHE HAD NOT ONLY OWNED THE SAID CASH BUT ALSO GAVE DETAILED INFORMATION ABOUT AVAILABILITY OF SUCH CASH AND THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN NOT BELIEVING THE SAID INFORMATION MERELY ON THE GROUND THAT HER INCOME - TAX ENTITY ITSELF WAS DOUBTFUL. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : 7.4 BECAUSE SHE WAS BEING ASSESSED TO TAX IN HER INDIVIDUAL RIGHTS AND THE TESTIMONY GIVEN BY HER IN SUPPORT OF THE AVAILABILITY OF CASH AMOUNTING TO RS.1 ,59,750/ - HAS WRONGLY BEEN DISBELIEVED. 7.5 BECAUSE THE CASH AMOUNTING TO RS. 40,000/ - WHICH BELONGED TO KM. GARIMA AGARWAL STOOD FULLY PROVED BY HER INCOME - TAX RETURN AND OTHER RELEVANT INFORMATION AS WAS PLACED ON RECORD, THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED EITHER ON FACTS OR IN LAW IN TREATING THE SAID SUM AS UNDISCLOSED INCOME OF THE APPELLANT. 8.1 BECAUSE THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE APPELLANT HAD SUPPRESSED HER PROFESSIONA L R ECEIPTS AND IN INCLUDING TH E FOLLOWING SUMS : - A) RS. 51,431 : IN THE A.Y. 1991 - 92 B) RS. 79,790 : IN THE A.Y. 1992 - 93 C) RS. 46,798 : IN THE A.Y. 1994 - 95 D) RS. 1,11,688 : IN THE A.Y. 1995 - 96 E) RS. 1,33,181 : IN THE A.Y. 1996 - 97 IN THE COMPUTATION OF 'UNDISCLOSED INCOME' FOR BEING SUBJECTED TO ASSESSMENT UNDER THE BLOCK PERIOD ASSESSMENT. 8.2 B E CAUSE THE VIEW TAKEN BY THE LEARNED ASSESSING O FFICER ABOUT THE ALLEGED S UPPRESSION OF PROFESSIONAL RECEIPTS, IS BASED ON MISR EADING/ MISINTERPRETATION OF MATERIAL SEIZED D URING THE COURSE OF SEARCH OPERATION AND THE SAME STAND WHOLLY VITIATED IN LAW. 8.3 BECAUSE THE PROFESSIONAL RECEIPTS AS ACTUALLY EARNED BY THE APPELLANT, STOOD FULLY REFLECTED IN THE INCOME - TAX RETURN FILED YEAR AFTER YEAR AND ANY ADDITION UNDER THIS HEAD WAS WHOLLY UNCALLED FOR AND UNJUSTIFIED, BOTH ON FACTS AS WELL AS IN LAW. 9. BECAUSE IN ANY CASE, THE MANNER OF COMPUTING THE INCOME FROM THE PROFESSION AND FROM THAT, IN COMPUTING THE SUPPRESSED REC EIPTS, IS ERRONEOUS AND THE ADDITION MADE ON THE' BASIS OF SUCH A METHOD IS LIABLE TO BE VACATED . PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : 10. BECAUSE THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN NOT ACCEPTING THE RECEIPTS BY WAY IF LOAN AND GIFTS AND TREATING TH E SAME AS UNDISCLOSED INCOME OF THE APPELLANT FOR VARIOUS YEARS AS PER DETAILS GIVEN BELOW ASSESSMENT YEAR SOURCE OF RECEIPT AMOUNT (RS.) NATURE OF RECEIPT 1987 - 88 DR. A. K. SHUKLA, RESIDENT OF CANADA RS.10,000 GIFT 1989 - 90 L.N. SHARMA 9,50 0 LOAN 1990 - 91 P.P. GARG 10,000 GIFT 1991 - 92 CEREMONIAL GIFTS RECEIVED FROM VARIOUS PERSONS 3,445 PETTY GIFTS 1995 - 96 KM. MEENAL AGARWAL 10,000 GIFT 1995 - 96 SHRI. GYAN CHAND SRIVASTAVA 30,000 GIFT 10.2 BECAUSE THE APPELLANT HAD ADDUCED SUFFICIENT DO CUMENTARY EVIDENCE, IN ORDER TO PROVE THE GENUINENESS OF GIFTS, LOANS ETC. AS MENTIONED ABOVE AN D THE TREATMENT GIVEN TO THE SAME IN THE BLOCK ASSESSMENT OF THE APPELLANT, IS WHOLLY ILLEGAL AND UNJUSTIFIED. 