- (1.) This is an appeal by the assessee in which the assessee has challenged the assessment for the block period completed under the provisions of Chapter XIV-B of the Income Tax Act, 1961 (hereinafter referred to as 'the Act) on various grounds. Hearing of this appeal has been fixed on priority basis as directed by the Hon'ble High Court of Allahabad vide order dated 16-3-1999.
(2.) In the grounds of appeal enclosed along with the memorandum of appeal the assessee has listed as many as 9 grounds but at the time of hearing the assessee's learned counsel Shri S.K. Garg, withdrew Ground No. 3.1 and 3.4 which are dismissed as withdrawn.
(3.) Ground Nos. 1, 2.1, 2.2, 2.3 and 2.4 In these grounds the assessee has objected to the validity of the notice dated 12-12-1996, issued as required by the provisions of section 158BC of the Act. 3.1. We have heard the assessee's counsel as well as the learned Addl. standing counsel. 3.2. The counsel for the assessee first of all submitted that the notice required to be served upon the assessee as per the provisions of section 158BC is analogous/within the parameter of the requirements for a notice under section 148 of the Income Tax Act and, therefore, the law relating to the requirements for the validity of the notice under section 148 and the case laws thereof, are fully applicable, so far as the requirements for a valid notice under section 158BC of the Act are concerned. 3.3. Referring to the copy of the notice dated 12-12-1996 (placed at p. 1 of assessee's paper booka copy, certified by both the parties, was filed during the course of hearing also), The assessee's counsel submitted that the notice is vague and invalid because of the following illegalities in the notice : (i)According to the provisions of section 282(2)(b), every notice issued, under the Act, in case of a company has to be addressed to the principal officer of the company and since the impugned notice has not been addressed in accordance with the requirement of this provision, the notice in question is vague and invalid ; (ii) The notice is also silent as to the 'status' in which the return was required to be furnished. Referring to the IVth and Vth line of the first paragraph (main body of the notice), the assessee's counsel submitted that submitted mentioning of the words" in respect of which an individual/HUF/firm/company/Association of persons/Body of individual local authority 'leads one to presume that the assessing officer was not satisfied as to whom the notice was being directed or in whose case the so-called block assessment was going to be completed. According to the counsel this illegality has also rendered the notice vague and invalid. (iii) According to the definition given as per section 158BA of Act, the block period is defined to be consisting of previous years relevant to 10 assessment years preceding the previous year in which the search had been conducted and period upto the date of commencement of search in the previous year in which search was conducted. According to the counsel, the definition of block period specifies the maximum number of previous assessment years which can be covered in assessment for the block period and it is not necessary that in each and every case the previous 10 assessment years are to be covered. Explaining his point the assessee's counsel submitted that if assessee's business had been in existence, say for only 3 previous assessment years, then the block period in that case will include only 3 assessment years and not 10 assessment years. From this interpretation of the provisions the assessee's counsel made out a case that in the notice under reference the exact period falling within the block period i.e. assessment years; has not been mentioned and since non mentioning of assessment year in a notice under section 148 of the Act has been held to have rendered the notice under section 148 of the Act as a vague notice, the present notice alleged to have been issued under section 158BC of the Act is also rendered vague and invalid. He further submitted that the business of the assessee's company was started during the previous year relevant to assessment year 1993-94 and since this fact was well within the knowledge of the assessing officer, mentioning of the block period as "the previous years relevant to 10 assessment years preceding the previous year 1996-97 and including the period upto the last date of search warrant executed in the case as defined under section 158BA upto the 3-9-1996", clearly goes to show that the assessing officer has simply mentioned the definition of block period given under section 158BA of the Act and not the assessment year which are requirement for a valid notice asking for the return of undisclosed income. (iv) From the period mentioned by the assessing officer in the notice the counsel for the assessee further submitted that as per the provisions of section 158B of the Act the block period is to include the period upto the date of commencement of search" and not upto the "last date of search warrant executed in one's case" and therefore on this account also the assessing officer cannot be said to have mentioned the block period/assessment year correctly. 