Reelvant Extract of the Judgment
Analysis and Findings
22. On the question of law presently before the court, the primary consideration is whether the AO had the jurisdiction to make the additions to the assessment under section 158BC of the Act. To analyze this, it is necessary to address the grounds of each such addition made, and assess if the AO had jurisdiction in conducting the block assessment within the meaning of section 158BC, or if this was indeed not within the purview of the AO’s jurisdiction. Section 158BC reads as follows:
“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) the Assessing Officer shall
(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days;
(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days,
as may be specified in the notice a return in the prescribed forml and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period:
Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter:
Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;
(b) the Assessing Officer 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 2[, section 144 and section 145] shall, so far as may be, apply;
(c)accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;
(d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.’
23. The Gujarat High Court had, in an earlier decision, in R. Paper & Board Ltd. v. DCIT (1998) 234 ITR 733 (Guj) ruled that block assessments and regular assessments deal with different purposes. The aim and objective of block assessments is the assessment of undisclosed income of the block period as a result of search. The objective of a regular or normal assessment is to determine the true total income or loss of the previous year on the basis of the return under section 139 and other documents and decide the Assessee’s tax liability. The structure and pattern of Chapter XIV-B as originally enacted e.f. 1st July, 1995 and as modified/changed through amendments, from time to time (in the relevant provisions), continues to retain its purpose, in that, a block assessment pertaining to a number of years remains distinct from an assessment under Section 143(3) pertaining to a single assessment year. Further, the amendment to section 158B(b) has enlarged the meaning of the term “undisclosed income” by including therein “any expenses, deduction or allowance claimed under this Act, which is found to be false”. However, this cannot be construed to mean that whatever has been left out in a regular assessment can be reassessed or re-examined with reference to those provisions which are relatable to an assessment u/s 143(3). This is evident from A.R. Enterprises (supra),where the court held as follows:
