Income Tax Appellate Tribunal - Agra
Chandra Bhan vs Assistant Commissioner Of Income-Tax on 13 October, 2005
Equivalent citations: [2006]98ITD6(AGRA)
ORDER
S.C. Tiwari, Accountant Member
1. This appeal has been filed by the assessee on 19-2-2002 against the order of the ld. CIT (Appeals)-II, Agra dated 11-12-2001 in the case of the assessee in relation to order under Section 158BC for the block period 1-4-1988 to 29-4-1998.
2. The first ground in this appeal is general and is covered by subsequent grounds of appeal. The grounds of appeal Nos. 2 and 3 are directed against the validity of notice under Section 158BC and the ground of appeal No. 4 is directed against the Assessing Officer completing the assessment under Section 158BC without issue of notice under Section 143(2) of the Act. Besides, by way of grounds of appeal No. 6, the assessee has disputed the legality of search itself.
3. During the course of hearing before us, the ld. counsel for the assessee stated that the assessee was not interested in disputing ground of appeal No. 6 in view of ITAT Special Bench decision in 95 TTJ (Delhi) 25 (sic). We, therefore, reject the assessee's ground of appeal No. 6 as withdrawn.
4. We shall refer to assessee's ground of appeal Nos. 2, 3 and 4, which are based on technical points a little later. On merits, the only ground taken by the assessee in this appeal is ground of appeal No. 5, whereby the assessee has disputed the addition of following amounts as undisclosed income of the assessee for the block period :
Assessment year Amount
1994-95 Rs. 35,000
1995-96 Rs. 42,000
1996-97 Rs. 1,36,840
1997-98 Rs. 60,530
1998-99 Rs. 8,411
Total Rs. 2,82,787
5. The facts of the case relating to this dispute, briefly, are that the assessee was carrying silver jewellery in a Maruti Van and was intercepted by the police. He was found to be in possession of silver jewellery weighing 242.507 kgs. As the assessee could not properly explain the source of acquisition of silver ornaments, warrant of authorization for requisition of the same was issued under Section 132A on 29-4-1998 and subsequently, the silver ornaments were seized. Thereafter, the ld. Assessing Officer issued a notice under Section 158BC and severed it on the assessee on 8-10-1998. The assessee filed return in Form 2B for the block period on 23-7-1999. During the course of block assessment proceedings, the assessee initially surrendered 54 kgs. of silver ornaments for taxation. The aforesaid surrender was revised to 75 kgs. and finally to 100 kgs. The Assessing Officer treated 102.42 kgs. of silver ornaments as unexplained and the balance as explained. The value of unexplained silver ornaments was determined at Rs. 4,33,907. In this appeal, the assessee has not disputed the assessment of this amount of Rs. 4,33,904.
6. The assessee had never filed any returns of income till the action under Section 132A, as above-mentioned, was taken on 29-4-1998. Thereafter, the assessee filed on 18-5-1998 returns of income for assessment years 1994-95 to 1997-98. For the assessment year 1998-99, the return of income was filed on 31-10-1998. In these returns, the assessee disclosed income from business of silver ornaments on labour basis. He also declared income from salary and rent. It was stated that the return for assessment year 1993-94 and earlier years were not filed as the assessee's income was below the taxable limit. The Assessing Officer treated the income as per the return of income filed by the assessee on 18-5-1998 for the assessment years 1994-95 to 1997-98 as representing the assessee's undisclosed income for the block period. The returns of income had been filed by the assessee after the search. The ld. Assessing Officer, therefore, held that this income was undisclosed income of the assessee and included the same in the assessment of the undisclosed income for the block period. Besides, the assessee disclosed certain cash loans during the financial year 1995-96. During the course of block assessment proceedings, the assessee surrendered four loans of Rs. 19,000 each for the assessment as the assessee's undisclosed income. The ld. Assessing Officer treated the sum of Rs. 76,000 also as representing assessee's undisclosed income under Section 158BC for the assessment year 1996-97. Besides, the ld. Assessing Officer disallowed certain amounts from out of depreciation, vehicle expenditure and interest paid, claimed by the assessee. The amount thus disallowed was also treated as undisclosed income of the block period.
