TaxTMI 
TaxTMI 
2016 (12) TMI 745
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....B of Income Tax Act, 1961, notice under Section 158BC dated 12.12.1996 issued in the name of assessee-company M/s Monga Steels (P) Limited, is invalid and illegal? (2) Whether Income Tax Appellate Tribunal was justified in holding that notice under Section 158BC is equivalent to the notice under Section 148 of Income Tax Act? (3) Whether in view of Section 131 and 131(1A) of Income Tax Act, Assistant Director of Income Tax (Investigation) was justified in recording statement and taking evidence consequent upon search under Section 132(1) of Act? (4) Whether in view of Taxation Laws Amendment Act, 1987, Income Tax Appellate Tribunal was not justified in holding that the seized material on record could not be handed over to Assistant Commissioner of Income Tax by completely overlooking the fact that the word 'Income Tax Officer' was substituted by the word 'Assessing Officer' by the aforesaid Amending Act of 1987? (5) Whether no opportunity of hearing is required to be given by Commissioner, Income Tax prior to approval under Section 158BG? (6) Whether Income Tax Appellate Tribunal was justified in deleting the additions of....
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....earned counsel for both the parties have advanced their submissions on the aforesaid questions of law. 7. Before adjudicating aforesaid substantial questions of law it would be appropriate to have a brief factual matrix of entire matter which may help us in arriving at a correct conclusion. 8. The assessee, M/s Monga Metals (Private) Limited is a company incorporated vide certificate dated 19.01.1991 under Companies Act, 1961, and is engaged in the business of manufacture and sale of ingots. It has its registered office at 76/43, Halsey Road, Kanpur and factory is at Malwan, District Fatehpur. 9. Search and seizure operations were carried out at the business premises at 76/43, Halsey Road, Kanpur and other places of assessee on 03.09.1996 including residential premises of Vijay Kumar Agrawal, Vinod Kumar Agrawal and Sanjay Agrawal, Directors of assessee company. A notice dated 12.12.1996 was issued under Section 158BC of Act, 1961 which was served upon assessee on 13.12.1996. Assessing Officer required assessee to file return for block period ending on 03.09.1996 which included Assessment Years (hereinafter referred to as 'AY') 1993-94, 1994-95, 1995-96 and 1996-97....
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....tions and recording statements of several persons, passed assessment order dated 30.09.1997 and worked-out undisclosed income for block period as under: "Asstt. Year 1993-94: Since the factory has been completed and used for the first time in the assessment year 1993-94, the undisclosed investment in the cost of construction of the factory is treated as undisclosed income u/s 69 of I.T. Act, 1961. 1 Undisclosed investment in the cost on construction of the factory building (Page No.36 of Asstt. Order) 3,42,357/- Asstt. Year 1995-96 1 Undisclosed Business Income (Page 34) Rs.1,53,28,028/- Less: Allowable depreciation as discussed above Rs.11,76,850/- Net Business Income 1,41,51,178/- 2 Income from other sources, Undisclosed investment in working capital (Page No.37 of the Asstt. Order) 18,00,000/- Asstt. Year 1997-98 1 Undisclosed business income (page no.39 of the Asstt. Order) 33,85,210/- 2 Income from other sources, Undisclosed investment in stock (page no.35 of Asstt. Order) 21,99,000/- 2,18,77,745/- The aggregate undisclosed income, thus, worked-out as under: AY 1993....
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....icer wants to make an assessment under the aforesaid Chapter. The requirement of a valid notice is must, being a jurisdictional issue and not mere procedural. The scheme of Act, 1961 shows that the moment a notice under Section 148 is served in the scheme of assessment of escaped income or notice under Section 158 BC is served in the scheme of assessment of undisclosed income in search cases, the already completed assessments or the assessment for the year for which income has escaped (where there is no search) and the assessments falling within the block period, for the assessment of undisclosed income (where there is a search), get reopened. 16. In paras 6.4 and 7.4 of the order, Tribunal has said as under: "6.4. The above provisions envisaged in the 2 schemes (supra) confirm beyond any doubt that: [(1) Purpose of both the notices is same viz; (i) A notice under Section 148 and under Section 158 BC can be issued only after fulfillment of required conditions such as a escapement of income or action U/s 132 of the Act, as the case may be. (ii) In both the cases service of a valid notice is a mandatory prerequisite condition before proceeding t....
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....Officer to proceed to make block assessment it is mandatory and has to be tested in same manner as requirement of notice under Section 148 itself has been tested time and again and held mandatory. 21. It, thus, answered all the three questions noted above holding that notice under Section 158 BC was bad in law, hence, block assessment made by Assessing Officer is without jurisdiction. 22. If view taken by Tribunal on the question of notice is sustained, there is no reason to proceed with the matter on other aspects and hence, we proceed to consider this aspect first, since substantial questions of law which have been pressed before us, substantially revolve around this very issue. 23. Chapter XIV B was inserted by Finance Act, 1995. It introduced a new concept of assessment in the cases relating to search conducted under Section 132 of Act, 1961 or requisition made under Section 132 A of Act, 1961 after 30.06.1995. 24. Section 158 BC reads as under: "158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then,- (a) the Assessing Officer....
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....s (2013) 3 SCC 196. It was held that Chapter XIV B is a self-contained code and gets attracted as a result of search proceedings initiated by Income Tax Authorities under Section 132 of Act notwithstanding any other provisions of Act except to the extent provided for in the chapter. 27. A Constitution Bench in Commissioner of Income Tax Vs. Vatika Township Private Limited (2015) 1 SCC 1 also echoed a similar view observing that provisions in Chapter XIVB laid down a special procedure for assessment of search cases with a view to combat tax evasion and also to expedite and simplify assessments in search cases. 28. A perusal of Section 158 BC makes it clear that Assessing Officer shall serve a notice to such person in respect of whom a search was initiated under Section 132, requiring him to furnish within such time not being less than fifteen days, but not more than forty-five days, as may be specified in the notice, a return in prescribed form, verified in same manner as a return Under Clause (i) of Sub-section (1) of Section 142, setting forth his total income including undisclosed income for block period. Clause (b) of Section 158BC provides that Assessing Officer shall pro....
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....look. Having said so Court very categorically said that by making notice issued under this Section, mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the Section is required to be served on the person who is found to be having undisclosed income. Form of notice is prescribed under Rule 12(1A) which in turn prescribes Form 2B for block return. Court further held that Section 158 BC(b) is a procedural provision for making a regular assessment applicable to block assessment as well. It provides for enquiry. Assessment and analysis of entire scheme of Section 158 BC indicates that after the return is filed, Assessing Officer gets jurisdiction to complete assessment by following procedure like issue of notice under Sections 143(2)/142 and complete assessment under Section 143(3). This Section does not provide for accepting return as provided under Section 143(1) (a). Assessing Officer has to complete assessment under Section 143(3) only. In case of default in not filing return or not complying with notice under Sections 143(2)/142, Assessing Officer is authorized to complete assessment ex-parte. 32. Section 158 BC (b) excluded application of Sect....