High Court Of Madras
Lakshmi Jewellary vs. DCIT
Sections 68, 158B, 158BE, 158BG
R. Jayasimha Babu & C. Nagappan, JJ.
Civil Misc. Petn. No. 65 of 2000 in T.C. No. 408 of 2000
9th August, 2001
V. Ramachandran for M/s Anitha Sumanth, S. Mallika, M. Mohideen & S. Sanath Chandran, for the Appellant : Mrs. Chitra Venkataraman, for the Respondent
R. JAYASIMHA BABU, J. :
Several questions have been raised by the appellant. We have heard counsel for the appellant at length. We have also heard counsel for the Revenue. The appeal is admitted and is also being disposed of by this order.
There was a search in the premises of the appellant on the 28th and 29th Sept., 1995. The appellant is a firm, which carries on business in jewellery. After the search, an assessment was made within the period allowed by law, on the 30th Sept., 1996. The assessment so made was challenged before the Tribunal. The Tribunal upheld some of the additions made, and with regard to some others it set aside the additions that had been made as before making such additions the report which the AO had relied upon had not been furnished to the appellant.
Counsel for the appellant submitted that the Tribunal has erred firstly in the manner in which it has considered s. 158BG of the IT Act by holding that the CIT, before making an order approving the order of assessment made by the AO in exercise of his powers under s. 158BG(a), need not give a hearing to the assessee. This submission, though superficially raising a question of law, is really bereft of any substance. A bare perusal of s. 158BG would show that no such obligation is cast on the CIT. The order of assessment, no doubt, must be made after giving an opportunity to the assessee. It is the case of the assessee that even after such opportunity had been given by the AO, the draft assessment order which is required to be submitted by the AO to the CIT can be approved by the CIT only after hearing the assessee and after such approval the assessment has to be finalised.
The act of submitting the draft assessment order to the CIT is a purely internal matter and at that stage no hearing is contemplated and no notice to the assessee is necessary. The proviso to s. 158BG only requires that the assessment order be passed after securing the previous approval of the CIT. The Tribunal was quite right in the view it took with regard to s. 158BG of the Act.
The second submission made before us by learned counsel for the appellant is regarding the manner in which the block period is to be computed under s. 158B of the Act. It is his submission that the block period, as defined in s. l58B(a), would include the year in which the search was conducted up to the date of search and nine preceding years. Learned counsel laid emphasis on the word “includes” used in the definition and sought to relate that term to the specification of ten assessment years made in the earlier part of the definition. It is necessary to set out the definition of “block period” given in the statute. “158B. In this Chapter, unless the context otherwise requires,â
(a) âblock periodâ means the previous years relevant to ten assessment years preceding the previous year in which the search was conducted under s. 132 or any requisition was made under s. 132A, and includes, in the previous year in which such search was conducted or requisition made, the period up to the date of the commencement of such search or, as the case may be, the date of such requisition.”
7. The opening part of this definition specifies that “block period” means the previous years relevant to ten assessment years, which precede the previous year in which the search was conducted under s. 132 or any requisition was made under s. 132A. Having so specified, a further addition is made for a block period by the latter part of the definition, which states that it would also include in the previous year in which the search was conducted or requisition made, the period up to the date of the commencement of such search or the date of requisition. The definition, could have been worded with greater clarity. However, the definition must be understood with the aid of the language used therein. The definition appears to be in two parts. First, it says that it means the previous years relevant to ten assessment years preceding the previous year in which the search was conducted or requisition made. Thereafter, an addition is made to that period by stating that the block period also includes in the previous year in which the search was made, the period up to the date of search. The submission made by counsel for the appellant that the word “includes” should be related to the specification to the previous years relevant to ten assessment years is difficult to accept. Reference to “the previous years relevant to the ten assessment years” is followed by the words “preceding the previous year”. It is, therefore, clear that no part of the previous year in which the search was conducted can be regarded as forming part of the “previous years relevant to the ten assessment years” referred to in the opening part of the definition. The words “and includes”, which occur in the later part of the definition are words which can only be regarded as relevant to the term “block period” as the inclusion of the additional period to which reference is made after the words “and includes” can only be for the purpose of regarding that period also as forming part of the block period.
The Tribunal was, therefore, right in holding that the computation of the block period had been made properly as including within it the ten previous years relevant to the ten assessment years preceding the date of search plus the period up to the date of the search in the previous year in which the search was conducted.
The next submission made was that the Tribunal has not given full effect to the period of limitation prescribed in s. 158BE(1)(a). The submission was that the period of one year from the date of search having elapsed long before the date on which the Tribunal decided the appeal, the Tribunal had no authority to remand the matter back to the AO thereby enabling him to exercise powers in relation to the assessment, long after the expiry of the period of one year specified in s. 158BE(1)(a). Sec. 158BE(1)(a) reads thus : “158BE. (1) The order under s. 158BC shall be passedâ (a) within one year from the end of the month in which the last of the authorisations for search under s. 132 or for requisition under s. 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned after the 30th June, 1995, but before the 1st Jan., 1997.”
This section only specifies the period within which the AO must complete the assessment. It does not come in the way of the appellate authorities, who find the assessment order to be defective for any reason, remanding the matter to the AO for making a proper order in relation to the matters with respect to which the matter is remanded by the appellate authority. The limitation of one year is only for the assessment and it is not a limitation which fetters the discretion of the appellate forum. There can be no dispute and there is none regarding the extent of the power of the appellate authority that it has the power not only to uphold or set aside the assessment order but also has the power to modify or remit.
The apex Court in more than one decision, under other provisions of the IT Act, including those in Chapter XX-C, has held that the limitation prescribed for making the initial order is for the making of that order alone and is not in the nature of limiting the power of the higher forum, which is empowered to examine the correctness of the initial order, and preventing it from exercising its powers. [Director of Inspection of IT vs. Pooran Mall & Sons 1974 CTR (SC) 243 : (1974) 96 ITR 390 (SC) : TC 61R.500, also Appropriate Authority vs. VarshabenBharatbhai Shah (2001) 166 CTR (SC) 373 : (2001) 248 ITR 342 (SC), wherein the Supreme Court remanded the matter to the appropriate authority). The limitation prescribed is to ensure that the assessee is not kept in the dark and kept guessing as to what will happen and also to ensure that the AO pays prompt attention to the record before him and makes up his mind as to the nature of the assessment order that is required to be made in the given circumstances. The specification of one year is not to provide an immunity to the assessee from any further order being made in the event the assessment order made is found for any reason defective by the higher forum.
12. The Tribunal, therefore, was well within its powers in directing the AO to redo the assessment in respect of certain items, after giving a copy of the report that it had relied on, to the assessee. There was no breach of s. 158BE in making that order.
13. The last point urged by counsel is with regard to the Tribunalâs decision to sustain some of the additions that had been made. It was submitted that under s. 68 of the Act cash credits made in the books of the assessee should be accepted as having been properly made under the head under which the credit was made.
14. Sec. 68 of the Act reads as under : “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.”
15. The Tribunal has found that the explanation offered by the assessee before the AO was not a satisfactory explanation in respect of some items and, with respect to certain others no explanation at all was offered. Sec. 68, in the context of the facts of this case, clearly enabled the AO to treat such unexplained cash credits as the income of the assessee. That is how it has been treated and the Tribunal was not in error in accepting such treatment given to such cash credits by the AO as being proper and legal. There is no error in that finding.
None of the submissions made for the appellant are thus worthy of acceptance. The appeal is, therefore, dismissed.
[Citation : 252 ITR 712]