High Court Of Kerala
K.V. Kader Haji (Decd.) Through LR vs. CIT
Sections 127
Asst. Year Block period 1986-87 to 1996-97
K.S. Radhakrishnan & Pius C. Kuriakose, JJ.
IT Appeal No. 172 of 2000
2nd April, 2004
Counsel Appeared
Kochunny Nair, S. Arun Raj & Dale P. Kurien, for the Appellants : P.K.R. Menon & George K. George, for the Respondents
JUDGMENT
K.S. Radhakrishnan, J. :
The question that arises for consideration in this case is whether block assessment under Chapter XIV-B of the IT Act, 1961 would fall within the meaning of “case” in Explanation to s. 127 of the IT Act enabling the Chief CIT to transfer block assessment to a subordinate officer.
The assessee was borne on the rolls of the ITO, Ward-I, Mercara. Original assessee expired after the proceedings in the appeal and is now represented by his son, the legal heir. The original assessee was a timber merchant having business interests in Mattanur in Kerala State and Mercara in Karnataka State. Search was conducted by the IT Department on 22nd Nov., 1995 in the residence and business premises of the assessee, his sons and other associates. Consequent to the search proceeding under s. 132 of the IT Act, it was proposed to transfer the case to the IT (Inv.) Circle, Calicut to facilitate effective and co-ordinate investigation. The Chief CIT, Bangalore, Karnataka in exercise of the powers under s. 127(2) of the IT Act transferred the case of the assessee to the jurisdiction of the Asstt. CIT, Investigation Circle I, Calicut, Kerala, vide proceedings dt. 28th Feb., 1996. The AO issued a notice under s. 158BC to file a return setting forth the total income including undisclosed income for the block period.
The assessee filed a writ petition in the High Court of Karnataka challenging the order passed by the Chief CIT, Bangalore, contending that the show-cause notice issued by the Chief CIT did not contain the entire reasons which prompted him to pass the impugned order. The High Court rejected the plea of the assessee and dismissed the writ petition on 8th Aug., 1996. Against that judgment, Writ Appeal Nos. 8551 and 8552 were filed and the appeals were dismissed on 10th Oct., 1996.
The assessing authority then issued notice under s. 158BC to file a return setting forth the total income including the undisclosed income for the block period. The assessee filed return showing Rs. 1,05,752 as undisclosed income for the block period 1986-87 to 1996-97. The assessing authority however passed an order on 27th Nov., 1996 under s. 158BC determining the undisclosed income of the assessee as Rs. 1,08,63,992. Aggrieved by the said order assessee preferred appeal before the Tribunal, Cochin Bench. Various contentions were raised by the assessee before the Tribunal. One of the contentions raised by the assessee before the Tribunal was that the Asstt. CIT, Investigation Circle I, Calicut did not get jurisdiction to make the block assessment and that such jurisdiction still remained with the AO originally having jurisdiction over the assessee under s. 2(7A) of the IT Act.
Counsel for the assessee Sri C. Kochunni Nair submitted that only ITO, Mercara who conducted search on 22nd Nov., 1995 has jurisdiction to make assessment for the block period in accordance with the provisions contained in Chapter XIV-B. Counsel submitted, even though the Chief CIT, Bangalore, has passed an order under s. 127(2) of the IT Act on 28th Feb., 1996 transferring the file to the Asstt. CIT, Investigation Circle I, Calicut, he can transfer only a case in relation to any proceedings under the Act in respect of any year. Counsel also submitted that the Chief CIT could have transferred only a case in relation to any “proceedings under the Act in respect of any year”. Counsel submitted that the assessment for the block period in accordance with the provisions contained in Chapter XIV-B is different from a regular assessment and also different from “proceedings” under the Act in respect of any year, as mentioned in the Explanation. Senior standing counsel for the Revenue Sri P.K. Ravindranatha Menon refuted the contentions and submitted that the Chief CIT had passed order under s. 127(2) after hearing the assessee and the order was challenged before the High Court of Karnataka, but without any success. Counsel also submitted that the word “case” in relation to an assessee means all proceedings under the Act which were pending on the date of the order. Counsel submitted that ITO, Mercara could not have taken action for the block assessment in view of the provisions of s. 158BC of the Act and so the case had to be transferred to Asstt. CIT and the Chief CIT has got power to effect such transfer. The Tribunal found no illegality in the order passed by the Chief CIT transferring the case to Asstt. CIT, Calicut. After considering the contentions of both sides, the Tribunal remanded the matter back to the AO to consider the entire issue afresh and make proper assessment in accordance with law. Aggrieved by this order, this appeal has been preferred. Identical legal question has also been raised in another writ petition and hence we posted both the cases together.
