TMI Blog2005 (5) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of block assessment and is holding that the notice was substantially in conformity to the law. 3. The CIT(A) has erred in the facts and circumstances of the case in upholding the charging of interest under s. 158BFA of the IT Act, 1961. 4. Because the assessment made against the appellant is bad in law, without jurisdiction, illegal, contrary to the law." 2. We have heard the parties. 3. The brief facts relating to the issues involved in this appeal and as have been revealed from the records are that the Trade Tax Authorities (Mobile Squad) Mathura, UP, had apprehended the assessee, Shri Kishore Agrawal along with one Shri Jagmohan Yadav, while travelling in a vehicle and had seized silver ornaments weighing 361.643 kgs. valued at Rs. 14,21,224. 3.1 Thereupon, it seems that the Trade Tax Authorities (Mobile Squad), Mathura, had passed this information to the Director of IT (Inv.), New Delhi, who, on 17th Oct., 1997, issued a warrant of requisition in exercise of his powers under s. 132A of the Act, 1961, and seized the silver ornaments. 3.2 Notices under s. 158BC of the Act were issued by the Dy. CIT, Circle-I, Mathura, in the case of Shri Kishore Kumar Agrawal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch warrant could not be sustained under law. The block assessment in the present case was, therefore, illegal. Furthermore, it is submitted that the provisions of r. 112D had not been followed in this case. The appellant was not given a copy of requisition along with the copy of warrant as required by r. 112D(2). The appellant was not afforded any opportunity to be present at the time of seizure and to place his seal as required by sub-r. (3). Nor he was furnished the list as required in the sub-rule. These were not mere insignificant lapses but had serious impact not only on the right of citizen but even otherwise on assessment proceedings, the action in the case was liable to be annulled on this ground also. 1.3.2. The appellant has also referred to the mistakes in the notice issued under s. 158BC on 6th Jan., 1998. The appellant has expressed reservations against notice of the AO requiring to file the return within 15 days because according to him, s. 158BC(a) clearly provided such time to be not less than 15 days and not more than 45 days. It is the case of the appellant that the period of not less than 15 days could not be equal to the period within 15 days, as had been prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case have been considered. It may be remarked that though the appellant has made specific objections against issue of warrant of authorization of s. 132A by Director of IT (Inv.), Delhi, but in this regard, it may suffice to observe that since there was no provision in s. 246A to challenge the validity of such a warrant, no adjudication on the same could be made in this appellate order. So far as errors and omissions in the issue of notice for the block assessment are concerned, I am in agreement with the AO that in view of the s. 292B and there being no reason for which such notice may have created irreparable harm to the assessee, it could not be said that there was any such grave error on the part of the AO on account of which the proceedings deserved to be annulled. With these remarks, the appeal is proceeded to be disposed of on its merit." 4. The assessee is aggrieved. 5.1 It was in view of the above facts and circumstances of the case, that the learned counsel for the assessee, after drawing our attention to the provisions of s. 132A and the Notification No. S.O. 703 (E) (F. No. 187/4/1989-ITA-1) dt. 6th Sept., 1989 and Notification F. No. 4151 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this purpose, relied on the decision of Tribunal, Allahabad Bench, in the case of Monga Metals (P) Ltd. vs. Asstt. CIT. 5.4 Validity of notice under s. 158BC of the Act, since reproduced above, was further challenged on the ground that the AO by requiring the assessee to furnish the return for undisclosed income "within 15 days of the service of notice" has contravened the mandatory requirement of provisions of s. 158BC(a), according to which a period of not being less than 15 days is to be allowed. Explaining further, the learned counsel for the assessee submitted that the terms "within 15 days" and "not being less than 15 days" are different and they represent different terms. According to the earlier term, the 'act' is to be done before the expiry of 15 days, whereas according to the second type of term, is to be done after the expiry of a period of 15 days. In view of this explanation, the learned counsel for the assessee submitted that since in the notice under s. 158BC of the Act issued to the assessee, the period allowed is less than 15 days (because the AO has mentioned the period is "within 15 days"), the notice in question is invalid and bad in law. 5.5 The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o annexed shall exercise their power;; vested in them under S. 132 of the said Act and perform their functions relating thereto in respect of the territorial areas of whole of India; (ii) directs that the Directors specified in column (2) of the Schedule hereto annexed shall exercise their powers vested in them under all other provisions of the said Act (other than s. 132) and perform their functions relating thereto in respect of the territorial areas specified in the corresponding entries in column (3) of the said Schedule; (iii) authorizes the Directors specified in column (2) of the Schedule hereto annexed to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the IT authorities who are subordinate to them, in respect of such territorial areas as may be specified in such orders. 2. This notification shall come into force with immediate effect. Sd/ (Anand Kishore) Under Secretary to the Government of India" Schedule to above notification: -------------------------------------------------- S. Designation of Territorial areas No. Directors -------------------------------------------------- 1. Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is quite clear that jurisdiction over the assessees in the States of UP and Bihar with respect to subject-matter involved in s. 132A of the Act was with the Director of IT (Inv.), Kanpur and not with Director of IT (Inv.), Delhi, who had the jurisdiction only over the assessees of Union Territory of Delhi, meaning thereby that the Director of IT (Inv.) of Delhi had no jurisdiction to issue warrant of requisition with respect to the assessees in the State of UP or with respect to material seized in the State of UP and by the authorities or the Courts situated in the State of UP. 9. The aforesaid conclusion is further supported by a clarificatory Notification F. No. 415/11/1986- IT (Inv.1) dt. 5th Oct., 1989 in which it has been claimed that All India Jurisdiction given to Director General or Directors of IT (Inv.) is with reference to s. 132 of the Act only. This notification reads as under: "F. No. 415/11/1986-IT (Inv. I) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 5th Oct., 1989 To, Shri C.v. Padmanabhan Director of IT (Inv.) Hyderabad Sir, Sub: Jurisdiction of the Directors General of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ura) to handover I the goods to him was illegal and bad in law for want of jurisdiction. 11. Having held the warrant of requisition as bad in law for want of jurisdiction, we have no option, but to hold, in view of the settled principles of law, that all subsequent proceedings including the proceedings under s. 158BC of the Act as well as consequential assessment of block period were illegal and bad in law and void ab initio. 12. Coming to the validity of notice under s. 158BC of the Act, we would like to discuss the validity of notice in the light of assessee's objection that a mandatory period of more than 15 days has not been allowed. 13. We have considered the rival submissions and facts and circumstances of the case. Similar issue had come up for consideration of Tribunal, Agra Bench, "SMC" Agra and also by the Tribunal, Delhi Bench "E", which we would like to discuss as below. (i) Decision of Tribunal Agra Bench, "SMC" Agra In the case of Vinod Kumar, Ram Kumar Agarwal, Kishan La1, Subhash Chand Sharma Satish Chand vs. Asstt. CIT in IT(SS)A Nos. 1, 2, 3, 4 and 51 Agr/2003, for block period 1st April, 1991 to 16th Feb., 2001, dt. 30th June, 2004 (unreported) The is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id notice under s. 158BC of the Act is served upon the assessee (in accordance with the provisions of law) the AO cannot have jurisdiction to proceed to make assessment of block period. I am, therefore, of the opinion that the requirement of service of a valid notice under s. 158BC is a prerequisite mandatory condition for the AO to proceed to make an assessment of block period. 13.2 Even otherwise, I am of the opinion that every notice requiring the assessee to furnish the return of income or of wealth is of mandatory nature, i.e., the valid service of a valid notice, requiring the assessee to furnish the return of income or wealth is prerequisite mandatory requirement for an AO to proceed with the assessment proceedings. Meaning thereby that unless and until this requirement is fulfilled, the AO has no jurisdiction to proceed further for making an assessment. 14.1 Corning to the question No.2, the terms 'not being less than ........ days' and 'within ....... Days' had been the subject-matter of discussion by the Hon'ble Supreme Court as well as various High Courts in the following cases: (i) CIT vs. Braithwaite Co. Ltd. (1993) 110 CTR (SC) 290 : (1993) 201 ITR 343 (SC), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase under r. l(v): (ii) that, however since the Department had not challenged the order of the Tribunal granting relief to the respondent to the extent of Rs. 16 lakhs, only the balance of Rs. 34 lakhs could not be included in the capital base of the respondent-company. Decision of the Calcutta High Court in Braithwaite Co. (India) Ltd. vs. CIT (1978) 111 ITR 825 (Cal) reversed On this point.' 14.1 (b) In case of New India Industries Ltd., the Hon'ble Supreme Court again had a chance to consider the term 'during a period of not less than seven years' as appearing in the proviso to cl. v of r. 1 of Sch. II to the Companies (Profits) Surtax Act, 1964. The headnote reads as under: 'The decision of the Gujarat High Court in New India Industries Ltd. vs. CIT (1977) 108 ITR 181 (Guj) at pp. 205-206, was, inter alia, to the effect that the legislature had in the proviso to cl. (v) of r. 1 of Sch. II to the Companies (Profits) Surtax Act, 1964, provided an outer limit to the repayment of the loan (to be included in the computation of capital) by using the words 'not less than seven years' and that 'therefore, if the spreadover of the repayment has been provided in the terms of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay when the provision of the statute under which the notice is served is that the assessing authority may serve a notice on a person requiring such person to furnish a return within such period, not less than thirty days, as may be specified in the notice, is not a valid notice. The mere fact that the person upon whom such a notice was served, furnished a return the next day, would not prevent him from objecting to the validity of the notice on the ground that it did not comply with the law. The issue of a valid notice is a condition precedent to the assumption of jurisdiction to reassess escaped income under s. 34.' 15.1 These two terms were also the subject-matter of consideration by the Hon'ble High Court of Bombay in case of Asstt CIT vs. Ekbal Co. (1945) 13 ITR 154 (Born) during the course of consideration of validity of notice under s. 22(2) of 1992 Act. The question for consideration of the Hon'ble High Court was as to whether a notice given under s. 22(2) of the Act requiring the assessee to furnish the return of income 'within thirty days' of the receipt of the notice as against the required period of 'not being less than thirty days' was an invalid notice? 15.