10.3 BECAUSE THE GIFTS AGGRE GATING RS 40, 000/ - AS RECEIVED - (A) RS.10,000 : FROM KM. MEENAL AGARWAL; AND (B) RS. 30 , 000 : FROM CYAN GHANA SRIVASTAVA AS ARE RELEVANT FOR THE ASSESSMENT YEAR 1995 - 96, STOOD FULLY REFLECTED AS PART OF CREDIT IN THE CAPITA L ACCOUNT OF THE APPELLANT AND THE SAME COULD NOT HAVE BEEN TREATED TO BE UNDISCLOSED INCOME OF THE APPELLANT FOR THE ASSESSMENT YEAR 1995 - 96. 11. BECAUSE THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN TREATING THE AGRICUL TURAL INCOME AMOUNTING TO - (A) RS. 29,950/ - : IN THE A. YEAR 1996 - 97 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : (B) RS. 45, 000/ - : IN THE A.Y EAR 1997 - 98 TO BE UNDISCLOSED INCOME OF THE APPELLANT AND IN SUBJECTING THE SAME TO BLOCK ASSESSMENT UNDER SECTION 158BC. 12. BECAUSE AGRICULTU RAL INCOME AMOUNTING TO RS. 29,950/ - S TOOD FULLY DISCLOSED AND INCLUDED (FOR RATE P URPOSES) IN THE INCOME - TAX RETURN FOR THE A. YEAR 1996 - 97 WHICH WAS ALREADY AVAILABLE IN THE INCOME - TAX R ECORDS OF APPELLANT AND ADDITION MADE IN THE ASSESSMENT OF APPELLANT ON THAT S CORE IS WHOLLY ILLEGAL AND UNJUSTIFIED . 13. BECAUSE SIMILARLY, THE AGRICULTURAL INCOME AGGREGATING RS. 45,000/ - RELATING TO THE FINANCIAL YEAR 1996 - 97 (SEARCH YEAR) STOOD FULLY REFLECTED IN THE DAY TO DAY RECORDS FOUN D DURING THE COURSE OF SEARCH OPERATION AND THE SAID AMOUNT COULD NOT HAVE BEEN TREATED AS UNDISCLOSED INCOME OF THE APPELLANT . 14.1 BECAUSE THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING, ON THE BASIS OF ESTIMATE PREPARED BY THE VALUATION OFFICER, THAT THERE WAS UNDER - STATEMENT IN CONSTRUCTION OF HOUSE PROPERTY AND IN MAKING THE FOLLOWING ADDITIONS ON THAT SCORE : - ASSESSMENT YEAR AMO UNT 1989 - 90 1,78,389 1990 - 91 1, 52,489 1991 - 92 2,07,447 1992 - 93 61,328 1997 - 98 42,347 14.2 BECAUSE THE APPELLANTS VERSION OF INVESTMENT IN COST OF CONSTRUCTION OF HOUSE PROPERTY STOOD FULLY SUPPORTED AND PROVED (A) NOT ONLY BY THE REPORT PREPARED BY THE APPROVED VALUER AND THE SEIZED MATERIAL IN THE OF DIAR Y MARKED AS ANNEXURE A - 1/2, (B) BUT ALSO BY THE DETAILED ORDER, CAPTIONED AS INTIMATION UNDER SECTION 143(1)(A) OF THE INCOME - TAX ACT,1961' PASSED BY THE ASSESSING OFFICER FOR THE ASSESSING YEAR 1991 - 92, NO ADDITION ON THIS SCORE WAS C A L LED FO R. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : 14.3 BECAUSE IN ANY CASE, THE INFORMATION IN THE FORM OF VALUATION RE PORT, AS SUPPLIED TO THE LEARNED ASSESSING OFFICER, BY THE VALUATION OFFICER, INCOME - TAX DEPARTMENT, COULD NOT HAVE BEEN MADE THE BASI S FOR ALLEGED UNDER - STATEMENT IN THE COST O F CONSTRUCTIO N, FOR THE FOLLOWING REASONS : - (A) THE COMMISSION TO THE VALUATION OFFICER, IN COME - T AX DEPA RTMENT FOR ESTIMATING COST OF CONSTRUCTION WAS ISSUED ON 27 . 9 . 