Patna High Court
Commissioner Of Income Tax & O vs Md.Rizwan on 27 November, 2008
Author: Chandramauli Kr. Prasad
Bench: Chandramauli Kr. Prasad, Ravi Ranjan
MISC. APPEAL No.206 OF 2004
(Against the order dated 10.11.2003 passed by the Patna Bench of the Income-
Tax Tribunal in I.T.A. No. 99 (Pat) of 2002 for the Assessment Year 1998-99)
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1. COMMISSIONER OF INCOME TAX (CENTRAL), PATNA
2. DCIT INV CIRCLE 1 (1) PATNA
3. ACIT, CENTRAL CIRCLE-2, PATNA
------- ASSESSING OFFICER/APPELLANT
Versus
MD.RIZWAN, PROPRIETOR M/S. JAWAID STORES, KHAJEKALAN, PATNA
CITY, PATNA.
------ ASSESSEE/RESPONDENT.
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For the Appellants : Mr. Rishi Raj Sinha,
Counsel for the Income-tax Department.
For the Respondent : Mr. Brejendra Kumar, Advocate.
------
PRESENT
THE HON'BLE MR. JUSTICE CHANDRAMAULI KR. PRASAD
THE HON'BLE DR. JUSTICE RAVI RANJAN
Prasad & The Commissioner of Income-tax aggrieved by the
Ranjan, JJ:
order dated 10th of November, 2003 passed by the Patna
Bench of the Income-tax Tribunal, in ITA No. 99 (Pat) of 2002
has preferred this appeal under Section 260A of the Income-
tax Act.
Short facts giving rise to the present appeal are that
respondent, Md. Rizwan, (hereinafter referred to as the
"assessee") is a dealer in fire crackers. On 31 st of October,
1998, he filed his return of income showing a loss of Rs.
1,880/-.
The case was selected for scrutiny and notice under
-2-
Section 143(2) of the Income-tax Act (hereinafter referred to
as the "Act") was served on the assessee and ultimately
assessment was made under Section 143(3) of the Act by
order dated 26.3.2001 on a total income of Rs. 51,81,173/-.
Assessee aggrieved by the same, preferred appeal
before the Commissioner of Income-tax (Appeal) and the
same was dismissed by order dated 17.1.2002. Thereafter, the
assessee filed appeal before the Income-tax Appellate
Tribunal, (hereinafter referred to as the "Tribunal"). It seems
that during the pendency of appeal, search and seizure
operation in the residential and godown premises of the
assessee was conducted under Section 132(1) of the Act on
29.10.2002. A notice was issued to the assessee under
Section 158BC of the Act and he filed the return for the block
period 1.4.1996 to 29.10.2002 on 23 rd/24th of December, 2002.
Assessee brought the aforesaid fact to the notice of the
Tribunal and contended that assessment for the assessment
year 1998-99 shall be merged with the assessment of the
block period 1.4.1996 to 29.10.2002 of which the Assessment
has to be made under Section 158BC of the Act. This
submission of the assessee found favour with the Tribunal and
it disposed of the appeal inter alia observing as follows:-
"We have heard both the parties
and perused the material available on record.
On perusal of the assessee's letter dated
10.09.2003we find that the assessment for the assessment year under appeal is fell under block period as defined in section 158B(a) of the Act and the assessment of -3- which is to be made u/s. 158BC as per law.
Since the assessment for the assessment year 1998-99 is merged with the assessment for the block period 01-04-1996to 29-10-2002 to be made u/s. 158BC of the Act, the matter is restored back to the A.O."
Aggrieved by the same, Commissioner of Income-tax has preferred this appeal under Section 260A of the Act and by order dated 5.1.2007, this appeal has been admitted on the following substantial questions of law:-
1. "Whether on the facts and circumstances of the appellant's case the Tribunal erred in law in holding that since the assessment framed for assessment year 1998-99 under section 143(3) is to be merged with the assessment to be made for the block period 1.4.96 to 29.10.2002 the assessment is to be made under section 158BC of the Act.
