1997 Supreme(P&H) 918

PUNJAB & HARYANA HIGH COURT
Ashok Bhan and Iqbal Singh JJ.
Raja Ram Kulwant Rai
Versus
Assistant Commissioner Of Income-tax
Civil Writ Petition No. 3035 of 1997,
Decided On : MAY 28, 1997

Once an assessment has been framed for a block period under Section 158BC of the Income-tax Act, 1961, which includes the years in question, the Income-tax Officer stands debarred from framing an assessment under Section 143 on the basis of returns already filed under Section 139.

Headnote:

INCOME TAX - Assessment - Block period - Notice under Section 143(2) - Whether Income-tax Officer can issue notice under Section 143(2) for an assessment year which is covered by the "block period" under Section 158B regarding which assessment has already been framed under Section 158BC ?

Fact of the Case:

The assessee, a commission agent, had its assessment completed for the year 1988-89 on February 28, 1989. In response to a notice issued under Section 148, the assessee filed its return of income declaring a net taxable income. The assessing authority assessed the taxable income at a higher amount. The assessee challenged the assessment order before the Commissioner of Income-tax (Appeals), who set aside the assessment order and remitted the case to the Assessing Officer with certain directions. The assessing authority did not pass any fresh order for the assessment year 1988-89. For the assessment year 1988-89, the assessing authority had completed the assessment on an income which became final as no appeal was carried against that assessment order to the appellate authority. On December 5, 1995, search and seizure operations were conducted in the case of the petitioner firm. As the provisions of Chapter XIV-B of the Income-tax Act, 1961 (the Act) were applicable to the search having been initiated after June 30, 1995, notice under Section 158BC of the Act was issued on February 12, 1996. The return in Form No. 2-B for the block period April 1, 1985, to December 5, 1995, was filed declaring undisclosed income at nil. The assessing authority computed the total income including the undisclosed income for the block period. Thereafter, the assessing authority issued notice under Section 143(2) of the Act dated January 20, 1997, relating to the assessment years 1988-89 and 1989-90 calling upon the petitioner to attend the office of the assessing authority on January 30, 1997, as the assessing authority required certain information in connection with the return of income for the said years.

Finding of the Court:

The court held that once an assessment has been framed for a block period under Section 158BC which includes the years in question, the Income-tax Officer stands debarred from framing an assessment under Section 143 on the basis of returns already filed under Section 139. After framing of assessment under Section 158BC for a block period of ten years, income of any year covered by any block period could not be determined afresh as all pending assessments of those years stood merged in the collective assessment under Section 158BC(c) of the Act.

Issues: Whether the Income-tax Officer can issue notice under Section 143(2) of the Income-tax Act, 1961, for an assessment year which is covered by the "block period" under Section 158B regarding which assessment has already been framed under Section 158BC ?

Ratio Decidendi: The court observed that the purpose of introduction of Chapter XIV-B which provides for special procedure for framing of assessment orders for a block period of ten years would be lost if the Assessing Officer is allowed to proceed under Section 143 on a return filed under Section 139 or in response to a notice under Section 142(1). Certainly two assessments cannot be framed for the same assessment year on an assessee. Once an assessment has been framed for a block period under Section 158BC which includes the years in question, the Income-tax Officer stands debarred from framing an assessment under Section 143 on the basis of returns already filed under Section 139.

Final Decision: The court quashed the impugned notices issued under Section 143(2) of the Income-tax Act, 1961, as being without jurisdiction and unsustainable in law.