7. During the course of hearing before us, the ld. Authorised Representative of the assessee argued that insofar as the amounts disputed by the assessee's ground of appeal No. 5 are concerned, the same are required to be deleted, as they do not pertain to block assessment proceedings at all. He argued that it was settled position that only income detected during the course of search or as a result of search can be assessed as undisclosed income of the assessee in the block assessment proceedings under Section 158BC. Other income of the assessee, whether disclosed by the assessee himself or found out as a result of enquiries etc. made by the Assessing Officer, are required to be assessed by way of regular assessment under Section 143(3). In support of these contentions, the ld. Authorised Representative of the assessee has placed reliance on the decision of ITAT Mumbai Bench - B in the case of Murarjee Goculdas Spg. & Wvg. Co. Ltd. v. Dy. CIT [2005] 95 ITD 1 (TM).
8. The ld. DR argued that this aspect had been duly considered by the ld. CIT(A) in para 4.3 of the impugned order. In the case of the assessee, there were no proceedings under Section 143(3) for finalization of regular assessment as at the time of search. As a matter of fact till the date of requisition under Section 132A, no return of income had been filed by the assessee. It was only after proceedings under Section 132A that the assessee had filed the return of income for the first time for various years. Therefore, even the income as shown in the returns belatedly filed by the assessee, was required to be treated as undisclosed income for the purpose of block assessment under Section 158BC.
9. We have carefully considered the rival submissions. The legal position is now well settled. While making order under Section 158BC, the Assessing Officer docs not have the same jurisdiction that he has while assessing the income of assessee under the general provisions of the Act. Under the provisions of Section 158BC, the Assessing Officer can bring to assessment only that undisclosed income, which has a nexus with the evidence found as a result of search or requisition of such other materials or information as are available with the Assessing Officer and relatable to such evidence. In the regular assessment under Section 143(3), the Assessing Officer is empowered to bring to assessment any income chargeable to tax under the provisions of the Act. The meaning of 'such other materials' appearing in Section 158BB(1) has been considered at length in the decision of ITAT, Mumbai and the Hon'ble Bench held that the Legislature has used the words 'such other materials'. Hence, 'such other materials' means the materials found as a result of search of requisition. The same view has been taken by the Hon'ble Allahabad High Court in the case of CIT v. Smt. Usha Tripathi . There are a large number of judgments supporting this view and reference may be made to CIT v. Shambhulal C. Bachkaniwala ; CIT v. Vinod Danchand Ghodawat ; CIT v. Rajendra Prasad Gupta ; Bhagwati Prasad Kedia v. CIT ; CIT v. Ravi Kant Jain [2001] 250 ITR 141 : 117 Taxman 28. (Delhi); CIT v. Dr. M.K.E. Memon . (Bom.) and so on. Examined from this point of view, we find that it is not the ease of the ld. Assessing Officer and/or CIT(A) that the income returned by the assessee in belated returns had already been unearthed or detected during the course of requisition under Section 132A. Even the amount of cash credits surrendered by the assessee, particularly of four loans were found not as a result of search but as a result of subsequent enquiries made by the Assessing Officer after the search. We are, therefore, satisfied that the amounts mentioned in ground No. 5 are required to be excluded from the block assessment proceedings for the short reason that they do not belong to block assessment proceedings in the first instance. As already mentioned, in the case of a person searched, there has to be block assessment as well as regular assessment and the income pertaining to regular assessment alone cannot be included in the block assessment proceedings. For that purpose, it makes little difference whether or not the assessee had filed return of income as on the date of search or requisition. We, therefore, direct deletion of the assessment of undisclosed amounts as mentioned in ground No. 5 for the purpose of block assessment proceedings.
