TaxTMI 
TaxTMI 
2026 (2) TMI 1095
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.... read with Section 274, the petitioner has approached this Court by way of filing this writ petition craving to invoke extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. 1.1. A seminal issue whether the Assessing Officer has jurisdiction to pass the Assessment Order dated 17.03.2025 as also the consequential orders imposing penalties inasmuch as these orders are passed contrary to avowed purport of sub-section (2) of Section 158BA of the Income Tax Act, 1961. Facts: 2. Shorn off irrelevant particulars adumbrated in the writ petition, suffice it to catalogue hereunder necessary factual details to address the issue raised in the writ petition. 2.1. The case of the petitioner being selected for the purpose of faceless assessment/reassessment with respect to the Assessment Year 2022-23, an intimation dated 01.06.2023 was issued invoking provisions of Section 144B of the Income Tax Act, 1961 (for brevity be referred to as, "IT Act"). On acknowledging filing of return of income on 08.10.2022 for the Assessment Year 2022-23 (relevant Finance Year being 2021-22), a Notice dated 01.06.2023 under Section 143(2) of the IT Act was issued seeking cla....
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....on, a search operation under Section 132 of the IT Act, 1961 was commenced on 26.11.2024 and concluded on 28.11.2024. 2.4. Notwithstanding the assessment proceeding by issue of Notice for assessment under Section 143 being abated in terms of Section 158BA(2) of Chapter XIV-B of the IT Act, the petitioner was issued a reminder letter on 17.01.2025 and 29.01.2025 in which it was directed to respond to the notices under Section 142(1) of the Act dated 16.09.2024 and 04.10.2024. The petitioner on 05.02.2025 was issued a Show Cause Notice whereby an opportunity was given to show cause as to why the assessment should not be completed under Section 144 on the basis of material available on record. A response to the said notice was submitted with detailed reply thereto on 10.02.2025. 2.5. While the matter stood thus, in connection with the search proceedings, the Deputy Director of Income Tax/ ADIT (Inv.), 1(2), Bhubaneswar sent a summons notice dated 07.02.2025 to the petitioner under Section 131(1A) of the IT Act. However, the petitioner on 14.02.2025 was issued another Notice under Section 142(1) of the IT Act from the Assessment Unit, Income Tax Department in which he was directe....
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....rade Marks (1998) 8 SCC 1, wherein following exceptions have been carved out: "28. The principles of law which emerge are that: *** (iii) Exceptions to the rule of alternate remedy arise where- (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged; ***" 2.8. As the Assessing Officer lacks jurisdiction to proceed till culmination of "block assessment" defined under Section 158BA, it is posed in the writ petition that the exercise of power under Section 143(3) to pass impugned Assessment Order is contrary to express provisions contained in Section 158BA. Arguments advanced by the counsel for the petitioner: 3. With the aforesaid backdrop of factual matrix, Sri Saswat Kumar Acharya, learned Advocate submitted that Section 158BA under Chapter XIV-B of the IT Act has been brought into the statute book with effect from 01.09.2024 by which a special procedure for as....
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....revious Year 2021-22), initiated prior to search operation conducted under Section 132 of the IT Act in view of explicit provision contained in sub-section (2) of Section 158BA, and copy of writ petition was served on the learned Senior Standing Counsel Sri Subash Chandra Mohanty, way back on 27.10.2025, no instructions appears to have been supplied by the Income Tax Department. 4.1. Appreciating the apprehension of the learned Advocate on behalf of the petitioner for the steps contemplated to be taken up by the Department for recovery of demanded tax and penalties, it was felt prudent to proceed with the matter on the basis of arguments advanced on the question of law as posed above. 4.2. Since the issue posits question of law emanating from the facts pleaded in the writ petition and it was conceded by the learned Advocate for the petitioner Sri Saswat Kumar Acharya that in the event no incriminating material is found in course of search operation, the Revenue is not remediless, but it is protected to revive the abated proceeding(s), no fruitful purpose would be subserved in keeping this writ petition pending. 4.3. This Court on the above limited question heard counsel fo....
