Showing posts with label Section 132. Show all posts
Showing posts with label Section 132. Show all posts

Sunday, October 3, 2021

S. 132 [HC Del] [Favor Revenue] Statement under oath

S. 132    Court : High Court Delhi                        In favor of revenue

Citation :  31 taxmann.com 274, 215 Taxman 229, 351 ITR 143

Name of the case :Bhagirath Aggarwal Vs CIT

======================

An addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect

Monday, November 14, 2011

Compilations of case law: IT Act related Topics : SEARCHES UNDER I.T. ACT

SEARCHES UNDER I.T. ACT


Assessee merely contended that Director of Investigation has no valid information on the basis of which he could issue warrant of search – Assessee not supporting contention with cogent material – Department cannot be asked to produce records to show information having been received – 132(3) order not seizure – No order u/s 132(3) can be passed when Assessing Officer is in doubt whether asset is disclosed or not.
Sriram Jaiswal Vs Union of India & Ors.(All) 176 ITR 261


"Reason to believe" need not be disclosed when a mere allegation made by petitioner – Illegality of search does not vitiate evidence collected during search.
Dr. Pratap Singh & another Vs Director of Enforcement & Ors.(SC) 155 ITR 166


Preliminary statement recorded before start of actual search and in which questions put to assessee were of general nature – was not at all a statement u/s 132(4) – Revenue cannot rely on such an unauthorized statement.
Rishab Kumar Jain Vs ACIT (ITAT,Del) 63 TTJ 236


Evidence collected during an illegal search can be used against the searched party.
State of Punjab Vs Baldev Singh etc (SC) 157 CTR 3
Vimalchand Jain Vs ACIT (ITAT, Jp) 64 ITD 394
Pooran Mal Vs Director of Inspection (Investigation) & Ors. ( SC ) 93 ITR 505


Amount seized and retained u/s 132(5) cannot be adjusted against advance-tax.
Kanhaiya Lal Doshi Vs ACIT (ITAT, Jaipur) 56 ITD 486
ACIT Vs Topsel (P) Ltd.(ITAT, Cal) 56 ITD 186
DCIT Vs Muni Lal & Ors. (ITAT, Chd) 57 TTJ 596


When the search continues over a period, it is not necessary that the same witness should be present on all occasions.
T.S. Chandrasekhar Vs ACIT (ITAT, Bang) 66 TTJ 360


Assessing Officer includes ADIT also
Dr. N.S.D. Raju Vs DGIT(Inv.) & Anr. ( Ker ) 282 ITR 154


Initiation of search – when authorities issue authorization and not when it is executed
Suraj Prakash Soni Vs ACIT (ITAT, Jodh) 106 ITD 321

Sunday, July 31, 2011

HC DEL : Sections 132(5), 143(3), 234A, 234B, 234C

Subject: Assessing Officers' Forum:- Income tax – Sections 132(5), 143(3), 234A, 234B, 234C – Whether the interest u/s 234A, 234B, 234C & 220(2) is rightly levied on the demand for various years when the department is having huge deposit on account of the assessee

2011-TIOL-410-HC-DEL-IT

IN THE HIGH COURT OF DELHI

W.P. (C) No.21428 of 2005

VISHWANATH KHANNA

Vs

UNION OF INDIA & OTHERS

A K Sikri and M L Mehta, JJ

Dated: June 03, 2011

Appellant Rep by: Mr. C S Gupta, Adv
Respondent Rep by: Mr. Sanjeev Sabharwal, Sr. Standing Counsel

Income tax – Sections 132(5), 143(3), 234A, 234B, 234C – Whether the interest u/s 234A, 234B, 234C & 220(2) is rightly levied on the demand for various years when the department is having huge deposit on account of the assessee in PD account and the assessee repeatedly requested to adjust the said amount against the demand – Whether the assessee is entitled to interest on the deposit with the department u/s 132D from the end of 120 days from the date on which the last of the authorizations for search under Section 132 or requisition under Section 132A and not from the date when the amount was transferred into the account of AO from P.D. Account.

Assessee is a proprietor of ‘F’, started in the year 1993 to trade in gold, silver and bullion – a search and seizure action was conducted whereby cash and silver were restrained initially but subsequently seized – ACIT, investigation circle passed order u/s 132(5) that the cash found during search as unexplained was retained and not released. Subsequently, vide another order u/s 132(5), various disputed additions were made and tax and penalty @200% was levied - the entire silver seized was retained and was not released.

The department disputed the status of the concern as it was an unregistered partnership firm and intended to tax it as firm. AO made assessment u/s 143(3) in the name of ‘F’ after making additions on protective basis. In appeal before CIT (A), partly additions were deleted and partly confirmed. Before the protective assessment orders were passed in the case of ‘F’, assessee approached the department to allow him to sell the seized silver after deposing the amount of equal value. As no heed was paid to this request, the assessee filed Writ Petition and the Court directed the department to release seized silver after depositing rotational deposits of Rs.50 lacs or equal amount of silver to be released. Accordingly the entire silver was released against total payment of Rs.4,20,50,000/- deposited by the petitioner from time to time on the sale of released silver.

After various orders / developments, against the deposit of Rs.4,70,36,500/- lying with the Department, liability of the assessee was ascertained to Rs.17,22,608/- and thus, he was entitled to refund of the balance amount along with interest.

Assessee approached the Settlement Commission u/s 245C to determine his income. The application was admitted. According to the assessee, the amount deposited with the department was much more than the tax liability and therefore, he had been making request for refund of the same and till it was refunded, to keep the same in the fixed deposit bearing interest. That was not done. The assessee was supposed to file the income tax return for the successive years. Assessee was required to pay the advance tax due and payable in respect of these income tax returns. Since he was facing cash flow problems in his business and there was sufficient surplus money lying with the Department which belonged to the petitioner, he made request for adjusting the advance tax payable out of the aforesaid amount lying with the Department. These requests of the assessee remained unattended. However, AO while passing the assessment order imposed interest u/s 234B, 234C and 220 of the Act for making deposit of advance tax.

