TMI Blog2007 (3) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... n is without any intent or purpose. Thus, in our considered opinion a notice served under section 158BC allowing a period less than the statutory specified time period of clear 15 days is in breach of the specific provision made in this respect in the statute and that such a defective notice cannot be held to be in substance and effect in conformity with or according to the intent of the Act. Further, such a defect is also not merely inconsequential technicality. When we examine the provisions of section 158BFA(1) it is observed that an assessee is liable to pay interest for a period which is determined with reference to the time allowed in the notice under section 158BC of the Act and thus, a short period allowed in the notice affects the liability of an assessee. On service of such a defective notice u/s 158BC, a procedural irregularity has taken place which can be cured by serving a valid notice. It have been vehemently argued before us that the Assessing Officer cannot complete the Block Assessment without service of a valid notice u/s 158BC of the Act and we are in full agreement with the said proposition. As the Assessing Officer had the jurisdiction to make the Block Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated 12-10-1999. Therefore, the initiation of the proceedings under section 158BC of the Act on the basis of alleged notice dated 12-10-1999 is not valid being illegal and bad in law because of non-compliance with the mandatory requirements of provisions of section 158BC(a)(i) and section 158BC(a)(ii) of the Act. 5. The Assessing Officer present during the course of the hearing before the CIT(A) submitted that the notice under section 158BC calling for return within 10 days would not invalidate entire block assessment proceedings and it was in these circumstances that section 292B of the Income-tax Act, deserves to be invoked. It was stated that it was only an omission which would not go to the root of the jurisdiction so as to invalidate the assessment order passed. It has also been stated that what also needs to be taken careful note of is the fact that the assessee took more than 31h months for filing the return. 6. The ld. CIT(A) after considering the rival submissions held that there was no fundamental irregularity committed by the Assessing Officer by calling for the return within 10 days. Moreover, such an omission or irregularity is minor and deserves to be ignored. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B. 9. He pointed out that clause (a) of section 158BC of the Act, mandates that where, inter alia, a search is conducted the Assessing Officer shall serve a notice to such person requiring him to furnish a return for the block period within the prescribed time. Since jurisdiction to make assessment under Chapter XIV-B of the Act is assumed on the basis of issue and service of a proper and valid notice issued under clause (a) of section 158BC of the Act, the requirement of that clause that the notice must allow 'not less than 15 days' time' for furnishing the return for the block period is a mandatory requirement, non-compliance whereof would vitiate the entire block assessment and would consequently be nullity in the eyes of law. 10. He submitted that jurisdiction to invoke the provisions of Chapter XIV-B and deal with the matter under that Chapter is assumed on the basis of a valid search, but, jurisdiction to make an order of assessment under section 158BC of the Act is assume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of search. The jurisdiction to make an order of assessment is switched on by issue of notice under section 158BC of the Act. 13. It was his submission that the aforesaid distinction was also appreciated and recognized in the decision of the Special Bench of the Tribunal in the case of Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 (Delhi). In para 38.1 (reproduced infra) the Tribunal observed that The power for initiation of proceedings as per the scheme of the Act is very different from the power of making an assessment . In that case, the Special Bench annulled the assessment completed on the basis of notice issued under section 142(1) of the Act after the expiry of the assessment year. 14. He also submitted that the Delhi Bench of the Tribunal in the case of Dr. K.C. Verma v. Asstt. CIT [2003] 84 ITD 33 (SMC) held that jurisdiction to assess can be assumed only within the four corners of the provision of section 143. In this case, assessment was made under section 144 on the basis of returns filed in response to notices under section 148. The Tribunal held that jurisdiction to assess income under section 143(3) can be assumed only on issue of notice under section 143(2) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to consider the mandate of section 158BC of the Act. Under section 158BC(a) of the Act, the Assessing Officer is directed that he, shall..... serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days. 17. The first limb of clause (a) of section 158BC of the Act, provides that Assessing Officer 'shall' .... serve a notice ... . The plain language of clause (a) using the expression 'shall' thus makes it abundantly clear that the requirement of serving the prescribed notice is a mandatory provision and such requirement cannot merely be held to be directory. 