IMPORTANT POINT
The power under Section 127 can also be exercised in respect of a block assessment.

JUDGMENT

S.B. Sinha, J. —

1. Leave granted.

2. Interpretation/ application of Section 127 of the Income Tax Act, 1961 (for short, “the Act”) vis-à-vis the provision regarding Block Assessment is in question in this appeal which arises out of a judgment and order dated 2.4.2004 passed by the High Court of Kerala at Ernakulam in ITA No. 172 of 2000 and WPC No. 23449 of 2003. A search was conducted by the Officers of the Income Tax Department in the residence as also in the business premises of the assessee, his sons and other associates, consequent whereupon, it was proposed to transfer the cases pertaining to the assessee to the Income Tax (Inv.) Circle, Calicut to facilitate effective and coordinate investigation. An order was passed to that effect by the Chief Commissioner of Income Tax, Bangalore under Section 127(2) of the Act. A notice was issued by the Assessing Officer under Section 158BC of the Act to file a return setting forth the total income including the undisclosed income for the block period. The assessee filed a writ petition in the High Court of Karnataka challenging the said order of transfer of cases passed by the Chief Commissioner of Income Tax. The said writ petition was dismissed. Writ Appeals preferred thereagainst were also dismissed. A notice was thereafter issued by the assessing authority asking the assessee to file a return setting forth the total income including the undisclosed income for the block period. Pursuant thereto, the return was filed. The purported undisclosed income of the assessee was determined. The said order of the Assessing Officer, Calicut was challenged on the ground that he had no jurisdiction to make the block assessment as the authority therefor remained with the Assessing Officer originally having the jurisdiction over the assessee.

3. A Division Bench of the High Court by reason of the impugned judgment opined that the provisions of Section 127 of the Act can also be resorted to for a block assessment.

4. Mr. TLV Iyer, learned Senior Counsel appearing on behalf of the petitioner would submit that having regard to the definition of block assessment occurring in Chapter XIV-B of the Act, Section 127 thereof ex facie cannot have any application thereto.

5. Mr. Gopal Subramaniam, the learned Additional Solicitor General appearing on behalf of the Revenue, however, would support the impugned judgment.

6. The power to conduct a search by the authorities of the Income Tax Department in terms of Section 132 of the Act is not in dispute. It is further not in dispute that Chapter XIV-B shall apply in a case of this nature. Clause (a) of Section 158 B defines ‘block period’, which reads as under:

“(a) “block period” means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under Section 132 or any requisition was made under Section 132A and also includes the period upto the date of the commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made :

Provided that where the search is initiated or the requisition is made before the 1st day of June, 2001, the provisions of this clause shall have effect as if for the words “six assessment years”, the words “ten assessment years” had been substituted;”

A block period, therefore, not only would include ten years of assessment but also that portion of the assessment year in which assessment was to take place as on the date of the search.

7. Chapter XIV-B provides for special procedure. Section 158 BC lays down the procedure for block assessment. Section 158 BD provides for taking into consideration undisclosed income of any other person. Section 158 BE provides for the time limit for completion of block assessment. Section 158 BH of the Act reads as under :

“158BH. Application of other provisions of this Act. Save as otherwise provided in this Chapter, all other provisions of this Ac