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2016 (8) TMI 1088 - GUJARAT HIGH COURT

2016 (8) TMI 1088 - GUJARAT HIGH COURT - [2016] 388 ITR 113 - Validity of assessment - Whether the Appellate Tribunal is right in canceling the assessment order framed by AO without going into the merits, on the ground that the Assessing Officer had issued notice u/s. 158BC to the assessee to file the return within 15 days from the date of service of notice? - Held that:- While block assessment is to be made, the Assessing Officer is having knowledge about the statutory provision and while issui .....

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een days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words `not less than fifteen daysí have to be interpreted .....

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8-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR. M.R. BHATT, SR. ADVOCATE WITH MRS MAUNA M BHATT, SR. STANDING COUNSEL FOR THE OPPONENT : MR. HARDIK V VORA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) By way of these appeals under section 260A of the Income-tax Act, 1961, the appellant-revenue has challenged the order of the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal ) whereby the Tribunal has allowed the appeal of the asses .....

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8BC to the assessee to file the return within 15 days from the date of service of notice? (B) Whether the Appellate Tribunal is right in law and on facts in canceling the assessment order despite the fact that the word within 15 days in the notice u/s. 158 BC issued by Assessing Officer is a mere typographical error and even otherwise, the notice and proceedings thereafter is in substance and effect in confirmity with the intent and purpose of the act as has been provided in section 292B of the .....

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ng nil income for the block period 2.11.1986 to 11.12.1997. The Assessing Officer assessed income of the assessee by making certain additions. In appeal, the Commissioner of Income-tax (Appeals) partly allowed the appeal of the assessee. In further appeal, the Tribunal cancelled the assessment order framed by the Assessing Officer without going into the merits of the case, on the ground that requirement of section 158BC has not been complied with. Hence the revenue is in appeal before us. 4. The .....

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e requisitioned under section 132A, in the case of any person, then,- (a) the Assessing Officer shall: (I) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time, not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or afte .....

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es of proceeding under this Chapter; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, subsections (2) and (3) of section 143 and section [section 144 and section 145] shall, so far as may be, apply; (c) the Assessing officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax .....

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mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 4.1 The learned counsel for the revenue has further contended that the notice which is contemplated within fifteen days from the date of service is to be construed keeping in mind the decisions which are rendered by different .....

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urther contended that in view of section 292B read with section 158BC of the Act, the Tribunal has committed serious error in reversing the decision of the Commissioner of Income-tax (Appeals) and the Assessing Officer. He has relied on the following decisions: (1) Shirish Madhukar Dalvi v. Assistant Commissioner of Income-tax and others [2006) 287 ITR 242 (Bom) where the Bombay High Court has observed as follows: Before we deal with the aforesaid contentions raised on behalf of the rival partie .....

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radesh (1964) 52 ITR 583 (SC); AIR 1964 SC 1329, the apex court has ruled that mere mistake in the opening part of the notification in reciting the wrong source of power does not affect the validity of the amendments made. In the case of State Bank of Patiala v. S.K. Sharma (1996) 3 SCC 364, the apex court ruled that in the case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. The order p .....

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e designed to afford a full and proper opportunity to the subject to defend himself. In the case of Dove Investments P. Ltd. v. Gujarat Industrial Investment Corporation (2006) 129 Comp. Cas 929 (SC); (2006) 2 SCC 619 the apex court has observed that regard must be had to the context, the subject matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid down in that behalf as to whether a partic .....

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shall is employed therein unless a prejudice is caused. In Chandrakant Uttam Chodankar v. Dayanand Rayu Mandrakar (2005) 2 SCC 188, the apex court has observed as under (page 212): 74. In this case, it is not necessary for us to go into the question as to whether section 83 is imperative in character or not inasmuch as it is settled law that even where the expression shall is used, the same may not be held to be mandatory. Even a mandatory provision having regard to the text and context of the .....

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at page 539, it is stated: 271. Miscellaneous implied exceptions from the requirements of mandatory rules, in general - Even where statute is clearly mandatory or prohibitory, yet, in many instances, the courts will regard certain conduct beyond the prohibition of the statute through the use of various devices or principles. Most, if not all of these devices find their jurisdiction in considerations of justice. It is a well-known fact that often to enforce the law to its letter produces manifest .....

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notice under section 143(2) of the Incometax Act, 1961 to 9 out of 10 representatives of the deceased did not invalidate the order of the Assessing Officer relating to the assessment year in question. 2. Venad Properties Private Limited v. Commissioner of Income-tax (2012) 340 ITR 463 (Delhi), particularly, paragraph Nos. 11, 12 and 18 which are reproduced as under: 11. In Sardar Amarjit Singh Kalra v. Smt. Pramod Gupta (2003) 3 SCC 272, a Constitution Bench of the Supreme Court has held: 26. La .....

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where it was held as under: 8. We must always remember that processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. It has been wisely observed that procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. Where the non-compliance, tho procedural, will thwart fair hearing or prejudice doing of justice to parties, the rule is mandatory. But, grammar apart, if the breach can be corrected wit .....

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mbay High Court in Shirish Madhukar Dalvi (2006) 287 ITR 242 (Bom.), wherein a distinction has been made between service of notice under sections 147 and 158BC of the Act. It has been held that section 158 BC is a procedural section and not a substantive section and, therefore, the ratio and the decision in State Bank of Patiala v. S.K. Sharma (1996) 3 SCC 364 applies. In the said case, the Supreme Court held that in the case of a procedural provision which is not of a mandatory character, the c .....

