TaxTMI 
TaxTMI 
2010 (7) TMI 606
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.... after getting the approval of the Addl. CIT, Cen. Range, Baroda and after thorough examination of all the relevant seized materials, bank transactions, etc. and hence granting of one more innings to the Department is totally unwarranted and unjustified in law. (4) That on facts and in law the original order not being erroneous and prejudicial to the interest of revenue, the order passed by the ld. CIT-III, Baroda under section 263(1) of the Income-tax Act, 1961 deserves to be quashed. 2. The only issue involved in the appeal is whether ld. CIT was justified in cancelling the order passed under section 158BC of the Assessing Officer, under section 263 and directing him to pass fresh assessment by examining all the bank transactions. 3. The facts of the case are that search under section 132(1) was conducted at the premises of the assessee and her group on 13-8-2002. In response to notice under section 158BC assessee filed return of undisclosed income at Rs. 1,48,500. It included the undisclosed income and deposits in S.B. account No. 23743 of Bank of Baroda, Bharuch. The Assessing Officer accepted the returned undisclosed income by observing as under :- "2. The fi....
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....hand. Thus the order dated 30-18-2004 (sic) passed in your case under section 158BC r.w.s. 158BG is erroneous insofar as it is prejudicial to the interest of revenue. 3. You are hereby given an opportunity of being heard and show cause as to why the order passed by the Assessing Officer should not be enhanced or cancelled by directing him to make fresh assessment in accordance with law. 4. You are requested to appear before the undersigned either personally or through your authorised representative on 14-3-2007 at 11.30 P.M (sic) at my office in room No. 215, 2nd floor, Aayakar Bhavan Annexe, Race Course Circle, Baroda along with all the supporting evidence on which you wish to rely upon in this regard. In case of non-compliance it will be presumed that you have nothing to say and the matter will be decided on merits. Yours faithfully, Sd/- Promila Bhardwaj) Commissioner of Income-tax-III Baroda." In response to this, the assessee furnished following explanation :- "Dear Madam, This has reference to your notice under section 263 of the Act asking me to attend your office on 21-3-2007, since my husband is incapacitated, I shall not be able to attend the he....
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....f change in the constitution i.e., 24-9-1997, the plot was valued at Rs. 32.70 lakhs and 85 per cent share there was worked out at Rs. 27,60,500. Mr. Mrs. Kelawala had already made investment of Rs. 3,96,000 as reflected in the books and further investment of Rs. 23,66,500 was made for acquiring shares in profit of the firm. Shri Mukesh M. Kelawala declared undisclosed income of Rs. 22,39,295 as his part of investment in the firm. He also stated that undisclosed investment to the tune of Rs. 1,50,000 was made by his wife. A sum of Rs. 1,00,000 was withdrawn by her from S.B. a/c No. 23743 with Bank of Baroda on 6-1-1998 and another sum of Rs. 50,000 was withdrawn from the same account on 30-7-2002. The department sought to assessee the sum of Rs. 1,27,205 (being difference between Rs. 23,66,500 the sum required to be and explained sum of Rs. 22,39,295 declared as undisclosed income by Shri Mukesh M. Kelawala) in the hands of Shri Mukesh M. Kelawala but the Tribunal deleted the addition on the ground that his wife, the present assessee had made investment after withdrawal from her bank account and, therefore, the sum could not be assessed in the hands of Shri Mukesh M. Kelawala. On t....
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....8,500 is hereby cancelled. The Assessing Officer is directed to make fresh assessment by thoroughly examining all the bank transactions and after taking into account other material facts, if any." 6. Before us, the ld. AR for the assessee submitted that ld. CIT could not have set aside the assessment under section 263 because it will create a procedural bottle neck. He submitted that block assessment under Chapter XIV-B could be completed within 2 years from the end of the months when search took place. There is no provision in Chapter XIV-B which would allow any extension of limitation in completing block assessment under any circumstances. He submitted that search in the case of the assessee was carried out on 13-8-2002. Therefore, in any case block assessment has to be completed by 31-8-2004; even if it was to be set aside by ld. CIT under section 263. Since ld. CIT has himself passed his order on 30-3-2007 Assessing Officer could not have framed the assessment by 31-8-2004. Therefore, the order of ld. CIT was without jurisdiction. He referred to the decision of Hon' ble Gujarat High Court in the case of Cargo Clearing Agency v. Jt. CIT [2008] 307 ITR 1. Ld. AR specifically r....
