Income Tax Appellate Tribunal - Madras
A.P. Shanmugaraj vs Deputy Commissioner Of Income Tax on 16 December, 2005
Equivalent citations: [2006]99ITD278(CHENNAI), (2006)100TTJ(CHENNAI)259
ORDER
Mahavir Singh, J.M.
1. These appeals of the assessee are directed against respective orders of the CIT(A). The relevant block assessment period involved in these appeals are 1st April, 1988 to 1st July, 1998. Since common issues are involved in these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity.
2. The first issue raised in the appeal of the assessee, viz., A.P. Shanmugaraj i.e., IT(SS)A No. 16/Mad/2001 is that the assessment is barred by limitation in view of the time-limit expired as per the provisions of Section 142(2A) of the Act and proviso to Section 142(2C) of the Act. The brief facts of the case are that the assessee was searched by the IT Department, Investigation Wing, on 1st July, 1998 and the last authorization was served on the assessee on 2nd July, 1998 when the search concluded. Notice under Section 158BG of the Act was served on the assessee on 5th June, 1999 and the return in response to the same was filed in Form No. 2B on 22nd July, 1999 admitting the undisclosed income of Rs. 7,84,650. The AO noticed complexity in the accounts and directed the assessee to get his accounts audited under Section 142(2A) of the Act on 17th April, 2000 and direction under Section 142(2A) was served on the assessee on 20th April, 2000. In this direction, the assessee was directed to get the audit report on or before 31st July, 2000. The CIT, Coimbatore, appointed Shri T.S. Sankararaman, chartered accountant , Salem, for auditing the books of account of the assessee in respect of block period 1st April, 1988 to 1st July, 1998 and the assessee failed to comply with the directions issued by the AO under Section 142(2A) of the Act and the block assessment was completed on 13th Nov., 2000 under Section 158BG r/w Section 144 of the Act. The assessee has raised the limitation issue before the CIT(A) and argued that block assessment order dt. 13th Nov., 2000 is barred by limitation in view of the proviso to Expln. 1 to Section 158BE of the Act. The CIT(A) rejected the claim of the assessee that the block assessment order dt. 13th Nov., 2000 is barred by limitation and it was held by the CIT(A) that it was within the time-limit for completion of block assessment as provided under Expln. 1 to Section 158BE of the Act. The assessment under Section 158BC/144 of the Act was completed by the AO as the assessee failed to comply with the direction of the AO to get his accounts audited under Section 142(2A) of the Act. Aggrieved, the assessee is in second appeal before the Tribunal.
3. Before us, the learned counsel for the assessee as well as the learned Departmental Representative argued this case,
4. We have heard both the sides and perused the case records and also the provisions including the precedents relied on by both the sides. We find from the facts as narrated above that search was conducted on the assessee under Section 132 of the Act on 1st July, 1998 and the time-limit prescribed to complete the block assessment under Section 158BE, Sub-section (1) Clause (b) and Expln, 1 is within two years from the end of the month wherein the last authorization for search under Section 132 or for requisition under Section 132A, as the case may be, was executed in cases where search is initiated or books of account or other documents or any other assets are reguisitioned. In this case, as the search was conducted on 1st July, 1998, the assessment is to be completed on or before 31st July, 2000 but as per the Expln. 1 to Section 158BE of the Act, the period to be excluded under Clause (ii) where the AO has directed the assessee to get its accounts audited under Section 142(2A) of the Act and the period so directed shall be excluded while computing the period for limitation and further the proviso to Expln. 1 to Section 158BE of the Act further provides extension of 60 days in case the period after this remains less than 60 days, then such remaining period shall be extended to 60 days and the aforesaid period of limitation shall be deemed to be extended. Accordingly, if we calculate the limitation, the AO directed for audit under Section 142(2A) on 17th April, 2000 to complete the audit and report to be submitted on or before 31st July, 2000, the period taken under Section 142(2A) of the Act is to be excluded. In the present case, 105 days was the time taken, hence, 105 days are to be excluded and the period of 105 days is to be extended. Accordingly, the limitation in this case will expire on 13th Nov., 2000, the date on which the assessment was framed by the AO and furthermore the proviso to Explanation to Section 158BE of the Act further extends the period to 60 days where the period remains for framing the block assessment less than 60 days. In this case there does not remain any day left for making the assessment, hence, extended period of 60 days will be taken into consideration. For clarity and convenience, we reproduce the relevant provisions of Section 158BE of the Act which reads as under :
158BE. Time-limit for completion of block assessment. (1) The order under Section 158BC shall be passed-
(a) ...