The Settlement Commission finally disposed of settlement application and the income of the assessee was determined. After this order was passed, the assessee again requested for release of the amount as the final tax payable was only Rs.17.22 lacs - Assessee approached various authorities in this behalf including the ITO, CBDT, Commissioner of Income Tax, etc. However, no action was taken.

Insofar as interest payable to the assessee on the deposit, the department calculated the same w.e.f the date when the amount transferred into the account of PD account. Assessee contended that he was entitled to interest u/s 132B at least till the time order is passed by the Income Tax Settlement Commission. The claim of the assessee was that u/s 132B of the Act, he was entitled to interest after six months from the date of order passed under Section 132(5) of the Act on initial seized amount minus tax due/payable and on further deposits in P.D. Account from the date of such deposit.

The issues raised by the assessee were (i) Whether interest u/s 234A, 234B, 234C and 220 (2) of the Act could be charged when according to the assessee, sufficient amount of the assessee was lying deposited with the Department wherever advance tax could be adjusted? (ii) From which date the assessee is entitled to interest on the amount which became refundable after giving effect to the orders passed by the Income Tax Settlement Commission?

Assessee contended that no interest could be charged for non-payment of advance tax as there was sufficient amount already lying with the Department. Revenue contended that it was not permissible for the assessee to seek adjustment from the amount lying with the Department, which in fact belonged to ‘F’ which was assessed as unregistered partnership and not as the sole proprietorship of the assessee. There was a dispute about the amounts seized and/or rotational payments either belonged to ‘F’ or the assessee in his personal capacity which was settled u/s 245D(4) by the Income Tax Settlement Commission vide its order dated 07.07.2003. Hence, no amount was available for adjustment of the demands raised in the case of assessee upto 07.07.2003.

After hearing both the parties, the High Court held that,

++ no doubt, ‘F’ was assessed as unregistered partnership. However, the assessee was clamouring that it was his sole proprietorship concern and had submitted proofs in respect thereof. If the plea of the assessee was not accepted erroneously by the Department, it cannot take advantage of its own wrong. Ultimately, the assessee was vindicated when the Settlement Commission accepted that he was the sole proprietor of ‘F’. The arguments of the department that it is only on 07.07.2003 when the Settlement Commission passed the orders u/s 245D(4) of the Act that the amount became available to the petitioner, is without any substance. The request of the assessee to adjust the advance tax from the amount lying deposited with the Department in the accounts of ‘F’ was justified, which was unnecessarily turned down by the Department. Therefore, the revenue would not be justified in levying interest, as the amount of advance tax payable by the assessee for these assessment years could be adjusted from the amount lying with the Department in the assessee's own account;

++ insofar as the assessee's entitlement to interest on the amount which became refundable after giving effect to the orders passed by the Settlement Commission, it cannot be disputed that the assessee is entitled to interest on such an amount u/s 132D(4) of the Act. This provision clearly mandates the Central Government to pay simple interest @ 1 ½ % for every month on amount by which the credit money seized under Section 132, etc. of the Act. Clause (b) sub-Section (4) of Section 132B of the Act stipulates that such interest shall run from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorizations for search under Section 132 or requisition under Section 132A was executed to the date of completion of the assessment. In accordance with this provision, from the date of search and seizure of the gold, 120 days would be calculated and from the expiry of this period, the interest shall become payable. In the present case, even after giving effect to the orders of the Settlement Commission, the excess amount was not refunded to the petitioner. The assessee has demanded interest u/s 132A of the Act and would be entitled to interest u/s 244A of the Act from the date of amount transferred into the account of AO from PD account after adjusting the tax due/payable.

Assessee’s appeal allowed

JUDGEMENT

Per: A K Sikri:

1. The petitioner is a proprietor of M/s Foto Traders, a firm started in the year 1993 to trade in gold, silver and bullion. Income Tax Department conducted a search and seizure operations on 04.02.1995 whereby cash and silver were restrained initially but subsequently seized as under:

Cash : Rs. 49,86,500/-

Silver : 222 bars of total weight 70003.859Kgs. Having market value estimated at Rs.4,44,66,395/- by the Income Tax Department.

2. The Assistant Commissioner of Income Tax, Investigation Circle (20)(1), New Delhi passed order under Section 132(5) of the Income Tax Act (hereinafter referred to as 'the Act') dated 02.06.1995 declaring that cash found during search as unexplained and hence, cash seized of Rs.49,86,500/- was retained and not released. Subsequently, vide another order under Section 132(5) dated 19.06.2005, various disputed additions were made and tax and penalty @200% were raised. Therefore, entire silver seized valuing Rs.4,44,66,395/- was retained and not released. We may mention at this state that the Income Tax Department disputed the status of M/s Foto Traders, as according to it, it was an unregistered partnership firm. Therefore, the Department intended to tax income in the hands of this firm. The concerned Assessing Officer (AO) passed the assessment order under Section 143(3) in the name of M/s Foto Traders after making huge additions of Rs.10,49,53,527/- on protective basis. In the appeal filed against the said order, additions of Rs.6,32,84,274/- were deleted and rest additions were confirmed. We may also mention at this stage that in the meantime and before the aforesaid protective assessment orders were passed in the case of M/s Foto Traders, the petitioner had approached the Department to allow him to sell the seized silver after deposing the amount of equal value. As no heed was paid to this request, the petitioner filed Writ Petition (Civil) No.4767/1998 in this Court. While disposing of the writ petition, this Court directed the Department to release seized silver after depositing rotational deposits of Rs.50 lacs or equal amount of silver to be released. In this manner, the Department released silver in installments against deposit of Rs.50 lacs each time. The entire silver was, thus, released against total payment of Rs.4,20,50,000/- deposited by the petitioner from time to time on the sale of released silver. Details of this deposit are as under:

“Date of Deposit

Amt. Deposited

05-02-1999

50,00,000

15-02-1999

46,00,000

01-03-1999

60,00,000

29-10-1999

25,00,000

05-11-1999

25,00,000

15-11-1999

25,00,000

22-11-1999

25,00,000

26-11-1999

44,00,000

14-12-1999

24,00,000
16,00,000

14-02-2000

50,00,000

05-04-2000

30,50,000

Total

4,20,50,000

Cash seized and retained on 04-02-1995

49,86,500

Grand Total

4,70,36,500”

3. The necessary consequence of the aforesaid developments/orders was that against deposit of Rs.4,70,36,500/- lying with the Department, liability of the petitioner was ascertained to Rs.17,22,608/- and thus, he was entitled to refund of the balance amount along with interest. To give effect of the orders of the Settlement Commission, the Deputy Commissioner of the Income Tax [Investigation Circle, 20 (1)] passed the orders dated 11.03.1999 under Section 250 of the Act. The net demand after giving effect was arrived at Rs.3,57,73,695/- including interest under Section 234A of Rs.10,63,883/-, interest under Section 234B of the Act of Rs.1,27,66,599/-, interest under Section 234C of the Act of Rs.6,142/-, interest under Section 220(2) of the Act of Rs.50,66,660/-. This amount, however was not released to the petitioner, in spite of his request to release the same and also return Original Title Deeds of the property kept as security.

4. In the meantime, the petitioner also approached the Settlement Commission by moving application under Section 245C of the Act to determine his income for the Assessment Year 1995-96.

This application was admitted on 07.03.2000 for assessment. During the pendency of this application, certain events which took place and have bearing on the dispute involved in this writ petition may now be recapitulated. As mentioned above, according to the petitioner, the amount deposited with the Department was much more than the tax liability and therefore, he had been making request for refund of the same and till it is refunded, to keep the same in the fixed deposit bearing interest. This was not done. The petitioner was supposed to file the income tax return for the successive years, i.e., Assessment Years 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04. He filed these returns. He was also required to pay the advance tax due and payable in respect of these income tax returns. According to the petitioner, since he was facing cash flow problems in his business and there was sufficient surplus money lying with the Department which belonged to the petitioner, he made request vide various letters for adjusting the advance tax payable out of the aforesaid amount lying with the Department. Separate letters and reminders were written in respect of each of the aforesaid assessment year. These requests of the petitioner also remained unattended. On the contrary, the AO while passing the assessment order imposed levied interest under Section 234B, Section 234C and Section 220 of the Act for making deposit of advance tax. A total demand raised was as under:

Assessment Year 1999-2000 : Rs.15,86,347/-

Assessment Year 2000-01 : Rs.22,75,638/-

Assessment Year 2001-02 : Rs.8,30,476/-

Total = Rs.46,92,461/-

5. Letter dated 11.02.2002 was written by the Department stating that the aforesaid amount would be adjusted in P.D. account with which deposit of the petitioner was lying. The petitioner objected to levy of these interest & demand and filed rectification application under Section 154 of the Act in respect of these assessment years.

6. While this was pending, the Income Tax Settlement Commission finally disposed of settlement application preferred by the petitioner vide order dated 07.07.2003 passed under Section 245D(4) of the Act. Vide this order, income of the petitioner for the assessment year 1995-96 was assessed at Rs.43,69,023/- on which tax was of Rs.1,78,430/-. After this order was passed, the petitioner again requested for release of the amount as the final tax payable for the assessment year 1995-96 was only Rs.17.22 lacs. The petitioner approached various authorities in this behalf including the ITO, CBDT, Commissioner of Income Tax, etc. He even faced claim from one M/s. Inter Gold (India) Limited, his supplier whom he could not make payment who filed OMP No.61 of 2004. In that OMP, this Court directed the Department to issue refund due to the petitioner by making the payment of Rs.4,20,00,000/- to the said M/s. Inter Gold (India) Limited.

7. Ultimately, order dated 27.09.2004 was passed by the AO giving effect to the orders of the Income Tax Settlement Commission. As per this order, refund payable to the petitioner was Rs.4,69,50,288/- and since the sum of Rs.4,20,00,000/- was already paid to the Inter Gold (India) Limited, balance amount of Rs.49,50,288/- was refunded to the petitioner. While computing the amount, the AO adjusted the interest charged from the petitioner in respect of non-payment of advance tax pertaining to the Assessment Years 1999-2000, 2001-02. That is the first grievance of the petitioner. The interest charged is as under:

Asst. Yr.

1995-96

1999-00

2000-01

2001-02

2002-03

Total

Interest under Section 234A

68,226

--

--

--

Interest under Section 234B

8,18,712 2,75,491

5,30,541

5,54,920

1,03,581 5,06,491

38,391

Interest under Section234C

--

55,042

90,471

38,220

Total

11,62,429

5,85,583

6,45,391

6,48,292

38,391

30,80,086

INTEREST UNDER SECTION 220(2)

TOTAL

Interest under section 220 (2)

3,33,960 4,64,886

3,70,798

5,31,927

57,220 30,105

15,310

TOTAL

7,98,846

3,70,798

5,31,927

87,325

15,310

18,04,206

8. Secondly, while calculating interest payable to the petitioner, the Department has admitted that an amount of Rs.4,39,91,00/- against the amount of Rs.4,70,36,500/-. However, the alleged draft of Rs.30.50 lacs dated 05.04.2000 to have been paid finds no mention in the Public Deposit account of M/s. Foto Traders. No original record is available in this regard with the Department. We are not concerned with this, as it is fairly stated that in this regard, litigation between the parties is pending in this Court.