Counsel on either side explained to us the meaning and scope of block assessment and the reasons for the introduction of Chapter XIV-B which deals with special procedure for assessment in search cases. Sec. 158BB shows how undisclosed income of the block period has to be computed. Procedure to be followed for block assessment has been explained in s. 158BC. Sec. 158BD deals with undisclosed income of any other person. Sec. 158BE deals with time limit for completion of block assessment. Sec. 158BG states that the order of assessment for the block period shall be passed by an AO not below the rank of an Asstt. CIT or Dy. CIT or Asstt. Director or Dy. Director, as the case may be.
The question mainly urged before us by the counsel for the petitioner is whether the Chief CIT has got the power to transfer the case relating to block assessment to the Asstt. CIT, Calicut. Counsel submitted power is conferred only on the Central Board of Direct Taxes under s. 120 of the Act and not on the Chief CIT so far as block assessment is concerned. Counsel laid considerable stress on the word “case” and on the words “in respect of” and the expression “any year”. Counsel submitted when Explanation to s. 120 was added, concept of block assessment was not in vogue. Therefore the expression “case” would take in only with regard to case relating to a particular year and not years. Counsel submitted that the expression in respect of any year would make the situation very clear. Legislature has not used the expression “cases” or “years”. Counsel made reference to the decision of the apex Court in P.V. Narasimha Rao vs. State (CBI/SPE) 1998 (4) SCC 626 and submitted that the correct interpretation of the expression “in respect of” cannot be made under any rigid formula but must be appreciated with reference to the context in which it has been used and the purpose to be achieved under the provision in question. Counsel submitted that the expression “case” was inserted using the word “in respect of” after the decision of the apex Court in Bidi Supply Co. vs. Union of India & Ors. (1959) 29 ITR 717 (SC). Counsel also placed reliance on the description given by the Department before the Supreme Court in SLP No. 1545/55/1998 (CIT vs. Sasidharan), which, according to the counsel, supports his reasoning.
Senior counsel appearing for the Revenue submitted that block assessment could be handled only by an officer not below the rank of an Asstt. CIT and the Chief CIT has rightly transferred the file to Asstt. CIT, Calicut. Counsel for the Revenue submitted that the expression “case” used in the Explanation has to be given a wider meaning and would take in block assessment as well, which includes number of years. Placing reliance on s. 127, counsel submitted that the word “any” has to be given a wider meaning which would take in assessment which would include block assessment as well. Counsel further submitted that in view of s. 127, provision relating to assessment being a machinery provision, the Court should give interpretation which makes the provision workable. Counsel also referred to the decision in 48 ITR 4 (sic). Counsel also submitted that the stand taken by the Revenue in the Supreme Court would not preclude the Court from giving a correct interpretation of the provisions. Counsel made reference to the decision of the Supreme Court in Salem Co-operative Central Bank Ltd. vs. CIT (1993) 111 CTR (SC) 394 : (1993) 201 ITR 697 (SC).
