HIGH COURT OF MADRAS
Commissioner of Income-tax, Central II
Tax Case (Appeal) No. 127 of 2006
Date of pronouncement – August 22, 2012
Mrs. Chitra Venkataraman, J.
The following is the question of law raised in the tax case appeal preferred by the assessee as against the order of the Tribunal in respect of the block assessment for the period 1986-87 to 1996-97 (upto 20.1.1996):-
“Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in rejecting the contentions of the appellant that the block assessment made on the appellant under Section 158BC and not under Section 158BD of the Income Tax Act, 1961 and the block assessment was not barred by limitation ?”
2. It is a matter of record that consequent on the search in the premises of one A.N. Dyaneswaran on 19.1.1996 the assessee’s residence was also subjected to search on the very same date under Section 132 of the Income Tax Act and certain materials were stated to have been seized. Based on the materials thus seized the block assessment was completed raising the demand therein. Aggrieved by the assessment, the assessee went on appeal before the Income Tax Appellate Tribunal contending that the assessment was barred by limitation as provided for under Section 158BE. The assessee pointed out that since the assessment was made under Chapter XIV-B the result of the search conducted in the case of the assessee would fall under Section 158BC and that therefore Section 158BE would apply for the purpose of limitation which provides the time limit for completion of block assessment as one year from the end of the month in which the last of the authorisations for search under Section 132 was executed. Per contra, the Revenue took the plea that the case of the assessee fell under Section 158BD. Hence, the time limit for completion of the assessment would be two years as per Section 158BE (2)(b). In considering the rival claims, the Tribunal accepted the view of the Revenue that the copy of the noting sheet dated 20.9.1996 clearly proved that the action against the assessee was initiated under Section 158BD and in such an event, as per Section 158BE, the time limit for completing the assessment would be two years. Thus, the assessee’s appeal was rejected. Aggrieved by the same, the present appeal has been filed before this Court.
3. It is a matter of record that the assessee was subjected to search proceedings by issuance of notice under Section 132. It is seen from para 2 of the assessment order that on 19.1.1996 there was a search conducted in the case of one A.N. Dyaneswaran and in connection with this search, the residence of the assessee was also searched on the same date. Taking the date of search as 19.1.1996, wherein the Revenue seized certain incriminating materials, the correct provision which cover the case herein would be Section 158BC. Section 158BD would have relevance only in such of those cases where based on the search conducted in the premises of one person, any other person is sought to be assessed under Chapter XIVB and Section 158BD would assume significance. In other words, Section 158BD will have relevance only in such of those cases where the Assessing Officer is satisfied that the undisclosed income belongs to a person other than the person in respect of whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132A. In such an event, the proceedings shall be taken under Section 158BD. Thus, Section 158BD is an enabling provision, whereby even persons who are not subjected to search are brought to the procedural exercise.
4. A reading of Section 158BE shows the limitation prescribed for passing assessment as regards cases falling under Section 158BC and 158BD. Sub-section (1) of Section 158BE specifies the time limit for completion of the assessment in cases falling under Section 158BC as one year from the end of the month in which the last of the authorisations for search under Section 132 or the requisition under Section 132A was executed in cases where the search is initiated or books of account or other documents / assets requisitioned after 30.6.1995 but before 1.1.1997 and (ii) in case of search initiated or books of account requisitioned or any documents or assets requisitioned on or after 1.1.1997, time limit would be 2 years from the end of the month in which the last of the authorisation for the search under Section 132 or for requisition under Section 132A executed.
5. Sub-section (2) of Section 158BE specifies the time limit in cases falling under Section 158BD. In the case of search initiated or books of account or other documents or assets requisitioned after 30.6.1995 but before 1.1.1997, the period of limitation is one year from the end of the month in which the notice was served on such other person and two years in respect of cases of search falling on or after 1.1.1997.
6. Going by the admitted facts herein, as noticed in the assessment order that the assessee was also subjected to search on 19.1.1996 and the case of the assessee falling under Section 158BC, the relevant provision for limitation would be only as per Section 158BE(1)(a). That being the case, the file noting has no significance for the purpose of working out the limitation. Thus, on the search conducted on 19.1.1996 the notice of assessment was issued on 20.9.1996. However the assessment was made only on 22.9.1997. When the limitation for completion of the assessment under Section 158BC is one year from the end of the month in which the last of the authorisation for search was executed and it having already expired, we have no hesitation in setting aside the order of the Tribunal thereby allowing the tax case appeal. Accordingly , the tax case appeal is allowed and the order of the Tribunal is set aside. No costs.