High Court Of Kerala
CIT (Central), Cochin Vs. T.O. Abraham & Co.
Block assessment period 30-4-1996 to 6-5-1996
Section : 158BE
C.N. Ramachandran Nair And M.L. Joseph Francis, JJ.
IT Appeal No. 12 Of 2010
January 6, 2011
1. A difference of opinion between the Judicial Member and the Accountant Member on the limitation in respect of a block assessment completed in the case of the respondent assessee was referred to the President of the Tribunal for his opinion. The President concurred with the Judicial Member in holding that assessment is barred by limitation. Consequently, revenue has filed this appeal against the majority decision of the Tribunal wherein the Accountant Member dissented and held that the assessment completed was well within time. We have heard the senior counsel appearing for the appellant and Adv. Sri V.V. Asokan appearing for the respondent assessee.
2. The facts borne out by the record which led to the controversy are the following. A search was conducted under section 132 of the Income-tax Act in the premises of the respondent assessee, which is a partnership firm, on various dates commencing from 30-4-1996 to 6-5-1996. During the search, the department recovered several records and the materials relating to undisclosed income of the assessee. Pursuant to the notice for assessment issued under section 158BC of the Act, the assessee filed return in Form 2B. The Assessing Officer after hearing the assessee prepared the draft of assessment and presented it to the Commissioner of Income-tax, for approval, under section 158BG of the Act. By proceedings dated 23-5-1999, the Commissioner approved the draft and final assessment was completed by the Assessing Officer in terms of the draft approved by the Commissioner on 27-5-1997, the last date for completion of assessment under section 158BE falling on 31-5-1997. The assessment order along with notice of demand issued under section 156 of the Income-tax Act was despatched to the assessee on 30-5-1997, that is one day prior to the last date for completion of the assessment as provided under section 158BE of the Act. The assessment order and notice of demand despatched by the department was admittedly received by the assessee on 2-6-1997. However, the Assessing Officer noticed that the assessment despatched to the assessee did not contain the statement that the assessment was completed after obtaining approval from the Commissioner of Income-tax under section 158BG and therefore he sent another assessment order signed by him on 2-6-1997 informing that the said assessment completed was with prior approval of the Commissioner of Income-tax in terms of section 158BG of the Act. The assessee noticed that the assessment order that accompanied the notice of demand that was depatched by the department to the assessee on 30-5-1997 did not contain signature of the Assessing Officer and so much so, the assessee while filing the appeal against the assessment contended before the Tribunal that the assessment order is invalid for the reason that the first copy received was not signed and the second copy of the assessment order which contained the signature of the Assessing Officer despatched to the assessee on 2-6-1997 is barred by limitation: During hearing of the appeal by the two Bench member, the Judicial Member took the view that the first copy of the assessment order have not been signed by the Assessing Officer within the period of limitation and therefore the assessment is invalid. On the other hand, the Accountant Member took the stand that the assessment was completed on 27-5-1997 and the same was done after obtaining prior approval from the Commissioner of Income-tax under section 158BG and even though the first copy sent to the assessee along with the signed copy of notice of demand did not contain the signature of the Assessing Officer, it does not invalidate the assessment that was completed on 27-5-1997, that is within the period of limitation. Since the President of the Tribunal agreed with the view of the Judicial Member, appeal happened to be decided by majority against the revenue and hence this appeal.
3. Senior counsel Sri P.K.R. Menon appearing for the appellant relied on several decisions particularly that of the decision of the Supreme Court in B.J. Shelat v. State of Gujarat AIR 1978 SC 1109 wherein Supreme Court has held as follows:
“The order of any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed and kept in the file, because such order may be liable to change at the hands of the authority who may modify it, or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period, though the actual service of the order may be beyond that period”.
4. He also cited the decision of the Supreme Court in Kalyan Kumar Ray v. CIT 191 ITR 634 wherein Supreme Court has noted that the statute does not contemplate service of assessment order and what is requires is service of notice of demand signed by the Assessing Officer. The counsel appearing for the respondent assessee also relied on the same judgments and contended that as held by the Supreme Court in the judgment referred above, the assessment in this case also should be treated as completed beyond the period of limitation.
