TMI Blog2000 (10) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of return filed Total income declared Rakesh S. Mardia 21-5-1997 Rs. 4,73,045 Rajeev S. Mardia 21-5-1997 Rs. 4,73,045 Rasik S. Mardia 21-5-1997 Rs. 8,33,325 2.1. Thereafter, the AO issued notices under s. 143(2) of the Act on 15th Dec., 1998, for the first time requiring the assessees to attend the hearing on 18th Dec., 1998, and on the basis of information gathered in the course of assessment proceedings for the block period, the AO determined the total income of these three assessees by passing orders under s. 158BC/143(3) on 29th Jan., 1999 as under: Rakesh S. Mardia Rs. 4,23,01,589 Rajeev S. Mardia Rs. 6,63,41,603 Rasik S. Marda Rs. 3,58,86,901 which inter alia included various additions which were challenged in appeals by the assessees before the learned CIT(A). One of the grounds taken by the assessees before the CIT(A) was validity of the assessment framed by the AO relating to the block assessment years which was challenged by the assessees by taking a specific ground as under: "That the AO has erred in making block assessment without having jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neously rejected the claim of the assessee t hat provisions of s. 143(2) r/w proviso appended thereto apply fully to the block assessment proceedings and as a corollary and consequence, notice under s. 143(2) of the Act issued by the learned AO beyond the period of one year must be held to be without jurisdiction. Accordingly, it was prayed that the block assessment proceedings may kindly be quashed. (2) The CIT(A) has erred in sustaining an addition of Rs. 1,74,632 on account of expenditure of furnishing of the residential house. (3) The CIT(A) has erred in sustaining an addition of Rs. 3,11,000 on account of diamond jewellery belonging to the assessee's wife by treating it as undisclosed income of the assessee. (4) The CIT(A) has erred in sustaining an addition of Rs. 15,000 on account of furniture items treated as undisclosed income for asst. yr. 1997-98. (5) The CIT(A) has erred in sustaining an addition of Rs. 1,16,000 out of Rs. 1,43,000 made by the AO on account of valuable items as undisclosed income of the assessee for asst. yr. 1997-98. (6) The CIT(A) has erred in law and on facts in not allowing rebate of the Act. (7) The CIT(A) has erred in law and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 Returns of income filed. 15-12-1998 Notice issued under s. 143(2). 29-1-1999 Assessments framed. 4.1. It was pleaded that in view of the fact that the assessees have filed the returns for the block period on 21st May, 1997, in response to notices under s. 158BC dt. 3rd April, 1997 and the AO having issued first notice under s. 43(2) on 15th Dec., 1998 which is more than one year from the date of filing, the returns, which is not permitted in terms of proviso to s. 143(2), the assessments made in consequence upon issue of such notice under s. 143(2) must be held to be invalid and consequently without jurisdiction. Reliance was placed on the decisions of the Hon'ble Supreme Court in the cases of CIT vs. Kurban Hussain Ibrahimji Mithiborwala 1973 CTR (SC) 454 : (1971) 82 ITR 821 (SC) and Y. Narayana Chetty vs. ITO (1959) 35 ITR 388 (SC) as well as CIT vs. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC). It was submitted that the reliance of the AO as well as CIT(A) on the non obstante clause in s. 158BA(1) does not lead to a conclusion that the proceedings of Chapter XIV-B are independent of the provisions of Chapter XIV inasmuch as till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period in the manner laid down in s. 158BB. Secs. 158B, 158BA, 158BB and 158BC deal with the procedure to be followed for making the assessment. Sec. 158BC(b) merely states that the AO shall proceed to determine an undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss. (2) and (3) of s. 143 and s. 144 shall, so far as may be apply. Accordingly, it was submitted that the manner and procedure of block assessment has to be that of s. 158BB and the reference to provisions of s. 142, 143(2)/143(3) and s. 144 are only secondary. It was submitted that this merely means that the assessee is required to be heard and given an opportunity to support the income declared by him. It was pleaded that there is no reference to s. 158BC in s. 143(2) and also the proviso appended to it. Accordingly, it was pleaded that the proviso to s. 143(2) lays down time-limit for scrutinizing the return cannot be held applicable to a return filed under s. 158BC. 5.1. It was further submitted that s. 158BE(1)(a) lays down time-limit of one year for completion of assessment therefore insertion of cl. (b) of s. 158BE w.e.f. 1st Jan., 1997, and as such all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashed. Accordingly, it was pleaded that the learned CIT(A) was perfectly justified in the facts and circumstances of the case to hold that the assessments framed by the AO were valid in law. 6. We have considered the rival submissions and have also gone through the orders passed by the AO as well as CIT(A). The relevant provisions of the IT Act which have bearing on the specific ground with regard to the validity of assessments framed