Caltradeco Steel Sales (P.) Ltd. and Others vs Deputy Commissioner of Income Tax

By this appeal, the appellant has challenged the impugned order of the learned single judge dated July 27, 1999. The main grievance of the assessee is that the learned single judge has not stayed the operation of the notice u/s 143 of the Income Tax Act, 1961, while, at the same time, the proceeding for the assessment year 1998-99 in pursuance of notice u/s 158BC is pending.

Heard learned counsel for the assessee and the Revenue.

Notices u/s 143(2) of the Income Tax Act, 1961, has been issued to the appellants, Caltradeco Steel Sales (P.) Ltd., Shri Mahesh Kumar Goyal, and Shri Dinesh Kumar Goyal. The copies of the relevant notices are at pages 100, 101 and 103 of the application.

We perused the notices. By issue of these notices, the Deputy Commissioner of Income Tax, Central Circle-VII, Calcutta, required these assessees to attend his office on June 22, 1999, June 26, 1999 and July 11, 1999, respectively, either the assessee will appear in person or through his representative, duly authorised in writing in this behalf.

Learned counsel for the appellants, Dr. Pal, submits that notices u/s 143(2) of the Act are for the purpose of regular assessment for the assessment year 1998-99. He submits that there was a search on August 21, 1998, at the premises of the assessees. A notice u/s 158BC of the Act has already been issued and proceeding in pursuance of that notice is pending. The period of that notice u/s 158BC covers the period of the assessment year 1998-99. Therefore, he further submits that once the assessment proceedings under the Act for the period 1998-99 are pending in pursuance of the notice u/s 158BC, there cannot be any parallel proceedings for regular assessment and no notices u/s 143(2) of the Act can be issued for assessment of income for the assessment year 1998-99.

Learned counsel for the Department submits that the assessment proceeding in pursuance of the notice u/s 158BC is for the undisclosed income in a block period while the regular assessment u/s 143(3) can he made for the income disclosed by the assessee. He submits that the assessee himself has voluntarily filed the return for the previous year relevant to the assessment year 1998-99. Therefore, there is no bar to proceed to assess the income of the assessee which he disclosed in the return.

Learned counsel for the parties both admit that the proceeding under the special Chapter XIV-B is in search cases and the undisclosed income of the assessee can be assessed and taxed as provided under the provisions of the special provisions under Chapter XIV-B of the Act. Dr. Pal has no objection in case the Assessing Officer proceeds for making assessment for disclosed income which has been disclosed by the assessee voluntarily in his return for the assessment year 1998-99.

The heading of Chapter XIV-B is "Special procedure for assessment of search cases" and Section 158BC defines "block period" and "undisclosed income". The provisions of other sections of this Chapter also restrict the assessment of undisclosed income as a result of search and that will be assessed in the block period, that is, previous years relevant to ten assessment years preceding the previous year in which the search was conducted u/s 132 of the Act, while regular assessment u/s 143(3) is on the basis of the return filed and income disclosed by the assessee.

Therefore, the limited question before us is when there is a proceeding of assessment under Chapter XIV-B of the Act pending, can the Assessing Officer proceed to assess the income of the same year which forms part of the block period ? In our view, when Chapter XIV-B of the Act pertains to undisclosed income and the assessment u/s 143(3) pertains to disclosed income, there should be no dispute on the fact that both the proceedings can go on simultaneously as both are for different types of income, though for the same period, one proceeding is for undisclosed income and the other proceeding u/s 143(3) is for disclosed income.

If any income is assessed and taxed under the regular proceeding, that is, u/s 143(3) of the Act, that cannot be taxed under the special Chapter in pursuance of the notice u/s 158BC, the Assessing Officer can proceed u/s 158BC to tax the income which has not been disclosed. Thus, the proceedings u/s 143(3) will go on simultaneously along with the proceeding in pursuance of the notices u/s 158BC of the Act.

In view of this undisputed fact, we find no justification to stay the proceedings in pursuance of the notice u/s 143(2) of the Act.

However, it is made clear that the Assessing Officer should not assess the undisclosed income in this proceeding which is the subject-matter of proceedings in pursuance of the notice u/s 158BC of the Act.

With the above observations, both the appeal and application stand disposed of.

All parties concerned are to act on a signed xerox copy of this dictated order on the usual undertaking.