9. Insofar as interest payable to the petitioner on the aforesaid deposit is concerned, the Department has calculated the same with effect from the date when the amount was transferred into the account of AO from P.D. Account. The petitioner claims that he is entitled to interest under Section 132B of the Act at least till the time order is passed by the Income Tax Settlement Commission on 07.07.2003d, whereas the Department on 27.09.2004, the Department had granted interest under Section 244A of the Act ignoring provisions of Section 132B completely. The claim of the petitioner is that under Section 132B of the Act, he is entitled to interest after six months from the date of order passed under Section 132(5) of the Act on initial seized amount of Rs.49,86,500/- minus tax due/payable and on further deposits in P.D. Account from the date of such deposit. In this backdrop, following reliefs are sought by the petitioner in this petition:

“a.(i) Issue appropriate writ, direction or order to the respondents declaring that no interest could be charged on such alleged demands raised for Assessment Years 1995-96, 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04 in view of the sufficient amount lying and deposited with the Income Tax Department since 1995.

a(ii) Issue appropriate writ, direction or order to the respondent to quash and/or set aside impugned actions of respondents in levying interest charged for Assessment years 1995-96, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 in view of sufficient amount lying and deposited with the Income Tax Department since 1995.

a(iii) Issue appropriate writ, direction or order to the respondents that they should refund an amount of Rs.48,16,066/- as being interest illegally recovered (as per statement marked as Annexure – 43 enclosed) by deducting from amount refundable.

b.(i) Issue appropriate writ, direction or order to the respondent that petitioner is entitled for interest from the date of deposit of money in Public Deposit Account and consequentially, respondent be directed to pay the petitioner the interest amount in accordance with law and as described in statement enclosed marked as ANNEXURE – 42.

b.(ii) Issue appropriate writ, direction or order to the respondents that petitioner is entitled for interest on the amount illegally adjusted from refund. Interest has already been covered in the statement marked as ANNEXURE -42.

c. Award cost to the petitioner.

d. Pass such further order or orders as this Court may deem fit and proper in the facts and circumstances of the case.”

10. It would be clear from the above that this petition basically raises two issues, viz.,

(i) Whether interest under Sections 234A, 234B, 234C and 220 (2) of the Act could be charged when according to the petitioner, sufficient amount of the petitioner was lying deposited with the Department wherever advance tax could be adjusted?

(ii) From which date the petitioner is entitled to interest on the amount which became refundable after giving effect to the orders passed by the Income Tax Settlement Commission?

ISSUE NO.(1):

11. Submissions made by the learned counsel for the petitioner on the basis of which he has argued that no interest could be charged for non-payment of advance tax was that there was sufficient amount was already lying with the Department. The Department, however, contends that it was not permissible for the petitioner to seek adjustment from the amount lying with the Department, which in fact belonged to M/s. Foto Traders and the same was assessed as unregistered partnership and not as the sole proprietorship of the petitioner. To support this plea, the Department has relied upon the statement of the petitioner himself at the time of search/survey, which was given on oath stating that material seized belonging to M/s. Foto Traders. The Panchnama was also prepared at the address of M/s. Foto Traders at Chandni Chowk. It is the petitioner who had changed the stand later on contending that M/s. Foto Traders was not a partnership firm, but his sole proprietorship, a protective assessment order was passed in the status of firm. This order was even confirmed by the CIT (A) vide order dated 17.03.1999 and only thereafter, adjustments from P.D. Account of M/s. Foto Traders beginning from 31.03.1999 were made. Therefore, as per the Department, there was a dispute about the amounts seized and/or rotational payments either belonged to M/s. Foto Traders or Mr. Khanna in his personal capacity. That dispute was ultimately settled vide order under Section 245D(4) of the Act dated 07.07.2003 passed by the Income Tax Settlement Commission. Hence, no amount was available for adjustment of the demands raised in the case of Shri V.N. Khanna upto 07.07.2003.

12. Under Section 234B of the Act, interest is payable by the assessee if there is default in payment of advance tax. Likewise, under Section 234C of the Act, interest can be charged for deferment of advance tax. On the other hand, when the income is assessed and the tax is payable for which notice of demand under Section 156 of the Act is issued and the tax payable is not deposited within 30 days of the service, the assessee would be deemed in default.

13. Taking shelter of all these provisions, the Department has levied the interest. It is not in dispute that when the assessee filed his income tax returns for the Assessment Years 1999-2000 to 2003-04, he did not deposit advance tax due and payable in respect of these income tax returns. However, his case is that sufficient amount was tending to his credit with the Department and his request for adjustment of the advance tax, etc. was legitimate which should have been allowed by the Department. It is also not in dispute that at least Rs.4.2 Crores were lying with the Department. The only reason given by the respondent for not making adjustment from this account is that it was not permissible for the petitioner to seek adjustment from this amount, as this belonged to M/s Foto Traders which was assessed as unregistered partnership and not as the sole proprietorship of the petitioner.