199 BY THE ASSISTANT DIRECTOR OF INCO ME - T AX (INVESTIG ATION), LUCKNOW WHO DID NOT THE R EQUISITE AUTHORITY; (B) BEFORE ISSUING THE COMMISSION, FOR WHICH THE ASSTT. DIRECTOR OF INCOME - TAX (INSV), LUCKNOW HAD NO AUTHORITY, WAS BASED ON A COMPLETE NO N - APPLICATION OF MIND AS IS EVIDENT FROM THE FACT THAT THE COMMISSION WAS ISSUED FOR THE PROPERTY SAID TO BE BELONGING TO DR. C. G .AGARWAL, WHEREAS EVEN AS PER THE INCOME - TAX RECORD, THE PROPERTY IN QUESTION UNDOUBTEDLY BELONG TO THE APPELLANT; (C) LOOKING TO THE DATES OF SEARCH AND REFERENCE MADE TO THE VALUATION CELL RESPECTIVE LY, IT IS EVIDENT THAT THERE EXISTED NO MATERIAL FOR MAKING SUCH A REFERENCE. 15. BECAUSE THERE BEING NO INFIRMITY IN THE REPORT PRE PARED BY THE APPROVED VALUER, THE SAME COULD NOT HAVE B EEN DISCARDED BY THE ASSES SI NG OFFICER, WHILE COMPLETING THE B LOCK ASSESSMENT. 16. BECAUSE IN ANY CASE THE ESTIMATE OF COST OF CONST RUCTION AS PREPARED BY THE VALUATION CELL AND AS HAS BEEN MADE WITHOUT MAKING THE APPELLANT AVAILABLE THE COMMENTS OF THE VALUATION OFFICER AND OTHER RELEVANT INFO RMATION 17. B ECAUSE IN ANY CASE AND WITHOUT PREJUDICE TO THE CONTENTION RAISED IN THE FOREGOING GROUND, THE COMPUTATION OF UNDISCLOSED INCOME AT RS. 13,62,940/ -- IS VITIATED AS THE SANE INVOLVES 'DUPLICITY' IN AS MUCH AS THE SAME HAS BEE N ARRIVED AT WITHOUT GIVING DUE SET OFF OF VARIOUS ADDITIONS THAT ARE COMPRISED IN THE BLOCK ASSESSMENT. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : 18. B ECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE . 2 . DURING THE COURSE OF PENDENCY OF THE APPEA L, THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUNDS: - 1 . BECAUSE THERE BEING NO SEARCH WARRANT 'INDIVIDUAL' IN T HE NAME OF THE APPELLANT HE CAN NOT BE HELD TO BE THE 'PERSON' SUBJECTED TO SEARCH SO AS TO COME WITHIN THE PURVIEW OF CHAPTER XIV B AN D THE BLOCK ASSESSMENT ORDER AS HAS BEEN PASSED IN THE CASE OF THE APPELLANT IS LIABLE TO BE DECLARED AS NULL AND VOID. 2 . BECAUSE OTHERWISE ALSO AND WITHOUT PREJUDICE TO THE GROUNDS TAKEN EARLIER, IT IS STATED THAT THE MANDATORY REQUIREMENT OF ISS UING NOTICE UNDER SECTION 143(2 ) HAVING NOT BEEN FULFILLED IN THE PRESENT CASE, THE BLOCK ASSESSMENT ORDER (WHICH HAS BEEN IMPUGNED IN THE AFORESAID APPEAL) IS WHOLLY WITHOUT JURISDICTION AND THE SAME IS LIABLE TO BE HELD A NULLITY. 3 . THE REVENUE HAS ALSO FILED OBJECT ION TO THE ADMISSION OF THE ADDITIONAL GROUNDS. 4 . THE ARGUMENTS WERE HEARD ON THE ADMISSION OF THE ADDITIONAL GROUNDS AND ON CAREFUL PERUSAL OF THE ADDITIONAL GROUNDS RAISED BEFORE US, WE FIND THAT THESE GROUNDS ARE LEGAL IN NATURE AND GO TO THE ROOT OF TH E CASE AND WE ACCORDINGLY ADMIT THE SAME. WE, HOWEVER, PREFER TO ADJUDICATE THE ADDITIONAL GROUNDS AT THE THRESHOLD. 5 . WHILE ADVANCING ARGUMENTS ON THE ADDITIONAL GROUND NO.2, WITH REGARD TO THE SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT, THE LD. COU NSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE OBJECTIONS FILED BY THE REVENUE IN RESPONSE TO ADMISSION OF THIS ADDITIONAL GROUND NO.2, WITH THE SUBMISSION THAT THE REVENUE HAS NOT CATEGORICALLY DENIED THE CONTENTION OF THE ASSESSEE THAT NOTICE UND ER SECTION 143(2) OF THE ACT HAS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 