(b) within two years from the end of the month in which the last of the authorizations for search under Section 132 or for requisition under Section 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.
(2) The period of limitation for completion of block assessment in the case of the other person referred to in Section 158BD shall be-
(a)...
(b) two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.
Explanation 1-In computing the period of limitation for the purposes of this section,-
(i) ...
(ii) the period commencing from the day on which the AO directs the assessee to get his accounts audited under Sub-section (2A) of Section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that subsection; or
(iii) ...
(iv) ...
shall be excluded :
Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in Sub-section (1) or Sub-section (2) available to the AO for making an order under Clause (c) of Section 158BC is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.
5. The assessee argued that for limitation purpose the date starts from 17th April, 2000 when the AO directed for audit under Section 142(2A) of the Act and not the date it was served on the assessee on 20th April, 2000. For this objection, we have perused the Section 142(2A) of the Act and the proviso to Section 142(2C) of the Act reads as under :
142. Inquiry before assessment. (1) For the purpose of making an assessment under this Act, the AO may serve on any person who has made a return under Section 139 or in whose case the time allowed under Sub-section (1) of that section for furnishing the return has expired a notice requiring him, on a date to be therein specified,-
...
(2A). If, at any stage of the proceedings before him, the AO, having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief CIT or CIT, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below Sub-section (2) of Section 288, nominated by the Chief CIT or CIT in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the AO may require.
(2B) ...
(2C) Every report under Sub-section (2A) shall be furnished by the assessee to the AO within such period as may be specified by the AO :
Provided that the AO may, on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under Sub-section (2A) is received by the assessee.
It is amply clear from the proviso to Section 142(2C) of the Act that the period originally granted or extended period which should not exceed more than 180 days will be applicable to the assessee from the date on which direction under Sub-section (2A) of Section 142 is received by the assessee. In the present case, the assessee received the direction on 20th April, 2000 and hence, the limitation will be counted from the date of service of direction and not from the issuance of direction by the AO. We have to refer to the Board's Circular No. 204, dt. 24th July, 1976, after introduction of these new Sub-sections (2A), (2B) and (2C) of Section 142 of the Act which empowers the AO to direct the assessee to get his accounts audited. Here also, as per para 39.5 of the circular, limitation will start from the date on which the direction under Section 142(2A) was received by the assessee. The relevant para 39.5 of the Board's circular is reproduced as it is for reference and clarity :
39.5 Under Sub-section (2C), the ITO is required to specify the period within which the audit report is to be furnished by the assessee. He is, however, empowered to extend this period on an application by the assessee for any good and sufficient reason. The aggregate of the period originally fixed and that allowed to the assessee by way of extension, for furnishing the audit report, cannot exceed 180 days from the date on which the direction under Sub-section (2A) was received by the assessee.
6. In view of proviso to Section 142(2C) of the Act as well as Expln. 1 to Section 158BE of the Act and the facts of the case, we are of the opinion that the assessment framed by the AO dt. 13th Nov., 2000 is not barred by limitation. The AO has extended the period available in view of proviso to Expln. 1 to Section 158BE of the Act and the direction under Section 142(2A) of the Act was served on 20th April, 2000. As per the proviso to Sub-section (2C) of Section 142 of the Act, the limitation will start from the date on which direction under Section 142(2A) is received by the assessee. Accordingly, the assessee fails on this issue and the assessment is not barred by limitation. It is well within the time-limit as provided in the provisions of the Act which is discussed in the above paras.