We may incidentally refer to the provision and the Explanation to s. 127. “127(1) The Director General or Chief CIT may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more AO’s subordinate to him (whether with or without concurrent jurisdiction) to any other AO or AO’s (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the AO or AO’s from whom the case is to be transferred and the AO or AO’s to whom the case is to be transferred are not subordinate to the same Director General or Chief CIT or CIT,— (a) where the Directors General or Chief CIT or CIT to whom such AO’s are subordinate are in agreement, then the Director General or Chief CIT or CIT from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Directors General or Chief CIT or CIT aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-s. (1) or sub-s. (2) shall be deemed to require any such opportunity to be given where the transfer is from any AO or AO’s (whether with or without concurrent jurisdiction) to any other AO or AO’s (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-s. (1) or sub-s. (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the AO or AO’s from whom the case is transferred. Explanation—In s. 120 and this section, the word “case” in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.” Sec. 127 confers powers on the Director or Chief CIT to transfer any case from one or more AO’s subordinate to him to any other AO, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so. Sec. 127, therefore, confers power to transfer cases. Sec. 120, on the other hand, deals with jurisdiction of IT authorities, which says that IT authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. Sec. 124 deals with jurisdiction of AOs, which says where by virtue of any direction or order issued under sub-s. (1) or sub-s. (2) of s. 120, the AO has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, etc. Therefore ss. 120 and 124 deal with jurisdiction and s. 127 deals with power. Jurisdiction does not mean power to do or order the act impugned but generally the authority of an officer to act in the matter. Power means authority to give one to another to act for him or to do some specified acts. The expression “power” is not always synonymous with jurisdiction. Sec. 120 uses the expression “jurisdiction” and s. 127 uses the expression “power” having different meaning and content. While exercising the powers under s. 127 the Chief CIT is not exercising any jurisdiction but exercising power of transferring a case from one officer to another. Sec. 158BG also confers powers on the Asstt. CIT or Dy. CIT, as the case may be, to make block assessment. In other words, jurisdiction to make block assessment has been conferred to the Asstt. CIT or to the Dy. CIT, by the statute. Chief CIT has only transferred the case from one officer to another officer.
11. Power under s. 127 has to be exercised in public interest and in the best interest so as to facilitate effective and co-ordinated investigation. Sec. 127 gives sufficient procedure to the assessee including any opportunity of being heard wherever it is possible. Chief CIT, in exercise of the power conferred under s. 127, has also to record reasons. Admittedly statutory formalities have already been complied with in the instant case, but question posed is whether block assessment would fall in the explanation to s. 127 and whether the CIT has got the power to transfer the case of the assessee. Sec. 127 has used the expression “any case”. Explanation contains the word “case” in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under the IT Act in respect of any year. Therefore, the expression “any case” means all proceedings under the Act in respect of any year. The expressions “any year” and “any case” exclude limitation or qualification, which points in a distributive construction. The words “any case” and “any year” connote wider generality. The word “any” may have one of several meanings; according to the circumstances it may mean “all”, “each”, “every”, “some”, or one or more out of several. In Gangadhar Narasingdas Agarwal vs. Union of India (1967) (1) MLJ 197, it was held that the word “any” means all except where this wide construction is limited by the subject-matter and context of a particular statute. In Ashiq Hassan Khan vs. SDO AIR 1965 Pat 444 and Chandi Prasad vs. Rameshwar Prasad AIR 1967 Pat 41, it was held that the expression given to the word “any” in certain context and subject-matter excludes limitation or qualification. Considering the object and purpose of s. 127 and to facilitate effective and coordinate investigation, the Explanation to s. 127 has to be liberally construed and therefore “block assessment” would fall within the expression “case” enabling the CIT to transfer those cases relating to block assessment to the subordinate officer. Sec. 127 is also a (machinery) provision and the Courts would lean in favour of an interpretation which makes the provision workable. Ut res valeat polius quar pareat, a construction be put upon the provision so as to uphold them and carry into effect the intention. That cannot be interpreted in a restrictive manner and making the machinery unworkable. Machinery section should always be construed so as to effectuate and charging (sic) rule is that construction should be workable. Reference was made to the decisions in 48 ITR 442 (sic), Bhimraj Pannalal vs. CIT (1957) 32 ITR 289 (Pat), Bhimraj Pannalal vs. CIT (1961) 41 ITR 221 (SC). Looking at the question in the above perspective, we find no infirmity in the order passed by the Chief CIT in transferring the case to the Asstt. CIT, Calicut. We therefore answer the question in favour of the Revenue and dismiss the appeal and writ petition.
[Citation : 268 ITR 465]
