2007 (9) TMI 325 - AT - Income Tax

Summary

Issues Involved:
1. Legality of notice u/s 158BD read with section 158BC.
2. Validity of block assessment order dated 28-3-2006.
3. Timeliness of initiating proceedings u/s 158BD.
4. Vagueness of notice dated 30-3-2005.
5. Confrontation with material and information used for computation of undisclosed income.
6. Validity of approval granted by CIT(A)-I, Lucknow u/s 158BC.

Summary:

1. Legality of Notice u/s 158BD read with section 158BC:
The assessee challenged the notice dated 30-3-2005 as wholly illegal, arguing that there is no enabling provision in Chapter XIV-B of the Act to issue such notice. The Tribunal found that the satisfaction note recorded by the Assessing Officer after a lapse of more than 8 years was not valid, and thus, the notice and subsequent block assessment order were without jurisdiction.

2. Validity of Block Assessment Order dated 28-3-2006:
The assessee contended that the block assessment order was null and void as the notice u/s 158BC should have been issued before 30-9-1997. The Tribunal agreed, noting that the proceedings were initiated after an unreasonable delay of more than 8 years, rendering the block assessment order invalid.

3. Timeliness of Initiating Proceedings u/s 158BD:
The Tribunal emphasized that proceedings u/s 158BD should be initiated within a reasonable time after the completion of block assessment proceedings of the person searched. Referring to various judicial precedents, the Tribunal held that initiating proceedings after 8 years was inordinate and beyond the reasonable period, which is considered to be 6 years, akin to the provisions of section 147/148/149.

4. Vagueness of Notice dated 30-3-2005:
The assessee argued that the notice was vague in its contents. The Tribunal did not specifically address this issue in detail, as the primary ground of inordinate delay was sufficient to cancel the assessment.

5. Confrontation with Material and Information:
The assessee claimed that the block assessment order was passed without confronting the appellant with the material and information used for computing undisclosed income. The Tribunal did not delve into this issue, as the assessment was already deemed invalid due to the delay.

6. Validity of Approval Granted by CIT(A)-I, Lucknow u/s 158BC:
The assessee argued that the approval was granted mechanically and without application of mind. The Tribunal did not specifically address this issue, as the assessment was invalidated on the grounds of delay.

Conclusion:
The Tribunal canceled the assessment u/s 158BD due to the inordinate delay of more than 8 years, which was beyond the reasonable period of 6 years as provided under the parallel provisions of section 147/148/149. Consequently, the appeal of the assessee was allowed.