7. The next issue in IT(SS)A No. 16/Mds/2001 and common in IT(SS)A Nos. 79, 80, 99 and 100/Mad/2005 is that no notice was issued under the proviso to Section 143(2) of the Act to complete the block assessment. It is an admitted fact that no notice under Section 143(2) was issued daring the course of block assessment. This fact is brought out by the CIT(A) in his order dt. 28th Feb., 2001 wherein it is written that "it appears that no notice under Section 143(2) was issued by the AO during the course of assessment proceedings." He further held that "in absence of any notice issued under Section 143(2) of the IT Act and in the interest of natural justice I consider it proper to set aside the block assessment order under Section 158BC/144 of the IT Act for the block period 1st April, 1988 to 1st July, 1998." The CIT(A) has also directed the AO to reframe the block assessment order afresh after proper service of notice under Section 143(2) of the Act and after giving adequate opportunity of being heard. Aggrieved by the order of the CIT(A), the assessee is in second appeal before the Tribunal.
8. Before us, the learned counsel for the assessee argued that the order of the CIT(A) requires modification resulting in cancellation of block assessment. Further, he argued that setting aside of the block assessment order by the CIT(A) does not extend the period within which notice under Section 143(2) of the Act is to be served. He further argued that the provisions of Section 158BC of the Act for block assessment have been enumerated and Clause (b) of Section 158BC clearly says that the provisions of Section 142, Sub-sections (2) and (3) of Section 143 and Section 144 of the Act will apply or shall apply but 'so far as may be. He further argued that the proviso to Section 143(2) is mandatory and any assessment or block assessment is to be completed, notice under Section 143(2) is to be issued and only then the assessment or block assessment can be made. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities. He further relied on various precedents.
9. We have heard both the sides and considered the material placed before us including the precedents relied on by the learned Departmental Representative. It is a fact that no notice under Section 143(2) of the Act was issued while completing the block assessment. As far as the provisions of Section 158BC of the Act are concerned, the procedure for completing the block assessment has been provided. The provisions of Section 158BC of the Act and the relevant clause applicable to the present case is Clause (b) which reads as under :
158BC. Procedure for block assessment.- Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132A, in the case of any person, then,-
(a) ...
(b) the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of Section 142, Sub-sections (2) and (3) of Section 143 and Section 144 shall, so far as may be, apply;
10. It is seen from the Chapter XIV-B where special procedure in respect of block assessment for search cases is provided and the procedure for issuance of notice under Sections 158BC and 158BD of the Act is provided, if search is conducted under Section 132, or books of account, or other documents or assets are requisitioned under Section 132A of the Act in case of any other person, the AO shall proceed in the manner laid down under these two provisions. Chapter XIV-B is a special code for assessing the undisclosed income and the provisions of Section 142, Sub-section (2) and (3) of Section 143 and Section 144 of the Act shall, so far as may be, apply to the proceeding section In Chapter XIV-B, Section 158BC of the Act has been incorporated with certain machinery provisions as applicable to regular assessment for limited application and the expression used in Clause (b) to Section 158BC is 'so far as may be' there. Here, to understand the meaning of expression 'so far as may be', we have to refer to the judgment of the Hon'ble Supreme Court in the case of Dr. Partap Singh and Anr. v. Director of Enforcement and Ors. . The Hon'ble apex Court has very beautifully defined the expression "so far as may be" which means that those provisions may be generally followed to the extent possible and it was held as under:
Section 37(2) provides that 'the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(1)'. Reading the two subsections together, it merely means that the methodology prescribed for carrying out a search provided in Section 165 has to be generally followed. The expression 'so far as may be' has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that Section 165(1) has been incorporated by pen and ink in Section 37(2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under Section 37(1). If Section 165(1) was to be incorporated by pen and ink as Sub-Section (2) of Section 37, the legislative draftsmanship will leave no room for doubt by providing that the provisions of the Cr.PC relating to searches shall apply to the searches directed or ordered under Section 37(1) except that the power will be exercised by the Director of Enforcement or other officer exercising his power and he will be substituted in place of the Magistrate. The provisions of Sub-section (2) of Section 37 has not been cast in any such language. It merely provides that the search may be carried out according to the method prescribed in Section 165(1). If the duty to record reasons which furnish grounds for entertaining a reasonable belief were to be recorded in advance, the same could have been incorporated in Section 37(1), otherwise a simple one-line section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in Section 165 of the Code by the officer to be set out in the section. In order to give full meaning to the expression 'so far as may be', Sub-section (2) of Section 37 should be interpreted to mean that broadly, the procedure relating to search as enacted in Section 165 shall be followed. But if a deviation becomes necessary to carry out the purposes of the Act in which Section 37(1) is incorporated, it would be permissible except that when challenged before a Court of law, justification will have to be offered for the deviation. This view will give full play to the expression 'so far as may be'.
