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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 26th DAY OF NOVEMBER 2013
PRESENT
THE HON’BLE MR. JUSTICE N.KUMAR AND THE HON’BLE MRS. JUSTICE RATHNAKALA
I.T.A. NO.173/2007
BETWEEN :
The Commissioner of Income-tax, No.55/1, Shilpashree, Vidyaranaya Complex, Vishweshwaranagar, Mysore.
The Deputy Commissioner Of Income-tax, Circle – 1(1), No.55/1, Shilpashree, Vidyaranaya Complex, Vishweshwaranagar, Mysore. ...APPELLANTS
(By Sri. K.V.Aravind & Sri.Kamaladhar, Advs.)
AND :
Sri.D.S.Srinivasa Rao & Brothers, 3-4-5, Manasara Road, 3rd Cross, Indiranagar, Mysore. …RESPONDENT
(By Sri.A.Shankar & Sri.M.Lava, Advs.) . . . .
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This I.T.A. is filed under Section 260A of the Income Tax Act, 1961 praying to (i) formulate the substantial questions of law stated therein, (ii) allow the appeal and set-aside the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in IT(SS)A 156/Bang/1997dated 08.09.2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Deputy Commissioner of Income Tax, Circle – 1(1), Mysore, in the interest of Justice and equity.
This I.T.A. coming on for hearing, this day, N.Kumar J., delivered the following:
JUDGMENT
This appeal is by the Revenue challenging the order passed by the Tribunal, which has set-aside the Block Assessment Order passed in respect of the assessee on the ground that the said order passed by the Joint Commissioner of Income Tax was not in accordance with the requirements of Section 158BG of the Act.
A search was conducted in the residential premises of Sri.D.T.S. Rao at 3-4-5, Manasara road, III Cross, Indiranagar, Mysore, one of the Directors of M/s. Madhuvana House Building Co-operative Society Limited, Mysore on 06.02.1996. During the course of
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search, several incriminating documents, papers and books of accounts and cash were seized. It was contended by Sri.D.T.S. Rao as well as Sri.D.S.Manjunath, who were present at the time of search, that the cash of Rs.28,65,100/- seized during search, belong to Sri. D.S.Srinivas Rao and Brothers (HUF). The Assessing Authority passed an order of assessment in the name of the assessee Sri.D.S.Srinivas Rao and brothers (HUF). The said order was challenged by preferring an appeal to the Tribunal. The ground urged in the said order of assessment was approved by the Joint Commissioner of Income-tax, who is not the duly authorized person under Section 158BG of the Income Tax Act, 1961 and therefore, the said order is void and liable to be set-aside.
The substantial question of law, which arises for consideration in this appeal is: Whether the assessment order passed in contravention of Section 158BG is still valid in law?
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Section 158BG reads as under:
158BG. The order of assessment for the block period shall be passed by an Assessing Officer not below the rank of an Assistant Commissioner 7[or Deputy Commissioner] or an Assistant Director 7[or Deputy Director], as the case may be : Provided that no such order shall be passed without the previous approval of— (a) the Commissioner or Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997; (b) the Joint Commissioner or the Joint Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997.
It is not in dispute that the search was conducted on 06.02.1996 i.e., before the 1st day of January 1997 and after 30th day of June 1995 and
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therefore, it is the Commissioner of Income Tax, who should have previously approved the order of assessment of the Block period, whereas it is the Joint Commissioner, who has previously approved the order of assessment. Therefore, the order of assessment is contrary to Section 158BG.
The learned counsel appearing for the Revenue, relying on Section 292B contended that the said violation is in the nature of a mistake, defect or omission, which shall not invalidate the order. What Section 292B provides for is, no return of income assessment notice, summons or other proceeding furnished or made or issued 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 proceedings, if there is a substantial compliance of the provisions of the Act keeping in mind the purpose of the Act. Having regard to the language employed in the proviso, where the intention of the Legislature has been expressed in a negatively couched form, the said provision is
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mandatory. If the previous approval is not obtained by the Assessing Authority before passing the order, the said order could be a nullity. It has no effect. That is the consequence of not obtaining an order. It cannot be construed as a mistake, defect, or omission and it does also not fall within the ambit of substantial provisions of the Act. Therefore, the Tribunal was right in holding that the Block Assessment Order is one without jurisdiction.
The learned counsel relying upon the judgment of the Bombay High Court in the case of Shirish Madhukar Dalvi Vs. Assistant Commissioner of Income Tax & others reported in (2006) 287 ITR 242 (Bom) submitted that the said provision of law is purely procedural in nature. In the aforesaid judgment, there is no reference to this provision at all and therefore, it cannot be said that this provision is procedural and it need not be complied. Moreover, these provisions are specially inserted into the Act with a specific purpose. The said provisions are very harsh. Before a Block Assessment Order is passed, certain legal requirements
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are to be complied. Otherwise, there is no jurisdiction to pass a Block Assessment order. It is in this background, the Legislature consciously provided the aforesaid provision, providing for previous approval so that these harsh provisions are not abused by the Lower Authorities. In that view of the matter, the said provisions cannot be said to be procedural and non- compliance of said provision cannot be construed as a mistake, defect or omission. If the said provision is not complied, the order passed by the Authority without the previous approval is no order in the eye of law.
It was also contended that the proceedings for assessment were initiated subsequent to 1st January 1997 i.e., on 03.01.1997 and therefore, the previous approval of the Joint Commissioner was in accordance with law. It is not the initiation of the proceedings, which is crucial. It is the initiation of search under Section 132, which is crucial and therefore, if one were to read into the Section, initiation of proceedings as the date, which is to be taken into consideration, we will be doing violation to the language employed in the Section
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and it amounts to rewriting the Section, which is not permissible in law. In that view of the matter, the order passed by the Tribunal is in accordance with law and do not call for interference. Hence, appeal is dismissed.
Sd/- JUDGE
Sd/- JUDGE
SPS