Punjab & Haryana H.C : The notice under section 158BD becomes defective merely because the Assessing Officer has allowed less than 15 days time to file the return

High Court Of Punjab & Haryana

CIT vs. Naveen Verma

Block Period : 1-4-1988 To 16-4-1999

Section : 158BC

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

IT Appeal Nos. 558 Of 2006 & 342 Of 2009

February 1, 2011

JUDGMENT

Adarsh Kumar Goel, J. – Since the registry has not been able to send the files on account of fire in the court premises, learned counsel for the Revenue has furnished paper books which are taken on record. We proceed to decide the matter after hearing learned counsel for the Revenue.

2. Both the above appeals are inter-connected as I. T. A. No. 558 of 2006 is on the issue of quantum while I. T. A. No. 342 of 2009 is on the issue of penalty.

3. I. T. A. No. 558 of 2006 has been filed by the Revenue under section 260A of the Income-tax Act, 1961 (in short “the Act”) against the order dated February 28, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench “B”, New Delhi, in I. T. A. No. 8/Del/2005 for the block period from April 1, 1988, to April 16, 1999 (since reported as Navin Verma v. Asstt. CIT [2006] 100 ITD 73 (Delhi)). Learned counsel for the Revenue fairly states that even though three questions were initially claimed, this court admitted the appeal only on the following two questions declining the third question at the time of admission on March 2, 2007 :

“(i) Whether the hon’ble Income-tax Appellate Tribunal was right in holding that the notice under section 158BD becomes defective merely because the Assessing Officer has allowed less than 15 days time to file the return ?

(ii) Whether the hon’ble Income-tax Appellate Tribunal, having held the notice under section 158BD to be defective, erred in holding that the defect was not curable under section 292B of the Act ?”

4. A search and seizure operation was carried on at the residence of Sh. Subhash Verma and Krishna Verma and on the basis of the material found, notice under section 158BD was issued to the assessee. The assessee did not file any return. The Assessing Officer on the basis of material found, made assessment under section 158BD read with section 158BC(c)/144 assessing the undisclosed income to be Rs. 1,20,14,405. The addition was partly upheld by the Commissioner of Income-tax (Appeals) against which cross-appeals were filed before the Tribunal by the assessee as well as the Revenue. The Tribunal allowed the appeal of the assessee only on the ground that the assessment proceedings were vitiated on account of the assessee having not been given clear period of 15 days for filing the return.

5. We have heard learned counsel for the appellant.

6. Learned counsel for the appellant submits that even if the period specified in the notice was less than 15 days, there was no prejudice as the assessee never filed the return even beyond the specified in the notice. In any case, the Tribunal could, at best give further opportunity to the assessee to file return instead of holding the assessment proceedings to be vitiated and thereafter closing the matter. The defect in the notice pointed out by the Tribunal was curable under section 292B of the Act.

7. In order to appreciate the above submission, the provisions of the Act may be referred to :

“158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then-

(a) the Assessing Officer shall-

(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days ;

(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five 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 the undisclosed income for the block period ; . . .”

“158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly.”

“292B. 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 conformity with or according to the intent and purpose of this Act.”

8. The above provisions are statutory recognition of the principles of natural justice which are applicable to assessment proceedings under the Act. The affected party is entitled to the fair opportunity and fair procedure. Since the period of 15 days has been specified statutorily, it may not be fair to expect filing of return in shorter period. At the same time, the effect of violation of the principles of natural justice is not to always nullify the exercise of jurisdiction unless prejudice is caused. Where period specified in the notice is less than the statutory period, no prejudice is caused if return filed is taken into account. The notice specifying lesser period can be read as specifying the statutory period. The principle is duly recognised under section 292B of the Act.

9. In State Bank of Patiala v. S. K. Sharma [1996] 3 SCC 364, after considering the case law on the point, it was concluded :

33. We may summarise the principles emerging from the above discussion. (These are by no means intended to be exhaustive and are evolved keeping in view the context of disciplinary enquiries and orders of punishment imposed by an employer upon the employee) : . . .