11. There is a clear distinction as far as application of provisions of Section 142, Sub-sections (2) and (3) of Section 143, and Section 144 of the Act to the regular assessment i.e., normal assessment and block assessment. In the normal assessment, the assessee has to file the return of income under the provisions of Section 139 of the Act and the assessee can revise his return of income under the provisions of Section 139(5) of the Act. For making a regular assessment, the AO after receiving the return of income from the assessee can issue notice under Section 142(1) of the Act for calling certain information and if at all, he wants to frame the assessment under Section 143(3) of the Act, then he has to issue a notice under Section 143(2) of the Act and the proviso to this section empowers the AO to issue notice within 12 months from the date of receipt of the return of income. If the time-limit of 12 months expires, then the AO has no power to issue notice under Section 143(2) of the Act and cannot complete the assessment under Section 143(3) of the Act. In case of block assessment, there is no such provision for the assessee to file the block return in Form No. 2B voluntarily. Only he files the return after the receipt of notice under Section 158BC of the Act where the procedure for completion of block assessment is prescribed. In a case where the AO wants to complete the block assessment, in case search has been conducted under Section 132 of the Act or books of account, or other documents or assets are requisitioned under Section 132A of the Act, then the AO shall serve a notice to such a person requiring him to furnish a return within the time prescribed and not being less than 15 days and not more than 45 days. As far as the normal assessment is concerned, the AO can process the return under Section 143(1) of the Act or he can scrutinize the assessment by issuing notice under Section 143(2) of the Act. But the AO can complete the assessment or can process the return as per the facts available in the returns. But in case of block assessment, the AO has no such choice. He has to proceed for scrutiny to complete the block assessment. In case of block assessment, further time-limit for completion of block assessment starts within two years from the end of the month in which the last authorization for search under Section 132 of the Act of for requisition under Section 132A of the Act, as the case may be, was executed. In cases where a search is initiated or books of account or other documents or any assets are requisitioned under Chapter XIV-B, where procedure for block assessment for search case prescribed is itself, a code in code. No doubt, it does not contain the machinery provisions of its own and it has incorporated certain machinery provisions applicable to normal assessment for limited applications and for that purpose legislature has used the expression in Clause (b) of Section 158BC of the Act i.e., "so far as may be". Even though in the block assessment the provisions of Section 139 of the Act do not apply as no assessee will file the voluntary return for block assessment. In Chapter XIV-B, it is defined that how undisclosed income is to be assessed for the block period on the basis of seized material found during the course of search conducted under Section 132 of the Act. Further, we have gone through the decision of the Tribunal, Lucknow, Special Bench, in the case of Nawal Kishoie & Sons Jewellers v. Dy, CIT wherein it has held as under (headnotes) :
Every fiscal statute prescribes a procedure to be followed for making assessment. The legislature inserted Chapter XIV-B by the Finance Act, 1995, for assessing the undisclosed income in search cases, Instead of prescribing a procedure for making such assessment, the legislature has referred to the provisions of Sections 142, 143(2), 143(3) and 144 of the IT Act, 1961, which are to be applied, as far as may be. The provisions of Sub-section (2) of Section 143 and other provisions mentioned therein are to be applied to the extent possible/practical and not in the literal sense. It is only the methodology or the procedural requirements of sections mentioned in Clause (b of Section 158BC, which are to be applied to search cases, Further, if any deviation is necessary to carry out such procedural provisions then justification for the same will have to be offered by the Revenue. Clause (b) of Section 158BC is an enabling provision for making assessment of undisclosed income falling within the scope of Section 158BB under Chapter XIV-B. Section 143(2) confers power on the AO to proceed to make assessment of the total income of an assessee if he considers that it is necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. The use of the word "if" by the legislature clearly shows that the power to assess is optional and the AO need not proceed to assess in each and every case. If he opts to exercise such powers then such exercise must be made within the period prescribed by the proviso to this section. On the other hand, there is no such option available to the AO under the provisions of Chapter XIV-B. According to Section 158BC, once a notice to file the return is issued under Clause (a), the AO is bound to proceed to assess the undisclosed income in each and every case after the period specified in such notice irrespective of the filing of the return by the assessee. Section 158BC r/w Section 158BA, being special provisions for proceeding to assess the undisclosed income of the assessee in search matters, would override the provisions of Section 143(2) as far as power/jurisdiction to proceed to make assessment is concerned inasmuch as it is the settled legal position that special provisions override the general provisions. Only that portion of Section 143(2) would apply which provides for serving of notice by the assessee. That means where a return has been filed under Section 158BC, notice as prescribed in Section 143(2) will have to be issued unless there are justifiable reasons for deviation. There is nothing in Section 158BC which may compel the AO to wait for filing of the return by the assessee. All seized material is normally required to be examined in the light of the explanation of the assessee, which may take a lot of time. That, is perhaps the reason that no limitation whatsoever is prescribed by the statute on the powers of the AO to proceed to make the assessment except to provide an opportunity, which is part of the natural justice.