9 - : NOT BEEN SERVED WHILE FRAMING THE BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT. THEY HAVE SIMPLY TAKEN A STAND THAT ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT IS NOT MANDATORY, THEREFORE, ASSESSMENT IS VALID. T HE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF ACIT VS. HOTEL BLUE MOON, 321 ITR 362, THROUGH WHICH THIS CONTROVERSY HAS BEEN RESOLVED AND THEIR LORDSHIPS OF THE HON'BLE APEX COURT HAVE CATEGORICALLY HELD THAT NOTICE UNDER SECTION 143(2) OF THE ACT IS REQUIRED TO BE ISSUED TO ASSUME JURISDICTION FOR COMPLETING ASSESSMENT UNDER SECTION 158BC OF THE ACT. SINCE NOTICE UNDER SECTION 143(2) OF THE ACT HAS NOT BEEN ADMITTEDLY ISSUED TO T HE ASSESSEE BEFORE INITIATING PROCEEDINGS FOR COMPLETING ASSESSMENT UNDER SECTION 158BC OF THE ACT, THE ASSESSMENT IS INVALID AND DESERVES TO BE QUASHED. 6 . THE LD. D.R., ON THE OTHER HAND, HAS CONTENDED THAT NOTICE UNDER SECTION 143(2) OF THE ACT IS MERELY A FORMALITY AND ON ACCOUNT OF ITS NON - ISSUANCE, THE BLOCK ASSESSMENT CANNOT BE HELD TO BE ILLEGAL AND VOID. 7 . THE ARGUMENTS ADVANCED BY THE LD. COUNSELS FOR THE PARTIES HAVE BEEN CAREFULLY EXAMINED IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF ACIT VS. HOTEL BLUE MOON (SUPRA) AND WE FIND THAT BEFORE THE HON'BLE APEX COURT A SPECIFIC QUESTION ; WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE PRESCRIBED TIME LIMIT FOR THE P URPOSE OF MAKING ASSESSMENT UNDER SECTION 143(3) OF THE ACT IS MANDATORY WAS RAISED AND THEIR LORDSHIPS HAVE ADJUDICATED THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SECTION 158BC OF THE ACT. IN THE AFORESAID CASE I.E. ACIT VS. HOTEL BLUE MOON (SUPRA), TH E DISPUTE RAISED WAS WITH REGARD TO THE REQUIREMENT OF ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE PRESCRIBED TIME FOR THE PURPOSE OF FRAMING THE BLOCK ASSESSMENT UNDER CHAPTER XIV - B AND THEIR LORDSHIPS HAVE CATEGORICALLY HELD THAT REQUIR EMENT OF NOTICE UNDER PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 10 - : SECTION 143(2) OF THE ACT IS MANDATORY AND IF IT IS NOT ISSUED, THE ENTIRE BLOCK ASSESSMENT WOULD BE HELD TO BE NULL AND VOID. THE RELEVANT OBSERVATIONS OF THE HON'BLE APEX COURT ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: - C HAPTER XIV - B PROVIDES FOR AN ASSESSMENT OF THE UNDISCLOSED INCOME UNEARTHED AS A RESULT OF SEARCH WITHOUT AFFECTING THE REGULAR ASSESSMENT MADE OR TO BE MADE. SEARCH IS THE SINE QUA NON FOR THE BLOCK ASSESSMENT. THE SPECIAL PROVISIONS ARE DEVISED TO OPE RATE IN THE DISTINCT FIELD OF UNDISCLOSED INCOME AND ARE CLEARLY IN ADDITION TO THE REGULAR ASSESSMENTS COVERING THE PREVIOUS YEARS FALLING IN THE BLOCK PERIOD. THE SPECIAL PROCEDURE OF CHAPTER XIV - B IS INTENDED TO PROVIDE A MODE OF ASSESSMENT OF UNDISCL OSED INCOME, WHICH HAS BEEN DETECTED AS A RESULT OF SEARCH. IT IS NOT INTENDED TO BE SUBSTITUTED FOR REGULAR ASSESSMENT. ITS SCOPE AND AMBIT IS LIMITED IN THAT SENSE TO MATERIALS UNEARTHED DURING SEARCH. IT IS IN ADDITION