18. In the following cases, the Courts have consistently held that the use of the word shall raises a prima facie presumption that the particular provision is ordinarily mandatory: (i) Hemalatha Gargya v. CIT [2003] 259 ITR 1 (SC) (ii) State of UP v. Manbodhan Lal Srivastava AIR 1957 SC 912 at 917 (iii) State of UP v. Babu Ram Upadhya AIR 1961 SC 751 at 765 (iv) Sainik Motors v. State of Rajasthan AIR 1961 SC 1480 at 1455 (v) Govind Lal Chaggan Lal Patel v. Agriculture Produce Market Committee AIR 1976 SC 263 at 267 19. He, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that now the issue that arises is whether it would be sufficient if notice under section 158BC(a) is issued even though statutory period of 15 clear days is not provided therein. The Supreme Court in Lachmi Narain v. Union of India AIR 1976 SC 714 has observed that the requirement of the notice prescribing the minimum statutory period is part of the scheme and cannot be held to be non-essential. In that case the issue before the Court was the effect of issuance of a notification issued without giving 'not less than 3 months' notice'. The Court observed as under: 67. In fixing this period of notice is mandatory terms, the Legislature had, it seems taken into consideration several factors. According to the scheme of the Bengal Act, the tax is quantified and assessed on the quarterly turnover. The period of not less than three months' notice conforms to that scheme and is intended to ensure that imposition of a new burden or exemption from tax causes least dislocation and inconvenience to the dealer in collecting the tax for the Government, keeping accounts and filing a proper return, and to the revenue in assessing and collecting the same. Another object of this pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnish a return within a certain period. It appears to us that unless the period for furnishing the return is specified in the notice, it is an incomplete notice. The very object of the Act, which is a fiscal statute, indicates that the assessment should be completed within a definite period and, therefore, it is necessary that the assessee should be required to file a return within a specified period. An assessee who fails without reasonable cause or excuse to furnish a return in due time is liable to penalty under section 37. The enactment of section 37 testifies to the intention of the Legislature that the return is required to be filed within a definite period, and accordingly a duty is cast upon the assessing authority to specify such period in the notice calling for the return. The notice must not merely require an assessee to furnish a return. It must require an assessee to furnish a return within a specified period, that period being not less than thirty days. It is only then a notice containing the requirements of section 15(3). (ii) O. Thomas Children's Benefit Trust v. Agrl. ITO [1998] 234 ITR 143 (Ker.): Notice issued under section 17(2) of the Kerala Agricultural In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn, such a notice has, as discussed supra, no legal sanctity in the eyes of law. Further, by the said notice the assessee is forced to furnish return within the short time prescribed in the notice. Since, the assessee is, in the process, not granted sufficient time to prepare and furnish its return, the assessee is denied proper opportunity to compute its 'undisclosed income', thereby exposing him to imposition of penalty under section 158BFA of the Act. It is important to note that return once filed under section 158BC(a) of the Act cannot be revised (refer second proviso thereto). Therefore, in a case where the assessee has not been granted sufficient time to furnish a return as prescribed under the law, such assessee is forced to file his return within the time prescribed and such person will thereafter, have no recourse of filing a revised return. (c) Under sub-section (1) of section 158BFA interest is levied for non-filing of the return or for filing the return within the time specified in the notice issued under section 158BC(a) of the Act. Such interest is imposed for the period commencing from the day immediately following the expiry of time specified in the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to hand over the books of account and other documents to the Assessing Officer having jurisdiction over such other person and then such other Assessing Officer has to proceed under section 158BC against such other person. Thus, the proceeding in respect of the person who has been searched as well as the person in whose respect the search has not been conducted, both have to be under section 158BC whereby the Assessing Officer shall serve a notice requiring furnishing of return within such time not being less than 15 days. Thus the question before this Special Bench is to be examined in the context of a notice issued in the case of a person who has been searched. It is an important issue which needs to be examined because in case the jurisdiction of the person who has been searched comes to the Assessing Officer the moment the search is conducted, then by implication the Assessing Officer shall also get the jurisdiction in respect of the person other than the person who has been searched. 