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....o indicate that the Legislature does not intend to reopen assessments completed under Chapter XIV-B of the Act assessing the undisclosed income by adopting the special procedure provided in the said Chapter." According to him the limitation for completing the block assessment is provided only in Chapter XIV-B and therefore, in any case block assessment has to be completed within two years. 7. On merit, the ld. AR submitted that Assessing Officer had carried out all the enquiries relating to the issues. He was satisfied and had come to the conclusion that sum of Rs. 1,27,205 is covered by the disclosure of Rs. 1,48,500 made by the assessee in the block return. 8. He also referred to the decision of Hon'ble Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 2821 for the proposition that the law prevalent at the time when CIT sought to revise the order should be applied and not the law amended subsequently retrospectively. 9. Finally he submitted that by passing order under section 263 ld. CIT has paved the way for violating time-limit prescribed under section 158BE. 10. On our asking ld. AR fairly submitted that neither the Assessing Officer had put up any question ....
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....had taken place and accordingly Mukesh M. Kelawala and assessee were required to make payment for acquiring higher shares of profit in the firm. Since enquiries were in fact not carried out by the Assessing Officer, ld. CIT was justified in revising the order and directing the Assessing Officer to thoroughly examine bank statements and pass fresh assessment. Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 has held that where Assessing Officer did not make proper enquiries called for in the circumstances of the case and assessment order did not show that Assessing Officer has considered all aspects of the case, the exercise of jurisdiction by the Commissioner under section 263(1) was justified. Hon'ble Apex Court in this regard has observed as under :- "The Commissioner noted that the Income-tax Officer passed the order of "nil" assessment without application of mind. Indeed, the High Court recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. The resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus....
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..... On the other hand, section 147 applies for assessing escaped income in regular assessment. In Chapter XIV-B there cannot be a case of non-disclosure of material fact as every thing has been discovered and unearthed by way of search. The block assessment has to be carried out on the basis of material and information found as a result of search and on the basis of enquiries carried out thereafter. Further there is always an application of mind of Commissioner or Director while giving approval as per section 158BG. It was to ensure that there is no undisclosed income escaping assessment and also there is no high pitch assessment. Chapter XIV-B provides separate time-limit to complete block assessment as per section 158BE. The provisions laid down under sections 147 to 153 pertaining to reassessment are separate and distinct from each other and scheme under Chapter XIV-B for the purposes of block assessment is separate. Section 158BH provides that where there is a conflict between the two scheme of procedure, the provision of Chapter XIV-B of the Act shall prevail and hold primacy. In nut shell the Hon'ble Gujarat High Court held that notice under section 148(1) cannot be issued to a....
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....rrying out proper enquiries would be erroneous insofar as it is prejudicial to the interest of Revenue. 17. The contention of ld. AR is basically focused on limitation on the issue. We are unable to agree with this contention. We have already discussed that the case of Cargo Clearing Agency (supra) is not applicable in the matter of revision under section 263 and further we also hold that the observation of Hon'ble Gujarat High Court regarding limitation is applicable only in a case of reopening block assessment under section 148(1). It cannot be for general application for all other actions to be taken under Income-tax Act. In our considered view the provisions of section 158BH would be applicable in respect of proceedings under section 263 also. This section reads as under :- "158BH. Application of other provisions of this Act.-Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter." This provision has been interpreted by Hon'ble Apex Court in Asstt. CIT v. Hotel Blue Moon [2010] 321 ITR 3625 wherein it is held that by virtue of section 158BH it would be necessary to issue the notice under sect....
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....rued in a manner so as to be workable. It should be construed to effectuate the charging section so as to allow the authorities concerned to do so in a manner wherefor the statute was enacted. Decision of the Kerala High Court in K.V. Kader Haji v. CIT [2004] 268 ITR 465 affirmed." Once the provisions of section 158BH has been interpreted so to enable the applicability of all other provisions of the Act which are not specifically provided in Chapter XIV-B, then there is no reason to hold that provisions of section 263 would not be applicable to block assessment. 18. Once provisions of section 263 are applicable to block assessment then thereafter question of restricting completion of fresh assessment by provisions of section 158BE would not arise. Since section 158BE does not prescribe any limit for completing assessment after it is being set aside by CIT, then by virtue of section 158BH limitation as laid down in section 153(2A) would be applicable. Therefore, it is not a case where limitation for completing assessment after revision is not available under Income-tax Act. It is not proper to hold that once limitation for completing fresh assessment after revision is not p....