TMI Blog2009 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... COMMISSIONER OF INCOME TAX Versus AMAR GUPTA COMMISSIONER OF INCOME TAX Versus ASHOK KHETRAPAL COMMISSIONER OF INCOME TAX Versus PRASHANT KUMAR DASH COMMISSIONER OF INCOME TAX Versus NAREASH KUMAR ARORA COMMISSIONER OF INCOME TAX Versus KHATRI HOTELS PVT. LTD. COMMISSIONER OF INCOME TAX Versus VEENU JEWELLERS ( INDIA ) COMMISSIONER OF INCOME TAX Versus GOVIND RAM GUPTA COMMISSIONER OF INCOME TAX Versus PADAM CHAND GUPTA COMMISSIONER OF INCOME TAX Versus ATUL GLASS INDUSTRIES LTD. BADAR DURREZ AHMED and RAJIV SHAKDHER JJ. ITA.No.200/2008, 1173/2007, 1034/2008, 916/2008, 203/2008, 862/2008, 655/2008, 204/2008, 1139/2008, 1202/2008, 831/2008, 1323/2008, 202/2008, 209/2008, 207/2008, 915/2008 Ms P.L. Bansal with Mr Sanjeev Rajpal and Mr R.D. Jolly with Ms Anshul Sharma and Ms Rani Kiyala For the Appellants. Mr Prakash Kumar in ITA 200/08. Mr Satyen Sethi with Mr Johnson Bara for Respondent in ITA 831/08 and 1034/08 Mr Manu Kumar Giri with Mr Anoop Sharma for the respondent in ITAs 655/08 and 862/08. Ms Aarti Saini for the respondent in ITA 1139/08. Mr M.P. Rastogi for the Respondent in ITA 1202/08. Mr Salil Agga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 158BC. The Assessing Officer also issued the notice under section 142(1), and completed the assessment under section 158BC and section 143(3) of the Act. Admittedly, no notice had been issued under section 143(2). The Gauhati High Court held as under:- "Under Chapter XIV, the powers of assessment under sub-section (3) in determining the total income or loss could be invoked only after service of notices as contemplated under clauses (i) and (ii) of sub-section (2). In the case of block assessment under Chapter XIV-B, where the Assessing Officer does not proceed to make an assessment and determine the tax payable on the basis of the return filed in response to a notice under section 158BC(a), he has to follow the provisions of sub-section (2) of section 143. The requirement of a notice under sub-section (2) of section 143 cannot be dispensed with in a case where the Assessing Officer proceeds to make an inquiry for the purpose of assessment, and determination of taxes payable after issuing notice under section 142(1) as well." "In the instant case, the Assessing Officer did not act upon the return filed in response to the notice issued under section 158BB(a). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return filed by the assessee.The question formulated is answered against the Revenue and in favour of the assessee. Consequent thereupon, the orders passed by the authorities below are set aside. The appeal, accordingly, stands allowed." 4. In view of this decision, the Tribunal accepted the contention advanced on behalf of the assessee that since notice under section 143 (2) of the Income Tax Act, 1961 (hereinafter referred to as "the said Act") had not been issued, the block assessment under section 158 BC of the said Act cannot be upheld and that the same was liable to be quashed. The Tribunal also noted that the department had been given full opportunity to produce evidence in support of the issuance of a notice under section 143 (2), if any, but the Department could not do so. Consequently, the Tribunal, following similar decisions which in turn followed the said Gauhati High Court decision, allowed the assessees appeals. 5. The Revenue, being aggrieved by the said decision and other similar decisions of the Tribunal in the connected matters has preferred these appeals. Mr. Jolly, the learned counsel appearing on behalf of the revenue in some of the appeals, submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under section 143 (2) is not an essential requirement in block proceedings. Consequently, he submitted that the questions be answered in favour of the Revenue and the appeals be allowed. 7. Mrs Bansal who also appeared for the Revenue in some of the appeals made similar submissions with regard to there being a distinction between the procedure of regular assessment under chapter XIV and the procedure of block assessment in search cases under chapter XIV B. She also contended that chapter XIV B of the said act is a self-contained code dealing with the substantive as well as procedural aspects of search cases. Under section 139 an assessee has to file the income tax return voluntarily if he is exigible to income tax. But, under chapter XIV B, there is no provision for filing the return voluntarily. She submitted that in the case of normal assessment if the assessee does not file a return under section 139 (1) then the assessing officer may call upon the assessee to file a return under section 142 (1) (i) of the said act. Where a return is filed either under section 139 or under section 142 (1) and if the assessing officer considers it necessary or expedient to ensure that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the decision to make the block assessment is taken before the filing of the return pursuant to the section 158 BC notice. The submission is that while the notice under section 143 (2) is passed on the filing of a return under section 139, the return filed under section 158 BC (a) is the consequence of search and the assumption of jurisdiction to ascertain undisclosed income. 