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....us: "Once the termination order is set aside and judgment of the High Court dismissing the writ petition challenging the said termination order has also been set aside, the natural consequence is that the employee should be taken back in service and thereafter proceeded with as per the directions. Once the termination order is set aside then the employee is deemed to be in service. We find no justification in the inaction of the High Court and also the State in not taking back the appellant into service after the order dated 20.04.2022. No decision was taken either by the High Court or by the State of taking back the appellant into service and no decision was made regarding the back wages from the date the termination order had been passed till the date of reinstatement which should be the date of the judgment of this Court. In any case, the appellant was entitled to salary from the date of judgment dated 20.04.2022 till fresh termination order was passed on 02.04.2024. The appellant would thus be entitled to full salary for the above period to be calculated with all benefits admissible treating the appellant to be in continuous service." 5.5. If an order is quashed for....
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....-B Special Procedure for Assessment of Search Cases 158B.In this Chapter, unless the context otherwise requires,- (a) "block period" means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was initiated under Section 132 or any requisition was made under Section 132A and also includes the period starting from the 1st day of April of the previous year in which search was initiated or requisition was made and ending on the date of the execution of the last of the authorisations for such search or such requisition; (b) "undisclosed income" includes any money, bullion, jewellery ^1[,virtual digital asset] or other valuable article or thing or any expenditure or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, ^2[,virtual digital asset] valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, exemption, deduction or allowance claimed ....
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....l be made under the provisions of this Chapter: Provided that in a case where the period of completing the assessment in respect of subsequent search is less than three months such period shall be extended to three months from the end of the month in which the assessment in respect of the earlier search was completed. (5) If any proceeding initiated under this Chapter or any order of assessment or reassessment made under clause (c) of sub-section (1) of Section 158BC has been annulled in appeal or any other legal proceeding, then, notwithstanding anything in this Chapter or Section 153, ^6[the assessment or reassessment or recomputation or reference or order relating to any assessment year] which has abated under sub-section (2) or sub-section (3), shall revive with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. (6) The total income (other than undisclosed income) of the assessment year relevant to the previous year in which the last of the authorisations for a search is executed or a requi....
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....come or transactions as recorded in the books of account and other documents maintained in the normal course for such period on or before the day immediately preceding the date of initiation of search or the date of requisition; (iii) the period commencing from the date of initiation of the search or the date of requisition and ending on the date of the execution of the last of the authorisations for search or requisition, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course for such period on or before the date of the execution of the last of the authorisations: Provided that where the Assessing Officer is of the opinion that any part of the income as computed by the assessee under this clause is undisclosed, he may recomputed such income; (d) the total income referred to in sub-section (5) of Section 115A or Section 115G or sub-section (1) of Section 194P.] (2) The undisclosed income falling within the block period, ^10[***] shall be computed in accordance with the provisions of this Act, on the basis of evidence found as a result of search or sur....
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....der this Chapter, losses brought forward from the previous year (prior to the first previous year comprising the block period) under Chapter VI or unabsorbed depreciation under sub-section (2) of Section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter but may be carried forward for being set off in the previous year subsequent to the assessment year in which the block period ends, for the remaining period, taking into account the block period and such assessment year, and in accordance with the provisions of this Act." 7. Having diligently considered the arguments of the Counsel for the petitioner and taking note of aforesaid facts as remained uncontroverted by the learned Senior Standing Counsel, this Court finds from Section 158BA that where on or after 01.09.2024 search is initiated under Section 132, or books of account, other documents or any assets are requisitioned under Section 132A, then the Assessing Officer shall proceed to assess or reassess the "total undisclosed income of the block period in accordance with the provisions of Chapter-XIV-B" and the assessment or reassessment or recomputation, other than sa....
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....elationship either singly or along with the respondent and includes... The section uses both the expressions "means and includes". A Three Judge bench judgment of this Court in Bharat Coop. Bank (Mumbai) Ltd. Vrs. Coop. Bank Employees Union, (2007) 4 SCC 685 had occasion to consider Section 2(bb) of Industrial Disputes Act, 1947, which section used both the words "means and includes". Explaining both the expressions, following was laid down in paragraph 23: '23. *** It is trite to say that when in the definition clause given in any statute the word "means" is used, what follows is intended to speak exhaustively. When the word "means" is used in the definition, to borrow the words of Lord Esher, M.R. in Gough Vrs. Gough, (1891) 2 QB 665 it is a "hard-and-fast" definition and no meaning other than that which is put in the definition can be assigned to the same. (Also see P. Kasilingam Vrs. P.S.G. College of Technology, 1995 Supp (2) SCC 348 = AIR 1995 SC 1395.) On the other hand, when the word "includes" is used in the definition, the legislature does not intend to restrict the definition: it makes the definition enumerative but not exhaustive. That is to say, the term defin....
