TaxTMI 
TaxTMI 
2005 (5) TMI 232
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....jurisdiction in absence of proper notice to file the return of block assessment and is holding that the notice was substantially in conformity to the law. 3. The CIT(A) has erred in the facts and circumstances of the case in upholding the charging of interest under s. 158BFA of the IT Act, 1961. 4. Because the assessment made against the appellant is bad in law, without jurisdiction, illegal, contrary to the law." 2. We have heard the parties. 3. The brief facts relating to the issues involved in this appeal and as have been revealed from the records are that the Trade Tax Authorities (Mobile Squad) Mathura, UP, had apprehended the assessee, Shri Kishore Agrawal along with one Shri Jagmohan Yadav, while travelling in a vehicle and had seized silver ornaments weighing 361.643 kgs. valued at Rs. 14,21,224. 3.1 Thereupon, it seems that the Trade Tax Authorities (Mobile Squad), Mathura, had passed this information to the Director of IT (Inv.), New Delhi, who, on 17th Oct., 1997, issued a warrant of requisition in exercise of his powers under s. 132A of the Act, 1961, and seized the silver ornaments. 3.2 Notices under s. 158BC of the Act were issued by the Dy. CIT, Cir....
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....without jurisdiction and, therefore, proceedings on the basis of such warrant could not be sustained under law. The block assessment in the present case was, therefore, illegal. Furthermore, it is submitted that the provisions of r. 112D had not been followed in this case. The appellant was not given a copy of requisition along with the copy of warrant as required by r. 112D(2). The appellant was not afforded any opportunity to be present at the time of seizure and to place his seal as required by sub-r. (3). Nor he was furnished the list as required in the sub-rule. These were not mere insignificant lapses but had serious impact not only on the right of citizen but even otherwise on assessment proceedings, the action in the case was liable to be annulled on this ground also. 1.3.2. The appellant has also referred to the mistakes in the notice issued under s. 158BC on 6th Jan., 1998. The appellant has expressed reservations against notice of the AO requiring to file the return within 15 days because according to him, s. 158BC(a) clearly provided such time to be not less than 15 days and not more than 45 days. It is the case of the appellant that the period of not less than 15 da....
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.... per his findings contained in para 1.5 which read as under: "1.5 The facts and circumstances of the case have been considered. It may be remarked that though the appellant has made specific objections against issue of warrant of authorization of s. 132A by Director of IT (Inv.), Delhi, but in this regard, it may suffice to observe that since there was no provision in s. 246A to challenge the validity of such a warrant, no adjudication on the same could be made in this appellate order. So far as errors and omissions in the issue of notice for the block assessment are concerned, I am in agreement with the AO that in view of the s. 292B and there being no reason for which such notice may have created irreparable harm to the assessee, it could not be said that there was any such grave error on the part of the AO on account of which the proceedings deserved to be annulled. With these remarks, the appeal is proceeded to be disposed of on its merit." 4. The assessee is aggrieved. 5.1 It was in view of the above facts and circumstances of the case, that the learned counsel for the assessee, after drawing our attention to the provisions of s. 132A and the Notification No. S.O. 703....
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....vidual HUF/firm/company/AOP/BOI/local authority", the notice in question is invalid notice and for this purpose, relied on the decision of Tribunal, Allahabad Bench, in the case of Monga Metals (P) Ltd. vs. Asstt. CIT. 5.4 Validity of notice under s. 158BC of the Act, since reproduced above, was further challenged on the ground that the AO by requiring the assessee to furnish the return for undisclosed income "within 15 days of the service of notice" has contravened the mandatory requirement of provisions of s. 158BC(a), according to which a period of not being less than 15 days is to be allowed. Explaining further, the learned counsel for the assessee submitted that the terms "within 15 days" and "not being less than 15 days" are different and they represent different terms. According to the earlier term, the 'act' is to be done before the expiry of 15 days, whereas according to the second type of term, is to be done after the expiry of a period of 15 days. In view of this explanation, the learned counsel for the assessee submitted that since in the notice under s. 158BC of the Act issued to the assessee, the period allowed is less than 15 days (because the AO has mentioned ....