TO THE REGULAR ASSESSMENT ALREA DY DONE OR TO BE DONE. THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF 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. THEREFORE, THE INCOME ASSESSABLE IN BLOCK ASSESSMENT UNDER CHAPTER XIV - B IS THE INCOME NOT DISCLOSED BUT FOUND AND DETERMINED AS THE RESULT OF SEARCH UNDER SECTION 132 OR REQUISITION UNDER SECTION 132A OF THE ACT. SECTION 158BC STIPULATES THAT THE CHAPTER WOULD HAVE APPLICATION WHERE SEARCH HAS BEEN EFFECTED UNDER SECTION 132 OR ON REQUISITION OF BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS UNDER SECTION 132A. BY MAKING THE NOTICE ISSUED UNDER THIS SECTION MANDATORY, IT MAKES SUCH NOTICE THE V ERY FOUNDATION FOR JURISDICTION. SUCH NOTICE UNDER THE SECTION IS REQUIRED TO BE SERVED ON THE PERSON WHO IS FOUND TO BE HAVING UNDISCLOSED INCOME. THE SECTION ITSELF PRESCRIBES THE TIME LIMIT OF 15 DAYS FOR COMPLIANCE. IN RESPECT OF SEARCHES ON OR AFT ER JANUARY 1, 1997, THE TIME LIMIT MAY BE GIVEN UP TO 45 DAYS INSTEAD PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 11 - : OF 15 DAYS FOR COMPLIANCE. SUCH NOTICE IS PRESCRIBED UNDER RULE 12(1A) WHICH IN TURN PRESCRIBES FORM 2B FOR BLOCK RETURN. SECTION 158BC(B) IS A PROCEDURAL PROVISION FOR MAKING A REGULA R ASSESSMENT APPLICABLE TO BLOCK ASSESSMENT AS WELL. SECTION 158BC(C) WOULD REQUIRE THE ASSESSING OFFICER TO COMPUTE THE INCOME AS WELL AS TAX ON COMPLETION OF THE PROCEEDINGS TO BE MADE. SECTION 158BC(D) WOULD AUTHORISE THE ASSESSING OFFICER TO APPLY TH E ASSETS SEIZED IN THE SAME MANNER AS ARE APPLIED UNDER SECTION 132B. WE MAY NOW REVERT BACK TO SECTION 158BC(B) WHICH IS THE MATERIAL PROVISION WHICH REQUIRES OUR CONSIDERATION. SECTION 158BC(B) PROVIDES FOR ENQUIRY AND ASSESSMENT. THE SAID PROVISION RE ADS 'THAT THE ASSESSING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142, SUB - SECTIONS (2) AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS MAY BE, APPLY.' AN ANALYSIS OF THIS SUB - SECTION INDICATES THAT, AFTER THE RETURN IS FILED, THIS CLAUSE ENABLES THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT BY FOLLOWING THE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTION 143(2)/142 AND COMPL ETE THE ASSESSMENT UNDER SECTION 143(3). THIS SECTION DOES NOT PROVIDE FOR ACCEPTING THE RETURN AS PROVIDED UNDER SECTION 143(1)(A). THE ASSESSING OFFICER HAS TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) ONLY. IN CASE OF DEFAULT IN NOT FILING THE RETU RN OR NOT COMPLYING WITH THE NOTICE UNDER SECTION 143(2)/142, THE ASSESSING OFFICER IS AUTHORIZED TO COMPLETE THE ASSESSMENT EX PARTE UNDER SECTION 144. CLAUSE (B) OF SECTION 158BC BY REFERRING TO SECTION 143(2) AND (3) WOULD APPEAR TO IMPLY THAT THE P ROVISIONS OF SECTION 143(1) ARE EXCLUDED. BUT SECTION 143(2) ITSELF BECOMES NECESSARY ONLY WHERE IT BECOMES NECESSARY TO CHECK THE RETURN, SO THAT WHERE BLOCK RETURN CONFORMS TO THE UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES, THERE IS NO REASON, WHY T HE AUTHORITIES SHOULD