TMI Blog2002 (10) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings, the total unrecorded expenses as per loose leaf papers were as under:-- Sept. 94 to March 95 April 95 to Nov. 95 Purchase of raw material Rs. 1,37,65,918 Rs. 1,85,81,477 Repairs and Maintenance Rs. 22,30,204 Rs. 29,22,504 Factory expenses Rs. 34,59,258 Rs. 36,56,369 ------------------- --------------------- Total Rs. 1,94,55,380 Rs. 2,51,60,350 ------------------- --------------------- 4. During the course of assessment proceedings it was submitted that the above unrecorded expenses pertains to four manufacturing units, viz. (1) M/s Irani Foods Investment Co. Pvt. Ltd., (2) M/s Western India Bakers' Pvt. Ltd., (3) M/s Model Bakers Confectioners and (4) M/s Hygienic Bakery. 5. It was further stated by the assessee that out of the total purchases of raw materials, it is estimated that 40% of such purchases were consumed by M/s. Irani Foods Investment Co. Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings in respect of a block assessment. (2) Assuming that reassessment is possible in respect of block assessment, whether re-opening of the case in the facts and circumstances of the present case meets the requirement of law. (3) Assuming that block assessment can be re-opened and requirements of law are meted with, whether in the facts and circumstances of the present case the disallowance can be made under section 40A(3) of the Act. 11. Shri Dave, learned CIT (DR) argued the first issue. In regard to the second and third issues he relied on the orders of the Assessing Officer. 12. We have considered the various precedents appropos the invocation of the reassessment proceedings. We have also perused the scheme of block assessment. Section 147 authorizes an Assessing Officer to assess or reassess income chargeable to tax, if he has any reason to believe that the said income for any assessment year has escaped assessment. The expression "escaped assessment" clearly connotes a very basic postulate that the income for a particular assessment year went un-noticed by the Assessing Officer and because of it not being noticed by him for any reason, it escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. Order of block assessment is required to be passed with the approval of CIT. As such, it is not open for the Assessing Officer to re-open the assessment. Section 149 speaks about the time limit for notice. No notice under section 148 can be issued after the expiry of the time stipulated in the section. This section cannot be applied in relation to block period. Similarly, time limit for completion of assessment and reassessment, as mentioned under section 153, cannot be fitted with the scheme of Chapter XIV-B. These provisions cannot be applied even mutatis mutandis. Section 158BC speaks about the procedure of block assessment. It is stipulated under sub-section (b) of section 158 that Assessing Officer shall proceed to determine the undisclosed income of the block period laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, shall, so far as may be apply. There is no mention of section 147. In the Circular reproduced at Para 17, it has been mentioned that Assessing Officer shall not be required to issue any notice under section 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undisclosed income for the block period, the provisions of sections 68, 69,69 A, 69B and 69C apply mutatis mutandis. The term "financial year" mentioned in these sections means the relevant financial years falling within the block period. The procedure for making block assessment is laid down in CBDT Circular No. 717 dated 14th August, 1995 as under:-- "(e) Procedure for making block assessment: (i) The Assessing Officer shall serve a notice on such person requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142 setting forth his total income including undisclosed income for the block period. The officer shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall apply accordingly. The Assessing Officer shall not be required to issue any notice under section 148 for the purpose of proceedings under this Chapter. Though the block period can be extended up to ten years in a case where the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is only interested in results. Keeping all this in mind, the special provision was enacted to deal with a case concerning the search operation. 21. Section 158BH prescribes that "save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter". Saving clauses are introduced into Acts to safeguard rights which, but for the savings would be lost and these clauses are seldom used to construe the Act. Saving repugnant to the enactment would be void. When two interpretations are sought to be put upon a provision, that which fits the description which the Legislature has chosen is to be applied. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose they are intended to serve as has been laid down. The provision wholly un-applicable cannot be applied in the guise of a saving provision. 22. Chapter XIV-B enacts a special procedure to deal with the search cases. The assessment pursuant to search cases cannot be equated with the ordinary assessment. The purpose of section 147 is to bring to tax the escaped income. Section 147 is a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 216 ITR 371 (Guj.), it was held that a notice for re-opening of completed assessment after the expiry of four years from the end of the relevant assessment year can be issued only in a case where the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose material facts necessary for assessment. In the present case we find that the assessee did disclose all the material facts necessary for assessment. 25. Assuming that re-opening is possible, Assessing Officer is required to issue the proper notice. Assessment cannot be re-opened without the issuance of proper notice. In the present case we find that Assessing Officer did issue only one notice for all the years. As such, there was no proper notice and the assessment made pursuant to that notice is bad in law. 26. We have also noticed that the case was reopened on the basis of audit party objection. In the present case, apart from the information furnished by the audit party, Assessing Officer did not have any other information for re-opening the assessment. The opinion expressed by the audit party would go to show that they had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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