28. He submitted that to decide the above issue it is important to make a distinction between section 158BA and section 158BC. The crucial point for determination will be whether section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV and bring the case under Chapter XIV-B. It does not give a jurisdiction per se to the Assessing Officer but only makes a classification that the assessment in the case of a search shall be made under Chapter XIV-B and not under Chapter XIV. It is important to note that by this section the assessee would have got a right to contend that the assessment even after the search is to be followed under the normal procedure of assessment under Chapter XIV. Thus, section 158BA makes only a classification between the two procedures of assessment and nowhere gives a jurisdiction. The jurisdiction gets created. 32. He further submitted that the provisions of section 158BA are akin to the provisions of section 4 of the Income-tax Act. Section 4 provides that where a Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of this Act in respect of the total income of the previous year of every person. Section 4 creates a classification that it is on income that is to be charged in accordance with and subject to the provisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only a classification whereby a proper clause is being created for charging as well as computation and assessment of the person in whose case search has been conducted. Had the intention of the Legislature been to create an automatic jurisdiction, there would not have been any need to insert the words 'proceed to'. It would have been 'the Assessing Officer shall assess'. The use of the words 'proceed to' clearly demonstrates that it is only the applicability of this Chapter which has been effected to. The whole scheme has been framed and the language of section 158BA is to carve out the case from Chapter XIV. 36. He further submitted that the above interpretation gets also justified from the provisions of section 158BD applicable where the undisclosed income belongs to a person other than the person in whose case the search has been conducted. As submitted earlier, the provisions of section 158BC also apply to such other person. If the interpretation that section 158BA gives a jurisdiction the moment a search is carried out, obviously such jurisdiction cannot be for the person in whose case the search has not been conducted. The jurisdiction of such other pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay interest and penalty is determined with reference to the notice itself supports the contention that the provisions of section 158BC are substantive provisions. He submitted that sub-clause (b) of section 158BC provides that the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BC and the provisions of sections 142(2), 142(3) and 144 shall, so far as may be, apply. In case it is interpreted that section 158BC is only a procedural requirement, then the above provisions shall become redundant. 38. It was also his argument that there is another point whether an assessment can be made without issue of notice under section 158BC. It is also important to note that as per the provisions of section 158BFA(2) no penalty is imposable in respect of the income disclosed in the block return filed in consequence to notice under section 158BC and the tax on the basis of such return has been paid and evidence has been furnished along with the return of income. In case the return filed is not in compliance with the provisions of section 158BC, i.e., if it is not filed within the period prescribed, there is a liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the most important distinction which has not been considered nor argued in that case before the Special Bench. As submitted earlier, but for the provision of section 158BA(1), the special procedure and the self-contained code in Chapter XIV-B would not have been applicable. The Assessing Officer will get the jurisdiction only after he serves notice under section 158BC and not before. Further, the inference drawn in that judgment that the provision of section 147 and section 148 in respect of reassessment in the case of income escaping assessment and the provision of section 158BC in respect of assessment of undisclosed income are different, is not correct. Both are the provisions for assessing the income which has not already been subjected to tax. In para 20 while drawing the above inference again, a presumption has been made that the Assessing Officer gets the jurisdiction to assess undisclosed income under section 158BA which, as submitted earlier, is not correct. In view of the above it is submitted that the Assessing Officer gets jurisdiction by issue of notice under section 158BC and section 158BA(1) only makes a classification and gives power to the Assessing Officer to ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 292B of the Act. Apparently, there is no omission in such a notice and what at the best can be said is that time-limit of 15 days was mentioned by mistake and thus it is a defective notice. Then, the pertinent question to be considered is whether such a mistake or defect in the notice which is contrary to the mandatory provisions of the statute is curable under section 292B of the Act. 42. He submitted that section 292B was introduced by the Taxation Laws (Amendment) Act, 1975 and in para 47 of the Explanatory Notes vide Circular No. 179, dated 30-9-1975, (102 ITR Statutes, 28) the Board has clarified the provisions as under:- A new section 292B has been inserted to provide that no return of income, assessment notice, summons or other proceedings shall be invalid merely by reason of any mistake, defect or omission, if the return, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purposes of the Act. This provision has been made to provide purely technical