14. However, to our mind, this plea taken by the respondent is totally misconceived. No doubt, M/s Foto Traders was assessed as unregistered partnership. However, the petitioner was clamouring that it was his sole proprietorship concern and had submitted proofs in respect thereof. If the plea of the petitioner was not accepted erroneously by the Department, it cannot take advantage of its own wrong. Ultimately, the petitioner was vindicated when the Settlement Commission accepted that he was the sole proprietor of M/s Foto Traders. There is an ample discussion in this behalf in the order of the Settlement Commission. The arguments of the learned counsel for the respondent that it is only on 07.07.2003 when the Settlement Commission passed the orders under Section 245D(4) of the Act that the amount became available to the petitioner, is without any substance. As stated above, the petitioner was questioning the assessment of M/s Foto Traders as unregistered partnership firm. He has been proved correct. Merely because order to this effect passed by the Settlement Commission on 07.07.2003 would not mean that it is on this date the amount became available at the hands of the petitioner. What is held by the Settlement Commission is that M/s Foto Traders is the sole proprietorship concern of the petitioner and it would follow from this finding that the request of the petitioner to adjust the advance tax from the amount lying deposited with the Department in the accounts of M/s Foto Traders was justified, which was unnecessarily turned down by the Department.

15. We are of the view that the respondent would not be justified in levying interest, as the amount of advance tax payable by the petitioner for these assessment years could be adjusted from the amount lying with the Department in the petitioner's own account.

ISSUE NO.(2):

16. Insofar as the petitioner's entitlement to interest on the amount which became refundable after giving effect to the orders passed by the Settlement Commission, it cannot be disputed that the petitioner is entitled to interest on such an amount under Section 132D (4) of the Act. This provision clearly mandates the Central Government to pay simple interest @ 1 ½ % for every month on amount by which the credit money seized under Section 132, etc. of the Act. Clause (b) sub-Section (4) of Section 132B of the Act stipulates that such interest shall run from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorizations for search under Section 132 or requisition under Section 132A was executed to the date of completion of the assessment. In accordance with this provision, from the date of search and seizure of the gold, 120 days would be calculated and from the expiry of this period, the interest shall become payable.

17. This interest is upto the date of assessment. However, in the present case, even after giving effect to the orders of the Settlement Commission, the excess amount was not refunded to the petitioner. On this count, the petitioner has demanded interest under Section 132A of the Act.

18. The petitioner would, thus, be entitled to interest under Section 244A of the Act from the date of amount transferred into the account of AO from PD account after adjusting Rs.49,86,500/-, which was the tax due/payable. The amount shall be calculated accordingly.

19. Writ petition is allowed in the aforesaid terms. The petitioner shall also be entitled to cost quantified at Rs.10,000/-.

Monday, July 4, 2011

Exclusion of income up to date of search is permissible only if time for fi


Exclusion of income up to date of search is permissible only if time for filing return for relevant assessment year is not already over and income was found to be accounted for by assessee - [2011] 10 taxmann.com 111 (Ker.)

Sunday, June 26, 2011

Block assessment

Undisclosed income — Matter remitted to Tribunal to decide as to whether M/S Globe Meditech was dummy concern of assessee and whether order of CIT(A), dealing with addition and holding that assessee herein was not benamidar, was correct or not, as held by Del HC in CIT v Mukesh Luthra — In favour of: Others; ITA Nos 1115, 1122 of 2009.

CIT v Mukesh Luthra
High Court of Delhi
ITA Nos. 1115, 1122 of 2009

A K Sikri and M L Mehta, JJ
Decided on: 3 June 2011

Counsel appeared:
Ms Prem Lata Bansal, Sr. Adv. & Mr Deepak Anand, Adv. for the appellant
Mr Ajay Vohra, Ms Kavita Jha & Mr Somnath Shukla, Advs. for the respondent

Judgment
Per: A K Sikri, J:
1. On 18.05.2001, ITA No.1115 of 2009 was admitted on the following substantial question of law: “Whether order passed by ITAT is perverse in law and on facts when it deleted the addition of Rs.92,29,561/- ignoring the material fact that said concern was a dummy concern and that the money was reflected in the regular books of accounts though found during the course of search and therefore, the addition could be made only in the regular assessment.”

2. The question of law in ITA No.1112 of 2009 is the same except the quantum of addition.

3. As the counsel for the parties were ready to argue the matter finally at that stage itself, the hearing also took place immediately after the admission of the appeal. The counsel for the parties took time to file the written submissions which have been filed as well. The dispute which has given rise to the aforesaid substantial question of law can be traced from the following events.

A search was carried in the case of the assessee on 30.08.2001. The assessee is a Director and one of the major shareholders of M/s CCIL which is in the business of running of health care centre under the name and style of M/s VLCC.
The assessee is also proprietor of M/s Shine International & Fashion dealing in export of garments. The assessee filed the block return on 31.12.2002 declaring undisclosed income at NIL.
Block assessment was completed on 31.10.2003 at undisclosed income for the block period at Rs.10,19,594/-.


4. In the course of block assessment proceedings, AO was noticed that there is a concern M/s Globe Meditech in the name of Shri Rajesh Khurana and this concern was in fact controlled by the assessee, Shri Mukesh Luthra. It was also noted by the AO that to investigate the case further, assessment in the case of Shri Rajesh Khurana for Assessment Years 1999-20000 to 2001-02 were reopened and on analysis of various evidences listed in detail in the case of Shri Rajesh Khurana.
In the said order, passed on 27.02.2004, it was held that M/s Globe Meditech is, in fact, a dummy concern of Shri Mukesh Luthra, but operated in the name of Shri Rajesh Khurana.
The AO reproduced the entire assessment order of Shri Rajesh Khurana in the assessment order for the present two assessment years in the name of the assessee. The AO added the income of Rs.92,29,561/- in Assessment Year 2001-02 and Rs.66,87,523/- in Assessment Year 2002-03 in the hands of the assessee on substantive basis which were added in the hands of Shri Rajesh Khurana on protective basis. The assessee carried the matter in appeal before the CIT(A) in both the years.

