TMI Blog2017 (5) TMI 1406X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be open to the ITSC to examine these aspects in the proceedings pending before it. However, it is also clarified that neither ITSC nor any of the parties to the pending proceedings refer to any part of the notices under Section 147 of the Act or the reasons for such reopening as such notices have been quashed by the present judgment of this Court. - W.P.(C) 4623/2001 - - - Dated:- 25-5-2017 - S. MURALIDHAR CHANDER SHEKHAR JJ. Petitioners Through: Mr. Shashwat Bajpai with Mr. Jagjeet Singh Sahani, Advocates. Respondents Through: Mr. Rahul Chaudhary, Senior Standing counsel with Ms. Lakshmi Gurung, Junior standing counsel. O R D E R Dr. S. Muralidhar, J. 1. South Asian Enterprises Limited ( SAEL ) and VLS Finance Limited ( VLS ), Petitioners 1 and 2, respectively, have filed the present petition on 30th July, 2001 under Article 226 of the Constitution of India praying (i) that the impugned notices dated 31st May 2001 issued under Section 148 of the Income Tax Act, 1961 ( Act ) being Annexure A, A-1 and A-2 and B, B-1 and B-2 be quashed and (ii) costs of the petition be awarded. 2. On 16th July 2002, while admitting the petition and expediting i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending, the AO issued the impugned notices to both the Petitioners on 31st May, 2001 under Section 148 of the Act seeking to reopen the assessments for the Assessment Years ( AYs ) 1994-95, 1995-96 and 1996-97. Although the reasons for the reopening were not immediately furnished to the Petitioners, it is submitted no action under Section 147 could lie on the basis of the same material for which even block assessment proceedings could not be legally taken. It is pointed out that for the aforesaid AYs, in the case of both Petitioners, the original assessments were completed under Section 143 (3) of the Act and depreciation was allowed in respect of the cinematographic films. Therefore, there was no question of escapement of any income. Even as regards the income from the lease rent, this was regularly assessed from the AY 199596 to 1999-2000. According to the Petitioners, the re-opening of the assessments was a simple case of change in the opinion on the same facts and material. Under protest both Petitioners filed their respective returns on 27th June 2001 pursuant to the notices issued under Section 148 of the Act. 7. The present petition was thereafter filed on 31st July 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o above and that a notice would have to be issued to the Petitioner in accordance with the law laid down by the Supreme Court. Since this issue is no longer res integra, we need not dilate any further on this. As far as the other issues that have been canvassed before us are concerned, we reserve orders. 10. Consequent upon the said order, fresh notice was issued to the Petitioners under Section 142 (2A) of the Act and another order directing a special audit was passed. 11. As regards the other issue concerning the validity of the block assessment proceedings, the High Court delivered a judgment on 15th December 2006 in W.P. (C) 4685 of 2000 holding that the block assessment proceedings initiated by the Department had not become time-barred and that the Department would have benefit of the period during which proceedings were pending in the High Court, in view of the interim orders passed that remained operative during the pendency of the writ petition. In other words, it was held that the period between 24th August, 2000, i.e., date on which interim order was passed staying special audit direction under Section 142 (2A) dated 29th June, 2000, and 15th December, 2016, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cellaneous Matters on 28th April, 2016. 14. On 28th April, 2016, the Court was informed that the Supreme Court had delivered the judgment in Civil Appeal No. 2667/2007 on that date which was in favour of the Revenue and against the Assessee. In effect, the Supreme Court allowed the block assessment proceedings to continue (which it had earlier stayed during the pendency of the Civil Appeal). Settlement Commission 15. An important development that took place thereafter was that both SAEL and VLS had approached the Income Tax Settlement Commission ( ITSC ) with applications on 1st June, 2016. By its order dated 3rd August, 2016 under Section 245D(1) of the Act, the ITSC, after perusing the order of the Principal Commissioner of Income Tax ( Pr CIT ) came to the conclusion that the Petitioners had satisfactorily explained the manner of deriving the undisclosed income offered in the settlement application. There was no clinching and direct evidence placed on record till then to enable the ITSC to come to the conclusion that the Applicants had not made true and full disclosure of its income in the settlement application. It was also pointed out that the issues raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by Mr. Chaudhary on whether notwithstanding the pendency of the block assessment proceedings under Section 158BC of the Act, notice under Section 147 of the Act could still be issued to an Assessee. The Court would like to confine its examination to the question whether, in the facts and circumstances of the present case, such a course was permissible for the Department to resort to. 19. The facts of the case as already noted show that the impugned notices under Section 147 of the Act were issued to the Petitioners consequent upon the search and seizure operations and subsequent to the issuance to them of the notices under Section 158BC of the Act. In other words, the impugned notices under Section 147 of the Act were issued by the Department even while it was seized of the block assessment proceedings. Notices under Section 158BC (a) of the Act had already been received by the Petitioners on 26th July 1999. They had filed their returns pursuant thereto for the block period 1st April 1988 to 22nd June 1998 on 10th September 1999. The subject matter of the block assessment proceedings, as noted in the order dated 3rd August 2016 of the ITSC, was on the alleged bogus transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but if an effort is made to incorporate the scheme under Chapter XIV of the Act for the purpose of assessment of the block period there is a conflict between the provisions which becomes apparent on a plain reading. In the circumstances, as per the established rules of interpretation, unless and until, a plain reading of the two streams of assessment procedure does not result in the procedures being independently workable, only when the question of resolving the conflict would arise. But to the contrary, in the present case, in the light of the provisions of Section 158BH of the Act, once there is a conflict between the two streams of procedure, as laid down by the Apex Court, the provisions of Chapter XIV-B of the Act shall prevail and have primacy. Thus, viewed from any angle, the stand of the Revenue does not merit acceptance. Once assessment has been framed under Section 158BA of the Act in relation to undisclosed income for the block period as a result of search there is no question of the Assessing Officer issuing notice under Section 148 of the Act for reopening such assessment as the said concept is abhorrent to the special income of assessment of undisclosed income f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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