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.... generally used in interpretation clauses as a word of enlargement, in some cases the context might suggest a different intention. Pottery is an expression of very wide import, embracing all objects made of clay and hardened by heat. If it had been the legislature's intention to bring within the entry all possible articles of pottery, it was quite unnecessary to add an explanation. We have found that the explanation could not possibly have been introduced to extend the meaning of potteries industry or the articles listed therein added ex abundanti cautela. It seems to us therefore that the legislature did not intend everything that the potteries industry turns out to be covered by the entry. What then could be the purpose of the explanation. The explanation says that, for the purpose of Entry 22, potteries industry "includes" manufacture of the nine articles of pottery named therein. It seems to us that the word "includes" has been used here in the sense of 'means'; this is the only construction that the word can bear in the context. In that sense it is not a word of extension, but limitation; it is exhaustive of the meaning which must be given to potteries industry for the purpose....
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....ificance of the words or expressions defined. It may be equivalent to 'mean and include', and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions.' 16. Dilworth, 1899 AC 99 and few other decisions came up for consideration in Peerless General Finance and Investment Co. Ltd., (1987) 1 SCC 424 and this Court summarised the legal position that (Peerless case, (1987) 1 SCC 424, SCC pp. 449-50, para 32) inclusive definition by the legislature is used: '32. *** (1) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (2) to include meanings about which there might be some dispute; or (3) to bring under one nomenclature all transactions possessing certain similar features but going under different names.' 17. It goes without saying that interpretation of a word or expression must depend on the text and the context. The resort to the word "includes" by the legislature often shows the intention of the legisl....
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....evious Year would be 2023-24. Preceding Previous Year is, thus, 2022-23. "Six Assessment Years Preceding Previous Years" would be: i. 2023-24; ii. 2022-23; iii. 2021-22; iv. 2020-21; v. 2019-20; vi. 2018-19. 7.5. The Previous Year in question, i.e., 2021-22 (Assessment Year 2022-23) would, thus, fall within the expression "six years preceding the previous year" "in which the search was initiated under Section 132 ... and also includes the period starting from the first day of April of the Previous Year in which search was initiated". 7.6. For better conceptual comprehension a reference may be had to interpretation of "Previous Year" as reflected in Shanti Construction Pvt. Ltd. Vrs. State of Odisha, (2025) 11 SCR 475, wherein the following pertinent observations are made: "14. The unsuccessful bidder is a company. It is axiomatic from the stand taken by the State in its counter, that the unsuccessful bidder had filed the Income Tax Return for the Financial Year 2020-2021. The auction notice was issued in the midst of the year i.e. on 11.07.2022. The proper construction of the phrase 'previous Financial Year' there....
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.... aforesaid conclusion, it is not necessary for us to advert to various other contentions urged by the parties." 7.7. Taking aid of the above analysis of the terms "Assessment Year", "Previous Year" and "Financial Year", the expression "preceding the previous year" contained in Section 158B assumes significance. The said expression "preceding the Previous Year" refers to any Financial Year that comes before the Previous Year relevant to a particular Assessment Year. 7.8. Reading Section 158BA of the IT Act as amended by virtue of the Finance (No. 2) Act, 2024 and the Finance Act, 2025, leaves no scope for ambiguity that pending proceedings under any other Chapter of the IT Act on the date of initiation of search or making requisition shall abate and shall be deemed to have been abated so far as it relates to "Assessment Year falling in the block period". 7.9. Thus this Court finds that provisions of Section 158BA(2) of the IT Act is attracted when the Assessment Year falls in the ken of definition of the term "block period" as defined under Section 158B. 7.10. This Court finds force in the argument of Sri Saswat Kumar Acharya, learned Advocate for the petitioner that the....
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....ix assessment years. However, it is required to be noted that as per the second proviso to Section 153-A, the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate. As per sub-section (2) of Section 153-A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the "total income" for the entire six years' period/block assessment period. The intention does not seem to be t....