5. In Assessment Year 2001-02, the CIT(A) set aside the assessment that any undisclosed income for the period covered by search can be assessed only under section 158BC of the Income Tax Act (hereinafter referred to as 'the Act'). It was observed by him that if regular assessment is pending pertaining to the block period, only such income should be considered in the regular assessments, the detail of which is disclosed in the books of account maintained in the normal course of business by the assessee. Even on merits, the addition was deleted as it was held by CIT(A) that no evidence had been found to assume that the assessee is the owner of M/s Globe Meditech. The CIT(A) opined that the onus was on the AO to prove that M/s Globe Meditech belongs to the assessee, but the AO had not brought on record any material which could establish that the profits out of the business of M/s Globe Meditech were enjoyed by the assessee either through direct or circumstantial evidence. On this basis, it was held by CIT(A) that he was unable to accept the AO's view that what is apparent is not real and that Shri Rajesh Khurana is the benamidar of Shri Mukesh Luthra. On this basis, he deleted the addition in Assessment Year 2001-02. In the Assessment Year 2002-03, he deleted the addition by following his order in Assessment Year 2001-02.

6. The Department/Revenue preferred appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') against the aforesaid findings of the CIT(A) deleting the addition for both the assessment years. The Tribunal has repelled the challenge laid by the Department concurring with the opinion of the CIT(A) that the matter could be gone into and examined in the course of block assessment and addition could be made in those proceedings if the AO was in a position to establish that M/s Globe Meditech was a dummy concerned of the assessee. For this reason, the Tribunal did not go into the merits.

7. It is in this backdrop the issue that has arisen for consideration is whether addition could be made in the regular assessment proceedings as done by the AO or it could be the subject matter of block assessment proceedings alone.

8. In an endeavour to demonstrate that the course of action taken by the AO was valid and justified, Ms. Prem Lata Bansal, learned Senior Counsel appearing for the Revenue argued that search at the premises of the assessee was conducted on 30.08.2001 and much thereafter belated return for the Assessment Year 2001-02 was filed on 31.12.2002. It is during the block assessment proceedings that the AO noticed that there was a concern M/s Globe Meditech in the name of Shri Rajesh Khurana which was, in fact, controlled by the assessee herein. Since the entries were recorded in the regular books of account maintained for M/s Globe Meditech and Shri Rajesh Khurana, proprietor thereof regularly filing the returns declaring the income earned from M/s Globe Meditech, as far as Shri Rajesh Khurana is concerned, the assessment in respect of Assessment Years 1999-2000, 2000-01, 2001-02 were reopened under section 148 of the Act, which resulted in passing of the reassessment orders on 27.02.2004 making protective assessment in his hands. According the learned Senior Counsel, since the entries were recorded in the regular books of account of M/s Globe Meditech, insofar as Shri Rajesh Khurana its sole proprietor is concerned, no addition could be made by the AO for the block assessment year and therefore, proceedings were rightly initiated under section 148 of the Act. According to her, such a course of action was in conformity with the judgment of this Court in the case of Commissioner of Income Tax v Ravi Kant Jain [250 ITR 141], wherein it is held that the block assessment under Chapter XIV of the Act is not intended to be a substitute for regular assessment. It was also contended that unless and until the transactions were examined in the hands of M/s Globe Meditech, the AO could not have made any additions in the hands of the present assessee, Shri Mukesh Luthra. She argued that in a sense, in the case of the present assessee, the AO has only lifted the veil and found out that M/s Globe Meditech actually belonged to the assessee and not Shri Rajesh Khurana. Otherwise, all the entries have been recorded in the books of account maintained in a regular manner by M/s Globe Meditech. Therefore, the AO was justified in making the additions in the regular assessment.

9. Mr. Ajay Vohra, learned counsel appearing for the respondent, on the other hand, sought to justify the orders of the Tribunal which has held that such a course of action was available only in the block assessment. His submission was that as per provisions of Chapter XIV-B, in the block assessment, additions can be made for income which is relatable to evidence unearthed during the course of search. Any other income would be outside the purview of block assessment and can only be added in the regular assessment proceedings. Conversely, in the regular assessment, no addition can be made for income which has its genesis in materials found during the course of search. In other words, block assessment and regular assessment are mutually exclusive. While in the block assessment, addition can only be made for undisclosed income discovered during the course of search, such income cannot be the subject matter of regular assessment. He referred to the judgment of this Court in the case of Commissioner of Income Tax v Jupiter Builders P. Ltd. [287 ITR 287 (Del) and the judgment of the Gujarat High Court in the case of N.R. Paper and Board Limited and Ors. v Deputy Commissioner of Income Tax [234 ITR 733].

10. He argued that in the present case, the apparent position is that M/s Globe Meditech is the proprietary concern of Shri Rajesh Khurana. On the basis of evidence alleged to be found during the course of search, it is the allegation of the Revenue that the apparent is not the real, viz., that M/s Globe Meditech is not owned/controlled by Shri Rajesh Khurana but is a dummy concern of the respondent assessee. Such an allegation raised by the Revenue is sought to be substantiated by documents alleged to be found during the course of search at the premises of the respondent assessee. In that view of the matter, such addition, if otherwise sustainable, could only be made in the block assessment proceedings.

