2007 (11) TMI 340 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are related to the validity of the order passed by the CIT(A), the initiation of proceedings under section 158BD of the Income Tax Act, and the justification for such proceedings.

Validity of CIT(A) Order:
The appeal was made by the assessee against the order of CIT(A) which was related to the block period from 1st April, 1986 to 13th Feb., 1997. The assessee contended that the order passed by the CIT(A) was bad both in the eye of law and on facts.

Proceedings under Section 158BD:
The proceedings under section 158BD of the Act were initiated against the appellant after the framing of block assessment of the searched person. The question raised was whether the notice under section 158BD requires to be issued within a reasonable time, and if not, whether the assessment made pursuant to the notice is liable to be set aside on that ground.

Justification for Proceedings:
The assessee, engaged in the business of a commission agent of fruits, was involved in a search and seizure operation under section 132(1) of the IT Act. The AO issued a notice under section 158BD to the assessee much later after receiving information from the AO of the person who was subjected to a search. The Tribunal held that the notice should have been issued within a reasonable period, and in this case, a delay of 19 months was considered unreasonable, leading to the annulment of the block assessment order.

Conclusion:
The Tribunal, following the decision of the Hon'ble Gujarat High Court, held that the delay in issuing the notice under section 158BD was unreasonable, rendering the assessment made on the assessee as bad in law. Consequently, the order of block assessment was annulled, and the appeal by the assessee was allowed.