M.Brahma Reddy, Hyderabad V. JCT, Hyderabad

ITSSA 156/HYD/2005

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7667 (ITAT-HYDERABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2011
• Assessment Year: misc
• Appeal Filed On: 07-11-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C R PATI
• Assessee Lawyers: S RAMA RAO
• Keywords: Block assessment
• Section: 143(3); 142(1); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER IT(SS)A NO.156/HYD/2005 BLOCK PERIOD 1989-90 TO 1998-99 AND UP TO 22-7-1999 . M. BRAHMA REDDY, HYDERABAD. GIR NO. B-701 VS JCIT, CENTRAL CIR - 1, HYDERABAD. APPELLANT RESPONDENT APPELLANT BY : SRI S. RAMA RAO RESPONDENT BY : SRI C.R. PATI DATE OF HEARING : 06-03-2012. DATE OF PRONOUNCEMENT : 16 -03-2012. ORDER PER SAKTIJIT DEY, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 6 TH SEPT. 2005 PASSED IN ITA NO.0095/CC-1, HYD/CIT(A)-I/01-02 FOR THE BLOCK PERI OD 1989-90 TO 1998-99 AND UP TO 22-07-1999. 2. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE RAISI NG 18 GROUNDS. SUBSEQUENTLY, THE APPELLANT HAS FILED A PETITION PRAYING FOR ADMISSION OF THE FOLLOWING ADD ITIONAL GROUND:- THE ORDER OF ASSESSMENT MADE UNDER SECTION 158BC IS INVALID AS THE NOTICE UNDER SECTION 143(2) WAS NOT ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF RETURN OF INCOME IN FORM 2B IT(SS) A NO.156/H/2005 A. BRAHMA REDDY, HYDERABAD. =============================== 2 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDS THAT SINCE THE ISSUE IN THE ADDITIONAL GROUND HAS B EEN RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION. THE ISSUE RAISED IN THE ADDITIONAL G ROUND IS PURELY A LEGAL AND JURISDICTIONAL ISSUE AND IT GOES TO THE ROOT OF THE MATTER AND THAT APART IT CAN BE DECIDED ON THE BASIS OF FACTS ON RECORD. IN THE AFORESAID VIEW, W E THINK IT PROPER TO ADMIT THE ADDITIONAL GROUND AND HEAR THE MATTER ONLY ON THE LEGAL ISSUE RAISED IN THE ADDITIONAL GR OUND. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH A ND SEIZURE OPERATIONS WERE CONDUCTED IN THE PREMISES O F THE ASSESSEE ON 22-7-1999. ON 13-12-1999 A NOTICE WAS ISSUED UNDER SECTION 158BC CALLING FOR RETURN OF IN COME FOR THE BLOCK PERIOD. THE ASSESSEE FILED ITS RETU RN OF INCOME IN RESPONSE TO THE NOTICE DATED 3-4-2000 DECLARING UNDISCLOSED INCOME AT NIL. THE FIRST NO TICE UNDER SECTION 142(1) WAS ISSUED ON 13-6-2001. THE ASSESSMENT WAS COMPLETED ON 27-7-2001 UNDER SECTION 158BC OF THE ACT. 5. THE LEARNED AR APPEARING FOR THE ASSESSEE CONTEN DS THAT FOR MAKING AN ASSESSMENT U/S 143(3) READ WITH SECTION 158 BC, THE MANDATORY REQUIREMENT IS ISSUAN CE OF A NOTICE U/S 143(2) OF THE ACT WITHIN A PERIOD OF O NE YEAR FROM THE DATE OF FILING OF THE RETURN. SINCE IN TH E PRESENT CASE, THE NOTICE UNDER SECTION 143(2) WAS NEVER ISS UED AND ONLY A NOTICE UNDER SECTION 