11. We have considered the respective submissions.

12. We are of the firm view that the view taken by the Tribunal is not proper in law. Learned Counsel for the Revenue is right in her contention that it is not a case where any evidence was unearthed during the course of the search. In fact, it was during block assessment proceedings the AO noticed that M/s Globe Meditech was in fact controlled by the assessee herein, though one Mr. Rajesh Khurana was shown as the proprietor of the said firm. Otherwise, entries were recorded in the regular books of accounts maintained by M/s Globe Meditech and Sh. Rajesh Khurana was even filing the income tax return declaring his income earned from M/s Globe Meditech as its proprietor. It was thus a case of lifting of the veil by the Assessing Officer and this could be done in the regular assessment proceedings, insofar as the assessee is concerned. At the same time, protective assessment is made at the hands of Mr. Rajesh Khurana in whose case the assessment is reopened under section 148 of the Act as that was the only course of action available qua Rajesh Khurana.

13. We, therefore, set aside the order of the Tribunal. Since the Tribunal has not gone into the merits of the additions made by the AO, the matter is remitted back to the Tribunal to decide as to whether M/s Globe Meditech was a dummy concern of the assessee herein and the order of the CIT (A) dealing with the addition holding that the assessee herein was not the benamidar is correct or not. The question of law is answered in the aforesaid terms, without any order as to cost.

14. The appeal is disposed of accordingly.

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Dear Friends : The emails are schedule to be posted in the blog and will sent to the group on various dates and time fixed. Instead of sending it on one day it is spread on various dates.  
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Thursday, October 21, 2010

Section 132: SLP

Asstt. CIT & Anr. v. Hotel Blue Moon

Counsel: V. Shekhar with Aryit Prasad, Kunal Bahri, B.V. Balaram Das, Hrishikesh Banian, Balvir Singh Dosanjh, Jagjit Singh Chhabra, Dr. Rakesh Gupta, Amboj Kumar Sinha & Aarti Sain, for the Appearing Parties

JUDGMENT

Leave granted in all the special leave petitions.

2. These six appeals have been heard together. They arise out of similar facts and the question of law arising therefrom is the same.

3. The facts in the lead case are : This is an appeal against the judgment of the High Court of Guwahati in an appeal under section 260A of the Income Tax Act, 1961, hereinafter referred to as `the Act', and the point that is raised for our determination is, whether issue of notice under section 143(2) of the Act within the prescribed time for the purpose of block assessment under Chapter XIV-B of the Act is mandatory for assessing undisclosed income detected during search conducted under section 132 of the Act. While, according to the department, issue of a notice under section 143(2) is not essential requirement in block assessment under Chapter XIV-B of the Act. According to the assessee, service of notice on the assessee under section 143(2) of the Act within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Act. The Tribunal held, while affirming the decision of the Commissioner (Appeals) that non-issue of notice under section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Guwahati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were :

"(1) Whether on the facts and in circumstances of the case the issuance of notice under section 143(3) (sic—143(2)) of the Income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under section 143(3) of the Income Tax Act, 1961 is mandatory ? and.

(2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner (Appeals), the additions made under section 68 of the Income Tax Act, 1961 should be deleted or set aside ?"

4. The High Court, disagreeing with the Tribunal, held, that the provisions of section 142 and sub-sections (2) and (3) of section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under section 158BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the revenue. The revenue thereafter applied to this court for special leave under article 136, and the same was granted, and hence this appeal.

5. The learned counsel Sri Shekhar for the revenue submitted, that, Chapter XIV-B of the Act provides a special procedure for search cases and is a complete code in itself dealing with both the substantive as well as procedural aspects of search cases and, therefore, there is a distinction between the procedure for regular assessment under Chapter XIV and the procedure of block assessment under Chapter XIV-B. Therefore, it is submitted for the purpose of block assessments the assessing authority need not follow the procedure prescribed under Chapter XIV which includes issuance of notice under section 143(2). The learned counsel has further contended that in a proceeding under section 158BC, there is no requirement of a notice to be issued under section 143(2), since issuance of notice for the purpose of section 158BC is separately prescribed. It is further submitted that block assessment is in addition to regular assessment, and what is included in regular assessment, cannot be assessed again in the course of a block assessment and similarly, what is assessed in block assessment, cannot be the subject-matter of regular assessment. It is further submitted that section 143(2) of the Act is in two parts. The first part deals with jurisdiction and the second with the procedure. The proviso to section 143(2) puts an embargo on the assessing officer to exercise jurisdiction after the expiry of 12 months- from the end of the month in which the return was filed by the assessee. It is the discretion of the assessing officer to accept the return as it is or to proceed further with the assessment of income, once the assessing officer decides to proceed, he has to issue notice under section 143(2) within the prescribed time-limit to make the assessee aware that his return has been selected for scrutiny assessment. In distinction to this procedure, under the special procedure prescribed in Chapter XIV-B, there is no discretion left with the assessing officer. It is further contended that the source and origin of a block assessment is the search which has been conducted under section 132 of the Act. Once the search has been carried out, the assessing officer is left with no discretion but to proceed with the block assessment. It is also submitted that in search cases the material is already found and is in the knowledge of the assessing officer. This is distinct and different from the situation of an ordinary assessment, where, the assessing officer does not have any material other than the return filed by the assessee. Therefore, the requirement of notice under section 143(2) is essential for production of material by the assessee. This is so because in regular assessments the assessing officer in the first instance has no material available to him except the return filed by the assessee. It is further submitted that the computation of undisclosed income of the block period has to be done in accordance with the provisions of section 158BB and on the basis of evidence found as a result of search or requisition of books of account, or other documents and such other materials or information as are available with the assessing officer and relatable to such evidence and, therefore, issuance of notice under section 143(2) is not required for block assessment proceedings. It is further submitted that the provisions of section 143(2) and other provisions mentioned in section 158BC(b) are to be applied only to the extent possible, since the provisions incorporated in the Chapter XIV-B constitute a special Code to assess the undisclosed income in search cases, they would override the provisions of Chapter XIV being the procedure for normal assessments. In support of this contention, reference is made to the decision of this court in the case of Dr. Partap Singh & Anr. v. Director of Enforcement & Ors. (1985) 155 ITR 166 (SC). Lastly, it is submitted, that, since both the schemes under Chapter XIV for a regular assessment and under Chapter XIV-B for block assessments are different that while no assessment under section 143(3) could be completed without the issuance of notice under section 143(2), the same restriction would not be applicable in the case of block assessment.

