HIGH COURT OF GAUHATI Applicability of sections 147/148 of IT Act, 1961 to block assessment

Applicability of sections 147/148 of IT Act, 1961 to block assessment

The provisions of section 147/148 will apply to an assessment for a block period made under Chapter XIV-B of the Act.



HIGH COURT OF GAUHATI

CIT

v.

Peerchand Ratanlal Baid (HUF)

ITA No. 19 of 2006

May 15, 2009

RELEVANT EXTRACTS:

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6. Section 147 of the Act is the only provision for reopening of a concluded assessment by the Revenue on its own subject to the fulfillment of the conditions prescribed including those prescribed by Section 153(3). It is on account of our above understanding of the provisions of the Act we have arrived at the conclusion that the purport of the order of the learned Tribunal is what had been indicated by us earlier, namely, that the addition of Rs.13,66,715/- to the undisclosed income of the assessee for the block period could have been made only by giving of a notice under Section 148 of the Act and no such notice having been given the provisions of Section 153 would operate as a legal bar for any such notice to the assessee.



7.The learned Tribunal having found that in the present case no notice under Section 148 of the Act was given/ issued to the respondent assessee though such notice was necessary, the aforesaid conclusion should have ended the controversy before the learned Tribunal. The further question that stood answered by the finding of the learned Tribunal that the provisions of Section 153 of the Act read with Explanation 3 was not followed while initiating the proceeding were really not necessary to be gone into by the learned Tribunal. Whether the limitation for issuing notice under Section 148 of the Act had expired and if so whether such bar of limitation stood lifted under Section 153 of the Act are questions that should have been left to be dealt with by the Revenue at an appropriate stage and time following the finding of the learned Tribunal. Notwithstanding the above as strenuous arguments have been made by the learned counsels for the parties in view of the conclusion recorded by the learned Tribunal, the same will have to be, at least, noticed by the Court.



10. We have given our anxious consideration as to whether we are required to deal with the aforesaid issue dealt with by the learned Tribunal. If the addition made by the Assessing Officer by the order dated 26.3.2003 could have been made only after following the provisions of Section 148 of the Act, a position that we are inclined to accept and no such notice was issued to the respondent assessee it was inappropriate for the learned Tribunal and therefore would be equally inappropriate for the Court to go into the further question as to whether the notice under Section 148 stood barred by limitation. This is particularly so in a situation where the above question was not raised before the learned Tribunal by either of the parties and no arguments had been made on the said question, a fact, evident from a reading of the order dated 17.1.2006 passed by the learned Tribunal. In such circumstances we deem it appropriate not to enter into the said arena and record any finding in that regard.



15.The following principles relevant to the present case can be culled out from the above observations of the Apex Court in Commissioner of Income Tax vs. Suresh N. Gupta (supra):-

A. Each 'previous year' under the Act is a distinct unit of time for the purpose of assessment. For the scheme under Chapter XIV-B, block period is an expanded unit of time comprising of 10/6 assessment years preceding the previous years.

B. The unit of time in both situations above remains constant.

C. It is open for Parliament to treat 10/6 previous years as one unit of time for the purposes of assessment for the block period.

D. The concept of previous year is retained in Chapter XIV-B of the Act.

E. The non-obstante clause in Section 158BA has to be read, in juxtaposition with Section 158BH. If so read other provisions of the Act will be applicable to the scheme under Chapter XIV-B, if no conflict arises upon such application.



16.The above principles adequately take care the view adopted by the Hon'ble High Court of Gujarat that as Section 147 of the Act provides for reassessment of escaped income of any assessment year the said Section cannot have any application to a block assessment which is made for 10/6 years without reference to any particular assessment year.



17.Insofar as the view expressed by the Hon'ble High Court of Gujarat that in course of block assessment following a search all materials are available with the Assessing Officer and therefore the conditions precedent for the exercise of power under Sections 147/148 are not present, we may straightway point out that the aforesaid view does not take care of the situation that has arisen in the present case, details of which have been set out herein above. We, therefore, deem it appropriate to understand that the view expressed in Cargo Clearing Agency (supra) cannot be considered to be comprehensive covering all situations to justify exclusion of the power under Section 147/148 from the provision of the special procedure for block assessments contemplated by Chapter XIV-B of the Act.



18.The question of limitation dealt with by the Hon'ble High Court of Gujarat, in our considered view, has to be understood in the context of the separate period of limitation provided by Section 158BE of the Act for completion of block assessments and not for reopening such assessment for the block period. In the absence of any separate and specific period of limitation for reopening of block assessments in Chapter XIV-B, on the ratio of the judgment in Commissioner of Income Tax vs. Suresh N. Gupta (supra), the provisions contained in Chapter XIV prescribing the period of limitation for reopening of assessment must be understood to be applicable to assessments under Chapter XIV-B of the Act. Such application will not bring in any conflict between the provision of Chapter XIV-B and those contained in Chapter XIV.



19.The exclusion of Section 148 by the first proviso to Section 158 BC(a) of the Act has been understood by us to be in the context of the notice that is required to be issued by the Assessing Officer following action taken under Section 132 and/or Section 132A of the Act, as may be. Such notice, in the fact of a concluded assessment for any of the assessment years included in the block period, may partake the character of reopening such an assessment, to clarify which the first proviso to Section 158BC(a) has been inserted. The question that confronts the Court in the present case is a stage after conclusion of the assessment for the block period whereas the aforesaid proviso deals with the stage of initiation of the block assessment proceeding.



20.Consequently and in the light of the foregoing discussions while dismissing the appeal of the Revenue we deem it proper and appropriate to record our conclusion that the provisions of Section 147/148 will apply to an assessment for a block period made under Chapter XIV-B of the Act. The appeal is consequently dismissed subject to our views as made above.



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