by the AO are as under : "Sec. 143(2)—Where a return has been made under s. 139, or in response to a notice under sub-s. (1) of s. 142, the AO shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee is notice requiring him, on a date to be specified therein either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. Sec. 158BC(b)—The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under s. 139(2), 'the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section' What this implies is, in our view, clear. Even after a notice is issued under s. 148, if the ITO proposes to make a variation in the income returned pursuant to such notice which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board, the ITO must forward a draft of the proposed order of assessment to the assessee........... If, therefore, the procedure that is prescribed by s. 144B is to be applied even to assessments and reassessments under s. 147 and, as we have stated, we think it must, having regard to the terms of the provisions of the Act hereinbefore referred to as also because the provisions of s. 144B are intended to safeguard the interest of the assessee, the extended period of limitation prescribed by Expln. 1(iv) to s. 153 must apply. It was submitted on behalf of the assessee that the provisions of s. 144B were not applicable to assessments and reassessment under s. 147 because s. 144B stated that it applied only to 'an assessment to be made under sub-s. (3) of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear falling in the block period including the previous year ending with the date of search or of the requisition. It would be clear from the reading of the above sub-section that after the words "shall, so far as may be, apply" there is modification which lays down that the expression "financial year as used in the said sections shall be construed as reference to the relevant previous year falling in the block period." In other words, the expression "financial year" stands modified for the purpose of invoking provisions of ss. 68 to 69C for the purpose of block assessment. It is important to note that there is no corresponding amendment in ss. 68 to 69C of the Act. Therefore, the objection raised by the learned AO and the learned Departmental Representative that in absence of any mention of s. 158BC in s. 143(2) the proviso is not applicable, is not tenable. (C) In s. 24(11) of the WT Act, there is reference to s. 255 of the IT Act. The relevant provisions read as follows: "(11) The provisions of sub-ss. (1), (4) and (5) of s. 255 of the IT Act shall apply to the Tribunal in the discharge of its functions under this Act as they apply to it in the discharge of its functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engrafts or incorporates the existing provisions to the new provisions either wholly or with modifications. Now if we look the facts of the case before us, there is no such modifications relating to the non-applicability of proviso to s. 143(2) which lays down the time-limit for issuing notice. Therefore, the proviso to s. 143(2) has got to be read along with s. 143(2) and ignoring the proviso which lays down the period of limitation is not predicated. Accordingly, it has to be held that the assessments as made by the AO is barred by limitation. 8. It is seen that the learned AO has inter alia stated that proviso to s. 143(2) of the Act has been rendered redundant and unless in view of the time-limit laid down under s. 158BE(1)(a) of the Act. Now the expression "so far as may be, apply" has been interpreted by the Hon'ble Supreme Court in the case of R. Dalmia Anr. vs. CIT. The Hon'ble Supreme Court in an earlier decision in the case of Banarsi Debi Anr. vs. ITO (1964) 53 ITR 100 (SC) at page 101 inter alia held as follows: "It is a well-established principle of construction of statutes that, where a word or phrase of doubtful meaning has received a clear judicial interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO on the legal ground, it is not considered fair and proper to adjudicate on various other grounds raised by the assessees in their respective appeals as it will be only of an academic nature and also will not be proper in view of the decision of the Nagpur Bench of the Tribunal in the case of Rahul Kumar Bajaj vs. ITO (1999) 64 TTJ (Nag) (SB) 200 : (1999) 69 ITD 1 (Nag) (SB). 11. Before parting, we may point out that Chapter XIV and Chapter XIV-B operate in different planes relating to the assessments of undisclosed income. If on the basis of material found during the course of search it is gathered that the assessees have concealed the income by furnishing inaccurate particulars or by claiming fictitious expenditure in the regular books of account, then the proceedings can be reopened and assessments framed under Chapter XIV as per the provisions contained in that Chapter if the facts and circumstances of the case so justify in view of the decision of the Gujarat High Court in the case of N.R. Paper Board Ltd. Ors. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj). 12. In the result, all the three appeals are allowed. - - TaxTMI - TMITax - Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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