10. We now come to the assessee's grounds of appeal relating to the validity of the block assessment order made by the Assessing Officer. During the course of hearing before us, the ld. A.R. of the assessee filed copy of notice under Section 158BC issued by the Assessing Officer. He pointed out that in the notice under Section 158BC issued by the Assessing Officer on 9-9-1998, the ld. Assessing Officer had not denoted whether the return of income was required from the assessee as individual/HUF/ Firm/Coy./AOP/BOI/Local Authority. The ld. Assessing Officer had not selected any of these for the notice under Section 158BC nor had he scored out other items. Notice under Section 158BC was, therefore, bad in law. Secondly, in the notice, the block period was mentioned as 1-4-1987 to 29-4-1998 whereas the correct block period was 1-4-1988 to 29-4-1998. The ld. Authorised Representative of the assessee argued that for this reason, the order under Section 158BC made by the Assessing Officer was void ab initio and liable to be struck down. In support of these contentions, the ld. Authorised Representative of the assessee placed reliance on the decision of ITAT, Agra Bench 'SMC, in the case of Vinod Kumar bearing IT Appeal No. [IT (SS) A. Nos. 01, 02, 03, 04 (Agra) of 2003 dated 30-6-2004]. The ld. counsel for the assessee further argued that in this case after the assessee had filed return of income for the block period under Section 158BC, the ld. Assessing Officer never issued notices under Section 143(2). Issue of such notice was mandatory as held by ITAT, Lucknow (Special Bench) in the case of Nawal Kishore & Sous Jewellers v. Dy. CIT [2003] 87 ITD 407. To our pointed query as to whether by raising these grounds of appeal, the assessee was seeking any fresh opportunity by way of fresh notice under Section 158BC/ 143(2), the ld. counsel for the assessee replied that during the course of block assessment proceedings, the assessee had been given sufficient opportunity to present its case and the block assessment order had been made in relation to the correct period and in the correct status. The assessee, therefore, did not have any grievance on this score in respect of the order tinder Section 158BC as made by the ld. Assessing Officer on 29-4-1998. However, these were technical issues of substance and therefore, the assessee's prayer was that the order under Section 158BC as made by the Assessing Officer may be annulled as being ab initio void. The ld. counsel of the assessee categorically submitted that if we find these defects pointed out by him to be curable defects, the same may be treated to have already been cured in the order under Section 158BC made by the Assessing Officer and the assessee was not interested in having the fresh order under Section 158BC, being made in this case.
11. The ld. DR argued that in this case, the assessee had been raising technical objections all the way. First the assessee challenged legality of requisition under Section 132A before the Hon'ble Allahabad High Court without success. The objections now raised in relation to notice under Section 158BC were also with the sole objectives of not paying amount of tax legitimately due from him on one pretext or the other. On receipt of notice under Section 158BC, the assessee filed return of income without any objection for the correct status and for the correct period. It was the case of the assessee himself that the order under Section 158BC made by the ld. Assessing Officer is correct both in respect of status as well as block period. It was admitted case of the assessee that no prejudice, whatsoever, was caused to the assessee on account of so called defects in the notice under Section 158BC made by the Assessing Officer. Even in relation to notice under Section 143(2), the assessee admitted that he was fully heard and there was no requirement of any further opportunity of behind heard in the matter. On these facts, no further relief was called for to the assessee on these counts.