There could not have been any intention of the legislature while enacting Chapter XIV-B by the Finance Act, 1995, to apply the proviso to Section 143(2). When Chapter XIV-B was enacted, the period prescribed for exercising the option to proceed to make the assessment under Section 143(2) was one year from the end of the month in which the return was filed. On the other hand, the legislature had provided period of one year under Section 158BE for completion of undisclosed income under Chapter XIV-B from the end of the month in which the last authorization for search under Section 132 or for requisition under Section 132A was executed. Since- the period for making assessment under Section 158BE was to commence much before the filing of the return in any case, such period would expire much before the expiry of the period prescribed under Section 143(2). Therefore, it is clear that there was no occasion for the AO to issue any notice under Section 143(2) beyond the period prescribed in the proviso. The proviso to Section 143(2) is not applicable to block assessment. There is no provision under Chapter XIV-B for filing of voluntary return. The only provision under which such return can be filed is Section 158BC. Therefore, assessment proceedings can be said to be validly initiated when the notice under Section 158BC is issued. Once assessment proceedings are validly initiated by issuance of notice under Section 158BC, then the AO would have seisin over the case resulting in vesting of overall jurisdiction of the AO, Accordingly, non-issuance of notice under Section 143(2) would only be a case of deviation from a rule of law resulting in irregularity only which is curable, and not a nullity.
Para 39.3 of Circular No. 717, dt. 14th Aug., 1995 [reported in (1995) 127 CTR (St) 21 : (1995) 215 ITR (St) 70, 95], provides 'the officer shall proceed to determine the undisclosed income of the block period and the provisions of Section 142, Sub-sections (2) and (3) of Section 143 and s, 144 shall apply accordingly'. No circular can omit/delete/obliterate the words or expression used by the legislature. Two Circulars No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], and Circular No. 554, dt. 13th Feb., 1990 [(1990) 82 CTR (St) 280], which provide that notice under Section 142 must be issued within the period prescribed in the proviso to that section were issued with reference to regular assessment when Chapter XIV-B was not in existence and, secondly, the provision was never intended to be applied to block assessment proceedings.
12. Even the provisions of Section 148 of the Act cannot be treated at par with the procedure for block assessment and the provisions of Section 148 of the Act apply to Section 147 of the Act where the income has escaped assessment. The provisions of Section 147/148 of the Act are not code in itself. There is no provision for making the assessment within these provisions and the provisions of Sections 143 and 144 of the Act will apply strictly. As far as application of proviso to Section 143(2) of the Act, in case of issuance of notice under Section 148 of the Act is concerned, the Hon'ble High Court in the case of CIT v. M. Chellppan (2005) 198 CTR (Mad) 490 has held as under:
2.4. Against the said orders of the Tribunal, the Revenue has preferred these appeals on the following substantial questions of law:
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reopening of the assessment under Section 147 of the Act and completion of assessment without issue of notice under Section 143(2) of the Act within 12 months is not valid?
