The Commissioner Of Income Tax, Faridabad v. Sh. Naveen Verma

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH (1) ITA No. 558 of 2006 Date of Decision: 1.2.2011 The Commissioner of Income Tax, Faridabad ....Appellant. Versus Sh. Naveen Verma ...Respondent. (2) ITA No. 342 of 2009 Date of Decision: 1.2.2011 The Commissioner of Income Tax, Faridabad ....Appellant. Versus Sh. Naveen Verma ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the revenue. ADARSH KUMAR GOEL, J. 1. Since the Registry has not been able to send the files on account of fire in the Court premises, learned counsel for the revenue has furnished paperbooks which are taken on record. We proceed to decide the matter afterhearing learned counsel for the revenue. 2. Both the above appeals are inter-connected as ITA No. 558 of 2006 is onthe issue of quantum while ITA No. 342 of 2009 is on the issue of penalty. 3. ITA No. 558 of 2006 has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against order dated28.2.2006 passed by the Income Tax Appellate Tribunal, Delhi Bench “B”,New Delhi, in ITA No. 8/DEL/2005 for the Block Period from 01.04.88 to16.04.99. Learned counsel for the revenue fairly states that even thoughthree questions were initially claimed, this Court admitted the appeal onlyon the following two questions declining the third question at the time ofadmission on 2.3.2007:- “(i) Whether the Hon'ble ITAT was right in holding that the notice u/s 158BD becomes defective merely because theAO has allowed less than 15 days time to file the return? (ii) Whether the Hon'ble ITAT, having held the notice u/s158BD to be defective, erred in holding that the defectwas not curable u/s 292B of the Act?”158BD to be defective, erred in holding that the defectwas not curable u/s 292B of the Act?” 4. A search and seizure operation was carried on at the residence of Sh.Subhash Verma and Krishna Verma and on the basis of the material found,notice under Section 158BD was issued to the assessee. The assessee didnot file any return. The Assessing Officer on the basis of material found,made assessment under Section 158BD read with Section 158BC(c)/144assessing undisclosed income to be Rs.1,20,14,405/-. The addition waspartly upheld by the CIT(A) against which cross appeals were filed beforethe Tribunal by the assessee as well as the revenue. The Tribunal allowedthe appeal of the assessee holding that the assessment proceedings arevitiated for the assessee having not been given clear period of 15 days forfiling the return. 5. We have heard learned counsel for the appellant. 6. Learned counsel for the appellant submits that even if the period specifiedin the notice was less than 15 days, there was no prejudice as the assesseenever filed the return even beyond the specified in the notice and in theperiod legally allowed to him. In any case, the Tribunal could, at best give further opportunity to the assessee to file return instead of holding theassessment proceedings to be vitiated and thereafter closing the matter. Thedefect in the notice pointed out by the Tribunal is curable under Section292B of the Act. 7. In order to appreciate the submissions, the relevant provisions of the Actare reproduced below:- “158BC(c). The Assessing Officer, on determination of theundisclosed income of the block period in accordance with thisChapter, shall pass an order of assessment and determine thetax payable by him on the basis of such assessment.” further opportunity to the assessee to file return instead of holding theassessment proceedings to be vitiated and thereafter closing the matter. Thedefect in the notice pointed out by the Tribunal is curable under Section292B of the Act. 7. In order to appreciate the submissions, the relevant provisions of the Actare reproduced below:- “158BC(c). The Assessing Officer, on determination of theundisclosed income of the block period in accordance with thisChapter, shall pass an order of assessment and determine thetax payable by him on the basis of such assessment.” “158BD. Where the Assessing Officer is satisfied that anyundisclosed income belongs to any person, other than theperson with respect to whom search was made under section132 or whose books of account or other documents or anyassets were requisitioned under section 132A, then, the booksof account, other documents or assets seized or requisitionedshall be handed over to the Assessing Officer havingjurisdiction over such other person and that Assessing Officershall proceed under section 158BC against such other personand the provisions of this Chapter shall apply accordingly.” “292B. No return of income, assessment, notice, summons orother proceeding, furnished or made or issued or taken orpurported to have been furnished or made or issued or taken inpursuance of any of the provisions of this Act shall be invalidor shall be deemed to be invalid merely by reason of anymistake, defect or omission in such return of income,assessment, notice, summons or other proceeding if such returnof income, assessment, notice, summons or other proceeding isin substance and effect in conformity with or according to theintent and purpose of this Act.” 8. The above provisions are statutory recognition of principles of naturaljustice which are applicable to assessment proceedings under the Act. Theeffective party is entitled to the fair opportunity and the assessment beingmade by a fair procedure, minimum period of 15 days has been specifiedstatutorily. At the same time, the effect of violation of principles of naturaljustice is not to always nullify the exercise of jurisdiction but to ensure thatthe compliance of such principles is made unless prejudice is caused. Whereperiod specified in the notice is less than the statutory period, no prejudiceis caused unless the assessee takes steps within the statutory time. Thenotice specifying lessor period can be read as specifying the statutoryperiod, this principle is duly recognized under Section 292B of the Act.Reference in this regard is being made to the judgments of the Hon'bleSupreme Court in .....1992 (4) SCT 727. The matter has also been recentlyconsidered by this Court in ______________________ wherein it was held that 9. In view of the legal position, the questions raised have to be answered in favour of the revenue. Accordingly, the appeals are allowed. The order of the Tribunal is set aside and the matter is remanded to the Tribunal for fresh decision on merits in accordance with law. 10. A photo copy of this order be placed on the file of the connected case. (ADARSH KUMAR GOEL)JUDGE February 1, 2011 (AJAY KUMAR MITTAL) gbs JUDGE connected case. (ADARSH KUMAR GOEL) JUDGEFebruary 1, 2011 (AJAY KUMAR MITTAL)gbsJUDGE In State Bank of Patiala v. S.K.Sharma, (1996) 3 SCC 364, after consideringthe case law on the point, it was concluded:- Para 33(3) In the present case, the tribunal held as under:- “In view of the above provisions contained under section158BC(a), the notice is to be served upon the assessee, requiring him tofurnish the return within such time not being less than 15 days. Theprovision is unambiguous and clear. The intention of the legislature in usingthe words ‘not less than 15 days’ is clear. The rule of literal constructfollowed for ascertaining the plain meaning of the terms used. There being (ADARSH KUMAR GOEL)JUDGE February 1, 2011 (AJAY KUMAR MITTAL) gbs JUDGE connected case. (ADARSH KUMAR GOEL) JUDGEFebruary 1, 2011 (AJAY KUMAR MITTAL)gbsJUDGE In State Bank of Patiala v. S.K.Sharma, (1996) 3 SCC 364, after consideringthe case law on the point, it was concluded:- Para 33(3) In the present case, the tribunal held as under:- “In view of the above provisions contained under section158BC(a), the notice is to be served upon the assessee, requiring him tofurnish the return within such time not being less than 15 days. Theprovision is unambiguous and clear. The intention of the legislature in usingthe words ‘not less than 15 days’ is clear. The rule of literal constructfollowed for ascertaining the plain meaning of the terms used. There being nothing in the language adopted, no other construction except that a clearnotice of more days is to be given, is possible. 10.3. The contention of learned DR that if a notice does not provide a periodclear 15 days, that is merely an irregularity, which is curable is notacceptable in view of specific provision of law referred to above whichcasts a specific obligation upon Assessing Officer. When the law requires aparticular act to be done in a particular manner and within a particular time,then on addition, subtraction or modification of such requirement ispermissible. If the requirement of law is clear, the authorities cannot beallowed to subvert the provision by curing such an irregularity. Therequirement of giving notice under section 158BC is a precondition formaking assessment. No assessment under section 158BC or 158BD can bemade without issuing a statutory notice as provided in section 158BC. Thenotice of less than 15 days is equal to no notice. As no assessment can bemade under section 158BC in absence of notice, the assessment made byissuance of notice otherwise than in accordance wqith the provsiosn fo law,has to be treated on the same footing i.e. without notice. If the AssessingOfficer cannot cure the irregularity in relation to non issuance of notice, heequally cannot cure the irregularity in relation to a notice which is ot inaccordance with the provisiosn fo law i.e. notice providing a lesser periodthan the prescribed clear period of 15 days. Thus, the argument of theleqarned DR fails on this count also.” We are of the view that the Tribunal erred in concluding thatfailure to give notice of 15 days will vitiate the assessment itself without considering the prejudice to the assessee. Total absence of notice may be ondifferent footing but if notice is duly serviced, the assessee can either availof the statutory time for filing of the return irrespective of shorter periodmentioned in the notice or can be given fresh opportunity if it is held thatthe assessee suffered prejudice on account of shorter period mentioned inthe notice. In any situation,it is not permissible to quash the assessmentproceedings merely on the ground that period mentioned in the notice waslesser than the statutory period specified under Section 158BC(a). This extract is taken from State Bank of Patiala v. S.K. Sharma, (1996) 3 SCC 364, at page 390 : considering the prejudice to the assessee. Total absence of notice may be ondifferent footing but if notice is duly serviced, the assessee can either availof the statutory time for filing of the return irrespective of shorter periodmentioned in the notice or can be given fresh opportunity if it is held thatthe assessee suffered prejudice on account of shorter period mentioned inthe notice. In any situation,it is not permissible to quash the assessmentproceedings merely on the ground that period mentioned in the notice waslesser than the statutory period specified under Section 158BC(a). This extract is taken from State Bank of Patiala v. S.K. Sharma, (1996) 3 SCC 364, at page 390 : (3) In the case of violation of a procedural provision, the positionis this: procedural provisions are generally meant for affording areasonable and adequate opportunity to the delinquentofficer/employee. They are, generally speaking, conceived in hisinterest. Violation of any and every procedural provision cannot besaid to automatically vitiate the enquiry held or order passed.Except cases falling under — “no notice”, “no opportunity” and“no hearing” categories, the complaint of violation of proceduralprovision should be examined from the point of view of prejudice,viz., whether such violation has prejudiced the delinquentofficer/employee in defending himself properly and effectively. If itis found that he has been so prejudiced, appropriate orders have tobe made to repair and remedy the prejudice including setting asidethe enquiry and/or the order of punishment. If no prejudice isestablished to have resulted therefrom, it is obvious, nointerference is called for. In this connection, it may be rememberedthat there may be certain procedural provisions which are of afundamental character, whose violation is by itself proof ofprejudice. The Court may not insist on proof of prejudice in suchcases. As explained in the body of the judgment, take a case wherethere is a provision expressly providing that after the evidence ofthe employer/government is over, the employee shall be given anopportunity to lead defence in his evidence, and in a given case, theenquiry officer does not give that opportunity in spite of thedelinquent officer/employee asking for it. The prejudice is self-evident. No proof of prejudice as such need be called for in such acase. To repeat, the test is one of prejudice, i.e., whether theperson has received a fair hearing considering all things. Now, thisvery aspect can also be looked at from the point of view of directoryand mandatory provisions, if one is so inclined. The principle statedunder (4) hereinbelow is only another way of looking at the sameaspect as is dealt with herein and not a different or distinctprinciple. Disclaimer: The text is computer generated. The user must verify the authenticity of the extractedportion with the original in Supreme Court Cases. This extract is taken from State Bank of Patiala v. S.K. Sharma, (1996) 3 SCC 364, at page 389 : 33. We may summarise the principles emerging from the abovediscussion. (These are by no means intended to be exhaustive and areevolved keeping in view the context of disciplinary enquiries andorders of punishment imposed by an employer upon the employee): Disclaimer: The text is computer generated. The user must verify the authenticity of the extractedportion with the original in Supreme Court Cases.