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....d even in case of completed/ unabated assessment. As per the second proviso to Section 153-A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, the second proviso to Section 153-A and sub-section (2) of Section 153-A would be redundant and/or re-writing the said provisions, which is not permissible under the law." 8.3. In the said reported case being Abhisar Buildwell Private Limited (supra) the Hon'ble Supreme Court of India has ultimately been pleased to hold as follows: "36. In view of the above and for the reasons stated above, it is concluded as under: 36.1. That in case of search under Section 132 or requisition under Section 132-A, the AO assumes the jurisdiction for block assessment under Section 153-A; 36.2. All pending assessments/reassessments shall stand abated; 36.3. In case any incriminating material is found/ unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdicti....
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....3A dealing with "Assessment in case of search or requisition" in the first proviso to sub-section (1) thereof confers that "the Assessing Officer shall assess or reassess the total income in respect of each Assessment Year falling within such six Assessment Years and for the relevant Assessment Year or Years" and the second proviso thereto speaks of abatement by using the expression "any Assessment Year falling within the period of six Assessment Years and for the relevant Assessment Year or Years referred to this sub-section pending on the date of initiation of the search under Section 132 or making requisition under Section 132A". Nonetheless, Chapter XIV-B- "Special Procedure for Assessment of Search Cases" in Section 158BA(1) vests power on the Assessing Officer to "proceed to assess or reassess the total undisclosed income of the block period in accordance with the provisions of this Chapter" and speaks of abatement in sub-section (2) thereof by employing the expression "any Assessment Year falling in the block period". As has already been discussed in the preceding paragraph the definition of the term "block period" in Section 158B makes it unequivocal that the period in ques....
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....ct"). The assessee is an individual engaged in the business of transportation of goods by road and trading of iron ore and showing his return of income from House Property, income from Business, capital gain and other sources. The case was selected under scrutiny under CASS. The reason for selection under CASS was: 1. High income reported in the return and no entry in Schedule Assets and Liabilities of return of income; 2. High liabilities as compared to low income/receipts; 3. Creditors are more than 50% of the purchases made during the year." 8.10. It is emanated from the above extracts of the notice and the Assessment Order that the case of the assessee was selected for assessment/reassessment of "total income" as disclosed in the return pertaining to Assessment Year 2022-23. Pleadings are lacking with respect to the fact whether the impugned assessment/reassessment of the petitioner is confined to "undisclosed income" in terms of Section 158BB read with Section 158B. Sri Saswat Kumar Acharya, learned Advocate for the petitioner having merely advanced his argument based on Section 158BA(2) could not demonstrate that the search under Section 132 was ....
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.... person." 8.12. Pleading in the above regard falls short of in the writ petition with respect to "other person" qua abatement. It is evident from paragraph 6 of the writ petition that the petitioner sought to rely on a particular sub-section of Section 158BA to hold that the assessment or reassessment would abate if search is conducted under Section 132 or requisition is made under Section 132A. Such approach of the petitioner is misdirected and upon misreading of the provisions of Section 158BA read with Section 158BD which indicate that the (re)assessment of undisclosed income is to be made in accordance with the provisions provided in Chapter XIV-B. Therefore, provisions contained in whole of said Chapter have to be taken into consideration. 8.13. It may be relevant to have regard to the principle laid down in Bhavnagar University Vrs. Palitana Sugar Mill Pvt. Ltd., (2003) 2 SCC 111 expositing that the statute has to be read as a whole. It is the basic principle of construction of statute that the same should be read as a whole, then chapter by chapter, section by section and words by words. Recourse to construction or interpretation of statute is necessary when there is a....
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....ng is cited that search was conducted in respect of person having individual status, namely Saroj Kumar Sahoo (petitioner). The Assessment Order dated 17.03.2025 (Annexure-27) reveals that it is framed against the petitioner on scrutiny of return pertaining to the Assessment Year 2022-23 in individual status. 8.17. Explanation to Section 158B employs the words "Panchnama drawn in relation to 'any person' in whose case the warrant of authorisation has been issued". From the Panchnama it is manifest that the search was in relation to juristic persons and independent entities other than individual. 8.18. In Sita Soren Vrs. Union of India, (2024) 3 SCR 462 it is observed as follows: "103.The words "anything" and "any" when read with their respective operative words mean that a member may claim immunity to say as they feel and vote in a direction that they desire on any matter before the House. These are absolutely outside the scope of interference by the courts. The wide meaning of "anything" and "any" read with their companion words connotes actions of speech or voting inside the House or committee which are absolute. The phrase "in respect of" applies to the collective....
