Nonetheless, while block assessment is to be made, the Assessing Officer is having knowledge about the statutory provision and while issuing notice he should have mentioned in it about his source of power and should have referred to time which is required to be given for the purpose of filing of return under section 158BC of the Act. The words mentioned in the notice are `within fifteen days’ whereas the provision mandates the time of “not less than fifteen days”. In view of the decisions of the Supreme Court referred more particularly New India Industries Ltd. (supra), we are of the opinion, fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid.
RELEVANT EXTRACT OF THE HIGH COURT JUDGMENT
1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee and remanded the matter back to the Assessing Officer.
2. This Court while admitting the appeal on 04.12.2009 had framed the following substantial questions of law:
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining validity of notice dated 10.12.1998 under section 158BC of the Act, and assessment order passed by the Assessing Officer dated 28.01.2000 irrespective of the fact that a notice under Section 158BC of the Act, does not fulfill requirement of the law, wherein time granted by the Assessing Officer was within 15 days for filing of the return from the service of the notice and not allowed minimum 15 days time as required by the law?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining an addition of Rs.55915/- made by the Assessing Officer on account of unexplained cash found during the course of search to the income of the appellant in the block assessment, irrespective of the fact that the appellant has already disclosed undisclosed debtors of Rs.625000/- and cash found is out of realization from the debtors?”
Counsel for the appellant has contended that the issues are squarely covered by the decision of this Court in the case of Brahmadev Kumawat vs. CIT, Ajmer in DB Income Tax Appeal No.183/2004 decided on 08.12.2016, wherein relying upon the earlier decision in the case of Venad Properties Private Limited vs. Commissioner of Income Tax (2012) 340 ITR 463 (Delhi), has observed as under:
“4. Counsel for the appellant submitted that the issue is squarely covered in favour of the assessee in the case of Surya Dev Kumawat vs. CIT (D.B. Income Tax Appeal No.30/2006 and other connected matters) decided on 3.11.2016 and another decision of Gujarat High Court in Commissioner of Income Tax vs. Amit K. Jain Alias Anil K. Jain (Tax Appeal No.243/2007) decided on 11.8.20 16 holding as under:-
“4.1 The learned counsel for the revenue has further contended that the notice which is contemplated within fifteen days from the date of service is to be construed keeping in mind the decisions which are rendered by different High Courts. He contended that the notice was issued which the assessee has received and no contention was raised against the same before the Assessing Officer. The assessee filed return of income on 13.1.1999 for the relevant assessment year and thereafter, the assessee has raised the contention before the Tribunal that the Assessing Officer has not given sufficient time to the assessee to file the return of income and therefore, the notice issued by the Assessing Officer is invalid. He has further contended that in view of section
292B read with section 158BC of the Act, the Tribunal has committed serious error in reversing the decision of the Commissioner of Income-tax (Appeals) and the Assessing Officer. He has relied on the following decisions:
(1) Shirish Madhukar Dalvi v. Assistant Commissioner of Income-tax and others [2006) 287 ITR 242 (Bom) where the Bombay High Court has observed as follows: Before we deal with the aforesaid contentions raised on behalf of the rival parties in the light of the above extracted statutory provisions, it is appropriate to first consider the law laid down by the apex court with various other High Courts relevant to the facts of the case at hand.
In the case of State of Karnataka v. Muniyalla, AIR 1985 SC 470, it is held that merely because an order is purported to be made under a wrong provision of law, it does not become invalid so long as there is some other provision of law.
In the case of Hukumchand Mills Ltd. v. State of Madhya Pradesh (1964) 52 ITR 583 (SC); AIR 1964 SC 1329, the apex court has ruled that mere mistake in the opening part of the notification in reciting the wrong source of power does not affect the validity of the amendments made.
In the case of State Bank of Patiala v. S.K. Sharma (1996) 3 SCC 364, the apex court ruled that in the case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. The order passed in violation of such provision can be set aside only where such violation has occasioned prejudice to the subject. It further went on to observe that even a mandatory requirement can be waived by the person concerned, if such mandatory provision of law is conceived in his interest and not in the public interest. The conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules governing such enquiries.
As a rule, all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself.
In the case of Dove Investments P. Ltd. v. Gujarat Industrial Investment Corporation (2006) 129 Comp. Cas 929 (SC); (2006) 2 SCC 619 the apex court has observed that regard must be had to the context, the subject matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid down in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the court to try to get the real intention of the Legislature by carefully analysing the whole scope of the statute or section or a phrase under consideration.
In the case of P.T. Rajan v. T.P.M. Sahir (2003) 8 SCC 498, the apex court has said that whether a statute would be directory or mandatory will depend upon the scheme thereof. Ordinarily, a procedural provision would not be mandatory even if the word `shall’ is employed therein unless a prejudice is caused. In Chandrakant Uttam Chodankar v. Dayanand Rayu Mandrakar (2005) 2 SCC 188, the apex court has observed as under (page 212):
`74. In this case, it is not necessary for us to go into the question as to whether section 83 is imperative in character or not inasmuch as it is settled law that even where the expression `shall’ is used, the same may not be held to be mandatory. Even a mandatory provision having regard to the text and context of the statute may not call for strict construction.