12. We have carefully considered the rival submissions. The assessee has disputed correctness of notice under Section 158BC on the twin grounds of the status of the assessee not having been mentioned therein and the block period having been wrongly mentioned. The contention of the assessee before us on the basis of these 'defects' is that the consequent order under Section 158BC made by the Assessing Officer may be annulled as void ab initio. The assessee, however, does not want any curative steps in relation to the alleged defects in the notice under Section 158BC and he admits that the order under Section 158BC has been made in the correct status and for the correct block period. The assessee has placed heavy reliance on the decision of ITAT, SMC Bench, Agra in the case of Vinod Kumar (supra). On consideration of that decision, we find that the proposition that non-mention of status in a notice under Section 158BC would render it void has been too broadly stated. In the case of Mulchand Rampuria v. ITO . the Hon'ble Calcutta High Court have held that mistake in description of assessee would not invalid notice under Section 148. In the case of Chooharmal Wadhuram v. CIT , it is held that where proceedings are initiated against the correct person, a mis-description of his status in notice is not material. In the case of Gopaldas Parshottamdas v. CIT [1941] 9 ITR 130 (All), the mistake in the notice of not scoring out any of four capacities printed therein was held to be not material because the assessee had been assessed in the previous years as undivided Hindu family and had submitted the return as undivided Hindu family. Hence, the arguments of the assessee that he did not know exactly as to which capacity of his was under investigation and, therefore, the notice was illegal, was not maintainable.
13. In our considered view, in all such matters, the provisions of Section 292B have to be kept in mind and properly applied wherever necessary. The provisions of Section 292B are as under :
No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
As to the scope and applicability of the provisions of Section 292B reference is invited to the judgments reported in the case of CIT v. R. Giridhar ; CIT v. K. Sarawswathi Ammal ; Swaran Kanta v. CIT ; I. Devarajan v. Tamil Nadu Farmers Service Co-operative Federation ; Assam Carbon Products Ltd. v. CIT . (Gauhati); Vanaja Textiles Ltd. v. CIT . etc.
14. Even prior to enactment of the provisions of Section 292B, the courts have held that mistakes/mis-description that are not of fundamental nature would merely make the notice or proceedings or the assessment defective and not void ab initio. In the case of Isha Beevi v. TRO , the Hon'ble Supreme Court held that in order to substantiate a right to obtain a writ of prohibition, an applicant has to demonstrate total absence of jurisdiction. If power to proceed is actually there, the mere reference to a wrung section for authority to act will not vitiate the action taken. In the case of Raja Buldeodas Birla Santatikosh v. CIT , the Hon'ble Calcutta High Court observed :
....no hard and fast line can be drawn between a nullity and an irregularity ; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it, or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated.
Whether a provision falls under one category or the other is not easy of discernment but in the ultimate analysis it depends upon the nature, scope and object of a particular provision. A workable test has been laid down by Justice Coleridge in Holmes v. Russell [1841] 9 Dowl 487 which reads:
It is difficult sometimes to distinguish between an irregularity and nullity; but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection; it he can waive it, it amounts to an irregularity; if he cannot, it is nullity'.
15. There can be different situation emerging where some error creeps in any statutory notice, proceedings or order. In first category of cases, the error can be ignored if the same have been waived. Ordinarily where a party ignores the error and responds as if there is no error, waiver can be assumed to have taken place. Only in matters relating to substantive law that goes to the root of the matter it can be held that there is a nullity that cannot be validated by waiver. Second situation may be where although there is no waiver; the defect or irregularity is curable and not fatal. This aspect has not been considered at all, we say so with respect, in t he decision in the case of Vinod Kumar (supra).