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....of Directors, the CBDT hereby: (i) directs that the Directors specified in column (3) of the Schedule hereto annexed shall exercise their power;; vested in them under S. 132 of the said Act and perform their functions relating thereto in respect of the territorial areas of whole of India; (ii) directs that the Directors specified in column (2) of the Schedule hereto annexed shall exercise their powers vested in them under all other provisions of the said Act (other than s. 132) and perform their functions relating thereto in respect of the territorial areas specified in the corresponding entries in column (3) of the said Schedule; (iii) authorizes the Directors specified in column (2) of the Schedule hereto annexed to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the IT authorities who are subordinate to them, in respect of such territorial areas as may be specified in such orders. 2. This notification shall come into force with immediate effect. Sd/ (Anand Kishore) Under Secretary to the Government of India" Schedule to above notification: -------------------------------------------------- S.&....
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....nbsp; Metropolitan city of (Inv.), Bombay Bombay -------------------------------------------------- 6. Director of IT States of Karnataka, Goa (Inv.), Bangalore and the territory under jurisdiction of CIT, Kolhapur in the State of Maharashtra -------------------------------------------------- 7. Director of IT States of Gujarat, (Inv.), Ahmedabad Rajasthan and Union Territories of Daman and &....
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.... UP or with respect to material seized in the State of UP and by the authorities or the Courts situated in the State of UP. 9. The aforesaid conclusion is further supported by a clarificatory Notification F. No. 415/11/1986- IT (Inv.1) dt. 5th Oct., 1989 in which it has been claimed that All India Jurisdiction given to Director General or Directors of IT (Inv.) is with reference to s. 132 of the Act only. This notification reads as under: "F. No. 415/11/1986-IT (Inv. I) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 5th Oct., 1989 To, Shri C.v. Padmanabhan Director of IT (Inv.) Hyderabad Sir, Sub: Jurisdiction of the Directors General of IT (Inv.) and Directors of IT (Inv.) Clarification regarding. Kindly refer to the Notifications No. S.O. 703 (E), dt. 6th Sept., 1989 and S.O. 708 (E) dt. 8th Sept., 1989 issued from Board's F. No. 137/4/1989-ITA-I dealing with the jurisdiction of the Directors of IT (Inv.) and the Directors General of IT (Inv.), respectively. 2. Provided in these notifications, the Directors of IT (Inv.) and the Directors General of IT (Inv.) will have All Indi....
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....to the validity of notice under s. 158BC of the Act, we would like to discuss the validity of notice in the light of assessee's objection that a mandatory period of more than 15 days has not been allowed. 13. We have considered the rival submissions and facts and circumstances of the case. Similar issue had come up for consideration of Tribunal, Agra Bench, "SMC" Agra and also by the Tribunal, Delhi Bench "E", which we would like to discuss as below. (i) Decision of Tribunal Agra Bench, "SMC" Agra In the case of Vinod Kumar, Ram Kumar Agarwal, Kishan La1, Subhash Chand Sharma & Satish Chand vs. Asstt. CIT in IT(SS)A Nos. 1, 2, 3, 4 and 51 Agr/2003, for block period 1st April, 1991 to 16th Feb., 2001, dt. 30th June, 2004 (unreported) The issue relating to validity of notices under s. 158BC of the Act issued in the case of aforesaid five persons requiring them to furnish the return of undisclosed income "within a period of 15 days" was dealt with by the Tribunal in para Nos. 12.1 to 19 which are in the following terms: "12.1 So far as question relating to the period of 'not being less than 15 days' required to be allowed for furnishing the return of undisclosed income, (b....
