2006 (6) TMI 148 - AT - Income Tax

Summary

Issues Involved:

1. Whether the order of assessment was barred by time as per the provisions of the Income Tax Act.
2. Application of sections 158BE, 158BH, and 153 of the Income Tax Act in computing the period of limitation for block assessment.

Issue-wise Detailed Analysis:

1. Whether the order of assessment was barred by time as per the provisions of the Income Tax Act:

The assessee argued that the order dated 31st March 2003 passed by the Assessing Officer (AO) was beyond the period of limitation as laid down in section 158BE of the Income Tax Act. The original assessment was completed on 31st March 2001, which was within the period of limitation. However, after the Commissioner of Income Tax (CIT) set aside this assessment under section 263, the AO passed a new order on 31st March 2003, which the assessee contended was beyond the prescribed time limit.

2. Application of sections 158BE, 158BH, and 153 of the Income Tax Act in computing the period of limitation for block assessment:

Section 158BE:
This section prescribes the time limit for completion of block assessment. It states that the order under section 158BC should be passed within two years from the end of the month in which the last of the authorizations for search was executed. In this case, the search was conducted on 12th October 1999, and the original assessment order was passed on 31st March 2001, which was within the time limit. However, the subsequent order passed on 31st March 2003, after the CIT's intervention, was beyond this period.

Section 158BH:
This section states that all other provisions of the Income Tax Act shall apply to assessments made under Chapter XIV-B, except where otherwise provided. The Revenue argued that by virtue of section 158BH, the provisions of section 153(2A) should apply, which allows one year from the end of the financial year in which the order under section 263 is passed by the CIT. Therefore, the period of limitation would be 31st March 2003, which is one year from the end of the financial year 2001-02.

Section 153:
The Revenue contended that section 153(2A) extends the period of limitation for passing the order of assessment after it is set aside by the CIT under section 263. This section allows an additional year from the end of the financial year in which the order under section 263 is passed.

Court's Analysis and Judgment:

The court held that section 158BE is a complete code in itself, providing a specific time frame for passing an order of assessment under Chapter XIV-B of the Act. The court referenced the judgment of the Rajasthan High Court in CIT vs. Ramesh Chand Soni, which stated that section 158BH permits the operation of other provisions of the Act only in areas where no provisions are made in Chapter XIV-B. Since section 158BE provides a specific period of limitation for block assessments, the provisions of section 153 do not apply.

The court found that the order passed on 31st March 2003 was beyond the prescribed time limit and annulled the assessment order. Consequently, the other issues raised by the assessee were not considered.

Conclusion:

The appeal by the assessee was allowed on the grounds that the order of assessment dated 31st March 2003 was barred by time as per the provisions of section 158BE of the Income Tax Act. The court emphasized that section 158BE is a complete code in itself, and the provisions of section 153 do not apply to block assessments under Chapter XIV-B.