TMI Blog2010 (7) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 263 is that order of the Assessing Officer is erroneous insofar as it is prejudicial to the interest of Revenue and no more - In the result, the appeal filed by the assessee is dismissed - IT(SS) APPEAL. NO. 84 (AHD.) OF 2007 - - - Dated:- 9-7-2010 - MAHAVIR SINGH, D.C. AGRAWAL, JJ. M.K. Patel for the Appellant. B.S. Sandhu for the Respondent. Order Per D.C. Agrawal, Accountant Member. This is an appeal filed by the assessee raising following grounds :- (1) That the ld. CIT-III, Baroda has grievously erred in assuming the jurisdiction under section 263(1) of the Income-tax Act, 1961 and thereby cancelling the order under section 158BC r.w.s. 158BG of the Income-tax Act, 1961. (2) That the ld. CIT-III, Baroda has grievously erred in mentioning in para 9 of the order under appeal that the order under section 158BC r.w.s. 158BG of the Act was passed by the Assessing Officer, Ward 1, Bharuch whereas in fact the said order was passed by the Dy. CIT, Cen. Cir.1, Baroda. (3) That the ld. CIT-III, Baroda have grievously erred in directing the Assessing Officer to make a fresh assessment whereas the original assessment was passed after get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 to her: Time Barring No. BRD/CIT-III/u/s 263/BMK/2006-07 Dated 7-3-2007 To Smt. Bhartiben M. Kelawala 4/5 Swami Vivekanand Society, Nr. Pritam Society, No. 1 Bharuch. Madam, Sub.: Notice under section 263 of Income-tax Act, 1961-for the Block period 1-4-1996 to 13-8-2002-regarding. The record of block assessment leading to passing of order under section 158BC r.w.s. 158BG in your case as well as in the case of Shri Mukesh M. Kelawala for the above mentioned period were called for and examined. 2. From the documents found and seized during the search, it came to notice that undisclosed investment in M/s. Ekta Corporation was made by you and your husband Shri Mukesh M. Kelawala to the tune of Rs. 23,66,500. Out of this Shri Mukesh M. Kelawala disclosed Rs. 22,39,295 only as undisclosed investment in M/s. Ekta Corporation in his block return of income. On perusal of documents, records and appellate orders it came to notice that you had made an investment of Rs. 1,27,205 in M/s. Ekta Corporation over and above the amount of Rs. 1,48,500 as disclosed by you in block return of income which is required to be taxed in your hand. Thus the order dated 30-18-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment over and above Rs. 1,48,500 was pointed out. The amount of Rs. 1,27,205 is therefore fully covered by the investment of Rs. 1,50,000 as shown in the return of block period. You are requested to take my this reply on record and drop the proceeding under section 263 of the Act and oblige. In nutshell it was explained that (i) order under section 158BC was passed after examining all the issues and (2) investment of Rs. 1,27,205 is fully covered by the disclosure of Rs. 1,48,500 made by her in the block return. 5. The ld. CIT, however, being not satisfied proceeded to pass his order under section 263. He indicated in the order under section 263 that Shri Mukesh M. Kelawala and the assessee became partners in the firm of M/s. Ekta Corporation on 24-9-1997. This firm acquired a plot in Survey No. 79 measuring 3175 sq.mts. at village Ghadokol, Ankleshwar on 30-10-1996 for Rs. 10 lakhs. The firm underwent change in constitution whereby assessee and her husband Shri Mukesh M. Kelawala acquired 35 per cent and 50 per cent in the profits respectively and the rest 15 per cent was left for Shri Gulam Mohmed Shaikh. On the date of change in the constitution i.e., 24-9-1997, the plot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not later. The assessee s plea that in her return for the block period 1-4-1996 to 13-8-2002 she had clearly shown undisclosed investment of Rs. 150,000 in M/s. Ekta Corporation does not hold water for the simple reason that the withdrawals had been made from S.B. account No. 23743 on 6-1-1998 and 31-7-20112 (sic) i.e., much after the finalization of the partnership. It is therefore, neither feasible nor logical to believe that the investments on 24-9-1997 were made out of funds withdrawn in 1998 and 2002. The facts and circumstances are a clear pointer to the inevitable conclusion that Smt. Bhartiben M. Kelawala made an unexplained investment of Rs. 1,27,205 in M/s. Ekta Corporation on 24-9-1997 over and above the sum of Rs. 1,50,000 shown by her in block return of income. 9. The replies submitted by the assessee s representative on 21-3-2007 are completely silent on this aspect taken by the Department. Under the circumstances and having regard to the entirety of facts of the case, the order under section 158BC r.w.s. 158BG passed by the Assessing Officer, Ward-1, Bharuch on 30-8-2004, determining total income at Rs. 1,48,500 is hereby cancelled. The Assessing Officer is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BE of the Act because the said period of limitation has already expired. At the cost of repetition in this context one has to refer to the language employed in section 158BA of the Act where there is a positive mandate to the Assessing Officer to assess the undisclosed income in accordance with the provisions of Chapter XIV-B of the Act, notwithstanding anything contained in any other provisions of the Act. As against that section 158BH states that except as otherwise provided in Chapter XIV-B of the