142(1) WAS ISSUED T HAT TOO AFTER EXPIRY OF ONE YEAR FROM THE DATE OF FILIN G OF THE RETURN, THE ASSESSMENT ORDER AS HAS BEEN PASSED UND ER IT(SS) A NO.156/H/2005 A. BRAHMA REDDY, HYDERABAD. =============================== 3 SECTION 158BC OF THE ACT, IS INVALID IN LAW. IN SU PPORT OF HIS CONTENTION, THE LEARNED AR OF THE ASSESSEE HAS RELIED UPON A DECISION OF HONBLE SUPREME COURT IN CASE OF ACIT & ANOTHER VS. HOTEL BLUE MOON REPORTED IN 321 IT R 362. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE BRINGS T O OUR NOTICE A LETTER DATED 2 ND JULY, 2010 BEARING NO.F.NO. ACIT (MISC.CORR)/ITAT/143(2)/2010-11 DATED 2 ND JULY, 2010 BY THE ACIT, CIRCLE-6(1), HYDERABAD TO THE CIT , ITAT-II, SHAPOOR HOUSE, ADARSHNAGAR, HYDERABAD WHEREIN IT HAS BEEN MENTIONED THAT NO NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE IN THIS C ASE. THE COPY OF THE AFORESAID LETTER IS PLACED ON RECOR D. IN VIEW OF THE FACT THAT NO NOTICE UNDER SECTION 143(2 ) WAS EVER ISSUED TO THE ASSESSEE BEFORE THE ASSESSMENT PROCEEDINGS, THE ORDER PASSED UNDER SECTION 158BC O F THE ACT CANNOT BE SUSTAINED IN VIEW OF THE LAW LAID DOW N BY THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. HOTEL BLUE MOON REPORTED IN 321 ITR 362. THE HONBLE SUPR EME COURT OBSERVED AS FOLLOWS:- 15. WE MAY NOW REVERT BACK TO S. 158BC (B) WHICH IS THE MATERIAL PROVISION WHICH REQUIRES OUR CONSIDERATION . SEC. 158BC (B) PROVIDES FOR ENQUIRY AND ASSESSMENT. THE SAID PROVISION READS 'THAT THE AO SHALL PROCEED TO DETER MINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNE R LAID DOWN IN S. 158BB AND THE PROVISIONS OF S. 142, SUB- SS. (2) AND (3) OF S. 143, S. 144 AND S. 145 SHALL, SO FAR AS MAY BE, APPLY.' AN ANALYSIS OF THIS SUB-SECTION INDICATES T HAT, AFTER THE RETURN IS FILED, THIS CLAUSE ENABLES THE AO TO COMPLETE THE ASSESSMENT BY FOLLOWING THE PROCEDURE LIKE ISSU E OF NOTICE UNDER S. 143(2)/142 AND COMPLETE THE ASSESSM ENT UNDER S. 143(3). THIS SECTION DOES NOT PROVIDE FOR ACCEPTING THE RETURN AS PROVIDED UNDER S. 143(1)(A). THE AO H AS TO COMPLETE THE ASSESSMENT UNDER S. 143(3) ONLY. IN CA SE OF DEFAULT IN NOT FILING THE RETURN OR NOT COMPLYING W ITH THE NOTICE UNDER S. 143(2)/142, THE AO IS AUTHORIZED TO COMPLETE IT(SS) A NO.156/H/2005 A. BRAHMA REDDY, HYDERABAD. =============================== 4 THE ASSESSMENT EX PARTE UNDER S. 144. CLAUSE (B) OF S. 158BC BY REFERRING TO SS. 143(2) AND 143(3) WOULD APPEAR TO IMPLY THAT THE PROVISIONS OF S. 143(1) ARE EXCLUDED. BUT S. 143(2) ITSELF BECOMES NECESSARY ONLY WHERE IT BECOMES NECE SSARY TO CHECK THE RETURN, SO THAT WHERE BLOCK RETURN CON FORMS TO THE UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES, THERE IS NO REASON, WHY THE AUTHORITIES SHOULD ISSUE NOTICE UNDER S. 143 (2). HOWEVER, IF AN ASSESSMENT IS TO BE COMPLET ED UNDER S. 143(3) R/W