16. In the case of (Estate of Late) Rangalal Jajodia v. CIT , Hon'ble Supreme Court has held that even the absence of notice may be curable. Facts of that case are that Rangalal Jajodia filed income-tax returns for the years 1942-43 and 1943-44 but before the assessments could be made, Rangalal Jajodia died. Rangalal Jajodia was survived by Shankarlal Jajodia, son by a predeceased wile, Aruna Devi, the second wife, and children by the second wife. Rangalal Jajodia had made a will on 16-4-1945, whereby Aruna Devi and one Ram Kumar Bhuwalka were executrix and executor respectively. Shankarlal Jajodia was disinherited under the will. The assessment orders were served on Shankarlal Jajodia who appealed to the Appellate Assistant Commissioner con tending that he was not the legal representative. Pursuant to the directions of Appellate Asstt. Commissioner, the Revenue Officer completed the assessments on the estate of the late Rangalal Jajodia by executors, Mrs. Aruna Devi and another. The executrix, Aruna Devi, appealed against the assessments contending before the Appellate Assistant Commissioner that the assessments were barred by limitation and that the previous Appellate Assistant Commissioner's direction to make assessments on her was invalid. It was also contended that reasonable opportunities were not given to Aruna Devi before the assessments were made. The Appellate Assistant Commissioner on 16-4-1955, held that the assessments were validly made on a valid direction by the previous Appellate Assistant Commissioner. He however, set aside the assessments directing the Revenue Officer to complete them after giving the executrix a fresh opportunity to object to the assessment. The High Court, on reference under Section 66(1) of the Act, held that the second proviso to Section 34(3) applied to save reassessment from the bar of limitation but that in the present appeals the first assessments which were made on Shankarlal Jajodia were set aside on appeal because these were not on the real legal representatives of the deceased and, therefore, no direction or finding could be made by the revenue authority in any such appeal as would remove the bar of limitation on the reassessment later made on the executor who was to be regarded as an entirely different assessee. The High Court also held that the direction or finding given by the Appellate Assistant Commissioner for making the assessment on the executors was, therefore, the direction and the findings outside the scope of the second proviso to Section 34(3) of the Act. Hon'ble Apex Court observed, "The lack of a notice does not amount to the revenue authority having had no jurisdiction to assess, but that the assessment was defective by reason of notice not having been given to her. An assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected. Similarly, if there is a mistake as to name or there is a misdescription of the name, the proceeding will be liable to be challenged and corrected by giving notice to the assessee subject to such just exceptions as an assessee can take under law. The direction given by the Appellate Assistant Commissioner was to make fresh assessment on Aruna Devi in accordance with the provisions of the Act".
17. In the instant case, apart from innocuous mistakes no prejudice has been caused to the assessee. The assessee has, therefore, rightly argued before us that in the event, the impugned orders not being found to be void ab initio, no further curative steps may be taken. Had there been prejudice caused to the assessee in any manner, the law laid down by the Hon'ble Supreme Court in the case of Estate of Late Rangalal Jajodia (supra) is quite clear that an assessment proceeding cannot cease to be a proceeding under the Act merely by reason of want of notice. It will be proceeding liable to be challenged and corrected. However, on the facts of the case before us there being no prejudice, the impugned order under Section 158BC can be treated as having been made in lawful manner within the meaning of Section 292B of the Act. The assessee also desires so. We, therefore, reject assessee's grounds of appeal Nos. 2 and 3 against the validity of the order under Section 158BC.
18. The assessee's ground of appeal No. 4 is directed against the Assessing Officer not having issued any notice under Section 143(2). Here again, we find the order under Section 158BC as having been validated by the provisions of Section 292B of the Act. To begin with, the ld. Assessing Officer himself gives the caption, '158BC read with Section 143(3) of the Income-tax Act'. On perusal of the assessment order, it is seen that the assessee appeared before the ld. Assessing Officer through his authorized representative from time-to-time and various aspects of the case were discussed. The assessee was accorded full opportunity to produce or cause to be produced any evidence on which the assessee would rely in support of the return under Section 158BC. The assessee was given full opportunity to substantiate all his claims. Thus, the want of issue of notice under Section 143(2) on the part of the Assessing Officer, if there is indeed any such lapse, is only a procedural error to be cured by suitable directions to the ld. Assessing Officer. In the instant case, there is no prejudice to the assessee and the assessee has himself requested that no curative steps be taken. Hence, no further action appears to be necessary. We, therefore, reject assessee's ground of appeal No. 4 also.
19. In the result, this appeal is partly allowed.