75. In U.P. State Electricity Board v. Shiv Mohan Singh (2004) 8 SCC 402, this court stated the law in the following terms: ( SCC p. 440, paras 96-97)`96. Ordinarily, although word `shall’ is considered to be imperative in nature it has to be interpreted as directory if the context or the intention otherwise demands. (see: Sainik Motors v. State of Rajasthan, AIR 1961 SC 1480,para 12).
97. It is important to that in Crawford on Statutory Construction at page 539, it is stated:
`271. Miscellaneous implied exceptions from the requirements of mandatory rules, in general – Even where statute is clearly mandatory or prohibitory, yet, in many instances, the courts will regard certain conduct beyond the prohibition of the statute through the use of various devices or principles. Most, if not all of these devices find their jurisdiction in considerations of justice. It is a well-known fact that often to enforce the law to its letter produces
manifest injustice, for frequently equitable and humane considerations, and other considerations of a closely related nature, would seem to be of a sufficient calibre to execute or justify a technical violation of the law.’
“In the case of Balchand v. ITO (1969) 72 ITR 197, the apex court ruled that merely because of a defect in service of notice, the assessment order does not become invalid. Similarly, the apex court in the case of Jai Prakash Singh (1996) 219 ITR 737 went on to hold that non-service of notice under section 143(2) of the Income tax Act, 1961 to 9 out of 10 representatives of the deceased did not invalidate the order of the Assessing Officer relating to the assessment
year in question.
“2. Venad Properties Private Limited v. Commissioner of Income-tax (2012) 340 ITR 463 (Delhi), particularly, paragraph Nos. 11, 12 and 18 which are reproduced as under:
“11. In Sardar Amarjit Singh Kalra v. Smt. Pramod Gupta (2003) 3 SCC 272, a Constitution Bench of the Supreme Court has held:
`26. Laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on the merits of substantial rights of citizen under personal, property and other laws. Procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice’. 12. Similar views are also expressed by the Supreme Court in State of Punjab v. Shamlal Murari (1976) 1 SCC 719, where it was held as under:
`8. We must always remember that processual law is not to be a tyrant but a servant, not an obstruction but an aid to
justice. It has been wisely observed that procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. Where the non-compliance, tho’ procedural, will thwart fair hearing or prejudice doing of justice to parties, the rule is mandatory. But, grammar apart, if the breach can be corrected without injury to a just disposal of the case, we should not enthrone a regulatory requirement into a dominant desideratum. After all, courts are to do justice, not to wreck this end product on technicalities.’
18. In view of our findings on the second contention, which are against the appellantassessee and in favour of the revenue, the third contention loses its relevance and is not required to be decided. However, we may notice that the Tribunal in this regard has followed the judgement of the Bombay High Court in Shirish Madhukar Dalvi (2006) 287 ITR 242 (Bom.), wherein a distinction has been made between service of notice under sections 147 and 158BC of the Act. It has been held that section 158 BC is a procedural section and not a substantive section and, therefore, the ratio and the decision in State Bank of Patiala v. S.K. Sharma (1996) 3 SCC 364 applies. In the said case, the Supreme Court held that in the case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. An order passed in violation of such provision can be set aside only when such violation has occasioned prejudice to the subject. Even mandatory requirement can be waived by the person concerned, if the mandatory provision is conceived in his interest and not in the public interest. The conduct of the subject is required to be examined and kept in mind. Procedural rules are assigned to afford a full and proper opportunity to the person concerned to defend himself.”
3. Commissioner of Income-tax v. Jagat Novel Exhibitors P. Ltd. (2013) 356 ITR 559 where at paragraph Nos. 41 and 45, it was observed as follows:
“41. The aforesaid observations are significant. In the present case, the Tribunal has not held that the jurisdictional preconditions were missing or not satisfied. Reasons to believe have been recorded. Notice has also been issued within the limitation period. The question whether the notice was addressed to the correct person has been examined and dealt with by us above. Service of notice is not the jurisdictional precondition but a matter pertaining to making of the order of assessment. Before an assessment order is passed, the notice must beserved. As noticed above, on February 21, 2002, Vijay Narain Seth, director of the respondent company appeared before the Assessing Officer. The respondent had also filed some details before the Assessing Officer who passed the assessment order.”
“45. We may note, the observations of the Supreme Court in Balchand v. ITO (1969) 72 ITR 197 (SC) wherein it was held that in construing a statutory notice, extraneous evidence may be looked into to find out whether the technical defects or lacuna had any effect on the validity of the notice. The facts had revealed that though there were defects in drafting the preamble of the notice, it did not affect its validity as the notice itself clearly informed the assessee that he had to file a return of income for the relevant year.”