Act, all other provisions of the Act shall apply to assessment made under this Chapter. Therefore, once period of limitation has been prescribed under section 158BE of the Act the time-limit for completion of assessment of undisclosed income has to be as provided under the said section. If the contention of the Revenue is accepted section 158BE becomes unworkable the limitation prescribed from the date of last of the authorizations, or in case of requisition under section 132A of the Act, has already expired. This is one more inherent pointer which flows on a conjoint reading of the provisions of Chapter XIV-B of the Act to indicate that the Legislature does not intend to reopen as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 148(1) to assessment framed under Chapter XIV-B. This decision, therefore, could not be applied in the case covered under section 263. He then referred to section 158BH which provided for applicability of the provisions of Income-tax Act except those which are provided in Chapter XIV-B. He submitted that if provisions of section 143(2) and its proviso can be invoked in block assessment proceedings then there is no reason that provision of section 263 cannot be invoked and ld. CIT cannot set aside the block assessment if other conditions are satisfied. 12. We have considered the rival submissions and perused the material on record. In our considered view ld. CIT was fully justified in cancelling the order under section 263. The ld. AR could not point out as to whether the Assessing Officer during the course of block assessment proceedings put up any question about the investment in Ekta Corporation or the period when money was withdrawn from her bank accounts. Prima facie the withdrawal of the money from bank account was much after the date when change in constitution of firm Ekta Corporation had taken place and accordingly Mukesh M. Kelawala and assessee wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13. Now we deal with the main contention raised by ld. AR that ld. CIT could not have exercised jurisdiction under section 263 because it would enable the Assessing Officer to pass fresh assessment order beyond time limit prescribed under section 158BE. For this contention he has relied on the decision of Hon ble Gujarat High Court in Cargo Clearing Agency s case (supra). In our considered view as also as per argument by ld. DR, above judgment was on the issue whether notice under section 148(1) can be issued to reassess any escaped income in block assessment. Hon ble Gujarat High Court held that the Assessing Officer has no jurisdiction to reopen block assessment by issuing notice under section 148(1). It was held that Chapter XIV-B provides for a special procedure for assessment of search cases. It provides for computation of undisclosed income in the manner as laid down in section 158BB. One cannot envisage escapement of undisclosed income once a search has taken place, all the material discovered in search is processed and undisclosed income is brought to tax. On the other hand, section 147 applies for assessing escaped income in regular assessment. In Chapter XIV-B there c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner considers that any order passed therein by the Assessing Officer..... It means and it covers any order passed by the Assessing Officer under Income-tax Act. Chapter XIV-B is undisputedly enacted within Income-tax Act and order passed by the Assessing Officer under section 158BC or 158BD is without any dispute an order under Income-tax Act. Then CIT would be within his jurisdiction to consider the order passed under section 158BC as erroneous in so far it is prejudicial to the interest of Revenue. The word order mentioned in section 263 which could be the subject-matter of revision by the CIT would mean an order determining the rights and liabilities of the assessee under Income-tax Act. An order under section 158BC or 158BD does determine rights and liabilities of the assessee subjected to search. 16. Thereafter only requirement with the CIT is to hold that order which is subject to revision is erroneous insofar as it is prejudicial to the interest of Revenue. We have already held above that where order is passed by an Assessing Officer without carrying out proper enquiries would be erroneous insofar as it is prejudicial to the interest of Revenue. 17. The content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return as provided under section 143(1)(a) : the officer has to complete the assessment under section 143(3) only. If an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable. Therefore, the requirement of notice under section 143(2) cannot be dispensed with. In respect of applicability of section 127 Hon ble Apex Court in K.P. Mohammed Salim v. CIT [2008] 300 ITR 3026 held that section 127 would apply in block assessment also by virtue of section 158BH : The power under section 127 of the Income-tax Act, 1961, to transfer cases from one Assessing Officer to another can also be exercised in respect of block assessments. The word any in that section must be read as all . The power to transfer is in effect a machinery provision. It must be given full effect. It must be construed in a manner so as to be workable. It should be construed to effectuate the charging section so as to allow the authorities conce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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