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....y notice requiring the assessee to furnish the return of income or of wealth is of mandatory nature, i.e., the valid service of a valid notice, requiring the assessee to furnish the return of income or wealth is prerequisite mandatory requirement for an AO to proceed with the assessment proceedings. Meaning thereby that unless and until this requirement is fulfilled, the AO has no jurisdiction to proceed further for making an assessment. 14.1 Corning to the question No.2, the terms 'not being less than ........ days' and 'within ....... Days' had been the subject-matter of discussion by the Hon'ble Supreme Court as well as various High Courts in the following cases: (i) CIT vs. Braithwaite & Co. Ltd. (1993) 110 CTR (SC) 290 : (1993) 201 ITR 343 (SC), (ii) CIT vs. New India Industries Ltd. (1995) 126 CTR (SC) 156 : (1995) 212 ITR 653 (SC); (iii) Mir Iqbal Husain vs. State of U.P. (1964) 52 ITR 625 (All). 14.1 (a) In case of Braithwaite & Co. Ltd., the Hon'ble Supreme Court was to define the term 'period of not less than seven years' as appearing in the proviso to r. 1(v) of Sch. II to the Companies (Profits) Surtax Act, 1964 and was pleased to hold, after relying on t....
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....f New India Industries Ltd., the Hon'ble Supreme Court again had a chance to consider the term 'during a period of not less than seven years' as appearing in the proviso to cl. v of r. 1 of Sch. II to the Companies (Profits) Surtax Act, 1964. The headnote reads as under: 'The decision of the Gujarat High Court in New India Industries Ltd. vs. CIT (1977) 108 ITR 181 (Guj) at pp. 205-206, was, inter alia, to the effect that the legislature had in the proviso to cl. (v) of r. 1 of Sch. II to the Companies (Profits) Surtax Act, 1964, provided an outer limit to the repayment of the loan (to be included in the computation of capital) by using the words 'not less than seven years' and that 'therefore, if the spreadover of the repayment has been provided in the terms of the agreement in such a manner that the repayment is completed by a date beyond seven years from the first advance made under the agreement under which the moneys are borrowed, the loan in question will qualify for inclusion in the capital of the company computed for the purposes of surtax. However, once it is found that the date for the repayment of the entire amount falls beyond the period of seven years counting from ....
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....to the validity of the notice on the ground that it did not comply with the law. The issue of a valid notice is a condition precedent to the assumption of jurisdiction to reassess escaped income under s. 34.' 15.1 These two terms were also the subject-matter of consideration by the Hon'ble High Court of Bombay in case of Asstt CIT vs. Ekbal & Co. (1945) 13 ITR 154 (Born) during the course of consideration of validity of notice under s. 22(2) of 1992 Act. The question for consideration of the Hon'ble High Court was as to whether a notice given under s. 22(2) of the Act requiring the assessee to furnish the return of income 'within thirty days' of the receipt of the notice as against the required period of 'not being less than thirty days' was an invalid notice? 15.2 The facts of the case were that the provisions of s. 22(2) Indian IT Act, 1922, required the ITO, in the case of any person whose total income was of such an amount as to render such person liable to income-tax to serve a notice upon such person requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the pres....
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....se two points of time. There must be an interval of not less than thirty days and that means thirty days clear. The period must continue beyond the expiration of the stated time. Whereas 'within' the stated period must mean what it says, something less than the moment of expiration. In my opinion, therefore, the notice is invalid and the question referred to must be answered in the negative. The CIT must pay the costs of the reference.' 15.3 (b) Justice Kania agreed with the findings of Hon'ble Chief Justice by observing as under: '1. I agree s. 22(2) provides that in the notice given to the assessee to furnish his return, a particular period must be given to him. The sub-section further provides for such period 'not being less than thirty days'. Reading the section by itself, therefore, clearly means that the period with which the assessee has to send his return must neither at the beginning nor at the end encroach upon the thirty days. To put it in other words, thirty clear days must elapse before his obligation to send the return becomes effective. The notice given in the case is to send the return 'within thirty days', that being treated as a period of time given to the a....