The Punjab & Haryana High Court in Vipan Khanna v. CIT held where no notice under Section 143(2) of the Act had been served on the assessee within the stipulated period and the return as such had become final, in view of the amendment made in Section 147 of the Act w.e.f. 1st April, 1989, the AO could not only assess or reassess the escaped income in respect of which proceedings under Section 147 of the Act have been initiated, but also any other income chargeable to tax which may have escaped assessment and which comes to his knowledge subsequently, in the course of such proceedings.
4. In the instant case, admittedly, no notices under Section 143(2) of the Act were served on the assessees within the stipulated period of twelve months and, therefore, the proceedings under Section 143 of the Act come to an end and the matter becomes final. Hence, applying the ratio laid down by the Punjab & Haryana High Court in Vipan Khanna v. CIT (supra), we are of the view that no substantial question of law arises for our consideration in these appeals. Accordingly, these appeals are dismissed.
But while completing the block assessment in-built system is provided for filing of block return in Section 158BC(a) of the Act and the provisions of Section 158BC(b) laid down the manner as to how the provisions of Section 142, Sub-sections (2) and (3) of Section 143, and Section 144 of the Act shall, so far as may be, apply. The expression 'so far as may be' has literally been discussed in the case of Bhavanagar University v. Palitana Sugar Mill (P) Ltd. and it has held as under ;
It is true that Section 21 of the Act imposes a statutory obligation on the part of the State and the appropriate authorities to revise the development plan and for the said purposes Sections 9 to 20 'so far as may' would be applicable thereto, but thereby the rights of the owners in terms of Sub-section (2) of Section 20 are not taken away.
36. The question, however, is as to whether only because the provision of Section 20 has been referred to therein : would it mean that thereby the legislature contemplated that the time of ten years specified by the legislature for the purpose of acquisition of the land would get automatically extended ? The answer to the said question must be rendered in the negative. Following the principle of interpretation that all words must be given its full effect, we must also give full effect to the words 'so far as may be' applied to such revision.
37. The said words indicate the intention of the legislature to the effect that by providing revision of final development plan from time-to-time and at least once in ten years, only the procedure or preparation thereof as provided therein, is required to be followed. Such procedural requirements must, be followed so far as it is reasonably possible. Section 21 of the Act, in our opinion, does not and cannot mean that the substantial right conferred upon the owner of the land or the person interest therein shall be taken away. It is not and cannot be the intention of the legislature that which is given by one hand should be taken away by the other.
The Hon'ble apex Court in the case law following the principle of interpretation held that all words must be given their full effect, full effect must be given to the words "so far as may be" applied to such revision. The said words indicate the intention of the legislature to the effect that providing revision of final development plan from time-to-time and at least once in ten years, only 'the procedure or preparation thereof as provided therein, is required to be allowed. Such procedural requirements must be followed so far as it is reasonably possible. Further, the Hon'ble apex Court in the case of Gursahai Saigal v. CIT has considered the facts in the backgrounds of legal position. The Hon'ble Justice Sarkar, held as finder :
Now it is well-recognized that the rule of construction on which the assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statute. It does not, for example, apply to a provision not creating a charge for the tax but laying down the machinery for its calculation or procedure for its collection. The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature which is to make a charge levied effective. Reference may be made to a few cases laying down this distinction. In CIT v. Mahaliram Ramjidas, it was said :
The section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that construction should be preferred which makes the machinery workable, utres valeat potius quam pereat.
Further, the Hon'ble apex Court in the case of India United Mills v. CEPT has pointed out with reference to another section :
That section is, it should be emphasized, not a charging section but a machinery section and a machinery section should be so construed as to effectuate the charging sections.
It is pertinent to note that after considering all this legal position, the Hon'ble Supreme Court in Gursahai Saigai's case (supra) held that Section 18A(6) might become workable in a case where no tax had been paid which provided that interest should be calculated "from the first day of January in the financial year in which the tax ought to have been paid," Thus, in the case of Guisahai Saigal (supra) the Hon'ble apex Court had accepted as the correct legal position and the principle that sections of a taxing statute other than the charging section or sections should be so read as to effectuate the intention of the legislature, which is to make the charge effective and the provisions should be so read as to make the machinery of assessment workable. After considering the above legal position, it is observed that the Hon'ble apex Court while interpreting provisions of machinery section held that rule of construction should be adopted which makes the machinery section workable and machinery section so construed as to effectuate charging sections and the section should be so read as to effectuate the intention of the legislature, which makes the charge effective and further the proviso should be so read as to make the machinery system workable. Hence, non-issuance of notice under Section 143(2) of the Act would only be a curable irregularity and not a nullity. Therefore, the block assessment order passed without issuance of notice under Section 143(2) of the Act cannot be declared as invalid or void being a procedural irregularity.