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....the conditions mentioned in sub-section (4) must also be interpreted as being cumulative." 8.22. Having such understanding of the term "any", when the word "any" is followed by "person" in Explanation to Section 158B, it can be construed to mean "every person"/"everyone". 8.23. Clauses (7) and (31) of Section 2 of the IT Act, 1961 defines the words "assessee" and "person" as under: "(7) ASSESSEE means a person by whom any tax or any other sum of money is payable under this Act, and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act; (31) PERSON includes- (i) An individual, (ii) A Hindu Undivided Family, (iii) A company, (iv) A fir....
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....iple of interpretation of a deeming clause. Whenever a deeming clause occurs in a statute and the Court is called upon to interpret the same, the Court has to first ascertain the purpose for which such deeming clause has been incorporated. Normally a deeming clause is created by way of a legal fiction. Therefore, the Court is to first ascertain the purpose behind the legal fiction. After ascertaining the purpose, the Court must assume those consequences, which are incidental and inevitable corollaries for giving effect to such legal fiction. See, Penguin Trading & Agencies Ltd. Vrs. State of Orissa, 2007 (Supp.-I) OLR 738. The exposition in Ashok Leyland Ltd. Vrs. State of TN, (2004) 134 STC 473 (SC) as propounded transpires that when legal fiction is created it must be given its full effect. Reference may also be had to East End Dwelling Co. Ltd. Vrs. Finsbury Borough Council, (1951) 2 All ER 587; State of Bombay Vrs. Pandurang Vinayak, AIR 1953 SC 244; Commissioner of Income Tax Vrs. S. Teja Singh, AIR 1959 SC 352; M. Venugopal Vrs. Divisional Manager, Life Insurance Corporation of India, Machilipatnam, A.P., (1994) 2 SCC 323; Indian Oil Corporation Limited Vrs. Chief Inspecto....
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.... in the return with respect to the individual. iv. Nothing is cited or was it argued that incriminating material is found in course of search of entities qua the instant "assessee"-petitioner and in the assessment proceeding under Section 143 of the IT Act such undisclosed income, if any, was made available to the Assessing Officer. 8.29. Such germane factors being not available for consideration by the Assessing Officer to take a decision whether Section 158BA(2) would attract in the instant case, this Court refuses to exercise the discretionary power under Article 226/227 of the Constitution of India. 8.30. Since no pleading is made nor was any argument advanced by the learned counsel for the petitioner, it is felt prudent to impress that the same are required to be agitated before the competent authority vested with power under the statute. Going through the replies submitted before the Assessing Officer during the course of Assessment proceeding under Section 143 nothing is pointed out that the petitioner-Assessee had taken any plea of abatement under Section 158BA of the IT Act. 8.31. Under the aforesaid premises, this Court desists from exercising power unde....
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....erlocutory application(s) is also disposed of, but in the circumstances there shall be no order as to costs. I agree. ---------------------- Notes: 1. Inserted by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.02.2025. 2. Inserted by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.02.2025. 3. Substituted "total income" by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024. 4. Substituted "total income" by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024. 5. Substituted "pending" by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024. 6. Substituted "the assessment or reassessment relating to any assessment year" by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024. 7. Substituted "total income" by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024. 8. Substituted "total income" by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024. 9. Substituted the following appearing in sub-section (1) by Finance Act, 2025 (No. 7 of ....
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....shall be considered in the assessment made under the other provisions of this Act.]" 12. Substituted sub-section (5) by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024, which stood thus: "(5) The tax referred to in sub-section (7) of Section 158BA shall be charged on the total income determined in the manner specified in sub-section (1) as reduced by the total income referred to in clause (ii), clause (iii) and clause (iv) of sub-section (1)." 13. Omitted sub-section (6) by Finance Act, 2025 (No. 7 of 2025), with retrospective effect from 01.09.2024, which stood thus: "(6) For the purposes of sub-section (1) and sub-section (5), if the disclosed income under clause (i) of sub-section (1) or where the income disclosed in respect of any previous year comprising the block period, or the returned income or assessed income under clause (ii) or clause (iii) of sub-section (1) or where the income as determined under clause (iv), is a loss, it shall be ignored." 14. The term "Financial Year" has been defined in Section 2(21) of the General Clauses Act, 1897 to mean "the year commencing on the first day of April". 15. "3. The first ....