1998 (3) TMI 692 - HC - Income Tax

Validity of Income Tax Act Section 143(2) Notices Confirmed for 1995-96 Assessments

N.R Paper & Board limited & Others Versus Deputy Commissioner of Income Tax

N.R Paper & Board limited & Others Versus Deputy Commissioner of Income Tax - TMI Issues Involved:1. Validity of notices issued under Section 143(2) of the Income Tax Act, 1961.2. Jurisdiction of the Assessing Officer to proceed with regular assessments for the Assessment Year 1995-96.3. Effect of block assessment under Chapter XIV-B on regular assessments.4. Double taxation concerns.5. Applicability of penalties and interest.Issue-wise Detailed Analysis:1. Validity of Notices Issued Under Section 143(2):The petitioner assessees challenged the notices issued under Section 143(2) of the Income Tax Act, 1961, requiring them to attend the office of the Deputy Commissioner of Income Tax, Special Range II, Surat, in connection with the returns of income submitted for the Assessment Year 1995-96. The court held that the Assessing Officer is within his jurisdiction to issue such notices for regular assessment under Section 143(3) to ensure that the assessee had not understated the income, computed excessive loss, or underpaid the tax. There is no requirement for the Assessing Officer to provide reasons for issuing notices under Section 143(2).2. Jurisdiction of the Assessing Officer to Proceed with Regular Assessments:The petitioners contended that the Assessing Officer had no jurisdiction to make any assessment order for the returns of income filed for the Assessment Year 1995-96 since 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 regular assessment of total income are distinct processes. The regular assessment can proceed independently and is not affected by the block assessment.3. Effect of Block Assessment Under Chapter XIV-B on Regular Assessments:The petitioners argued that the block assessment under Chapter XIV-B, which included the Assessment Year 1995-96, precluded any further regular assessment for the same year. The court clarified that the block assessment targets undisclosed income, while regular assessment deals with the total income or loss of a specific year. Both assessments can operate concurrently without overlapping. The court emphasized that the block assessment does not freeze or substitute pending regular assessments.4. Double Taxation Concerns:The petitioners expressed concerns about double taxation if regular assessments were allowed to proceed alongside block assessments. The court dismissed these concerns, explaining that the assessed undisclosed income is taxed at a higher rate of 60% under Section 113, and there would be no question of paying tax again on the same income in a regular assessment. All taxes paid are taken into account and adjusted in regular assessments.5. Applicability of Penalties and Interest:The court noted that no interest and penalties enumerated under Section 158BF can be levied on the undisclosed income determined in the block assessment. However, there is no immunity from other penal provisions such as failure to deduct tax at source, failure to comply with certain sections, failure to furnish information, and failure to pay tax, which may be associated with regular assessments.Conclusion:The court concluded that the Assessing Officer has the jurisdiction to proceed with regular assessments for the Assessment Year 1995-96, notwithstanding the block assessment under Chapter XIV-B. The impugned notices under Section 143(2) were valid, and there was no requirement for the Assessing Officer to provide reasons for issuing them. The concerns about double taxation and penalties were unfounded, as the block assessment and regular assessment operate in distinct fields. The petitions were rejected with no order as to costs, and the request for a certificate of fitness for appeal to the Supreme Court was denied.