objections without substance coming in the way of the validity of assessment proceedings, etc. 43. He urged that the words, 'technical object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant month and return is not filed within the prescribed time, then interest would be charged for one complete month, even when the delay is of only one day. However, in case time allowed in the notice under section 158BC is of 16 days, then interest would be charged only from the next month and thus interest under section 158BFA(1) in two situations would be different. It is an admitted position of law that interest under section 158BFA(1) is mandatory and the same cannot be waived. It would thus be seen that when time to file the return allowed is within 15 days and not less than 15 days i.e., at least 16 days, interest under section 158BFA(1) would be drastically different and thus such a defect cannot be said without substance. If such a defect is examined deeper and time allowed is considered ranging between 16 to 45 days, then ambiguity in the implementation of section 158BFA(1) would be further compounded. It can thus safely be said that such a defect cannot be said to be technical or minor but it would be fatal to the provisions of section 158BFA(1) of Chapter XIV-B of the Act. 46. He also pointed out that a similar position also existed in the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn should be signed and verified and if it is not signed and verified, then it is in breach of the provisions of section 140 of the Act. Therefore, this cannot be defect which can be cured and any return which has been filed without signature and verification of the assessee, will not be treated as a valid return. 49. He urged that it seems that provisions of section 292B can be invoked only where defects are of minor in nature i.e., some irrelevant columns were not struck of but the notice was properly served etc., and thus a pure technical objection has been raised. However, if a notice is contrary to the mandatory provisions of the statute, such a notice cannot be said to be defective, but it is no notice and the entire proceedings would be bad in law. 50. He pointed out that the ITAT, Amritsar, Special Bench, in Smt. Mahesh Kumari Batra v. Jt. CIT [2005] 95 ITD 152 have made analysis of provisions of section 158BC vis-a-vis 148 and have opined that it cannot be said that notice under section 158BC is akin to one issued under section 148 and that any defect in the notice or with regard to its issue cannot render the block assessment proceedings to be null and void. However, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures committed by it. It is also felt that in case it is held that assessee cannot waive such defect in law, then Appellate authority would also not be competent to condone such a defect or mistake, and the only remedy probably left over would be to cancel the assessment being bad in law, or the amendment in section 158BC is made in the same manner as was done in regard to section 148 of the Act, as it existing prior to its amendment by Finance Act, 1996. He also placed reliance on the following judgment of the ITAT: Navin Verma v. Asstt. CIT [2006] 283 ITR (AT) 83 (Delhi), where the following judgments have been relied upon : Vinod Kumar v. Asstt. CIT [2005] 98 TTJ (Agra) 769 (Unreported judgment of ITAT E-Bench, New Delhi dated 9-2-2005 in IT Appeal Nos. (SS)/142 and 143 (Delhi) of 2003 in Neera Agarwal and Anil Agarwal v. Dy. CIT. 55. The ld. Departmental Representative Shri K.C. Jain, CIT DR at the outset relied on the decision of the Hon'ble Bombay High Court in Shirish Madhukar Dalvi v. Asstt. CIT [2006] 203 CTR (Born.) 621 and quoted from page 634 para Nos. 46 to 48 as under : 46. Having examined factual matrix statutory provision, law laid down by various Courts present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contain provisions which are in the realm of substantive law. At least, sections 158B, 158BA and 158BB are such provisions, whereas section 158BC is in the realm of procedure law; (d) Section 158BA(1) gives power to the Assessing Officer to assess undisclosed income and such power is conferred on the Assessing Officer at the time when search is initiated in the case of a person. Thus, the existence of the jurisdictional fact of search having been initiated gives power to the Assessing Officer to assess undisclosed income. (e) The acquisition of power by the Assessing Officer is not at all related to the formation of belief by the Assessing Officer that a person has not disclosed certain income. (f) The Assessing Officer can and has to activate his power only on the completion of search; (g) Since the action of using notice under section 158BC is within the jurisdiction and not of assuming jurisdiction, any error committed in such action cannot render the whole assessment a nullity and that such errors are rectifiable by section 292B of the Act. 57. He further relied on the decision of the Special Bench of the Tribunal in the case of Pro main Lid. v. Dy. CIT [2005] 95 ITD 489 (Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of irregularity which can be cured by taking the matter back to the stage where the irregularity occurred. This is so because the taxability arises by virtue of sections 3 and 4 of the IT Act and section 142 etc., are machinery provisions provided for the procedure to be followed while determining the amount of tax chargeable. 