4. K. Sakthivel v. Assistant Commissioner of Income tax, Central Circle 1, Coimbatore (2012) 26 taxmann. 35 (Madras), particularly, paragraph Nos. 14, 16 and 17 where it is observed as under:
“14- Even though learned counsel appearing for the assessee reiterated the contentions in the grounds as had been taken before the Tribunal and contended that when the issuance of notice under section 158 BD is the very foundation to initiate proceedings against the assessee, the non-mentioning of the block period in the notice would cut at the very root of the assessment proceedings. Learned standing counsel for the revenue placed before us the decision in Shirish Madhukar Dalvi v. Asstt. CIT (2006) 287 ITR 242 / 156 Taxman 79 (Bom.), Smt. Mahesh Kumari Batra v. Jt. CIT (2005) 146 Taxman 67/95 ITD 152 (Asr.) (SB) as well as Sakthivel Bankers case (supra) (255 ITR 144) and submitted that when the assessee had acted on the notice and filed the return
knowing fully well the period of block assessment, yet considering the fact the notice issued under section 158BD is only procedural and not related to assumption of jurisdiction, it is not open to the assessee to contend that the assessment was not valid.”
“16. As far as the non mentioning of the block period in the notice issued under section 158BD is concerned, in the decision relied on by learned Standing Counsel for the revenue in Shirish Madhukar Dalvi’s (supra) the Bombay High Court considered the nature of the proceedings contained in section 158BD. On going through the provisions contained under sections 147, 148 and 158BC, the Bombay High Court held that section 158BA refers to jurisdiction of the Assessing Officer to assess undisclosed income in accordance with Chapter XIV-B, whereas Section 158BA(2) is the charging section, section 158BB provides for computation of undisclosed income for the block period, whereas section 158BC provides the procedure for block assessment. In the decision in Sakthivel Bankers (supra) this court held that failure to mention the provision in the notice was not a circumstance which could be said to vitiate the ultimate order. The said decision relates to the assessment made consequent on the search conducted in assessee’s place and notice was issued thereon to eight firms and to the wife of the assessee. Referring to Section 158BD, this court held that non mentioning of the purpose for which the notice was issued or the source of the authority of the Officer issuing the notice per se would not defeat the aspect of the persons against whom the notice issued were fully aware of the purpose of issuing notice.”
“17. In the light of the above said decision of this court as well as in view of the Bombay High Court cited supra, we reject the contention of the assessee that the non mentioning of the block period would defeat the very assessment. Quite apart from this, the assessee participated in the inquiry conducted under section 131 of the Incometax Act and had also made a statement confirming the purchase of the land. Subsequent thereto, the assessee had participated in the enquiry and on 15.5.2002, in response to the notice under section 142(1) the assessee expressed his inability to file the return on or before 15.5.2002 on account of liquidity problem, hence he sought for time to file return. Ultimately, when the assessee filed the return under Form No. 2 B, as already noted in the preceding paragraph, the assessee mentioned the block period as ascertained from the Income-tax Officer and said fact is stated by the assessee in the return filed by him. Thus, when the assessee received the notice issued on 5.8.99, the assessee had no doubt as to the nature of proceedings initiated, the purpose of the said proceedings and the block period for which proceedings were initiated. In the circumstances, it is too late for the assessee to contend that non mentioning of the block period would defeat the assessment proceedings. In the circumstances, we reject the assessee’s contention.”
5.1 He has further relied on the decision of the Karnataka High Court in the case of Commissioner of Income-tax v. Micro Labs Ltd. reported in (2012) 348 ITR 75 (Karnataka) to submit that calling upon the assessee to file the return of income within a period of 15 days is in violation of mandatory period of time as stipulated under section 158BC of the Income-tax Act. He has contended that the Karnataka High Court after considering the decision of Bombay High Court in the case of Shrish Madhukar Dalvi v. Asst. CIT (2006) 287 ITR 242, has observed that the defect in the notice is vital and held that notice under section 158BC is mandatory. In paragraph No. 26 of the said judgement, the Karnataka High Court has observed as under:
“The contention is unacceptable. The time to be granted in terms of section 158BC is mandatory. Having failed to comply with the same, granting another opportunity to the revenue is highly improper. If that were to be so, then each and every violation of law by the revenue would stand rectified by orders of remand. That is not the intent and purport of the Act. The period as specified in the Act requires to be strictly complied with. Therefore, the plea of the revenue for a direction to pass fresh orders of assessment after complying with the provisions of section 158BC requires to be rejected. Consequently, question No. 5 is answered in favour of the assessee and against the revenue.”
6. We have heard learned counsel for the parties. We are aware of the decision of the Apex Court which has been referred by the Bombay High Court. Nonetheless, while block assessment is to be made, the Assessing Officer is having knowledge about the statutory provision and while issuing notice he should have mentioned in it about his source of power and should have referred to time which is required to be given for the purpose of filing of return under section 158BC of the Act. The words mentioned in the notice are `within fifteen days’ whereas the provision mandates the time of “not less than fifteen days”. In view of the decisions of the Supreme Court referred more particularly New India Industries Ltd. (supra), we are of the opinion, fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words `not less than fifteen days’ have to be interpreted correctly. In that view of the matter, since the Assessing Officer asked the assessee to file the return within fifteen days of the service of the notice, the notice issued by the Assessing Officer is invalid. We are, herefore, of the opinion that the Tribunal has rightly cancelled the order of the Assessing Officer. The questions referred to us are, therefore, answered in favour of the assessee and against the revenue.”