3.4. In view of the above alleged illegalities claimed to have been committed in the notice under section 158BC of the Act, the assessee's counsel submitted that the assessee- company was not able to understand as to whose, for which period and in which status, the return was required to be furnished. Explaining the illegalities further, the counsel submitted that since the assessing officer has mentioned various status such as individual/HUF/firm/company/assessing officer/BOI/local authority in the notice, it is clear that the assessing officer was not satisfied as to from whom he was going to ask for a return and in whose case was going to make assessment for block period. The assessee's counsel further submitted that simply addressing the notice in the name of company cannot be interpreted as a notice asking the company to furnish its return in the status of the company and for the period during which it existed. Giving an example, the assessee's counsel submitted that if a notice is addressed as per the provisions of section 282(2)(b) of the Act to the principal officer, it cannot be interpreted as a notice asking the addressed person i.e. the principal officer to furnish his return in the individual status. 3.5. The assessee's counsel, after referring to the purpose behind introducing the provisions of Chapter XIV-B of the Act submitted that it is a complete and independent code itself in which not only the term "undisclosed income" is defined but procedure for making assessment, the period which are covered by such assessment and the requirement with regard to the service of notice as well as applicability of other provisions of the Act have been specified, and, therefore, the provisions have to be construed strictly. 3.6. In the light of the above submissions the assessee's counsel submitted that since the notice dated 12-12-1996, claimed by the department to have been issued as required under section 158BC of the Act is vague and bad in law, all the consequential actions including the assessment for block period are illegal and void ab initio. 3.7. In support of the submissions that the notice was illegal and bad in law, the assessee's counsel has placed reliance on the decisions in following case: (i) Y. Narayana Chetty Anr. v. Income Tax Officer, 1959 35 ITR 388; (ii) CIT v. Kurban Hussain Ibrahimji Mithiborwala, 1971 82 ITR 821; (iii) CIT v. Ishwar Singh Sons, 1981 131 ITR 480; (iv) Madan Lal Agarwal v. CIT, 1983 144 ITR 745; (v) CIT v. Thayaballi Mulla Jeevaji Kapasi, 1967 66 ITR 147; and (vi) P. N. Sasi Kumar v. CIT, 1988 170 ITR 80. 3.8. The assessee's counsel further submitted that the notice under section 158BC is neither akin nor analogous to a notice under section 142(1) of the Act nor can amount to an obligation for a return to be furnished under section 139(1) because in those cases it is the assessee who is to choose the status, but under the provisions of section 158BC of the Act the assessee is to furnish the return in the status in which notice has been issued to the assessee is required and, therefore, the assessee has no choice to claim a particular status. 3.9. The assessee's counsel further submitted that the illegalities pointed out in the notice under section 158BC of the Act were not curable and consequently such notice cannot be cured/saved by the provisions of section 292B of the Act and for this purpose relied on the Tribunal's decision in case of M/s Prakash Spun Pipe, in assessment year 1990-91 ITA No. 1014/All/1994, dated 1-2-1998, and the relevant part is contained in paras 10 and 11 of the order which is reproduced as under : "10. Referring to the view taken by the learned Commissioner that the assessing officer had condoned the defect, with reference to section 292B of the Act, we have no hesitation in saying that this provision of law is not a panacea, pulling the assessing officer out of any and all sort of statutory non-compliances by him. Section 292B only says that a return, assessment notice, summons or other proceedings shall not become invalid merely by reasons of any mistake, defect or omission in such return assessment notice, summons or other proceedings if these are in substance and effect in conformity with or according to the intent and purpose of this Act. Even a plain reading of this provision conveys that the heart of the matter is that it is only a technical or venial sort of defect in any return, assessment notice, summons or other proceedings that is capable of being cured under this provision. In this connection a reference may be made to Departmental Circular No. 179, dated 30-9- 1975, which, as found at p. 6928 of Chaturvedi and Pithisaria's Commentary, 4th Edn. Vol. VI, also states that section 292B was enacted to provide against purely technical objections without substance coming the way of the validity of assessment proceedings, etc. We are certain that to treat a return as, valid for the purposes of the completion of an assessment which as per unambiguous provisions of law, namely, section 139(9)" shall be treated as valid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return" is not at all a technical or venial matter. In our considered opinion it does in nowhere come even within the legal vicinity of section 292B of the Act 11. In the result, we are of the view that on the facts and circumstances of the case, 'the assessing officer ceased to remain vested with the legal power to complete the assessment'. If he had wanted to do so, he should have issued either a notice under section 142(1) or resorted to proceedings under section 147 of the Act. Not having done so, the resultant assessment is void ab initio. ";