11. Mrs Bansal submitted that in the case of a regular assessment the interaction with the assessee starts by the assessing officer issuing a questionnaire under section 142 (1)(ii) and (iii). She submitted that section 158 BC(b) prescribed the same manner for determining undisclosed income as is adopted in the case of a regular assessment but this is qualified by the words "so far as may be" which, according to her, means to the extent it is possible and practicable. It was her submission that once this search has been conducted, the assessee is already aware of the block assessment proceeding. She however admitted that for the purpose of observing the principles of natural justice, section 158 BC (b) has prescribed a manner of assessment similar to the manner stipulated for regular assessment. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that when chapter XIV B was introduced the limitation for completion of a block assessment was one year from the end of the month in which the last of the authorisations under section 132 was executed. This was provided in section 158 BE of the said act. From this alone it is apparent that the Legislature never intended to apply the provisions of section 143 (2) strictly in the case of block assessment proceedings and, particularly so, the proviso thereto. 14. She submitted that in the case of a block assessment proceeding if there was some lapse on the part of the assessing officer in the issuance of a notice under section 143 (2) then such lapse would not render the block assessment invalid and would only be a curable irregularity. It was her contention that it is a well-established principle of law that where there is a lapse with regard to some procedural aspect then the same can be cured afterwards and would not render the consequential assessment order null and void. For this proposition she placed reliance on a decision of the Supreme Court in the case of CIT v. Jai Prakash Singh: 219 ITR 77. 15. It was also her submission that once the search is valid and some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing or at least giving an opportunity of hearing to the assessee. The second stream for assessment is when no return is filed pursuant to a section 142 (1) notice. In such an eventuality, the assessing officer proceeds to make the best judgement assessment under section 144 of the said act. The third stream or process of assessment relates to the escapement of income and is initiated through the procedure prescribed under section 147/148 of the said act. This also follows the route of a regular assessment under section 143 (3) of the said Act. Referring to the decision of a division bench of this court in the case of Janki Exports International v. Union of India: 278 ITR 296 (Del), Mr. Aggarwal submitted that the provisions of section 158 BD have been found to be analogous to section 148 insofar as the procedure that is required to be followed is concerned. 19. It was further contended that after a notice under section 158 BC is issued the assessee is required to file a return within the stipulated period. Once the return is filed, it is open to the assessing officer to accept the same or to require further investigation. If he accepts the return of undisclosed income as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that although that decision pertained to the provisions of section 148, the ratio would be applicable to block proceedings also. A reference was also made to the Bombay High Court decision in the case of CWT v. HUF of JM Scindia: 300 ITR 193 (Bom), which was a case under the Wealth Tax Act. In section 17 (1) of the Wealth Tax Act, the expression employed was "and the provisions of this act shall so far as may be apply as if the return was a return required to be furnished under section 14". The Bombay High Court after referring to the decision of the Gauhati High Court in Smt. Bandana Gogoi (supra) was of the view that the language used in section 143 (2) of the said act was similar to the language used in section 16 (2) of the Wealth Tax Act. The Bombay High Court also took the view that two High Courts, Madras and Gauhati, had taken a view that the notice under section 143 (2) was mandatory even in a case of reopening of assessment under section 148 of the said act. Even independently, the Bombay High Court after having examined the scope and effect of sections 14 to 16 on the one hand and section 17 on the other of the Wealth Tax Act was of the opinion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Aggarwal that it is also a well-established principle that when a power is granted to do a certain thing in a certain manner then that thing must be done in that manner or not at all. The consequence of the omission to do the thing in the manner prescribed could be fatal to its validity. For this proposition he placed reliance on the case of Dr. Nalini Mahajan and Others v. Director of Income-tax (Inv.) Others: 257 ITR 123 (Del) as also on Commissioner of Income-tax v. Smt Phoolmati Devi: 144 ITR 954 (All). 25. Mr. Aggarwal summed up his arguments by submitting that the proviso to section 143(2) was applicable to chapter XIV B proceedings. Since section 143(2) was a condition precedent for a regular assessment under section 143 (3) it was equally so for computing undisclosed income. 