(3) In the case of violation of a procedural provision, the position is this : procedural provisions are generally meant for affording a reasonable and adequate opportunity to the delinquent officer/employee. They are, generally speaking, conceived in his interest. Violation of any and every procedural provision cannot be said to automatically vitiate the enquiry held or order passed. Except cases falling under-‘no notice’, ‘no opportunity’ and ‘no hearing’ categories, the complaint of violation of procedural provision should be examined from the point of view of prejudice, viz., whether such violation has prejudiced the delinquent officer/employee in defending himself properly and effectively. If it is found that he has been so prejudiced, appropriate orders have to be made to repair and remedy the prejudice including setting aside the enquiry and/or the order of punishment. If no prejudice is established to have resulted therefrom, it is obvious, no interference is called for. In this connection, it may be remembered that there may be certain procedural provisions which are of a fundamental character, whose violation is by itself proof of prejudice. The court may not insist on proof of prejudice in such cases. As explained in the body of the judgment, take a case where there is a provision expressly providing that after the evidence of the employer/Government is over, the employee shall be given an opportunity to lead defence in his evidence, and in a given case, the enquiry officer does not give that opportunity in spite of the delinquent officer/employee asking for it. The prejudice is self-evident. No proof of prejudice as such need be called for in such a case. To repeat, the test is one of prejudice, i.e., whether the person has received a fair hearing considering all things. Now, this very aspect can also be looked at from the point of view of directory and mandatory provisions, if one is so inclined. The principle stated under (4) hereinbelow is only another way of looking at the same aspect as is dealt with herein and not a different or distinct principle.”

10. In the present case, the Tribunal held as under (pages 85 & 86 of 100 ITD :

“In view of the above provisions contained under section 158BC(a), the notice is to be served upon the assessee, requiring him to furnish the return within such time not being less than 15 days. The provision is unambiguous and clear. The intention of the Legislature in using the words ‘not less than 15 days’ is clear. The rule of literal construction has to be followed for ascertaining the plain meaning of the terms used. There being no ambiguity in the language adopted, no other construction except that a clear notice of more than 15 days is to be given, is possible.

The contention of learned Departmental representative that if a notice does not provide a period of clear 15 days, that is merely an irregularity, which is curable is not acceptable in view of specific provision of law referred to above which casts a specific obligation upon the Assessing Officer. When the law requires a particular act to be done in a particular manner and within a particular time, then no addition, subtraction or modification of such requirement is permissible. If the requirement of law is clear, the authorities cannot be allowed to subvert the provision by curing such an irregularity. The requirement of giving notice under section 158BC is a precondition for making assessment. No assessment under section 158BC or 158BD can be made without issuing a statutory notice as provided in section 158BC. The notice of less than 15 days is equal to no notice. As no assessment can be made under section 158BC in the absence of notice, the assessment made by issuance of notice otherwise than in accordance with the provision of law, has to be treated on the same footing, i.e., without notice. If the Assessing Officer cannot cure the irregularity in relation to non-issuance of notice, he equally cannot cure the irregularity in relation to a notice which is not in accordance with the provisions of law, i.e., notice providing a lesser period than the prescribed clear period of 15 days. Thus, the argument of the learned Departmental representative fails on this count also.”

11. We are of the view that the Tribunal erred in concluding that failure to give notice of 15 days will vitiate the assessment itself without considering the prejudice to the assessee. Total absence of notice may be on a different footing but if notice is duly served, the assessee can either avail of the statutory time for filing of the return irrespective of shorter period mentioned in the notice or can be given fresh opportunity if it is held that the assessee suffered prejudice on account of shorter period mentioned in the notice. In any situation, it is not permissible to quash the assessment proceedings merely on the ground that the period mentioned in the notice was lesser than the statutory period specified under section 158BC(a).

12. In view of the above legal position, the questions raised are answered in favour of the Revenue. The appeals are allowed. The order of the Tribunal are set aside and the matters are remanded to the Tribunal for fresh decision on the merits in accordance with law.

13. A photo copy of this order be placed on the file of the connected case.

[Citation : 346 ITR 100]

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