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... divided. There is no fraction of second, which is so short in duration that it cannot be divided into something smaller. In my judgment, expressions 'within thirty days' and 'not less than thirty days' are two quite different things. 'Within thirty days' is within two points of time, one at which the period begins and the other at which it expires. On the other hand, 'not less than thirty days' is outside these two points of time. There must be an interval of not less than thirty days and that means thirty days clear. The period must continue beyond the expiration of the stated time. Whereas 'within' the stated period must mean what it says, something less than the moment of expiration. In my opinion, therefore, the notice is invalid and the question referred to must be answered in the negative. The CIT must pay the costs of the reference.' 15.3 (b) Justice Kania agreed with the findings of Hon'ble Chief Justice by observing as under: '1. I agree s. 22(2) provides that in the notice given to the assessee to furnish his return, a particular period must be given to him. The sub-section further provides for such period 'not being less than thirty days'. Reading the section by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that a notice under s. 41 was issued to the assessee in respect of the asst. yr. 1962-63 on 7th March, 1967, and was enclosed along with another notice bearing the same date. As per the notice, the assessee was called upon to produce his books and other documents on 25th March, 1967 and to show cause as to why he should not be assessed under s. 41 and why penalty for non-submission of returns should not be imposed. The assessee attended before the Agrl. ITO on the 25th March, with his books and documents. On the 27th of March, 1967, he submitted his returns. On 31st March, 1967, the Agrl. ITO passed an order of assessment. In express terms it began by stating that it was an order of assessment under s. 41 r/w s. 23 of the said Act for the accounting period in question. Throughout the order for the purpose of arriving at the taxable agricultural income of the assessee what was referred to were the books of account produced by the assessee in pursuance of the first of the said two notices dt. 7th March. 1967. It was only after the agricultural income of the assessee had been assessed and the amount of tax payable by him determined that while discussing the question whether penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm 'a period not being less than fifteen days' and the term 'within a period of fifteen days' are altogether not only different but effect the jurisdiction of the authorities as well as the rights of subjects. The earlier term, i.e., the term 'a period not being less than..... days' specifies that the period allowed will be more than the number of days, i.e., it will start after the expiry of the number of days mentioned therein whereas the later term, i.e., 'within a period of..... days' specifies that the period allowed will end at the click of last minute of the last day. This difference, in my opinion, in these two terminologies is of a great significance because it may affect the jurisdiction of the authorities and also the rights of the subjects. If an authority is permitted to do an act or to initiate a proceeding 'within' a certain period, the moment the period is over the authority get divested of his powers to do that act or to initiate that proceeding. Similarly if an assessee is to act 'within' a certain period and fails to act, the moment the period is over the assessee loses right to act. For example if the AO fails to serve a notice under sub-s. (2) of s. 143 before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of s. 158BC contained in Chapter XIV-B, the AO was under statutory obligation to serve a notice to a person in whose case search had been initiated and books of account or other documents or any assets requisitioned on or after the first day of January, 1997, requiring him to furnish a return in the prescribed form and verified in the prescribed manner setting forth his total income including the undisclosed income for the block period within such time not being less than fifteen days but not more than forty-five days. In the present case, the AO, however, issued the notices under s. 158BC on 7th Dec., 2001 requiring the assessees to file their returns of undisclosed income for the block period within fifteen days of the service of the said notices. The expression used by the AO in the said notices is 'within fifteen days' and the question for consideration before us is whether there was a proper compliance by the AO of the statutory requirement contained in s. 158BC(a)(ii) which requires the AO to allow a period 'not being less than fifteen days'. 8. It is observed that similar issue arose for consideration before the Supreme Court in the case of CIT VS. Braithwaite Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y usefully refer to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Ramsukh Motilal (1955) 27 CTR 54 (Born) wherein it was held by their Lordships of the Bombay High Court that if a notice permitted the assessee to comply with the requirement of s. 22(2) of 1922 Act within a period which is less than thirty days, the same was clearly illegal and the assessee cannot be said to have waived such illegality merely because the return was actually filed by him after such a minimum period prescribed in the statute. As such, considering all the facts of the case as well as the legal position emanating from the aforesaid judicial pronouncements, we hold that the notices issued in the present cases under s. 158BC not allowing the assessees the minimum required time prescribed in the relevant provisions to file their returns for the block period were bad in law and consequently, the assessments made in pursuance of the same were invalid and are liable to be quashed." 14. In view of facts and circumstances of the case, provisions of s. 158BC of the Act and following the decisions of Tribunal, Agra Bench "SMC" and Tribunal, Delhi Bench "E", we are of the opinion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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