2011 (8) TMI 169 - HC - Income Tax

High Court clarifies on block assessment & Limitation Act in Income-tax appeals

Dheeraj Construction & Industries Ltd. Versus Commissioner of Income-tax, Central-XII, Calcutta

The Calcutta High Court reviewed an order under section 260A of the Income-tax Act concerning the addition of amounts in block assessment based on alleged ... Review of earlier order - Search and seizure - Block assessment addition of bogus purchase - Time limitation - the words 'expressly excluded' would mean that there must be an express reference made in the special or local law to the specific provisions of the Limitation Act of which the operation is to be excluded - even in a case where the special law does not exclude the provisions of sections 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the court to examine whether and to what extent, the nature of those provisions or the nature of the subject-matter and scheme of the special law exclude their operation - Held that: - We, consequently, dispose of this application by clarifying our above observation that we never intended to direct the Assessing Officer to bring those transactions within regular assessment after the expiry of the period of limitation prescribed under the Income-tax Act by taking aid of section 14 of the Limitation Act which is not even applicable. Issues:Review of order under section 260A of the Income-tax Act regarding addition of amounts in block assessment based on alleged bogus purchase.Analysis:1. The main issue in the appeal was whether the addition of Rs. 39,78,315 and Rs. 20 lakh based on alleged bogus purchase could be made in block assessment without material from search and seizure.2. The Court held that findings not based on search and seizure material were not liable for block assessment but for regular assessment.3. The application for review challenged an observation in the judgment regarding regular assessment proceedings being barred by limitation under section 149(1) of the Act.4. The Appellant argued that the observation might lead to fresh assessment, while the Revenue contended that fresh assessment could proceed even if barred by time.5. The Court clarified that its observation was not a direction to the Assessing Officer for fresh assessment beyond the scope of the appeal under section 260A.6. The Court discussed the application of the Limitation Act to Income-tax Act appeals and distinguished a previous decision's interpretation.7. Referring to Supreme Court precedents, the Court concluded that the Limitation Act did not apply to the Income-tax Act.8. The Court rejected the previous decision's interpretation and clarified that the Assessing Officer could not reopen regular assessment based on the judgment's observation.9. The application was disposed of, clarifying that the observation did not direct the Assessing Officer to bring transactions under regular assessment post-limitation period, as the Limitation Act was inapplicable.10. No costs were awarded in the matter.Judgment:The Calcutta High Court reviewed an order under section 260A of the Income-tax Act concerning the addition of amounts in block assessment based on alleged bogus purchase. The Court clarified that findings not supported by search and seizure material should be subject to regular assessment, not block assessment. The application for review challenged an observation regarding the limitation period for regular assessment proceedings. The Court rejected the applicability of the Limitation Act to Income-tax Act appeals, emphasizing the Act's self-contained nature. The judgment clarified that the Assessing Officer could not reopen regular assessment based on the observation, as the Limitation Act did not apply. The Court disposed of the application, clarifying that the observation did not direct the Assessing Officer to initiate fresh assessment post-limitation period. No costs were awarded in the case.