6. Per contra, the contention on behalf of the assessee(s) is that, for the purpose of block assessment under section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and, therefore, no block assessments could be made without issuing notice under section 143(2) of the Act. It is further contended that notice under section 143(2) could have been dispensed with by the assessing officer if he proceeds to determine the income on the basis of the return without going for scrutiny. Referring to the provisions in clause (v) of the second proviso to section 158BC, it is submitted by the learned counsel that the words "so far as may be" does not give any discretion to the assessing officer to dispense with the requirement of such a notice under section 143(2), when he proceeds to make an enquiry within the scope and ambit of section 143(2). It is further contended that after a notice under section 158BC is issued, the assessee is required to file a return within a stipulated period. Once the return is filed, it is open to the assessing officer to accept the same or to require further investigation. If he accepts the return of undisclosed income as it is, then, there would be no necessity of issuing any notice under section 143(2) of the Act. However, if the assessing officer is not satisfied with the return so filed, then he is required to issue further notice under section 143(2) before an assessment order is passed under Chapter XIV-B of the Act.

7. The only question that arises for our consideration in this batch of appeals is, whether service of notice on the assessee under section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961 ?

8. Chapter XIV-B prescribes the special procedure for making the assessment of search cases.

9. Section 158B defines "undisclosed income", and "block period" which are the two basic factors for framing the block assessments.

10. Section 158BA is an enabling section, empowering the assessing officer, to assess "undisclosed income" as a result of search initiated or requisition made after 30-6-1995, in accordance with the provisions of this chapter and tax the same at the fixed rate specified in section 113. Section 158BB provides the methodology for computation of undisclosed income of the block period. Section 158BC prescribes the procedure for making the block assessment of the searched person. Section 158BD enables assessment of any person, other than the searched person. Section 158BE sets the time-limits for completion of the block assessments. Section 158BF provides for immunity from levy of interest under sections 234A, 234B and 234C and penalties under sections 271(1)(c), 271A and 271B. Section 158BFA provides for levy of interest and penalty in cases of search on or after 1-1-1997. Section 158BG specifies the authorities competent to make the block assessment. Section 158BH provides for application of all the other provisions of this Act, except those as provided in Chapter XIV-B. Section 158BI provides for abolition of the scheme in cases of search after 31-5-2003.

11. The scheme of block assessment has been explained by Central Board of Direct Taxes in para 39.3 of Circular No. 717, dated 14-8-1995 (1995) 215 ITR 70 (St)). We may only notice clause (e) of the circular which provides for the procedure for making block assessment. Omitting what is not necessary for the purpose of this case, clause (e) is extracted and it reads as under :

"(e) Procedure for making block assessment : (i) The assessing officer shall serve a notice on such person requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice, a return in the prescribed form 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 undisclosed income for the block period. The officer shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall apply accordingly."

12. Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct' field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done of to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing officer. Therefore, the income assessable in block assessment under Chapter XIV-B is the income not disclosed but found and determined as the result of search under section 132 or requisition under section 132A of the Act.

13. Section 158BC stipulates that the chapter would have application Where search has been effected under section 132 or on requisition of books of accounts, other documents or assets under section 132A. By making the notice issued under this section mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the section is required to be served on the person who is found to be having undisclosed income.

The section itself prescribes the time-limit of 15 days for compliance. In respect of searches on or after 1-1-1997, the time-limit may be given up to 45 days instead of 15 days for compliance. Such notice is prescribed under rule 12(1A) which in turn prescribes Form 2B for block return.

14. Section 158BC(b) is a procedural provision for making a regular assessment applicable to block assessment as well. Section 158BC(c) would require the assessing officer to compute the income as well as tax on completion of the proceedings to be made. Section 158BC(d) would authorise the assessing officer to apply the assets seized in the same manner as are applied under section 132B.

15. We may now revert back to section 158BC(b) which is the material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads "that 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, section 144 and section 145 shall, so far as may be, apply." An analysis of this sub-section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under section 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The assessing officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the notice under section 143(2)/142, the assessing officer is authorized to complete the assessment ex parte under section 144. Clause (b) of section 158BC by referring to sections 143(2) and 143(3) would appear to imply that the provisions of section 143(1) are excluded. But section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143(2). However, if an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the section 158BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XTV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under section 158BC(a), the assessing officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of section 158BC(b) it has done so specifically. Thus, when section 158BC(b) specifically refers to(sic-s. 143(2)) applicability of the proviso thereto cannot be excluded. We may also notice here itself that the clarification given by CBDT in its Circular No. 717, dated 14-8-1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment could be made without issuing notice under section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the department that in view of the expression "So far as may be" in section 153BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this court in Dr. Partap Singh's case (supra). In this case, the court has observed that section 37(2) provides that "the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this court in the case of Maganlal v. Jaiswal Industries & Ors. (1989) 4 SCC 344, wherein this court while dealing with the scope and import of the expression "as far as practicable" has stated "without anything more the expression as far as possible' will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied."

16. The case of the revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143.

17. Section 158BH provides for application of the other provisions of the Act.

It reads : "Save as otherwise provided in this chapter, all the other provisions of this Act shall apply to assessment made under this chapter." This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes section 142 and sub-sections (2) and (3) of section 143.

18. On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court.

19. The result is that the appeals fail and are dismissed. No order as to costs.