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.... not be imposed. The assessee attended before the Agrl. ITO on the 25th March, with his books and documents. On the 27th of March, 1967, he submitted his returns. On 31st March, 1967, the Agrl. ITO passed an order of assessment. In express terms it began by stating that it was an order of assessment under s. 41 r/w s. 23 of the said Act for the accounting period in question. Throughout the order for the purpose of arriving at the taxable agricultural income of the assessee what was referred to were the books of account produced by the assessee in pursuance of the first of the said two notices dt. 7th March. 1967. It was only after the agricultural income of the assessee had been assessed and the amount of tax payable by him determined that while discussing the question whether penalty should be levied or not, the said officer had referred to the return filed by the assessee on 27th March, 1967. He had referred to it solely for the purpose of considering whether the filing of the return could be said to be an extenuating circumstance for non-levy of penalty. On the question whether the order of assessment was valid, the Hon'ble High Court after observing that: 'Sec. 41 of the Mah....
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.... number of days mentioned therein whereas the later term, i.e., 'within a period of..... days' specifies that the period allowed will end at the click of last minute of the last day. This difference, in my opinion, in these two terminologies is of a great significance because it may affect the jurisdiction of the authorities and also the rights of the subjects. If an authority is permitted to do an act or to initiate a proceeding 'within' a certain period, the moment the period is over the authority get divested of his powers to do that act or to initiate that proceeding. Similarly if an assessee is to act 'within' a certain period and fails to act, the moment the period is over the assessee loses right to act. For example if the AO fails to serve a notice under sub-s. (2) of s. 143 before the expiry of twelve months from the end of the month in which the return is furnished, he gets divested of his jurisdiction to frame an assessment under s. 143(3) and similarly if the assessee fails to furnish the appeal under s. 246A or under s. 253, as a case may be, within the prescribed period of thirty days and sixty days, respectively, the assessee loses the right to furnish the appeal. Th....
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....luding the undisclosed income for the block period within such time not being less than fifteen days but not more than forty-five days. In the present case, the AO, however, issued the notices under s. 158BC on 7th Dec., 2001 requiring the assessees to file their returns of undisclosed income for the block period within fifteen days of the service of the said notices. The expression used by the AO in the said notices is 'within fifteen days' and the question for consideration before us is whether there was a proper compliance by the AO of the statutory requirement contained in s. 158BC(a)(ii) which requires the AO to allow a period 'not being less than fifteen days'. 8. It is observed that similar issue arose for consideration before the Supreme Court in the case of CIT VS. Braithwaite & Co. Ltd. and while interpreting the relevant provisions of the Companies (Profits) Surtax Act, 1964, providing that in order to claim the benefit of the relevant rule, the borrowed money has to be repaid 'during a period of not less than seven years', the Hon'ble Supreme Court held that the only interpretation which can be given to the expression 'during a period of not less than seven years' is....
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....aid to have waived such illegality merely because the return was actually filed by him after such a minimum period prescribed in the statute. As such, considering all the facts of the case as well as the legal position emanating from the aforesaid judicial pronouncements, we hold that the notices issued in the present cases under s. 158BC not allowing the assessees the minimum required time prescribed in the relevant provisions to file their returns for the block period were bad in law and consequently, the assessments made in pursuance of the same were invalid and are liable to be quashed." 14. In view of facts and circumstances of the case, provisions of s. 158BC of the Act and following the decisions of Tribunal, Agra Bench "SMC" and Tribunal, Delhi Bench "E", we are of the opinion that the notice under s. 158 of the Act issued in assessee's case on 6th Jan., 1998, was invalid and bad in law. 15. After having held the notice under s. 158BC of the Act, 1961, also as invalid and bad in law, the next question for our decision is as to the validity of the subsequent proceedings and block assessment completed on 26th Oct., 1999. 16. After having considered the settled law on....