2008 (11) TMI 235 - HC - Income Tax

Search and Seizure during appeal before ITAT merger of block assessment with assessment u/s 143(3) - ITAT allowed the same held that - the Tribunal erred in holding that assessment framed for the assessment year 1998-99 under section 143(3) of the Act shall merge with the assessment to be made under section 158BC of the Act for the block period April 1 1996 to October 29 2002 - there could be a regular assessment in addition to a block assessment under Chapter XIV-B of the Act

Summary

Issues:
1. Appeal against the order of the Income-tax Appellate Tribunal.
2. Merger of assessment for the assessment year with the assessment for the block period.
3. Permissibility of regular assessment in addition to block assessment under Chapter XIV-B.

Analysis:

Issue 1:
The Commissioner of Income-tax appealed against the order of the Income-tax Appellate Tribunal dated November 10, 2003, regarding the assessment of the respondent, who is a dealer in firecrackers, showing a loss in the return of income filed on October 31, 1998. The assessment was made under section 143(3) of the Income-tax Act, 1961, on a total income of Rs. 51,81,173. The Tribunal observed that the assessment for the assessment year 1998-99 falls under the block period and is to be merged with the assessment to be made under section 158BC of the Act. The Commissioner of Income-tax challenged this decision by raising substantial questions of law.

Issue 2:
The Tribunal's decision to merge the assessment for the assessment year with the assessment for the block period was challenged. The appellant contended that a regular assessment in addition to a block assessment under Chapter XIV-B is permissible. The appellant relied on a decision of the Calcutta High Court to support this argument. The Court analyzed the provisions of Chapter XIV-B and held that the assessment under section 143(3) of the Act, based on disclosed income, is distinct from the assessment of undisclosed income under Chapter XIV-B. Therefore, the Court concluded that the assessments can proceed simultaneously, and the regular assessment does not merge with the block assessment under section 158BC of the Act.

Issue 3:
The Court found merit in the appellant's submission and the judgment cited, emphasizing the distinction between the proceedings under Chapter XIV-B and section 143(3) of the Act. The Court highlighted that the special procedure for assessment of search cases under Chapter XIV-B does not preclude the possibility of a regular assessment. Consequently, the Court held that the Tribunal erred in merging the assessments and confirmed the permissibility of regular assessment alongside block assessment under Chapter XIV-B. The appeal was allowed, and the matter was remanded to the Tribunal for reconsideration in accordance with the law, with no order as to costs.