61. He viewed that the question of validity of notice under section 158BC of the IT Act wherein sufficient time for filing return has not been given is to be examined in this context. It is to be noted that unlike section 148, in case of block assessment the Assessing Officer doesn't get jurisdiction consequent upon issue of a notice by him. In fact the jurisdiction gets conferred on him by virtue of section 158BA(1) of the IT Act which provides that in case of an action under section 132 of the IT Act the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter. This provision firstly confers the jurisdiction on the Assessing Officer and secondly makes it mandatory for him to make an assessment as per the provisions of this Chapter. It is immaterial whether any undisclosed income was found during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. In these circumstances, the assessment orders completed without service of proper notice under section 143(2) cannot be said to be ab initio void and when it is not so, the assessment order cannot be annulled.' 64. He submitted that on a reading of the decision in Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC) the principle that emerges is that a defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions (charging sections). Any such omission or defect may render the order made irregular - depending upon the nature of the provision not complied with - but certainly not void or illegal.' 65. He also submitted that in Dhirendra Nath Gorai v. Sudhir Chandra Ghosh AIR 1964 SC 1300, the following passage from the decision in Ashutosh Sikdar v. Behari Lal Kirtania [1907] ILR 35 Cal. 61 (FB) was cited with approval to bring about the distinction between a nullity and an irregularity: .... no hard and fast line can be drawn between a nullity and an irregularity; but this much is clear, that an irregularity is a deviation from a rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of jurisdiction and irregular exercise of authority/jurisdiction. A proceeding is a nullity when the authority taking it has no power to have seisin over the case. The first Appellate Authority has come to the conclusion that there was no bias against the assessee. However, there was violation of the rule of natural justice and, therefore, the CIT(A) exercised his authority under section 251 of the Act by remitting back to the Assessing Officer after setting aside the impugned order passed by the Assessing Officer. There was no justification for the Tribunal to hold that the assessment was a nullity. The ld. DR therefore submitted that not giving notice of 15 days to the assessee to file the return under section 158BC was at most an irregularity which could be cured and not a nullity which would render the assessment order null and void. 69. The ld. DR further relied on the decision in the case of CIT v. Pearl Mechanical Engg. Foundry Works (P.) Ltd. [2004] 267 ITR 11 (SC) wherein it was held that jurisdiction always emanates directly and immediately from the law; it is a power which nobody on whom the law has not conferred it can exercise. In other words, jurisdiction has refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn filed by the assessee, similarly, in terms of section 158BA of the Act, jurisdiction under Chapter XIV-B is assumed on the basis of a valid search on the assessee. The provisions of section 158BC are, according to the Revenue, in tune with the procedure of assessment prescribed in section 143 and the notice issued under section 158BC(a) is akin to notice issued under section 143(2) of the Act. 71. He submitted that on the basis of the aforesaid, it was contended on behalf of the Revenue that non-issuance of notice does not vitiate the proceedings, as has been held by the Supreme Court in CIT v. Jai Prakash Singh [1996] 219 ITR 737 the Rajasthan High Court in the case of CIT v. Gyan Prakash Gupta [1987] 165 ITR 501 and the Third Member decision in Ashok Kumar v. ITO [2002] 80 ITD 33 (Asr.). 72. He argued that in response, it is respectfully submitted that the submission of the Revenue that non-issuance of notice under section 143(2) of the Act does not vitiate the assessment and is merely a procedural error is not correct. While so contending, the Revenue has failed to appreciate the distinction in the scheme of assessment under section 143(3) [regular assessment] and assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment'. It started with the words 'for the purpose of making an assessment', It then did not have clause (i) of sub-section (1) authorising the Assessing Officer to call for a return from the assessee. Other clauses empowered the Assessing Officer to ask the assessee to produce or cause to be produced accounts and documents and give information in writing and verified in the prescribed manner. In the present appeal, there is no quarrel that as far as powers given to the Assessing Officer in the provisions other than clause (i) of sub-section (1) of section 142 are concerned, they can be exercised for the purpose of making an assessment at any time before the assessment is made. The Assessing Officer can ask the assessee to produce accounts etc. and do every thing provided in clauses (ii) and (iii) of sub-section (1) up to the time of making the assessment. But it does not follow that the Assessing Officer, for making an assessment, can exercise any power at any time without satisfying the conditions attached to the exercise of the power. Issue of notice calling for a return i.e., the power which was earlier exercised under section 139(2) of I.T. Act for initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national Inc. v. Dy. CIT [IT Appeal No. 2216 (Delhi) of 2001] (i) Smt. C. Malathy v. ITO [2004] 88 ITD 37 (Chennai) (j) Bhan Textiles (P.) Ltd v. Dy. CIT [2005] 149 Taxman 10 (Delhi) (Mag.). 78. He submitted that the reliance placed by the Revenue on the decision Gyan Prakash Gupta's case to contend that nonservice of a valid notice under section 143(2) of the Act will not vitiate assessment is, in our respectful submission, misplaced. In that case, notice issued by the Assessing Officer against the assessee, who had died after filing the return, was received by his son, Gyan Prakash Gupta (legal heir of the assessee). On receipt of the said notice, the son intimated the Income-tax Officer names of the other legal heirs. The Assessing Officer, however, without serving notice on the other legal heirs, completed the assessment in the name of Gyan Prakash Gupta. In appeal filed by the Revenue against the order of the ITAT quashing the assessment, the High Court, after referring the various judicial precedents rendered in the context of the fate of the assessment framed without service of notice on all the legal heirs of the deceased assessee, held that though the assessment comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Dr. K. C. Verma [affirmed by the Delhi High Court in CIT v. Dr. K. C. Verma [2004] 266 ITR 476] has held that jurisdiction to assess can be assumed only within the four corners of the provision of section 143. 85. It was submitted by him insofar as the issue under consideration is concerned, it is emphatically reiterated that even though jurisdiction to deal with the matter under Chapter XIV-B of the Act is assumed on the basis of a valid search, jurisdiction to make an order of assessment under section 158BC of the Act is assumed only on issue and service of a valid notice under that section. Jurisdiction to assess under section 158BC of the Act is lost if a proper and valid notice under clause (a) of that section is not served on the assessee. 86. It was his submission that the decision of the Bombay High Court in the case of Shirish Madhukar Dalvi v. Asstt. CIT [2006] 203 CTR (Bom.) 621 relied upon by the Revenue is distinguishable. In that case, a notice dated 6th July, 1998 was issued to the assessee for filing return for the block period. The said notice did not prescribe the minimum 15 days statutory period for filing the block return. Subsequently, another notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail. He was directed to file return. Pursuant to the above notice dated 17th September, 1998, the appellant approached the Dy. CIT vide his letter dated 28th September, 1998 and sought further extension of 45 days for filing block period return. He has, accordingly, filed his return on 2nd November, 1998, declaring total income of Rs. 1,01,33,700. The same was accordingly assessed vide assessment order dated 30th June, 2000. It is not in dispute that notice dated 6th July, 1998 did not cause any prejudice to the appellant. During the course of hearing, we specifically asked Mr. Sather as to what prejudice was suffered by the appellant on account of alleged defective notice dated 6th July, 1998. He made a positive statement - no specific prejudice was suffered by the appellant. At any rate, the notice dated 6th July, 1998 suffered from only technical defects, if any, and, in our opinion, it was protected under the umbrella of section 292B of the Act. 89. It was his argument that the aforesaid observations clearly reveal that the aforesaid decision of the Bombay High Court proceeded on its own peculiar facts. 90. Firstly, it was submitted that the decision of the Bombay High Court pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted judgment, the Special Bench held that by using the word shall in section 158BC of the Act, it has been made obligatory for the Assessing Officer to issue notice under that section, which clearly supports the case of the appellant herein that issue and service of a valid and proper notice is a mandatory requirement. The Special Bench accordingly observed: . . . Section 158BC merely sets in motion the machinery to quantify the liability of the assessee. The notice served by the Assessing Officer is the first step in this direction which will make the earlier three provisions which are substantive in nature to be workable. By virtue of section 158BA(1), Assessing Officer obtains the power connection. Under section 158BC, he switches on that power by issue of notice. . . . 96. Accordingly, it was submitted that the aforesaid correctly illustrates the legal position that by virtue of section 158BA(1), the Assessing Officer obtains the power connection and under section 158BC of the Act, he switches on that power by issue of notice. By not issuing the notice under section 158BC of the Act or by issuing an invalid notice, having no legal sanctity in the eyes of law, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morrin in Herrington v. British Railways Board [1972] 2 WLR 537 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. 101. It was his submission that based on the aforesaid, it is respectfully reiterated that the decision of the Bombay High Court in the case of Shirish Madhukar Dalvi, the Karnataka High Court in the case of B.M. Reddy and the Special Bench of the Tribunal in Smt. Mahesh Kumari Batras case cannot be said to be binding precedents. 102. It was also his submission that in any case, the decision of the Hon'ble Karnataka High Court, not being the decision of the jurisdictional High Court, is not binding on the Hon'ble Bench as held in the following cases :- Taylor Instrument Co. (I) Ltd. v. CIT [1998] 232 ITR 771 (Delhi) CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 (Bom.) Consolidated Pneumatic Tool Co. (India) Ltd. v. CIT [1994] 209 ITR 277, 282 (Bom.) Patil Vijaykumar v. Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 132A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter. Reading of this provision suggests that this section 158BA empowers the Assessing Officer to assess undisclosed income in accordance with Chapter XIV-Bin respect of a person in whose case a search under section 132 has been conducted. In other words, this section confers jurisdiction in favour of the Assessing Officer to make the block assessment in case of a searched person. Section 158BA(2) is a charging section; section 158BB provides for computation of undisclosed income for the block period; whereas section 158BC provides the procedures to be followed for making the block assessment. 107. In this case few facts may be noted. Search under section 132 was conducted at the premises of the assessee on 12-3-1999. Notice for framing an assessment for the block period under section 158BC(a) was issued on 12-10-1999. In the said notice the assessee was directed to file return within 10 days thereafter. The assessee actually filed the return on 27th January, 2000. The assessment was framed on 30th April, 2001. The sum and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer had power to frame an assessment under section 143 and after exercising such power if he has reason to believe that any. income has escaped assessment he may proceed to make reassessment under section 147 by issue of notice under section 148. Thus prior to issue of notice under section 148, he has to frame an opinion that income has escaped assessment and by virtue of such opinion framed he reassumes the jurisdiction to frame reassessment. Prior to assumption of such jurisdiction the Assessing Officer becomes functus officio to assume the office of Assessing Officer. He has to assume the power of reassessment. Such powers cannot be assumed mechanically. Thus it will be incorrect to equate notice under section 158BC(a) as notice under section 148 of the Act. Even the proviso to section 158BC(a) makes it clear that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter. This allays the fear that notice under section 158BC(a) can be equated with that under section 148 of the Act. 109. It is true that under section 158BC(a) the Assessing Officer shall issue and serve upon the assessee a notice requiring him to furnish the return fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision is couched in a mandatory form, prima facie, it would be a nullity. Every act done in breach of a mandatory provision, however, is not necessarily a nullity. In Dhirendra Nath Gorai v. Sudhir Chandra Ghosh AIR 1964 SC 1300, the following passage from the decision in Ashutosh Sikdar v. Behari Lal Kirtania [1907] ILR 35 Cal. 61 (FB) was cited with approval to bring about the distinction between a nullity and an irregularity: ... no hard and fast line can be drawn between a nullity and an irregularity; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is proceeding that is taken without any foundation for it or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated. What is a workable test to distinguish a nullity from an irregularity? The following passage from the decision in Holmes v. Russell [1841] 9 Dow 1487, which provides the clue, was cited with approval in Dhirendra Gorai v. Sudhir Chandra Ghosh AIR 1964 SC 1300 : It is difficult sometimes to distinguish betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed for failure to file return in time. The Assessing Officer proceeded to impose penalty without affording hearing. The Appellate Commissioner set aside the order imposing penalty as defective and directed refund of any penalty that have been recovered. On receipt of Appellate Commissioner's order the Assessing Officer issued further notice calling upon the assessee and afforded opportunity of being heard. The Hon'ble Supreme Court held- As the Appellate Assistant Commissioner pointed out only to an illegality which vitiated the proceedings after they were lawfully initiated, the notice issued under section 28(1)(a) did not cease to be operative and it was open to the Income-tax Officer to take up the matter at the point at which the illegality supervened and to correct his proceedings. The notice under section 28(1)(a) having still to be disposed of, the proceedings started after the order passed by the Appellate Assistant Commissioner could be described as during the course of the assessment proceedings, because the action would relate back to the time when the first notice was issued. The Income-tax Officer had jurisdiction to continue the proceedings from the stage a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, comes to an end with reference to the assessment year in which the income was first assessable irrespective of the date when notice under section 143(2) was issued or served. In contrast to this, in case of a reassessment under section 147, we find that as per the provisions of section 153(2), the jurisdiction of the Assessing Officer comes to an end after the expiry of one year or nine months, as the case may be, from the end of the financial year in which the notice under section 148 was served. Thus, it is observed that the time-limit for making the reassessment, i.e., the ending of the jurisdiction of the Assessing Officer depends upon the date of service of a notice under section 148 of the Act. Thus, it is observed that as per the scheme of the Income-tax Act, where the notice is a jurisdictional one, time-limit for completion of assessment, i.e., end of the jurisdiction of the Assessing Officer is dependent upon the date of the service of such notice. Taking a cue from this, when we examine the provisions of Chapter XIV-B of the Act, we find that as per the provisions of section 158BE(1) of the Act, the jurisdiction of an Assessing Officer to make a block assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons covered by section 158BD) both have to be made under section 158BC following the same procedure. Hence, it was contended that if it was held that in case of a person who has been searched, section 158BA gives a jurisdiction the moment a search is carried out, obviously such jurisdiction cannot be for the person in whose case the search has not been conducted. The jurisdiction of such other person shall obviously come under section 158BC of the Act. If that be so, then the jurisdiction of the person in whose case the search has been conducted shall also flow from section 158BC as both have to follow the same procedure. It cannot be said or interpreted that the jurisdiction in the case of a person in whose case a search has been conducted will flow from section 158BA whereas in the case of any other person the jurisdiction will flow from section 158BC. In our considered opinion, the above proposition is not correct. Simply because assessment has to be made in respect of two different persons by following one and same procedure does not mean that jurisdiction to assess both the persons flows from the same provision of the Act. For example, in case of a person in whose case procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such ... notice ... if such ... notice ... is in substance and effect in conformity with or according to the intent and purpose of this Act. 120. A reading of the above shows that this section provides that a notice shall not be invalid merely because of any mistake, defect or omission, if notice is in substance and effect in conformity with or according to the intent and purpose of this Act. This section, thus, covers cases where there is minor breach or lapse, which is technical, or venial in nature in the notice served upon the assessee. But for such minor or technical mistake, defect or omission if the notice is in substance and effect is in accordance with the intent and purposes of the Act then, for such mistake, defect or omission the notice shall not be invalid or deemed as invalid. Thus, even without any rectification by the Assessing Officer, if the notice is in substance and effect is in accordance with the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest for a period which is determined with reference to the time allowed in the notice under section 158BC of the Act and thus, a short period allowed in the notice affects the liability of an assessee. 124. In the circumstances, in our considered view, on service of such a defective notice under section 158BC, a procedural irregularity has taken place which can be cured by serving a valid notice. It have been vehemently argued before us that the Assessing Officer cannot complete the Block Assessment without service of a valid notice under section 158BC of the Act and we are in full agreement with the said proposition. As the Assessing Officer had the jurisdiction to make the Block Assessment, and after the bestowing of jurisdiction on him, a procedural irregularity has taken place, it is open to him to correct the procedural irregularity and then complete the block assessment. Hence, we also find ourselves in agreement with the contention of the learned D/R that in such a case the assessment should be set aside for being redone de novo from the stage where irregularity had occurred and the assessment proceedings cannot be declared null and void. 125. Reliance was placed on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has an option to proceed to make an assessment under section 143(3) and when he exercises such an option than the condition precedent is that he has to serve a notice under section 143(2) within a period of 12 months from the end of the month in which return has been filed. We find that there is no such option with the Assessing Officer under section 158BC in case of a person in whose case a search has been conducted. Further, in contradistinction of the facts of the above cases, in the instant case the fact is that notice under section 158BC was served on the assessee within the period of limitation for serving such a notice. Service of notice within the period of limitation is not in dispute in the case before us. The dispute in the present case is that such notice is defective inasmuch as it does not allow the minimum stipulated period for filing the return which was not in dispute on the facts of the above case. In the above case a non-curable defect has taken place because of the lapse of the limitation whereas in the present case notice was issued within time with some curable defect. Hence, the above cited case are distinguishable on facts. 127. Reliance was placed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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