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2014 (5) TMI 860 - HC - Income TaxBlock assessment - Inclusion of period up to date of execution of warrant - Whether the period up to the date of execution of warrant of authorization u/s 132A is to be included in the Block Period in view of the Explanation 2 of Section 158BE of the Act Held that - Block period has been defined to mean the period comprising previous years relevant to the six assessment years preceding the previous year in which search u/s 132 of the Act is conducted or requisition u/s 132A is made. It also includes a part of the previous year till the date when the search under section 132 of the Act is conducted or such requisition under section 132A is made - the words of a statute must be understood in the natural, ordinary sense - Phrases and sentences must be construed according to their grammatical meaning, unless construing the words of a statute as per their ordinary meaning would lead to absurdity - The ordinary meaning of words and expressions may also be discarded where it leads to inconsistencies and repugnancies with the other provisions of the Act - the context of the statute may require that the words and expressions be read in conformity with the context. Whether Explanation 2 to Section 158BE can be extended to interpret Section 158B(a) of the Act Held that - The opening words of the said Explanation indicate that the same has been introduced for the purposes of creating a legal fiction - This is clear from the use of the words deemed to have been executed - The opening words of the said Explanation also clearly indicate that the legal fiction has been introduced for the purposes of removing any doubt with regard to the expression authorization which is referred to in Section 158BE(1) - the Legislature did not intend to extend this Explanation for interpreting any other provision except as specifically indicated - the scope of legal fiction in a statute would be confined only for the purposes for which it has been introduced Relying upon The Supreme Court in the case of Vodafone International Holdings BV v. Union of India 2012 (1) TMI 52 - SUPREME COURT OF INDIA - the ordinary, natural meaning of the words used u/s 158B(a) need not be departed from - There is no ambiguity in the language - the definition of the expression Block Period as understood by the plain language of Section 158B(a) also conforms to the scheme of Chapter XIV-B of the Act there was no reason to read the expression requisition was made to not mean the date on which the authorized officer made the requisition but to mean the date when he received the records/assets pursuant thereto. The Block Period adopted by the AO was not in accordance with the provisions of the Act, the assessment made by the AO would also require to be reviewed the matter is remitted back to the AO for assessment of the income for the block Period 01.04.1995 to 18.09.2001 - the assessee had given details of the cash rewards received by him including the names of the officers who had given the cash rewards to the assessee This can be easily be verified by the AO by making enquiries with the DRI - the affidavit filed by the assessee could not have been rejected summarily without verifying the facts from the relevant authority - The AO would also have to determine whether the cash seized by the CBI included any amount received by the assessee as cash rewards as asserted by him Decided in favour of Assessee. Rejection of Penalty Held that - The Tribunal has concluded that the assessee was under a belief that the cash rewards received by the assessee were not taxable the decision to remand the matter with respect to the assessment to the AO, the question of levy of any penalty on account of the amount being treated as undisclosed income is also remanded to the AO without expressing any opinion on the decision of the Tribunal Decided against Revenue.
Issues Involved:
1. Determination of the Block Period under Section 158B of the Income Tax Act. 2. Assessment of undisclosed income of Rs.1,14,54,077/-. 3. Inclusion of Rs.22,50,000/- received as cash reward from the Directorate of Revenue Intelligence (DRI) as undisclosed income. 4. Reduction of penalty under Section 158BFA(2) of the Act. Issue-wise Detailed Analysis: 1. Determination of the Block Period: The primary issue was whether the block period should end on the date of the requisition (18.09.2001) or the date of receipt of the requisitioned materials (21.03.2003). The court noted that the Block Period, as defined under Section 158B(a) of the Act, includes the period up to the date of the requisition under Section 132A. The court emphasized that the ordinary meaning of "requisition was made" should be taken as the date the requisition was issued, not the date the materials were received. The court rejected the Revenue's interpretation that the block period should extend to the date of receipt, as this would contradict the clear language of the statute and the legislative intent. The court concluded that the block period should end on 18.09.2001, not 21.03.2003, and remanded the matter to the Assessing Officer to reassess the income for the correct block period. 2. Assessment of Undisclosed Income of Rs.1,14,54,077/-: The court found that the assessment made by the Assessing Officer for the block period from 01.04.1996 to 21.03.2003 was incorrect due to the improper determination of the block period. The court directed the Assessing Officer to reassess the income for the block period from 01.04.1995 to 18.09.2001, as per the correct interpretation of the statute. 3. Inclusion of Rs.22,50,000/- as Undisclosed Income: The assessee claimed that Rs.22,50,000/- was part of the cash rewards received from the DRI. The court noted that the assessee had provided an affidavit and supporting documents, including a letter from the DRI confirming the receipt of cash rewards. The Assessing Officer had doubted the authenticity of the letter and the correlation between the cash found and the rewards claimed. The court held that the affidavit and the letter from the DRI should not have been summarily rejected without verification. The court remanded the matter to the Assessing Officer to verify the facts from the DRI and determine whether the cash seized included the cash rewards claimed by the assessee. 4. Reduction of Penalty under Section 158BFA(2): The Revenue challenged the Tribunal's decision to reduce the penalty from Rs.15,46,068/- to Rs.1,28,568/-. The Tribunal had concluded that the assessee was under the belief that the cash rewards were not taxable and directed the deletion of the penalty on Rs.22,50,000/-. The court, in light of its decision to remand the assessment of Rs.22,50,000/- to the Assessing Officer, also remanded the question of penalty to the Assessing Officer for reconsideration, without expressing any opinion on the Tribunal's decision. Conclusion: The court disposed of the appeals by remanding the matters to the Assessing Officer for reassessment of the block period and verification of the cash rewards. The court emphasized the correct interpretation of the block period and the need for proper verification of the facts regarding the cash rewards received by the assessee.
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