TaxTMI 
TaxTMI 
2014 (4) TMI 33
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.... Ms. Rakhi Ray, Adv., Mr. Salil Kapoor, Adv., Mr. Vikas Jain, Adv., Ms. Hardeep Kaur, Adv., For Mr. Kamal Mohan Gupta, Adv., Dr. Rakesh Gupta, Adv., Mr. Rishabh Kapoor, Adv., Ms. Rani Kiyala, Adv., Mr. Ambhoj Kumar Sinha, Adv., Mrs Anil Katiyar, Adv., Mr. R. P. Bhatt, Sr. Adv., Mr. H. Raghavendra Rao, Adv., Mr. Anupam Tripathi, Adv., Mr. Puneet Kapur, Adv., Mr. Govind K. Chaturvedi, Adv., For Mr. Nikhil Jain. JUDGMENT 1. Delay, if any, in filing and refiling the Special Leave Petitions is condoned. 2. Leave granted. 3. The issue that falls for our consideration and decision in all these appeals is: at what stage of the proceedings under Chapter XIV-B does the assessing authority require to record his satisfaction for issuing a notice under Section 158BD of the Income Tax Act, 1961 ('the Act' for short). 4. Since the issue is common in all these appeals, after hearing the learned counsel for the parties to the lis, we dispose of all these appeals by this common order. 5. For the purpose of disposal of these appeals, we take the Civil Appeal@ Special Leave Petition (Civil) No. 10542 of 2011 as the lead case. Civil Appeal No. 3958 of 2014 @S.L.P.....
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....d the aforesaid stand of the assessee and assessed the undisclosed income as Rs. 21,76,916/- (Rs.16,05,744/- (unexplained investment) and Rs. 5,71,172/- (profit element)) by order dated 08.02.2008. The assessing officer is of the view that Section 158BE of the Act does not provide for any limitation for issuance of notice and completion of the assessment proceedings under Section 158BD of the Act and therefore a notice could be issued even after completion of the proceedings of the searched person under Section 158BC of the Act. 11. Disturbed by the orders passed by the assessing officer, the assessee firm had carried the matter in appeal before the Commissioner of Income Tax (Appeal- II) (for short 'the CIT(A)'). The CIT(A), while rejecting the stand of the assessee in respect of validity of notice issued under Section 158BD, has partly allowed the appeal filed by the assessee firm and deleted the additions made by the assessing officer in its assessments, by his order dated 27.08.2008. 12. The Revenue had carried the matter further by filing appeal before the Income Tax Appellate Tribunal (for short 'the Tribunal') and the assessee has filed cross objections the....
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....l for the assessees would state that a satisfaction note requires to be made by the assessing officer before the seized documents were transmitted to another assessing officer in whose jurisdiction the person other than the searched person is assessed and submit that the said satisfaction note should be recorded before the assessment proceedings of the searched person are completed under Section 158BC of the Act and not later in time. By saying so, the learned counsel would justify the reasoning and the conclusion reached by the Tribunal as well as the High Court. 18. In order to resolve the controversy, certain provisions of the Act require to be noticed by us. 19. Chapter XIV-B of the Act is a special provision carved out by the legislature for the purpose of the assessments in cases pertaining to Sections 132 and 132A of the Act. The said chapter was introduced by the Finance Act, 1995 with effect from 01.07.1995 and comprises Sections 158B to 158BH of the Act. The provisions under this Chapter were made inapplicable in case of search initiated under Section 132 or Section 132A after 31.05.2003 by introduction of an amendment to the Chapter as Section 158BI vide the Financ....
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....tion 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;] (b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 [section 144 and section 145] shall, so far as may be, apply; (c) The Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) The assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.] *** *** *** Section 158BD. UNDISCLOSED INCOME OF ANY OTHER PERSON. Where the Assessing Officer is satisfied that any undisclosed income belon....