13. In view of the legal position discussed above and respectfully following the case law of the Hon'ble apex Court in Dr. Piatap Singh and Anr. (supra) and the decision of the Tribunal, Special Bench, Lucknow, in Nawal Kishore & Sons Jewellers (supra), we are of the considered view that non-issuance of notice under Section 143(2) of the Act for completing the block assessment, cannot be held as invalid or null and void. By issuing notice under Section 158BC or 158BD of the Act, as the case may be, the action for framing the block assessment is validly laid out by asking the assessee to file the return. Even the time-limit for completion of block assessment starts from the date of issuance of last warrant of authorization under the provisions of Section 132 of the Act and not by issuance of notice under Section 158BC or 158BD of the Act. In view of this, non-issuance of notice under Section 143(2) of the Act can, at the most, be held as irregularity which is curable and not a nullity. For this view, we rely on the decision of the Allahabad High Court in the case of Sant Baba Mohan Singh v. CIT wherein the provisions of Section 23(2) of the IT Act, 1922, are discussed which is pari materia to Section 143(2) of the IT Act, 1961, and it has held that non-issuance of notice under Section 143(2) [sic-23(2)] of the Act would amount to a curable irregularity and the assessment order cannot be declared as invalid, null and void. The Hon'ble Allahabad High Court has decided the issue which reads as under ;
Section 31(3)(a) speaks of the power of the AAC to annul an assessment. That is a power to be exercised where the assessment proceeding is a nullity in the sense that the ITO had no jurisdrction ab initio to take the proceeding. A proceeding is a nullity when the authority taking it has no jurisdiction either because of want of pecuniary jurisdiction or of territorial jurisdiction or of jurisdiction over the subject-matter of the proceeding. A proceeding is a nullity when the authority taking it has no power to have seisin over the case. The omission of the ITO to issue a notice under Section 23(2) does not affect the ab initio jurisdiction enjoyed by the ITO in respect of the proceeding. The ITO had seisin over the case, he had overall jurisdiction over the case and in that sense had power to initiate the proceeding. The omission to issue a notice under Section 23(2) merely prevents the ITO from making an assessment order under Section 23(3), and after he rectifies the omission by issuing that notice he can proceed further to the next stage, that is, to exercise the power of completing the assessment under Section 23(3). All these are steps within the overall jurisdiction vested in the ITO over the entire assessment proceeding. We are of definite opinion that the failure of the ITO to issue a notice under Section 23(2) does not call for an order by the AAC annulling the assessment. The AAC was right in merely setting aside the assessment.
14. In view of the above, we are of the considered opinion that the use of expression 'so far as may be' by the legislature in cl, (b) of Section 158BC of the Act for application of provisions of Section 142, Sub-sections (2) and (3) of Section 143 and Section 144, means "to the extent possible" or "as far as possible" and not in its entirety in the literal sense and if these provisions are not applied and notice under Section 143(2) of the Act is not issued in the case of block assessment it is a curable defect and the assessment is to be set aside for issuance of notice to cure the infirmity. Since, in the case of Sri A.P. Shanmugaraj, the CIT(A) has set aside the issue and the reassessment order was passed by the AO after complying with the directions of the CIT(A), this issue is dismissed in IT(SS)A No. 16/Mad/2001. In other appeals, this issue is set aside to the file of the AO with direction to issue notice under Section 143(2) of the Act.
15. The next issue in the case of Shri A.P. Shanmugaraj, in IT(SS)A No. 16/Mad/2001 is that the CIT(A) has not considered the difference between nomination and appointment in proper perspective. During the course of hearing, the learned counsel for the assessee did not press this ground and, therefore, this ground is dismissed as not pressed.
