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High Court Of Calcutta
Ajoy Nath Ray
SHAW WALLACE AND CO.LTD. - Appellant
Versus
ASSISTANT COMMISSIONER OF INCOME-TAX AND ANR. - Respondent
W. P. 443 Of 1998
Decided On : 02/23/1999
INCOME TAX - Assessment year 1995-96 - Regular assessment - Power of Assessing Officer to make regular assessments in respect of a financial year which formed the subject-matter of the block period of assessment - Chapter XIVB of the Income Tax Act, 1961 - Sections 142(1), 143(2), 158b, 158ba, 158bb, 158bc - Held, that the regular assessment relates only to the residuary duty of regular assessment which still vests in the Assessing Officer after completion of the block assessment. If block assessment is completed appropriately, then and in that event, by the time such process is over the Assessing Officer will have concluded all his jobs leading up to and included in Section 143(3) which relate to computation, and all that will remain for him is to do the rest as provided for in Section 143(3).
Fact of the Case:
The assessee-writ petitioner was subjected to search and seizure between August and November, 1996. The block period, therefore, became the 1985-96, ten years period. The block assessment for this period was made by order dated November 28, 1997. Out of the ten years opened up for block assessment, the regular assessment was outstanding in respect of two assessment years only, viz., 1994-95 and 1995-96. While the order for block assessment was subsisting, two notices were issued respectively under Section 143(2) and Section 142(1) of the Income-tax Act, respectively, dated December 19, 1997 and February 2, 1998. Pursuant to these notices, the Assessing Officer purported to proceed to make the regular assessment under the regular procedure.
Finding of the Court:
The court held that the regular assessment relates only to the residuary duty of regular assessment which still vests in the Assessing Officer after completion of the block assessment. If block assessment is completed appropriately, then and in that event, by the time such process is over the Assessing Officer will have concluded all his jobs leading up to and included in Section 143(3) which relate to computation, and all that will remain for him is to do the rest as provided for in Section 143(3). The court further held that both the notices issued by the Income-tax Officer under Section 142 and Section 143(2) are bad in law and should not have been issued in regard to the regular assessment.
Issues: Whether the Assessing Officer has the power to make regular assessments in respect of a financial year which formed the subject-matter of the block period of assessment.
Ratio Decidendi: The court held that the regular assessment relates only to the residuary duty of regular assessment which still vests in the Assessing Officer after completion of the block assessment. If block assessment is completed appropriately, then and in that event, by the time such process is over the Assessing Officer will have concluded all his jobs leading up to and included in Section 143(3) which relate to computation, and all that will remain for him is to do the rest as provided for in Section 143(3). The court further held that both the notices issued by the Income-tax Officer under Section 142 and Section 143(2) are bad in law and should not have been issued in regard to the regular assessment.
Final Decision: The court set aside the regular assessment already made by the Assessing Officer in regard to the assessment year 1995-96 and directed the Assessing Officer to complete the regular assessment for the assessment year 1995-96 within six months of finalisation of the block assessment on the basis of the returns filed by the assessee for that assessment year.
( 1 ) THE writ application in the instant case raises interesting points about the interaction between the special procedure for block assessment introduced by Chapter XIVB of the Income-tax Act, 1961, and the regular procedure for assessment.
( 2 ) THE new Chapter deals with cases where there has been a search or seizure (as here) or a requisition under Section 132a.
( 3 ) BROADLY speaking, the provisions of the Chapter are that, once a search and seizure has been made, the assessee's total income shall be computed under Chapter XIVB for the past ten years, irrespective of whether reopening notice has been served under Section 148.
( 4 ) THIS is referred to as block assessment. In the block assessment, the Assessing Officer is to take into account the materials obtained on search and seizure as well as all other materials which are in his possession, like, say, the returns already filed by the assessee.
( 5 ) AFTER computation of the block period income, the Assessing Officer should deduct therefrom the income already regularly assessed or the income returned and then arrive at the figure for assessment of the tax payable on undisclosed income, if any. Under Section 113, the undisclosed income is charged to tax at 60 per cent, irrespective of what rates or slabs the Finance Act of the corresponding opened up block years had provided at the material time.
( 6 ) THE above is a very rough and ready overall view of Chapter XIVB. It is necessary to have this overall view to see the facts of this case in the light of that Chapter. The search and seizure in the instant case took place between August and November, 1996. The block period, therefore, became the 1985-96, ten years period. The block assessment for this period was made by order dated November 28, 1997. Since the block assessment is appealable directly to the Tribunal, and to the Tribunal alone, the assessee went up there. By an order passed on the April 2, 1998, the Tribunal has in effect set aside the order of block assessment and remanded the matter for fresh assessment for the block period.
( 7 ) OUT of the ten years opened up for block assessment, the regular assessment was outstanding in respect of two assessment years only, viz. , 1994-95 and 1995-96, but we are concerned in the present writ with only one assessment year, viz. , 1995-96.
( 8 ) WHILE the order for block assessment was subsisting, two notices were issued respectively under Section 143 (2) and Section 142 (1) of the Income-tax Act, respectively, dated December 19, 1997 and February 2, 1998. Pursuant to these notices, the Assessing Officer purported to proceed to make the regular assessment under the regular procedure.
( 9 ) THIS writ application was filed challenging the power of the Assessing Officer to make regular assessments in respect of a financial year which formed the subject-matter of the block period of assessment.
( 10 ) AS the limitation for making the first assessment under Section 153, for the assessment year 1995-96 would expire two years after the end of that assessment year, viz. , with the expiry of March 31, 1998, an interim order was passed in aid of this writ on March 5, 1998, which permitted the regular assessment to be made, keeping in view the facts with respect to limitation, but a direction was also passed that no demand would be enforced thereon except with the leave of court.
( 11 ) ON the basis of the interim order, the assessment for the single year has been made ; the writ petitioner-assessee has also appealed therefrom departmentally to the Commissioner of Income-tax (Appeals), this appeal being an appeal in the regular manner and not an appeal directly made to the Tribunal from a block order.
( 12 ) THE arguments on both sides in this writ centred round the validity of the two notices under Sections 142 (1) and 143 (2) in view of the search and seizure already made and the block assessments being already under way.
( 13 ) BOTH Mr. Bajoria,
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