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r opportunity to the person concerned to defend himself. 3. Commissioner of Income-tax v. Jagat Novel Exhibitors P. Ltd. (2013) 356 ITR 559 where at paragraph Nos. 41 and 45, it was observed as follows: 41. The aforesaid observations are significant. In the present case, the Tribunal has not held that the jurisdictional preconditions were missing or not satisfied. Reasons to believe have been recorded. Notice has also been issued within the limitation period. The question whether the notice was .....

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45. We may note, the observations of the Supreme Court in Balchand v. ITO (1969) 72 ITR 197 (SC) wherein it was held that in construing a statutory notice, extraneous evidence may be looked into to find out whether the technical defects or lacuna had any effect on the validity of the notice. The facts had revealed that though there were defects in drafting the preamble of the notice, it did not affect its validity as the notice itself clearly informed the assessee that he had to file a return of .....

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he non-mentioning of the block period in the notice would cut at the very root of the assessment proceedings. Learned standing counsel for the revenue placed before us the decision in Shirish Madhukar Dalvi v. Asstt. CIT (2006) 287 ITR 242 / 156 Taxman 79 (Bom.), Smt. Mahesh Kumari Batra v. Jt. CIT (2005) 146 Taxman 67/95 ITD 152 (Asr.) (SB) as well as Sakthivel Bankers case (supra) (255 ITR 144) and submitted that when the assessee had acted on the notice and filed the return knowing fully well .....

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the proceedings contained in section 158BD. On going through the provisions contained under sections 147, 148 and 158BC, the Bombay High Court held that section 158BA refers to jurisdiction of the Assessing Officer to assess undisclosed income in accordance with Chapter XIV-B, whereas Section 158BA(2) is the charging section, section 158BB provides for computation of undisclosed income for the block period, whereas section 158BC provides the procedure for block assessment. In the decision in Sak .....

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cer issuing the notice per se would not defeat the aspect of the persons against whom the notice issued were fully aware of the purpose of issuing notice. 17. In the light of the above said decision of this court as well as in view of the Bombay High Court cited supra, we reject the contention of the assessee that the non mentioning of the block period would defeat the very assessment. Quite apart from this, the assessee participated in the inquiry conducted under section 131 of the Income-tax A .....

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riod as ascertained from the Income-tax Officer and said fact is stated by the assessee in the return filed by him. Thus, when the assessee received the notice issued on 5.8.99, the assessee had no doubt as to the nature of proceedings initiated, the purpose of the said proceedings and the block period for which proceedings were initiated. In the circumstances, it is too late for the assessee to contend that non mentioning of the block period would defeat the assessment proceedings. In the circu .....

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ora has supported the order of the Tribunal and contended that the Tribunal has not committed any error in cancelling the order of the Assessing Officer. He has relied on the decision of the Apex Court in the case of Commissioner of Income-tax v. Braithwaite & Co. Ltd., reported in (1993) 201 ITR 343, where at paragraph Nos. 6, 7, 8 and 9, the apex court has observed as under: 6. The learned counsel for the appellant contended that no part of the term loan of ₹ 50,00,000/- qualified fo .....

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erm loan was payable within the period of seven years. According to him, the period of seven years is obviously a period which is not less than seven years . 7. We are of the view that on the plain reading of the proviso to rule 1(v), Second Schedule it is clear that in order to claim benefit of the said provision the borrowed money has to be repaid during the period of more than seven years. The only interpretation which can be given to the expression during a period of not less than seven year .....

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.1971 and 1.8.1971). Even if the loan was paid back at 11.59 P.M., on 31.7.1971 the period would be less than seven years by one minute. It is, therefore, obvious that the period of not less than seven years can only mean till after the completion of seven years. We, therefore, hold that the repayment of borrowed amount during the period of seven years does not mean repayment during a period of not less than seven years . To claim the benefit under rule 1(v) of the Second Schedule the repayment .....

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ebruary. It was held that not less than means the same as clear and seven whole days must elapse between the day of the notice and the day fixed for sale. In Re Railway Sleepers Supply Company LJ 1885 54 Ch 720, the expression not less than given number of days means clear days . It was held that the expression not less indicates a minimum . 9. In the present case the whole of the term was payable within the period of seven years and as such, the loan of ₹ 50 lakhs taken by the respondentc .....

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in the case of Commissioner of Income-tax v. Micro Labs Ltd. reported in (2012) 348 ITR 75 (Karnataka) to submit that calling upon the assessee to file the return of income within a period of 15 days is in violation of mandatory period of time as stipulated under section 158BC of the Income-tax Act. He has contended that the Karnataka High Court after considering the decision of Bombay High Court in the case of Shrish Madhukar Dalvi v. Asst. CIT (2006) 287 ITR 242, has observed that the defect i .....

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intent and purport of the Act. The period as specified in the Act requires to be strictly complied with. Therefore, the plea of the revenue for a direction to pass fresh orders of assessment after complying with the provisions of section 158BC requires to be rejected. Consequently, question No. 5 is answered in favour of the assessee and against the revenue. 5.2 He has further relied on the decision of the Supreme Court in the case of Assistant Commissioner of Income-tax and another v. Hotel Blu .....

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ounsel for the assessee has relied on the decision of this court in the case of New India Industries Ltd. v. Commissioner of Income-tax reported in 108 ITR 181 where the words within seven years have been interpreted by this court which has been subsequently approved by the Supreme Court in the case of Commissioner of Income-tax v. New India Industries Ltd. reported in 212 ITR 653. 6. We have heard learned counsel for the parties. We are aware of the decision of the Apex Court which has been ref .....

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