TMI Blog2000 (11) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... correct some arithmetical mistakes or clerical mistake as allowed under section 143(1) of the Act of 1961. On August 27, 1996, a search was conducted at the office premises of the assessee-company under section 132 of the Act of 1961, in the course of which various documents and records were seized. On November 28, 1997, the Assessing Officer passed the order of block assessment for the assessment year 1986-87 to August 27, 1996. That the said block assessment includes part of the assessment year 1995-96 for which the return was filed before the date of search was pending before the Assessing Officer. The Assessing Officer after completing the block assessment issued the notice under sections 142(1) and 143(2) for the assessment year 1995-96 to complete the regular assessment. Those notices were challenged by way of Writ Petition No. 443 of 1998 (see [1999] 238 ITR 13). The learned single judge has allowed the petition directing not to proceed with the notices under sections 142(1) and 143(2). While considering the various arguments, the learned single judge has observed in his judgment that once the two total incomes under section 158BB are computed, no further scope remains f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) as infructuous. Heard learned counsel for the parties. They are also allowed to file written submissions, time was allowed to file the written submission by the first week of November, 2000. Both the parties filed written submissions. Learned counsel for the appellant, Mr. Shah, submits that Chapter XIV-B of the Act of 1961, deals with the assessment of undisclosed income. As a result of search, the undisclosed income for block period is assessable under the provisions of Chapter XIV-B of the Act of 1961. Section 158B(b) defines "undisclosed income" but assessment for block assessment is only of undisclosed income of the block period. If any return is filed for regular assessment for any period of the block period, the Assessing Officer can proceed with assessing the regular income of the assessee under the regular provisions of this Act. But while computing the undisclosed income under Chapter XIV-B, the return pending cannot be disturbed in computing the undisclosed income for the block period. He further submits that the undisclosed income assessable under Chapter XIV-B of the Act of 1961, is on the basis of material seized during the search but the income decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no return of income has been filed, as nil. Shri Bajoria learned counsel for the assessee, therefore, submits that there cannot be two assessments for the income of the particular period and when in the block assessment, the income has been assessed, the Assessing Officer has no jurisdiction to proceed with the regular assessment on the basis of the-return filed for a particular year in the block period. Shri Bajoria mainly stressed on the provision of section 158BB, which provides for computation of income. In computing the income for the block period, how to adjust the assessed income or income, in a case where assessment is pending at the time of search. He submits that, there should be one assessment for the block period, which includes the assessed income and the income disclosed in the return under section 139, where the assessment is pending for that year. According to him if some return of income of block period is pending that cannot be proceeded and whatever income declared that should be accepted. He further submits that to that extent that income be reduced from the total income assessed for the block period, under Chapter XIV-B of the Act of 1961. He relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emain to be determined after the assessment of the income of that period. All pending assessments of those years merged in the collective assessment under section 158BC(c). Therefore, notices issued under section 148 prior to the search were rendered infructuous. Therefore, the Department could not proceed on the basis of notices under section 148, when the notice under section 148 is prior to the framing of assessment under Chapter XIV-B. The notices issued under section 143(2) were not valid and were liable to be quashed. In Raja Ram Kulwant's case [1997] 227 ITR 187 (P H), though they have quashed the notice under section 148 of the Act, but a finding has been given that the total income of the block period that is disclosed and undisclosed has been assessed and nothing remained to be determined. To that extent there may not be a regular assessment, but if any part of income escaped assessment in that case regular assessment is necessary. In the case of N. T. John [1997] 228 ITR 314, the Kerala High Court has held that "block period" means the period of ten years preceding the previous year in which the search was conducted under section 132 of the Act of 1961 and when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that there can be an assessment under section 143(3), in addition to the assessment of his income in a block period under Chapter XIV-B of the Act of 1961. Thus, the Gujarat High Court, Kerala High Court and this High Court has taken the view that there can be a regular assessment in the block period in addition to the assessment under Chapter XIV-B of the undisclosed income of the block period. However, the Punjab and Haryana High Court has quashed the notice under section 148 on the basis that when the total income has been assessed, i.e., disclosed and "undisclosed income", nothing remained for determination of any income. On the facts before the Punjab and Haryana High Court, i.e., that the total income was assessed, nothing remained to determine, in fact no serious controversy was there on this issue between the views of two sets of High Courts, but even that has been set at rest by the insertion of the Explanation in section 158BA of the Act of 1961. The Explanation, inter alia, provides that the assessment made under Chapter XIV-B shall be in addition to the regular assessment in respect of each previous year included in the block period. For undisclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return under section 139 cannot be processed in the block assessment. Firstly, in the block assessment under Chapter XIV-B only for "undisclosed income" and tax rate for undisclosed income and disclosed income in the return is different. How the income assessed in pursuance of a return can be taxed at higher rate ? This will also not fit in with logic that in some of the years of block period where the assessment are completed normal rate of tax will be paid and in one year though the return is filed before search but assessment is not made under Chapter XIV-B, the tax will be at a higher rate. If we accept the submission of Mr. Bajoria that return pending on the date of search can be processed under the provisions of Chapter IV of the Act, in that case why there should not be a regular assessment under section 143(3) why that return should be processed under the provision of Chapter XIV-B. Therefore, in either of the cases if the return filed under section 139 pending on the date of search and not proceeded to complete the assessment under section 143(3), there is every possibility of escapement of income under the scheme of the Act. That cannot be the intention of the Leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the constructions suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the Legislature." While interpreting the provisions of the Act, the statutory provisions must be so construed, if possible, that absurdity and mischief may be avoided. Considering the fact that if the regular assessment is not allowed there may be scope for escapement of assessable income. The interpretation suggested by learned counsel for the assessee, Shri Bajoria, will run counter to the intention of the Legislature. Therefore, we are in agreement with the view expressed by the Gujarat High Court in N. R. Paper and Board Ltd. v. Deputy CIT [1998] 234 ITR 733, and also the view taken by this court in the case of Caltradeco Steel Sales (P.) Ltd. [2000] 243 ITR 643, that there, can be a regular assessment in addition to the assessment made under Chapter XIV-B and both the proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide that income assessed in regular assessment shall not be included in the block period and income assessed in the block period shall not be included in the regular assessment. The clarificatory amendment is proposed to be inserted retrospectively from the 1st day of July, 1995." Considering the fact that when two opinions are expressed by two different High Courts whether a regular assessment of any block period can be made in addition to the undisclosed income of the block period assessed as per Chapter XIV-B of the Act. The Legislature has clarified its intention under the Chapter that there can be a regular assessment in respect of each previous year included in the block period in addition to the assessment made under Chapter XIV-B of the Act of 1961 and the undisclosed income relating to the block period shall not include the income assessed in a regular assessment as income of such block period. The aforesaid Explanation now has left no doubt that there can be a regular assessment even of the year of a block period in addition to the assessment of undisclosed income under Chapter XIV-B of the Act of 1961. In view of the aforesaid discussion, we are of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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