5. After hearing both sides and after going through the orders of the two members and of the President of the Tribunal, what we feel is that the requirement of section 158BE is satisfied if the department establishes that the block assessment is completed before the last date provided for completion of assessment under section 158BE which in this case is 31-5-1997. It is the settled position particularly through the decision of the Supreme Court in B.J. Shelat’s case ( supra), for validity of the assessment there is no need for the department to serve the assessment order on the assessee before the prescribed period of limitation provided for completion of assessment. The test laid down by Supreme Court in the above case is that in order to establish that assessment has been completed within time, the department should have completed the proceeding and despatched it so that the proceeding is out of the control of the officer issuing it. In this case, admittedly the assessment was approved by the Commissioner of Income-tax by proceedings dated 23-5-1997 as required under section 158BG of the Act. The office of the Assessing Officer also despatched copy of the assessment order along with signed copy of notice of demand. Even though the copy of the assessment order sent to the assessee was not signed by the officer, copy of the assessment order so despatched along with notice of demand signed by the Assessing Officer on 30-5-1997 was received by the assessee on 2-6-1997. In fact, a modified copy of the assessment order was sent by the Assessing Officer on 2-6-1997 wherein the approval of draft assessment by the Commissioner of Income-tax which is the requirement of section 158BG was also stated by the Assessing Officer in the assessment order. The first question now to be considered is whether the despatch of an unsigned copy of the assessment order along with signed copy of notice of demand invalidates the assessment. The second question is whether the evidence on record prove beyond doubt the claim of the department that the assessment in this case was completed within the period of limitation, i.e., on 27-5-1997 as claimed by the department, which is within the period of limitation provided under section 158BE of the Act. We notice that the assessment is a very elaborate order and it contains sixty pages. The assessee does not deny the approval of the draft of the assessment order by the Commissioner of Income-tax on 23-5-1997, which was in fact done after hearing the assessee on that date. Therefore there is no dispute on the finalisation of the draft assessment by the Assessing Officer with the approval of the Commissioner on 23-5-1997 which is eight days prior to the last date provided for completion of assessment. Admittedly, the Assessing Officer despatched the signed notice of demand along with an unsigned copy of the assessment order to the assessee on 30-5-1997, which was received by the assessee on 2-6-1997. Records were produced before the Tribunal and there is no dispute that the signed copy of notice of demand was despatched to the assessee by the department before the last date for completion of assessment and it contains tax demand which is the same amount contained in the signed assessment order later despatched by the Assessing Officer on 2-6-1997. Going by the nature of assessment, which is a voluminous document with full facts and figures containing sixty pages, nobody can have a doubt that it cannot by prepared within a period of one or two days after sending the notice of demand. In our view the mere fact that the first copy of the assessment order sent to the assessee did not contain the signature of the Assessing Officer does not give rise to a presumption that the original assessment order was not signed by the Assessing Officer. Admittedly the assessment is made in several copies and one of the copies is sent to the assessee along with copy of demand notice. It may so happen that the despatch section without noticing the omission would have sent an extra copy of assessment order which was not signed. However, the same does not mean that the original assessment is not signed by the Assessing Officer with reference to which only he prepares the notice of demand which was admittedly signed and despatched to the assessee within the period of limitation. The additional feature that supports the case of the department is that the draft assessment prepared and finalised by the Assessing Officer was approved by the Commissioner of Income-tax after giving a hearing to the assessee on 23-5-1997 and so much so the assessee cannot even contend that a draft assessment was not finalised within the period of limitation. In our view even though records were produced before the Tribunal and verified by the Tribunal, there is no finding that the assessment order signed on 27-5-1997 was not available on file. It cannot also be assumed that the Assessing Officer pre-dated the assessment order in this case because the draft assessment was already approved by the Commissioner of the Income-tax on 23-5-1997 after hearing the assessee and there is no case of any deviation made from the approved draft while issuing the final order. Further the notice of demand which is issued based on the tax determined on the assessment order was despatched to the assessee on 30-5-1997 well before the last date for completion of the assessment. In this context, we have to refer to section 292B of the Income-tax Act which is as follows:
“292B. Return of income etc., not to be invalid on certain grounds. – No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in confirmity with or according to the intent and purpose of this Act.”
6. In our view the whole purpose of the above section is not to defeat on technicalities the object of the statute that is to assess and collect the tax legitimately due under the Act. As already noticed this is a case where elaborate evidence is collected in the course of search and the processing of the document took several months before completion of the block assessment. In our view the Accountant Member rightly held that on hyper technicality a proper assessment completed strictly observing the provisions of the Act should not be held invalid. The evidence on record in our view establish beyond doubt that a draft assessment was approved by the Commissioner of Income-tax under section 158BG on 23-5-1997 and the assessment was in fact finalised by the Assessing Officer on 27-5-1997 as borne out by the records. The fact that the first copy of assessment order sent to the assessee on 30-5-1997 along with signed valid notice of demand issued under section 156 of the Act did not contain the signature of the Assessing Officer does not invalidate the assessment which was validly completed on 27-5-1997 within the period of limitation provided under section 158BE of the Act. We therefore allow the appeal by reversing the order of the Tribunal. However since Tribunal has not considered the case on merits, we restore the appeal to the file of the Income-tax Appellate Tribunal for decision on merits after hearing both sides. However, since the assessment is for the block period from April 1986 to May 1996, we direct the Tribunal to dispose of the appeal finally within a period of three months from the date of receipt of a copy of this judgment.
[Citation : 333 ITR 182]