S. 158BC, NOTICE UNDER S. 143(2) SHOU LD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF B LOCK RETURN. OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER S. 143(2) CANNOT BE A PROCEDURAL IRREG ULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQ UIREMENT OF NOTICE UNDER S. 143(2) CANNOT BE DISPENSED WITH. THE OTHER IMPORTANT FEATURE THAT REQUIRES TO BE NOTICED IS THAT THE S. 158BC(B) SPECIFICALLY REFERS TO SOME OF THE PROV ISIONS OF THE ACT WHICH REQUIRES TO BE FOLLOWED BY THE AO WHILE COMPLETING THE BLOCK ASSESSMENTS UNDER CHAPTER XIV- B OF THE ACT. THIS LEGISLATION IS BY INCORPORATION. THIS SECTION EVEN SPEAKS OF SUB-SECTIONS WHICH ARE TO BE FOLLOWE D BY THE AO. HAD THE INTENTION OF THE LEGISLATURE WAS TO EXC LUDE THE PROVISIONS OF CHAPTER XUIV-B OF THE ACT, THE LEGISLATURE WOULD HAVE OR COULD HAVE INDICATED THAT ALSO. A REA DING OF THE PROVISION WOULD CLEARLY INDICATE, IN OUR OPINIO N, IF THE AO, IF FOR ANY REASON, REPUDIATES THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER S. 158BC(A), T HE AO MUST NECESSARILY ISSUE NOTICE UNDER S. 143(2) OF TH E ACT WITHIN THE TIME PRESCRIBED IN THE PROVISO TO S. 143 (2) OF THE ACT. WHERE THE LEGISLATURE INTENDED TO EXCLUDE CERT AIN PROVISIONS FROM THE AMBIT OF S. 158BC(B) IT HAS DON E SO SPECIFICALLY. THUS, WHEN S. 158BC(B) SPECIFICALLY R EFERS TO [SIC-SO 143(2)] APPLICABILITY OF THE PROVISO THERET O CANNOT BE EXCLUDED . WE MAY ALSO NOTICE HERE ITSELF THAT THE CLARIFICATI ON GIVEN BY CBDT IN ITS CIRCULAR NO.717, DT. 14TH AUG., 1995, 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 SUB-S. (2) OF S. 143 OF THE ACT. ACCORDINGLY, WE CONCLUDE EVEN FOR THE PURPOSE OF CH APTER XIV-B OF THE ACT, FOR THE DETERMINATION OF UNDISCLO SED INCOME FOR A BLOCK PERIOD UNDER THE PROVISIONS OF S . 1588C, THE PROVISIONS OF S. 142 AND SUB-SS. (2) AND (3) OF S. 143 ARE APPLICABLE AN D NO ASSESSMENT COULD BE MADE WITHOUT ISSUING NOTICE UND ER S. 143(2) OF THE ACT. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF TH E HONBLE SUPREME COURT, WE ALLOW THE APPEAL ON THIS LEGAL ISSUE ONLY WITHOUT ADJUDICATING UPON THE OTHER GROU NDS RAISED IN THIS APPEAL. IT(SS) A NO.156/H/2005 A. BRAHMA REDDY, HYDERABAD. =============================== 5 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER WAS PRONOUNCED IN THE COURT ON 16 -03-201 2. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 16 TH MARCH, 2012. COPY FORWARDED TO: 1. SRI S.RAMA RAO, ADVOCATE, FLAT NO.103, H.NO.3-6- 542/4, STREET NO.7, HIMAYATNAGAR, HYDERABAD. 2. JCIT, CENTRAL CIR-1, HYDERABAD. 3. CIT (A)-I, HYDERABAD. 4. THE CIT CONCERNED, HYDERABAD 5. THE DR, ITAT, HYDERABAD JMR* IT(SS) A NO.156/H/2005 A. BRAHMA REDDY, HYDERABAD. =============================== 6 IT(SS) A NO.156/H/2005 A. BRAHMA REDDY, HYDERABAD. =============================== 7