2. Whether the order of the Tribunal suffers from the error of law in so much as per provisions of Chapter XIVB and also settled by catena of judicial decisions that there could be a regular assessment in addition to block assessment Chapter XIVB and both the proceedings could go simultaneously".
Mr. Rishi Raj Sinha, appearing on behalf of the appellant submits that the Tribunal erred in law in holding that the assessment framed for the assessment year 1998-99 under Section 143(3) of the Act shall merge with the assessment to be made for the block period 1.4.1996 to 29.10.2002 under Section 158BC of the Act. He submits that regular assessment in addition to block assessment under Chapter XIV-B of the Act is permissible. In support of his -4- submission, he has placed reliance on a decision of the Calcutta High Court in the case of Caltradeco Steel Sales (P) Ltd. and others Vrs. Deputy Commissioner of Income-Tax, 243 ITR 643 and our attention has been drawn to the following passage which reads as follows:-
"Therefore, the limited question before us is when there is a proceeding of assessment under Chapter XIV-B of the Act pending, can the Assessing Officer proceed to assess the income of the same year which forms part of the block period? In our view, when Chapter XIV-B of the Act pertains to undisclosed income and the assessment under section 143(3) pertains to disclosed income, there should be no dispute on the fact that both the proceedings can go on simultaneously as both are for different types of income, though for the same period, one proceeding is for undisclosed income and the other proceeding under section 143(3) is for disclosed income.
If any income is assessed and taxed under the regular proceeding, that is, under section 143(3) of the Act, that cannot be taxed under the special Chapter in pursuance of the notice under section 158BC, the Assessing Officer can proceed under section 158BC to tax the income which has not been disclosed. Thus, the proceedings under section 143(3) will go on simultaneously along with the proceeding in pursuance of the notices under section 158BC of the Act".
Mr. Brijendra Kumar, appearing on behalf of the respondent-assessee, however, contends that after the order of the Tribunal, the Assessisng Officer has passed separate orders of assessment of the block period including the assessment year 1998-99. He points out that against the regular assessment for the assessment year 1998-99 the appeal is pending before the Commissioner of Income-tax -5- (Appeal) and against the block assessment, the matter is pending before the Tribunal.
Having appreciated the rival submissions, we find substance in the submission of Mr. Sinha and the judgment relied on, supports his contention. The heading of Chapter XVI-B of the Act is special procedure for assessment of search cases. Section 158B(a) and (b) define block period and undisclosed income respectively. Section 158BC of the Act provides for procedure for assessment of undisclosed income as a result of search for the block period i.e. previous year relevant to six assessment years preceding the previous year in which the search was conducted under Section 132 of the Act. So far as the assessment under Section 143(3) of the Act is concerned, same is on the basis of return filed and income disclosed by the assessee. Thus, proceeding under Chapter XIV-B is a different proceeding than proceeding under Section 143(3) of the Act. Therefore, in our opinion, simply the fact that assessment for the block period shall cover the period of regular assessment, later shall not merge with the assessment to be made under Section 158BC of the Act.
In that view of the matter, we are of the opinion that the Tribunal erred in holding that assessment framed for assessment year 1998-99 under Section 143(3) of the Act shall merge with the assessment to be made under Section 158BC of the Act for the block period 1.4.96 to 29.10.2002. -6-
We are further of the opinion that there could be regular assessment in addition to block assessment under Chapter XIV-B of the Act. Both the questions are answered accordingly.
In the result, the appeal is allowed and the matter is restored back to Tribunal for reconsideration of the appeal in accordance with law.
In the facts and circumstances of the case, there shall be no order as to cost.
(Chandramauli Kr. Prasad, J.) (Dr. Ravi Ranjan, J.) Patna High Court Dated, the 27th Nov.2008 NAFR/S.Ali