16. As regards the additional grounds raised by the assessee, Shri A.P. Shanmugaraj in IT(SS)A No. 23/Mad/2004, on merits, it is observed that the original block assessment was completed on 13th Nov., 2000 which was set aside by the CIT(A) vide order dt. 28th Feb., 2001 to the file of the AO to frame the assessment de novo after issuing notice under Section 143(2) of the Act. The assessee has got ample opportunities to raise these specific grounds before the AO at the time of completion of set aside assessment and at the time of appellate proceedings but the assessee, (for) the reasons best known to him, refrained from raising these grounds. Even in the second round before the Tribunal, the assessee has not raised these grounds. As these grounds are on merits and the entire facts are to be investigated and the assessee has not given (reasons) as to why these were not raised in regular course, we feel that there is no reasonable cause for admitting these additional grounds raised by the assessee on merits. Accordingly, these additional grounds are not admitted for adjudication.
17. The next issue in IT(SS)A No. 79/Mad/2004 relates to challenging of jurisdiction on issuance of warrant as it is sealed and signed by the Dy. Director of Inspection (Inv. Unit), Coimbatore. During the course of hearing, the learned counsel for the assessee produced a copy of Panchnama to show that warrant of authorisation under Section 132 of the Act was issued by Dy. Director of Inspection (Inv. Unit), Coimbatore and he argued that the same can be issued only by the Director of Income-tax (Inv.) or equivalent authority. For this, he relied on the decision of the Hon'ble Delhi High Court in the case of Dr. Nalini Mahajan and Ors. v. Director of IT (Inv.) and Ors. . On the other hand, the learned Departmental Representative stated that warrant of authorisation was issued only by the Director of Inspection (Investigation) and not by the Dy. Director of Inspection (Inv. Unit), Coimbatore. Further, he stated that due to inadvertence, in Panchnama, the Dy. Director of IT (Inv.) has been deleted whereas as per the warrant issued under Section 132 of the Act in the case of the assessee, it is only signed and authorised by the Director of IT (Inv.). The learned counsel for the assessee fairly conceded that the warrant was issued by the Director of IT. Accordingly, he has no grievance. As it is observed from the records and agreed by the learned counsel for the assessee, that the warrant is issued by the Director of IT (Inv.), Madras, this ground does not stand and this issue is dismissed.
18. As regards the issue raised by the assessee, Late Shri A. Mani L/h Smt. Thavamani in IT(SS)A No. 80/Mad/2005 is that the assessment was framed without bringing on record all legal heirs of the deceased. The assessee died on 11th Oct., 1999 and the block assessment was framed on 28th June, 2001. The assessee filed a return of income for the block period in Form No. 2B on 6th July, 1999 admitting 'nil' undisclosed income. Now, the question arises as to whether the block assessment can be framed on a deceased person or not-no. As per the legal heir certificate, the assessee is having the following legal heirs :
Smt. M. Thavamani-wife Navin Prabhu-son Mr. Arumuga Gounder-father Mrs. Subbath-mother, It is seen from the statement of the wife who is brought on record as legal heir that she does not know anything about the business or properties of the assessee. She is not aware of the income and the property to be inherited. The age of the assessee's wife at the time of death of the assessee was 29 years and the son was only 8 years, the father was 58 years old and the mother was 52 years old. It seems that the wife is not representing the whole interest of the deceased and this will not fall in the exceptional cases where service of notice to one of the legal representatives is sufficient. Here, all the representatives must be proceeded against the deceased and general rule will apply. The expression 'legal representative' in Section 159 takes in plurality of legal representatives. In the present case, there are more than one legal representatives to represent the deceased and all must be impleaded to make the representation of the estate acquired. This view has been fortified by the decision of the Hon'ble jurisdictional High Court in the case of Muniyammal v. ITO (1060) 38 ITR 664 (Mad). Accordingly, this assessment is irregular but curable. Respectfully following the aforesaid decision of the Hon'ble jurisdictional High Court, we set aside the entire assessment to the file of the AO to cure the irregularity and to bring on record all legal heirs. This issue is allowed for statistical purposes.
19. In the result, the appeals in IT(SS)A Nos. 16/Mad/2001 and 23/Mad/2004 are dismissed, IT(SS)A Nos. 79, 80, 99 and 100/Mad/2005 are allowed for statistical purposes.