ISSUE NOTICE UNDER SECTION 143(2). HOWEVER, IF AN ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 158BC, NOTICE UNDER SECTION 143(2) SHOULD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF BLOCK RETURN. OMI SSION ON THE PART PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 12 - : OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. THE OTHER IMPORTAN T FEATURE THAT REQUIRES TO BE NOTICED IS THAT SECTION 158BC(B) SPECIFICALLY REFERS TO SOME OF THE PROVISIONS OF THE ACT WHICH REQUIRE TO BE FOLLOWED BY THE ASSESSING OFFICER WHILE COMPLETING THE BLOCK ASSESSMENTS UNDER CHAPTER XIV - B OF THE ACT. THIS LE GISLATION IS BY INCORPORATION. THIS SECTION EVEN SPEAKS OF SUB - SECTIONS WHICH ARE TO BE FOLLOWED BY THE ASSESSING OFFICER. HAD THE INTENTION OF THE LEGISLATURE BEEN TO EXCLUDE THE PROVISIONS OF CHAPTER XIV OF THE ACT, THE LEGISLATURE WOULD HAVE OR COULD HAVE INDICATED THAT ALSO. A READING OF THE PROVISION WOULD CLEARLY INDICATE, IN OUR OPINION, IF THE ASSESSING OFFICER, IF FOR ANY REASON, REPUDIATES THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 158BC(A), THE ASSESSING OFFICER MU ST NECESSARILY ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE TIME PRESCRIBED IN THE PROVISO TO SECTION 143(2) OF THE ACT. WHERE THE LEGISLATURE INTENDED TO EXCLUDE CERTAIN PROVISIONS FROM THE AMBIT OF SECTION 158BC(B) IT HAS DONE SO SPECIFICAL LY. THUS, WHEN SECTION 158BC(B) SPECIFICALLY REFERS TO APPLICABILITY OF THE PROVISO THERETO IT CANNOT BE EXCLUDED. WE MAY ALSO NOTICE HERE ITSELF THAT THE CLARIFICATION GIVEN BY THE CENTRAL BOARD OF DIRECT TAXES IN ITS CIRCULAR NO. 717 DATED AUGUST 14, 1 995, HAS A BINDING EFFECT ON THE DEPARTMENT, BUT NOT ON THE COURT. THIS CIRCULAR CLARIFIES THE REQUIREMENT OF LAW IN RESPECT OF SERVICE OF NOTICE UNDER SUBSECTION (2) OF SECTION 143 OF THE ACT. ACCORDINGLY, WE CONCLUDE THAT EVEN FOR THE PURPOSE OF CHAPT ER XIV - B OF THE ACT, FOR THE DETERMINATION OF UNDISCLOSED INCOME FOR A BLOCK PERIOD UNDER THE PROVISIONS OF SECTION 158BC, THE PROVISIONS OF SECTION 142 AND SUB - SECTIONS (2) AND (3) OF SECTION 143 ARE APPLICABLE AND NO ASSESSMENT COULD BE MADE WITHOUT IS SUING NOTICE UNDER SECTION 143(2) OF THE ACT. HOWEVER, IT IS CONTENDED BY SRI SHEKHAR, LEARNED COUNSEL FOR THE DEPARTMENT THAT IN VIEW OF THE EXPRESSION 'SO FAR AS MAY BE' IN SECTION 153BC(B), THE ISSUE OF NOTICE IS NOT MANDATORY BUT OPTIONAL AND ARE T O BE APPLIED TO THE EXTENT PRACTICABLE. IN SUPPORT OF THAT CONTENTION, THE LEARNED PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 13 - : COUNSEL HAS RELIED ON THE OBSERVATION MADE BY THIS COURT IN DR. PARTAP SINGH'S CASE [1985] 155 ITR 166. IN THIS CASE, THE COURT HAS OBSERVED THAT SECTION 37(2) PROVIDES TH AT 'THE PROVISIONS OF THE CODE RELATING TO SEARCHES, SHALL SO FAR AS MAY BE, APPLY TO SEARCHES DIRECTED UNDER SECTION 37(2). READING THE TWO SECTIONS TOGETHER IT MERELY MEANS THAT THE METHODOLOGY PRESCRIBED FOR CARRYING OUT THE SEARCH PROVIDED IN SECTION 165 HAS TO BE