2004 (3) TMI 21 - HC - Income Tax

Court directs firm petitioner to include partner in challenge under Income-tax Act

The court directed the firm petitioner to include a partner in the challenge to the notice under section 158BD of the Income-tax Act, 1961. It emphasized ... Notice issued under section 158BD – petition submitted that within a period of two years from the date of completion of search and seizure ending on November 21, 2000, proceedings could have been initiated against the petitioner under section 158BD. But that having not been done the proceedings, having been initiated on July 24, 2003, are required to be quashed as being time-barred – petitioner submitted that he was called upon to file the return within 15 days of service of notice while under section 158BC, it becomes clear that a notice is required to be served requiring him to furnish the return within such time not being less than 15 days - Further submission is that the notice has been issued on July 24, 2003, and, therefore, the block assessment period should be a block period of six years and not ten years as claimed by the Revenue - Held that the Assessing Officer will consider the provisions and shall pass an appropriate order. Issues:1. Challenge to notice under section 158BD of the Income-tax Act, 1961 by a firm.2. Time-barred proceedings under section 158BD.3. Requirement of satisfaction and reasons recorded by the Assessing Officer.4. Compliance with the provisions of the Act regarding the timeline for filing returns.5. Determination of block assessment period.Issue 1: Challenge to notice under section 158BD by a firmThe petitioner, a firm, challenged a notice dated July 24, 2003, issued under section 158BD of the Income-tax Act, 1961. The court noted that a petition can only be filed by a citizen, not a firm. To rectify this, the court directed the petitioner to include a partner of the firm as a separate petitioner within four days, failing which the petition would be dismissed. This directive aimed to avoid undue delay in the proceedings.Issue 2: Time-barred proceedings under section 158BDThe petitioner argued that the proceedings initiated on July 24, 2003, were time-barred under section 158BD of the Act. The petitioner contended that since the search in another case had been completed more than two years prior, the proceedings against them should be quashed. The court analyzed the requirements of section 158BD, emphasizing the importance of the Assessing Officer's satisfaction regarding undisclosed income. The court highlighted the need for the Assessing Officer to inform the concerned party about the satisfaction recorded and provide an opportunity to object to it.Issue 3: Requirement of satisfaction and reasons recorded by the Assessing OfficerDrawing parallels with section 147 of the Act, the court stressed the significance of the Assessing Officer's satisfaction in initiating proceedings under section 158BD. Citing the case of GKN Driveshafts (India) Ltd v. ITO, the court directed the Assessing Officer to provide reasons for their satisfaction to the petitioner promptly. The petitioner was granted the right to file objections, and the Assessing Officer was mandated to pass a speaking order in response.Issue 4: Compliance with the provisions of the Act regarding the timeline for filing returnsThe petitioner raised concerns about the timeline specified in the notice for filing returns, arguing it did not align with the provisions of the Act. The court urged the Assessing Officer to review the notice and ensure compliance with the stipulated timelines for filing returns under section 158BC.Issue 5: Determination of block assessment periodThe petitioner contended that the block assessment period should be six years, contrary to the Revenue's claim of ten years. The court left it to the Assessing Officer to address this matter in accordance with the law. Consequently, the petition was disposed of, and the interim order was vacated, allowing further proceedings to take place based on the court's directives.