1998 (3) TMI 102 - HC - Income Tax

AO can proceed with regular assessments despite prior block proceedings under Section 143(2) and 143(3)

NR. Paper And Board Limited And Others Versus Deputy Commissioner Of Income-Tax

The HC rejected petitions challenging notices issued under section 143(2), holding the AO had jurisdiction to proceed with regular assessments for the ... Seeking to challenge the notices issued u/s 143(2) - time limit provided in section 158BE for completion of block assessment - search and seizure operation - Double Assessment - petitions strongly contended that the Assessing Officer had no jurisdiction to make any assessment order in respect of the returns of income filed by these petitioners in connection with the assessment year 1995-96 and that no notice could have been issued by him under section 143(2) - HELD THAT:- An assessee who had not disclosed and did not intend to disclose income or property, which fact is detected in the search, cannot acquire immunity from being assessed to still other income or property which did not come to surface as his undisclosed income from the evidence found and material available at the time of the block assessment, but is now found by virtue of the enquiry made under section 143(2)(iii) of the Act for regular assessment showing that the assessee had understated the income or had computed excessive loss or underpaid tax even after taking into account the fact that his undisclosed income for the block period was separately assessed and taxed at the higher rate of 60 per cent. was charged thereon. The immunity from levy of penalties attached to the undisclosed income determined in the block assessment have no relevance to the levy of interest and penalties that may follow the regular assessment in respect of understatement of income or computation of excessive loss made by the assessee, which are not relatable to the undisclosed income determined and taxed in the separate proceedings. The essence of the special procedure of Chapter XIV-B is to provide for an assessment of the undisclosed income detected as a result of the search without affecting the regular assessments made or to be made. The special provisions are devised to operate in the separate field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. From the statutory provisions, it therefore clearly emerges that the Assessing Officer can proceed with the regular assessment, which was pending at the time when the block assessment is undertaken for the undisclosed income or is completed. The impugned notices under section 143(2) are in respect of the regular assessment and the Assessing Officer is perfectly within his jurisdiction to proceed with the same as per section 143(3) and make a regular assessment of the total income/loss of the previous year in question as contemplated therein in respect of all these assessees and complete the regular assessments for the said previous year of the assessment year 1995-96 notwithstanding the fact that the said previous year was included in the block period for the purposes of assessment of the undisclosed income and that such assessment was already done and is the subject-matter of challenge before the Tribunal under section 253(1) of the said Act. We are of the view that there is absolutely no merit in these petitions and they are required to be rejected. All these petitions are, therefore, rejected with no order as to costs. Issues Involved:1. Validity of notices issued u/s 143(2) of the Income-tax Act, 1961.2. Jurisdiction of the Assessing Officer to proceed with regular assessment for the assessment year 1995-96.3. Interaction between block assessment under Chapter XIV-B and regular assessment under section 143(3).Summary:Issue 1: Validity of Notices Issued u/s 143(2)The petitioner-assessees challenged the notices issued u/s 143(2) by the Deputy Commissioner of Income-tax, Special Range II, Surat, requiring them to attend his office in connection with the returns of income for the assessment year 1995-96. The court found that the Assessing Officer is within his jurisdiction to issue these notices for regular assessment as per section 143(3) and make a regular assessment of the total income/loss of the previous year in question. The court held that there is no requirement for the Assessing Officer to provide reasons for issuing the notices u/s 143(2).Issue 2: Jurisdiction of the Assessing OfficerThe petitioners argued that the Assessing Officer had no jurisdiction to proceed with the regular assessment for the assessment year 1995-96 as the total income for this year was already computed in the block assessment under Chapter XIV-B. The court rejected this argument, stating that the block assessment of undisclosed income and the regular assessment of total income operate in different fields. The court emphasized that the block assessment does not affect the regular assessments or the orders of appellate or revisional authorities. The court concluded that the Assessing Officer has the jurisdiction to proceed with the regular assessment for the assessment year 1995-96.Issue 3: Interaction between Block Assessment and Regular AssessmentThe court explained that Chapter XIV-B lays down a special procedure for the assessment of undisclosed income detected as a result of search and does not affect the regular assessments. The court noted that the block assessment targets undisclosed income that was not disclosed and would not be disclosed, while the regular assessment assesses the total income or loss of the previous year. The court clarified that there is no overlapping between the block assessment and regular assessment, and both can operate together. The court also addressed the petitioners' concern about double taxation, stating that the assessed undisclosed income is taxed at a higher rate and there is no question of paying tax again in a regular assessment.Conclusion:The court found no merit in the petitions and rejected them, stating that the Assessing Officer is within his jurisdiction to proceed with the regular assessment for the assessment year 1995-96. The court also rejected the petitioners' request for a certificate of fitness for appeal to the Supreme Court, stating that there is no substantial question of law of general importance involved.