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.... approach ... simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 25. In Commissioner of Stamp Duties (NSW) v. Simpson, (1917) 24 CLR 209 Barton J., citing Viscount Haldane in Lumsden v Inland Revenue Commissioners, [1914] AC 877, stated the following: "The duty of Judges in construing Statutes is to adhere to the literal construction unless the context renders it plain that such a construction cannot be put on the words. This rule is especially important in cases of Statutes which impose taxation." The Court in Simpson case (supra) sought to determine whether a deed poll constituted a settlement for the purposes of Section 49 of the Stamp Duties Act, 1898 (NSW). Section 3 which defined the word 'settlement' as meaning 'any contract or agreement' was examined. The Court by adopting a strict literal approach held that only a contract or an agreement could constitute a settlement and that Section 49 providing for deed poll was not applic....
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....Income Tax Assessment Act, 1936(Cth). The Court held that under a literal interpretation Section 36A could apply to allow the taxpayer to claim a loss. Barwick CJ, speaking for the majority relied on the decision in Inland Revenue Commissioners v. Westminster (Duke), [1936] AC 1 which advocated the literal approach be applied when interpreting taxation legislation and stated the following: "It is for the Parliament to specify, and to do so, in my opinion, as far as language will permit, with unambiguous clarity, the circumstances which will attract an obligation on the part of the citizen to pay tax. The function of the court is to interpret and apply the language in which the Parliament has specified those circumstances. The court is to do so by determining the meaning of the words employed by the Parliament according to the intention of the Parliament which is discoverable from the language used by the Parliament. It is not for the court to mould or to attempt to mould the language of the statute so as to produce some result which it might be thought the Parliament may have intended to achieve, though not expressed in the actual language employed" 29. In Cooper Brooke....
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....rved as follows: "32. The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language. 33. We may mention here that the literal rule of interpretation is not only followed by Judges and lawyers, but it is also followed by the lay man in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean." 34. Th....
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.... 276 would be apposite: "13. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. ... Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT v. Mahaliram Ramjidas (1940) 8 ITR 442, Indian United Mills Ltd. v. Commissioner of Excess Profit s Tax, Bombay, [1955] 27 ITR 20(SC) and Gursahai Saigal v. CIT, Punjab, [1963] 1 ITR 48(SC)." 37. It is the duty of the court while interpreting the machinery provisions of a taxing statute to give effec....
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....n of books were made under Section 132A of the Act and thereafter, transmit the records for assessment of such other person. Therefore, the short question that falls for our consideration and decision is at what stage of the proceedings should the satisfaction note be prepared by the assessing officer: whether at the time of initiating proceedings under Section 158BC for the completion of the assessments of the searched person under Section 132 and 132A of the Act or during the course of the assessment proceedings under Section 158BC of the Act or after completion of the proceedings under Section 158BC of the Act. 40. The Tribunal and the High Court are of the opinion that it could only be prepared by the assessing officer during the course of the assessment proceedings under Section 158BC of the Act and not after the completion of the said proceedings. The Courts below have relied upon the limitation period provided in Section 158BE(2)(b) of the Act in respect of the assessment proceedings initiated under Section 158BD, i.e., two years from the end of the month in which the notice under Chapter XIV-B was served on such other person in respect of search initiated or books of acc....
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....tisfaction note under Section 158BD and consequent issuance of notice to the other person. 43. In the lead case, the assessing officer had prepared a satisfaction note on 15.07.2005 though the assessment proceedings in the case of a searched person, namely, S.K. Bhatia were completed on 30.03.2005. As we have already noticed, the Tribunal and the High Court are of the opinion that since the satisfaction note was prepared after the proceedings were completed by the assessing officer under Section 158BC of the Act which is contrary to the provisions of Section 158BD read with Section 158BE(2)(b) and therefore, have dismissed the case of the Revenue. In our considered opinion, the reasoning of the learned Judges of the High Court is contrary to the plain and simple language employed by the legislature under Section 158BD of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158BC. Further, the interpretation placed by the Courts below by reading into the plain language of Section 158BE(2)(b) such as to extend the period of limitation to r....