GENERALLY FOLLOWED. THE EXPRESSION `SO FAR AS MAY BE' HAS ALWAYS BEEN CONSTRUED TO MEAN THAT THOSE PROVISIONS MAY BE GENERALLY FOLLOWED TO THE EXTENT POSSIBLE'. THE LEARNED COUNSEL FOR THE RESPONDENT HAS BROUGHT TO OUR NOTICE THE OBSERVA TIONS MADE BY THIS COURT IN THE CASE OF MAGANLAL V. JAISWAL INDUSTRIES, NEEMACH, [1989] 4 SCC 344 WHEREIN THIS COURT WHILE DEALING WITH THE SCOPE AND IMPORT OF THE EXPRESSION 'AS FAR AS PRACTICABLE' HAS STATED 'WITHOUT ANYTHING MORE THE EXPRESSION `AS F AR AS POSSIBLE' WILL MEAN THAT THE MANNER PROVIDED IN THE CODE FOR ATTACHMENT OR SALE OF PROPERTY IN EXECUTION OF A DECREE SHALL BE APPLICABLE IN ITS ENTIRETY EXCEPT SUCH PROVISION THEREIN WHICH MAY NOT BE PRACTICABLE TO BE APPLIED.' THE CASE OF THE REV ENUE IS THAT THE EXPRESSION 'SO FAR AS MAY BE APPLY' INDICATES THAT IT IS NOT EXPECTED TO FOLLOW THE PROVISIONS OF SECTION 142, SUBSECTIONS (2) AND (3) OF SECTION 143 STRICTLY FOR THE PURPOSE OF BLOCK ASSESSMENTS. WE DO NOT AGREE WITH THE SUBMISSIONS OF T HE LEARNED COUNSEL FOR THE REVENUE, SINCE WE DO NOT SEE ANY REASON TO RESTRICT THE SCOPE AND MEANING OF THE EXPRESSION 'SO FAR AS MAY BE APPLY'. IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE RETURN FILED UNDER SECTION 158BC(A) PROCEEDS TO MAKE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISIONS OF SECTION 142, SUB - SECTIONS (2) AND (3) OF SECTION 143. SECTION 158BH PROVIDES FOR APPLICATION OF THE OTHER PROVISIONS OF THE ACT. IT READS : 'SAVE AS OTHERWISE PROVIDED IN THIS CHAPTER, A LL THE OTHER PROVISIONS OF THIS ACT SHALL APPLY TO ASSESSMENT MADE UNDER THIS CHAPTER.' THIS IS AN ENABLING PROVISION, WHICH MAKES ALL THE PROVISIONS OF THE ACT, SAVE AS OTHERWISE PROVIDED, APPLICABLE FOR PROCEEDINGS FOR BLOCK ASSESSMENT. THE PROVISIONS WHICH ARE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 14 - : SPECIFICALLY INCLUDED ARE THOSE WHICH ARE AVAILABLE IN CHAPTER XIV - B OF THE ACT, WHICH INCLUDES SECTION 142 AND SUBSECTIONS (2) AND (3) OF SECTION 143. ON A CONSIDERATION OF THE PROVISIONS OF CHAPTER XIV - B OF THE ACT, WE ARE IN AGREEMENT WITH T HE REASONING AND THE CONCLUSION REACHED BY THE HIGH COURT . 8 . SINCE THE CONTROVERSY HAS BEEN SET AT REST IN THIS REGARD BY THE HON'BLE APEX COURT IN THE CASE OF ACIT VS. HOTEL BLUE MOON (SUPRA) , WE, RESPECTFULLY FOLLOWING THE SAME, HOLD THAT SINCE NOTICE UND ER SECTION 143(2) OF THE ACT FOR ASSUMING JURISDICTION FOR FRAMING THE ASSESSMENT UNDER SECTION 158BC OF THE ACT HAS NOT BEEN ISSUED AND SERVED UPON THE ASSESSEE, THE ASSESSMENT FRAMED CONSEQUENT THERETO IS ILLEGAL, NULL AND VOID. WE ACCORDINGLY QUASH THE BLOCK ASSESSMENT FRAMED ON 29.9.1993. 9 . SINCE THE BLOCK ASSESSMENT HAS BEEN ANNULLED, WE FIND NO JUSTIFICATION TO DEAL WITH THE ISSUES RAISED ON MERIT, AS NO ARGUMENT WAS ADVANCED THEREON. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON 21.8.2014. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST AUGUST , 2014 JJ: 0708 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )