TMI Blog2003 (3) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... result that the AO be directed not to demand any tax as per the demand note issued by him to the appellant. Without prejudice to the above grounds, the appellant further raises the following grounds of appeal. 3. On the facts and in law, the learned CIT(A) erred in confirming the additions of Rs. 3,632 in financial year 1988-89 and of Rs. 40,105 in financial year 1997-98 on stamp duty and registration charges as unexplained expenditure when the appellant had proved that the undisclosed income of the firm M/s Modern Traders (Chinese Room) wherein he is a partner was available to him for incurring the expenditure." 2. The relevant facts are that there was a search action under s. 132 of the Act at the residential and business premises of the assessee on 9th Sept., 1998, pursuant to which notice under s. 158BC was issued on the assessee calling for return in Form 2B for the block. In response to this notice, the assessee filed return on 17th Jan., 1999, declaring undisclosed income at Nil. The assessment for the block period was finalised at income of Rs. 2,12,812. 3. The facts relating to the addition of Rs. 3,632 and Rs. 40,105 as undisclosed income for the asst. yrs. 1989- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unexplained investment of Rs. 40,105 because the said disclosure was made in respect of certain irregularities in respect of business activities of that firm. Accordingly, I do not find any case to interfere with addition of Rs. 3,632 and Rs. 40,105 made as undisclosed income for asst. yr. 1989-90 and 1998-99. Appeal thus fails in ground Nos. 1 and 2." 4B. Still aggrieved, the assessee is in further appeal. So far as points in ground No. 1 and 2 of appeal are concerned, the same are found to have not been raised before the lower authorities, i.e., before the AO or before the learned CIT(A) and these are totally fresh issues, but of course are legal issues. Therefore, these are being dealt with for the first time and the assessee hits to the root of the matter of the assessment on the legal ground that assessment under s. 158BC(c) is bad in law, inasmuch as the same has been made in pursuant to the invalid notice issued under s. 158BC(b) r/w s. 143(2) because it was issued for the first time after lapse of one year from the end of the month in which return of undisclosed income was furnished in response to notice issued in this regard. As per assessee s counsel, provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of undisclosed income. The procedure for block assessment is given in s. 158BC which talks about notice for furnishing of return of income for the block period. It specifies that return is to be filed in the prescribed form, i.e., Form No. 2B. It further says that the AO has to determine undisclosed income of the block period in the manner laid down in s. 158BC and provisions of s. 142 sub-ss. (2) and (3) of s. 143 and s. 144 shall, so far as may be, apply. The AO on determination of undisclosed income of the block period in accordance with this Chapter shall pass an order of assessment and determine the tax payable by him on the basis of the assessment. This also talks of retention of seized assets. 5A. Sec. 158BE talks about time-limit for completion of block assessment and s. 158BFA talks about levy of interest and penalty in certain cases. Sec. 158BFA(3)(a) provides for opportunity of being heard to be given to the assessee, but no such provision is found to be mentioned in s. 158BC which is very important as per the learned Departmental Representative. Though in the provisions with relation to interest and penalty it is specifically mentioned that opportunity to be given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d return required to be filed is also different than normal return, hence, practical approach to give opportunity is to be taken of full effect to the section is not to be given. Further reliance on Grindlays Bank Ltd. vs. ITO Ors. (1980) 15 CTR (SC) 157 : (1980) 122 ITR 55 (SC) was placed to contend that Court can't be party to an unfair advantage that the assessee tries to gain such effort should be neutralized. Reference was made to G.P. Singh s (6th Ed.) commentary. Further reliance was placed on AIR 1992 SC 87 Rule of interpretation Otherwise also non-adherence of procedural part of statute cannot vitiate block assessment proceedings and reference was made to CIT vs. Jai Prakash Singh (1996) 132 CTR (SC) 262 : (1996) 219 ITR 737 (SC), CIT vs. Gyan Prakash Gupta (1986) 54 CTR (Raj) 69 : (1987) 165 ITR 501 (Raj), Ratan Lal Tiku vs. CIT (1974) 97 ITR 553 (J K). Further reference in this context was made to (2002) 21 STC 372 (Guj), Madhupuri Corpn. vs. Prabhat Jha, Dy. Director of Income-tax (2001) 171 CTR (Guj) 593 : (2002) 256 ITR 498 (Guj), CIT vs. Bharat Kumar Modi (2000) 164 CTR (Bom) 273 : (2000) 246 ITR 693 (Bom) difference in lack of jurisdiction and irregular exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under s. 37(1). If s. 165(1) was to be incorporated by pen and ink as sub-s. (2) of s. 37, the legislative draftsmanship will leave no room for doubt by providing that the provisions of the Cr.PC relating to searches shall apply to the searches directed or ordered under s. 37(1) except that the power will be exercised by the Director or Enforcement or other officer exercising his power and he will be substituted in place of the magistrate. The provisions of sub-s. (2) of s. 37 has not been cast in any such language. It merely provides that the search may be carried out according to the method prescribed in s. 165(1). If the duty to record reasons which furnish grounds for entertaining a reasonable belief were to be recorded in advance, the same could have been incorporated in s. 37(1), otherwise a simple one-line section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in s. 165 of the Code by the officer to be set out in the section. In ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have been reenacted by such reference into the later one, rendering irrelevant what happened to the earlier statute thereafter. Examples of this can be seen in Secretary of State vs. Hindustan Co-op. Insurance Society AIR 1931 PC 149, Bolani Ores Ltd. vs. State of Orissa AIR 1975 SC 17, Mahindra Mahindra Ltd. vs. Union of India (1979) 49 Comp Cas 419 (SC) : AIR 1979 SC 798. On the other hand, the later statute may not incorporate the earlier provisions. It may only make a reference of a broad nature as to the law on a subject generally, as in Bajya vs. Gopikabai (Smt) (1978) 3 SCT 561, or contain a general reference to the terms of an earlier statute which are to be made applicable. In this case, any modification, repeal or reenactment of the earlier statute will also be carried into the later, for here, the idea is that certain provisions of an earlier statute which become applicable in certain circumstances are to be made use of for the purpose of the later Act also. Examples of this type of legislation are to be seen in Collector of Customs vs. Nathella Sampathu Chetty (1962) 3 SCR 786, New Central Jute Mills Co. Ltd. vs. Asstt. Collector (1971) 2 SCR 92 and Special Land Acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board Ltd. Ors. vs. Dy. CIT has held as under: "Chapter XIV-B of the IT Act, 1961, lays down a special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of search. Under s. 158BB(1), r/w s. 158BC of the IT Act, 1961, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed in the normal regular assessment under s. 143(3). This exercise under s. 143(2) and (3) for regular assessment stands in contrast to the exercise of the AO under s. 158BB r/w s. 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted under s. 132 of the Act. The regular assessment is to assess the total income or loss of the previous year where a return is filed under s. 139 and the AO considers it necessary or expedient under s. 143(2) to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid tax in any manner. There was a search and seizure operation in the case of the assessees and in the block ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or has not computed excessive loss or has not underpaid the tax in any manner." 11. In another case titled R. Dalmia Anr. vs. CIT (1999) 152 CTR (SC) 383 : (1999) 236 ITR 480 (SC) where the question about the procedure prescribed in s. 144B is to be applied even to assessment and reassessment under s. 147 and extended period of limitation prescribed by Expln. 1(iv) to s. 153 has to be applied, the Hon ble Supreme Court has opined as under: "If, therefore, the procedure that is prescribed by s. 144B is to be applied even to assessments and reassessments under s. 147 and, as we have stated, we think it must, having regard to the terms of the provisions of the Act hereinbefore referred to as also because the provisions of s. 144B are intended to safeguard the interest of the assessee, the extended period of limitation prescribed by Expln. 1(iv) to s. 155 must apply. It was submitted on behalf of the assessee that the provisions of s. 144B were not applicable to assessments and reassessments under s. 147 because s. 144B stated that it applied only to "an assessment to be made under sub-s. (3) of s. 143". The submission cannot be accepted because the words we have quoted from s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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