Assessee/Appellant/S v. Commissioner Of Income Tax, Central, Patna

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.239 of 2011 ====================================================== Chand Bihari Agrawal, S/o Late Shankarlal Ji Agrawal, 802B, White House,Budh Marg, P.S. Kotwali, P.O.- G.P.O., Patna-800 001, Bihar. ... ... Assessee/Appellant/s Versus 1. Commissioner Of Income Tax, Central, Patna. 2. Assistant Commissioner of Income-Tax, Central Circle-2, Patna ... ... Assessing Officer/Respondent/s ====================================================== Appearance :For the Appellant/s: Mr. Ajay Kumar Rastogi, Senior Advocate Ms. Smriti Singh, AdvocateFor the Respondent/s: Mrs. Arhana Sinha, Sr. S.C., Income Tax. ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHYORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 25-07-2023 1. The questions of law arising for consideration from the order of the Tribunal are re-framed as follows: (i) Whether on the facts and in the circumstances ofthe case, the Tribunal was correct in law inholding that the return filed by the appellant on22.11.2004 is beyond the time limit prescribedunder Section 158BC of the Income Tax Act andhence non-est; when there is no such time limitprescribed therein?the case, the Tribunal was correct in law inholding that the return filed by the appellant on22.11.2004 is beyond the time limit prescribedunder Section 158BC of the Income Tax Act andhence non-est; when there is no such time limitprescribed therein? (ii) Whether in the facts and circumstances of thecase, the Tribunal was correct in distinguishingthe decision of the Hon’ble Supreme Court inAssistant Commissioner of Income-Tax v. HotelBlue Moon [(2010) 321 ITR 362 (SC)] andholding that since the return was not filed withinthe prescribed time, the notice under Section 143(2) of the Income Tax Act is not required to beissued to complete the assessment under Section158BC of the Income Tax Act?case, the Tribunal was correct in distinguishingthe decision of the Hon’ble Supreme Court inAssistant Commissioner of Income-Tax v. HotelBlue Moon [(2010) 321 ITR 362 (SC)] andholding that since the return was not filed withinthe prescribed time, the notice under Section 143(2) of the Income Tax Act is not required to beissued to complete the assessment under Section158BC of the Income Tax Act? (iii) Whether on the facts and in the circumstances ofthe case, the Tribunal was correct in holding thatlack of notice under Section 143(2) of theIncome Tax Act; which is very evident in thesubject case, stands cured by the provisions ofSection 292BB of the Income Tax Act; which, inany event stood inserted after the blockassessment under Section 158BC of the IncomeTax Act was completed?the case, the Tribunal was correct in holding thatlack of notice under Section 143(2) of theIncome Tax Act; which is very evident in thesubject case, stands cured by the provisions ofSection 292BB of the Income Tax Act; which, inany event stood inserted after the blockassessment under Section 158BC of the IncomeTax Act was completed? 2. On the facts leading to the order of the Tribunal ithas to be noticed that a search and seizure was conducted in theresidential-cum-business premises of the appellant on27.02.2003. On the basis of the alleged recovery made, a noticeunder Section 158BC of the Income Tax Act (for brevity, ‘theAct’) was issued on 09/10.12.2003. The appellant was directedto file a return within a period of one month. A further noticeunder Section 142 (1) of the Act was issued on 09.11.2004wherein again the assessee was required to file a return inresponse to the notice issued under Section 158BC issuedearlier. The appellant filed a return on 22.11.2004 declaringundisclosed income of Rs.2,25,000/-. An order was passedunder Section 158BC of the Act determining undisclosedincome of Rs.7,71,955/-. 2. On the facts leading to the order of the Tribunal ithas to be noticed that a search and seizure was conducted in theresidential-cum-business premises of the appellant on27.02.2003. On the basis of the alleged recovery made, a noticeunder Section 158BC of the Income Tax Act (for brevity, ‘theAct’) was issued on 09/10.12.2003. The appellant was directedto file a return within a period of one month. A further noticeunder Section 142 (1) of the Act was issued on 09.11.2004wherein again the assessee was required to file a return inresponse to the notice issued under Section 158BC issuedearlier. The appellant filed a return on 22.11.2004 declaringundisclosed income of Rs.2,25,000/-. An order was passedunder Section 158BC of the Act determining undisclosedincome of Rs.7,71,955/-. 3. The assessment was completed without any noticeunder section 143(2) of the Act, but noticing in the order, thatthe assessee had ultimately filed the return of income in the prescribed form on 22.11.2004. The assessee took up the matterin first appeal before the first appellate authority which turnedunsuccessful as is indicated from Annexure-2. A further appealwas taken to the Tribunal which also stood rejected. TheTribunal found that there is an outer limit of 45 days prescribedfor a notice to the return to be filed under Section 158BC andany return filed after the said period would be non-est, thusenabling the assessing officer to proceed for assessment withoutany further notice under Section 143(2). The Tribunal alsofound that the absence of notice, if at all relevant would standcured going by the provisions of Section 292BB, which thoughbrought into the statute later to the assessment order, was merelya procedural clarification. It was further held that Section292BB gave statutory effect to the principle of waiver andacquiescence; which would apply since the assessee appearedand co-operated in the enquiry relating to the assessmentwithout demur. 4. Hotel Blue Moon (supra) raised a question whetherthe service of notice on the assessee under Section 143(2) of theAct within the prescribed period of time is a pre-requisite toframe the block assessment under Chapter XIV-B of the Act.Chapter XIV-B was argued to be providing a special procedure for search cases and was a complete code in itself dealing withboth the substantive as well as procedural aspects of such cases;which distinguishes it from the procedure for regular assessmentunder Chapter XIV. After noticing the various provisions underChapter XIV-B, the Hon’ble Supreme Court emphasized theprescription in Section 158BC(a)(ii); in respect of searchinitiated or books of account or other documents or any assetsrequisitioned on or after the 1[st] day of January, 1997, for thepurpose of assessment, mandating a notice to such personrequiring him to furnish within such time not being less thanfifteen days but not more than forty-five days, a return in theprescribed form and verified in the same manner as providedunder Section 142(1)(i). In addition, clause (b) of Section158BC requires that the procedure for determination ofundisclosed income for the block period shall be in the mannerlaid down in Section 158BB and the provisions of Sections 142,143 (2) and (3), 144 and 145 shall so far as may be, apply. Acircular of the Central Board of Direct Taxes bearing No.717dated 14.08.1995 ([1995] 215 ITR (St.) 70, 98) was alsonoticed. Clause (e) of the Circular delineated the procedure formaking block assessment; which mandated that the AssessingOfficer shall serve a notice on such person requiring him to furnish within such time, not being less than fifteen days, asmay be specified in the notice, a return in the prescribed formand verified and directs further procedure to determine theundisclosed income of the block period to be under theprovisions of Sections 142, 143(2) & (3) and 144. Hence,though a block assessment under Chapter XIV-B, the procedurefor regular assessment under Chapter XIV has to be followed. Itwas clarified that in the case of default in filing the return andnot complying with the notice under Section 143(2)/142, theAssessing Officer is authorized to complete the assessment exparte under Section 144. Clause (b) of Section 158BC excludesthe application of Section 143(1), which provides for acceptingthe return as provided in Section 143 (1) (a). Section 143(2)becomes necessary only where it is required to check the returnfiled and in cases where block return conforms to theundisclosed income inferred by the authorities, there is noreason, why the authorities should issue notice under Section143 (2). However, if an assessment is to be completed underSection 143(3) read with Section 158BC, notice under Section143(2) should be issued within the time provided and anyomission on the part of the Assessing Officer to issue such anotice under Section 143(2) would be a procedural irregularity; which is not possible to be dispensed with and also not curable.Though the block assessment under Chapter XIV-B of the Act isa complete code in itself, the procedure under Chapter XIV forregular assessment insofar as it is applicable to blockassessments stands incorporated under clause (b) of Section158BC; was the finding. The Circular referred to earlier alsoclarifies the requirement of law in respect of service of notice;under Section 142, 143(2) & (3) of the Act. It was declared that“even for the purpose of Chapter XIV-B of the Act, for thedetermination of undisclosed income for a block period underthe provisions of section 158BC, the provisions of section 142and sub-sections (2) and (3) of section 143 are applicable andno assessment could be made without issuing notice undersection 143(2) of the Act.” 5. It was also held that the words “so far as may be,apply” only mean that the specific provisions mentioned thereinapplies with all its force and not the other provisions of ChapterXIV, dealing with regular assessment. The said declaration oflaw was followed in Commissioner of Income Tax v. LaxmanDas Khandelwal, [(2019) 417 ITR 325 (SC)]; and KiranPrakashan v. Department of Income-Tax, [(2017) 391 ITR 31(Pat)]. 6. On facts it has to be noticed that a notice of hearingunder Section 142(1) was issued on 09.11.2004 requiring theassessee to file a return in response to Section 158BC and theassessee filed the return on 22.11.2004 declaring undisclosedincome of Rs.2,25,000/- and an order under Section 158BC waspassed on 24.02.2005 determining the undisclosed income ofRs.7,71,555/-. It is the admitted case of the parties that a returnwas filed, which was termed to be delayed on the ground thatnotice under Section 158BC of the Act was issued on10.12.2003 requiring the assessee to file a block return within amonth of service of the said notice. The ground on which theappeal was rejected by the Tribunal was also that the blockreturn was not filed by the assessee within the statutory periodlaid down under Section 158BC. 7. We have to examine first whether there is anystatutory period provided under Section 158BC and we extract Section 158BC (a)(i) & (ii) of the Act as under:- “—158BC. Procedure for block assessment.Where any search has been conducted under section 132or books of account, other documents or assets arerequisitioned under section 132A, in the case of anyperson, then,— (a) the Assessing Officer shall— 7. We have to examine first whether there is anystatutory period provided under Section 158BC and we extract Section 158BC (a)(i) & (ii) of the Act as under:- “—158BC. Procedure for block assessment.Where any search has been conducted under section 132or books of account, other documents or assets arerequisitioned under section 132A, in the case of anyperson, then,— (a) the Assessing Officer shall— (i) in respect of search initiated or books of accountor other documents or any assets requisitionedafter the 30th day of June, 1995, but before the1st day of January, 1997, serve a notice to suchperson requiring him to furnish within suchor other documents or any assets requisitionedafter the 30th day of June, 1995, but before the1st day of January, 1997, serve a notice to suchperson requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of accountor other documents or any assets requisitionedon or after the 1st day of January, 1997, serve anotice to such person requiring him to furnishwithin such time not being less than fifteendays but not more than forty-five days,or other documents or any assets requisitionedon or after the 1st day of January, 1997, serve anotice to such person requiring him to furnishwithin such time not being less than fifteendays but not more than forty-five days,as may be specified in the notice a return in theprescribed form and verified in the same manner as areturn under clause (i) of sub-section (1) of section142, setting forth his total income including theundisclosed income for the block period: prescribed form and verified in the same manner as areturn under clause (i) of sub-section (1) of section142, setting forth his total income including theundisclosed income for the block period: 8. Notice under clause (a) (ii) of Section 158BC, as it stands, provides the assessee with a minimum period of fifteendays to file a return and also mandates that the authority shallnot provide for a period in excess of forty-five days. It cannot, atall be said that there is a limitation provided by the aboveprovision to file a return within 45 days. It incorporates theprinciple of a reasonable opportunity and also the need forexpeditious conclusion of proceedings, with respect to theundisclosed income. Thus, ensuring least prejudice to assesseeand the Revenue. The provision mandates that in a notice issuedunder Section 158 BC, the assessee shall be provided aminimum period of fifteen days; which is a reasonable periodfor the assessee to file a return or a maximum period of forty-five days; after which the Assessing Officer can proceed withthe assessment. 9. In the present case, a notice, as we see from the orders on record, provides a time of thirty days to file a returnwhich is in accordance with the above quoted provisions.However, since there is no limitation for filing a return, theassessee cannot be faulted if a return is filed at any time beforethe completion of assessment. The Assessing Officer also, afterthe time provided in the notice, if it is within 15 to 45 days canproceed further if no return is filed. In the present case, asubsequent notice was issued under Section 142(1), which wasresponded with a return filed, within almost twelve days. Theassessment was completed much after, but without issuing anotice under Section 143(2). This is not a case where there wasno return filed, in which event it was also held by the HighCourt of Gujarat in CIT v Devendranath G. Chaturvedi,[(2017) 249 Taxman 0049], that a notice is required underSection 143(2). It was held that in the circumstances when therewas no return filed pursuant to a notice under Section 142(1),there is a requirement for a further notice under Section 143(2),which provision has been made applicable to Section 158BC. 10. We answer the first two questions of law againstthe Revenue and in favour of the assessee. The assessmentcompleted under Section 158BC without a notice under Section143(2) cannot be sustained and the same has to be set aside. However, we notice that the undisclosed income, as disclosedby the assessee, remains on record and is deemed to have beenaccepted by the Assessing Officer, since it has been held inHotel Blue Moon (supra) that though Section 143(1) has notbeen made applicable to assessment under Section 158BC, anotice under Section 143(2) becomes necessary only when thereis a need to check the return filed and not where the block returnfiled conforms to the undisclosed income inferred by theauthorities. Though the facts herein, may not necessarily lead toan inference that the block return conforms with what wascontemplated by the authorities; the absence of notice deems theassessment under Section 158BC to have been completed withthe return filed. 11. So far as the third question of law, we need notlabour much, since Section 292BB only speaks of a notice beingdeemed to be valid in certain circumstances, when the assesseehas appeared in any proceeding and cooperated in any enquiryrelating to assessment or re-assessment. It does not take in thecircumstances of a complete absence of notice; which does notstand cured under Section 292BB, especially in the teeth of suchnotice being found to be mandatory under the Act. We need toonly notice the decision of the Hon’ble Supreme Court in Laxman Das Khandelwal (supra) to find the last question alsoin favour of the assessee and against the Revenue. 12. The questions of law framed having beenanswered against the Revenue and in favour of the assessee, theappeal stands allowed. The assessment order would stand setaside. The assessment is deemed to be completed on the basis ofthe block return filed by the assessee, in response to the noticeunder Section 142(1) of the Act. (K. Vinod Chandran, CJ) (Partha Sarthy, J) Sunil/- AFR/NAFRNAFRCAV DATEUploading Date31.07.2023Transmission Date