26. Mr. Ashwini Taneja, advocate, appearing for the respondent assessee in ITA 1139/2008 pointed out that the decision of the Gauhati High Court in Bandana Gogoi (supra) was taken in appeal before the Supreme Court by the Department. However, the special leave petition was dismissed by the Supreme Court on 05.09.2008 on the ground of delay though the question of law was kept open. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hasis supplied) 28. Thus, it was contended that even as per the understanding of the Department the provisions of sub-sections (2) and (3) of section 143 were to apply to block assessment proceedings. 29. The learned counsel appearing on behalf of the respondent/assessee in ITA 1202/2008 referred to the principle of incorporation. In that context he placed reliance on the decision of the Supreme Court in the case of M/s Surana Steels Pvt. Ltd v. The Deputy Commissioner of Income Tax and Ors: 237 ITR 777. The Supreme Court quoted the following passage from the Principles of Statutory Interpretation (7th edition, 1999) by Justice GP Singh:- "Incorporation of an earlier act into a later act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier act into the later. When an earlier act or certain of its provisions are incorporated by reference into a later act, the provisions so incorporated become part and parcel of the later act as if they had been "bodily transposed into it". The effect of incorporation is admirably stated by Lord Escher, M.R.: "if a subsequent act brings into itself by refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis, it depended upon the nature, scope and object of the particular provision. Their Lordships in terms approved a workable test laid down by Justice Coleridge in Holmes v. Russel [1841] 9 Dowl 487 as under: "It is difficult sometimes to distinguish between an irregularity and a nullity; but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection; if he can waive it, it amounts to an irregularity; if he cannot, it is a nullity." Thereafter it was pointed out that a waiver is an intentional relinquishment of a known right, but obviously an objection to jurisdiction could not be waived, for consent could not give a court jurisdiction where there was none. Even if there was inherent jurisdiction, certain provisions could not be waived. What can be waived would be only those provisions which are for the private benefit and protection of an individual in private capacity, which might be dispensed with without infringing any public right or public policy. The learned Chief Justice in terms pointed out that the revenue statutes are based on public policy. The revenue statutes protect the public on the one hand and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in section 158 BC (b) would have to be construed as mandatory or merely directory depending upon what action the assessing officer takes. If the assessing officer accepts the return of undisclosed income as it is then obviously there is no necessity to issue a notice under section 143 (2). However, if the assessing officer does not agree in the first instance with the return of undisclosed income filed by an assessee pursuant to a notice under section 158 BC then the only course left to the assessing officer is to investigate further into the matter and have an interaction with the assessee. This further interaction can only be done by following the procedure of issuance of notice prescribed under section 143 (2). 35. While we do not entirely agree with the analysis that the provision becomes mandatory or directory depending upon what action the assessing officer takes, we are in agreement with the conclusion arrived at by the Gauhati High Court. We are of the view that section 143 (2) is a mandatory provision whether we look at it from the standpoint of a regular assessment or from the standpoint of an assessment under chapter XIV B. If the assessing officer, on receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that there are several distinguishing features between the two processes of assessment. But, this does not enable us to detract from the position that section 158 BC (b) itself requires that the provisions of section 143 (2) be followed. The intention of the legislature is quite clear inasmuch as specific provisions have been mentioned. The qualifying words "so far as may be" have already been construed by us to indicate situations where a notice under section 143(2) would or would not be required. That is a secondary issue. The main point is that section 143 (2) has been specifically incorporated in the scheme of block assessment proceedings and that cannot be ignored. 38. Thus, we are of the clear view that where the assessing officer is not inclined to accept the return of undisclosed assessment filed by the assessee issuance of a notice under section 143(2) is a prerequisite for framing the block assessment order under chapter XIV B of the Income Tax Act, 1961. We are also of the view that if an assessment order is passed in such a situation without complying with section 143(2), it would be invalid and not be merely irregular. 39. Consequently, we answer both the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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