Lakshmi Jewellary vs Deputy Commissioner of Income Tax

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 of September, 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 of September, 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 Assessing Officer 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 Section 158BG of the Income Tax

Act by holding that the Commissioner, before making an order approving the order of assessment made by the Assessing Officer in exercise of his

powers u/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 Section 158BG would show that no such obligation is cast on the Commissioner. 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

Assessing Officer, the draft assessment order which is required to be submitted by the Assessing Officer to the Commissioner can be approved by

the Commissioner 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 Commissioner is a purely internal matter and at that stage no hearing is contemplated and

no notice to the assessee is necessary. The proviso to Section 158BG only requires that the assessment order be passed after securing the

previous approval of the Commissioner. The Tribunal was quite right in the view it took with regard to Section 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

u/s 158B of the Act. It is his submission that the block period, as defined in Section 158B(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,--

(a) ''block period'' means the previous years relevant to ten assessment years preceding the previous year in which the search was conducted u/s

132 or any requisition was made u/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.

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 u/s 132 or any requisition was made u/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 Section 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 Assessing Officer thereby enabling him to exercise powers in relation to the

assessment, long after the expiry of the period of one year specified in Section 158BE(1)(a).

Section 158BE(1)(a) reads thus :

158BE. (1) The order u/s 158BC shall be passed,-

(a) within one year from the end of the month in which the last of the authorisations for search u/s 132 or for requisition u/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 day of

June, 1995, but before the 1st day of January, 1997.

This section only specifies the period within which the Assessing Officer 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 Assessing Officer 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 Income Tax 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. ( The Director of

Inspection of Income Tax (Investigation), New Delhi and Another Vs. Pooran Mal and Sons and Another, also Appropriate Authority and

Commissioner Income Tax Vs. Smt. Varshaben Bharatbhai Shah and Others, , 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 Assessing Officer 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.

The Tribunal, therefore, was well within its powers in directing the Assessing Officer 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 Section 158BE in making that order.

The last point urged by counsel is with regard to the Tribunal''s decision to sustain some of the additions that had been made. It was submitted

that u/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,

Section 68 of the Act reads as under :

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 Assessing Officer, satisfactory, the sum so credited may

be charged to Income Tax as the income of the assessee of that previous year.

The Tribunal has found that the explanation offered by the assessee before the Assessing Officer was not a satisfactory explanation in respect

of some items and, with respect to certain others no explanation at all was offered. Section 68, in the context of the facts of this case, clearly

enabled the Assessing Officer 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 Assessing Officer 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.