M. TIRUPATI REDDY (HUF) v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2005-LL-0330-2]

Citation 2005-LL-0330-2
Appellant Name M. TIRUPATI REDDY (HUF)
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 30/03/2005
Assessment Year BLOCK PERIOD 1986-87 TO 1996-97
Judgment View Judgment
Keyword Tags time-limit for completion of • warrant of authorization • undisclosed investment • period of limitation • curable irregularity • barred by limitation • search and seizure • undisclosed income • managing director • valid assessment • block assessment • block period
Bot Summary: CIT had informed the appellant that his earlier notice under s. 158BC which was served on the appellant on 18th July, 199 6 should be treated as a notice under s. 158BD of the IT Act, 19 6 1. Since the notice under s. 158BD in the appellant s case was served on 18- 7-199 6 the block assessment order ought to have been completed within one year from the end of July, 199 6 , i.e., on or before 31st July, 1997. 9th Aug., 199 6 treating the notice under s. 158BC as Notice under s. 158BD in page No. 43. First Notice purported to be s. 158BC notice issued on 8th July, 199 6 which is reproduced as below : Notice under s. 158BC of the IT Act, 19 6 1. 8th July, 199 6 By mistake the notice under s. 158BC of the IT Act was issued to you instead of a notice under s. 158BD of the IT Act, 19 6 1. 9th March, 199 6 which was reproduced above clarifies the position that the notice under s. 158BC to be taken as notice as issued under s. 158BD. If that being the case, that the notice under s. 158BD must be 8th July, 199 6. 9th Aug., 199 6 as notice issued under s. 158BD. This 9th Aug., 199 6 letter is only clarificatory in nature admitting the mistake that it was issued only on the impression that it was notice under s. 158BD and however it was by mistake issued styling as s. 158BC notice.


Both these appeals are by assessees, who are husband and wife. There was search and seizure action in case of M/s Samyukata Foundation (P) Ltd., Chennai in which M/s Tirupati Reddy (HUF) is Managing Director of Company and Smt. Mastanamma is one of Promoter and shareholder. Consequent to search it was noticed that M/s Tirupati Reddy (HUF) has made some undisclosed investment out of undisclosed income and accordingly, s. 158BD proceedings were initiated. Initially notice dt. 8th July, 199 6 was issued under s. 158BC to assessees. It followed by another rectification letter dt. 9th Aug., 199 6 wherein AO asked assessees to treat notice issued under s. 158BC dt. 9th July, 199 6 as notice issued under s. 158BD of IT Act. same was received and acknowledged by assessees on 13th Aug., 199 6 . In response to these notices, assessees filed their respective return of income on 10th Sept., 199 6 admitting undisclosed income. AO framed assessment under s. 158BD r/w s. 158BC on 27th Aug., 1997 in case of both assessees wherein he made various additions to return income. 2 . Aggrieved assessees have raised grounds opposing additions, which are common in nature including question of validity of assessment on reason that assessment order is barred by time limit. 3. At outset, we have heard learned Authorised Representative on validity of assessment order as well as learned Departmental Representative. Authorised Representative submitted as follows : "Limitation : search in this case was on 23rd Nov., 1995. warrant of authorization was issued in name of Samyuktha Foundations (P.) Ltd. notice under s. 158BC, dt. 5th July, 199 6 was served on appellant on 18th July, 199 6 by Asstt. CIT, Central Circle 11(1), Chennai, issued letter dt. 9th Aug., 199 6 , and served same on appellant on 13th Aug., 199 6 . text of this letter is as under : By mistake notice under s. 158BC of IT Act was issued to you instead of notice under s. 158BD of IT Act, 19 6 1. Please treat notice issued to you as notice under s. 158BD of IT Act, 19 6 1. It may thus be seen that by this letter dt. 9th Aug., 199 6 Asstt. CIT had informed appellant that his earlier notice under s. 158BC which was served on appellant on 18th July, 199 6 should be treated as notice under s. 158BD of IT Act, 19 6 1. For all purposes, therefore, date for service of notice under s. 158BD in appellant s case is 18th July, 199 6 . As per cl. (a) of sub-s. (2) of s. 158BE of IT Act, 19 6 1, period of limitation for completion of block assessment in case of other person referred to in s. 158BD shall be, (a) One year from end of month in which notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets requisitioned after 30th June, 1995, but before 1st day of January, 1997. Since notice under s. 158BD in appellant s case was served on 18- 7-199 6 block assessment order ought to have been completed within one year from end of July, 199 6 , i.e., on or before 31st July, 1997. However, assessment was completed as per order dt. 27th Aug., 1997. Enclosed copy of notice under s. 158BC, dt. 5th July, 199 6 in page No. 41 and letter dt. 9th Aug., 199 6 treating notice under s. 158BC as Notice under s. 158BD in page No. 43. It is most respectfully submitted that assessment order passed by Asstt. CIT under s. 158BD on 27th Aug., 1997 clearly barred by limitation." 4. On learned Departmental Representative submitted that order of AO was passed in time and filed paper book containing Annexs. A1 to 6 . By this, learned Departmental Representative attempted to impress that assessment was framed in time and assessment was not barred by limitation and vehemently submitted that if there was any mistake it is curable under s. 292B of IT Act. 5. We have heard both parties and perused materials available on record. We have carefully considered their submissions. s. 158BE deals record. We have carefully considered their submissions. s. 158BE deals with time-limit for completion of Block assessment. period of limitation for completion of block assessment in case of other person referred to in s. 158BD(a) is one year from end of month in which notice under this chapter was served on such other person in respect of search initiated or books of account or other documents or any assets requisitioned after 30th June, 1995 but before 1st Jan., 1997. Here in this case search took place on 23rd Nov., 1995 which falls in this clause. There is no dispute regarding applicability of this limitation clause. Now, we are concerned with whether assessment framed was well within time. For this purpose we are going through paper Book relied by Department for this Block assessment period. First Notice purported to be s. 158BC notice issued on 8th July, 199 6 which is reproduced as below : "Notice under s. 158BC of IT Act, 19 6 1. Block period : Asst. yrs. 198 6 -87 to 1995-9 6 and 199 6 -97 PAN/GIR 201-T ITO dt. 8th July, 199 6 To, Dr. M. Thirupathy Reddy (HUF) 11 & 12, Gopalakrishna lyer St., T. Nagar, Madras - 17. In pursuance of provisions of s. 158BC of IT Act, 19 6 1, you are requested to prepare true and correct return of your total income including undisclosed income in respect of which you as individual/HUF/firm/company/ AOP/BOI/local authority are assessable for block period mentioned in s. 158B(a) of IT Act, 19 6 1. return should be in prescribed form No. 2B and be delivered in this office within 1 6 days of service of this notice, duly verified and signed in accordance with provisions of s. 140 of IT Act, 19 6 1. Sd./ (AO) Name : TH. Lucas Peter Designation: Asstt. CIT/Central Circle 11(1), Madras-31." 6 . There came another letter dt. 9th Aug., 199 6 , whereby above notice was asked to be treated as s. 158BD notice which is reproduced below : "G.I.No.201-T To, Dr. M. Thirupathy Reddy (HUF) 11 & 12, Gopalakrishna Iyer St., T. Nagar, Madras - 6 001 7. Sir, Sub. : Block Assessment - Asst. yrs. 198 6 -87 to 1995-9 6 and 199 6 -97 your own - regarding. Ref. : Notice under s. 158BC of IT Act dt. 8th July, 199 6 By mistake notice under s. 158BC of IT Act was issued to you instead of notice under s. 158BD of IT Act, 19 6 1. Please treat notice issued to you as notice under s. 158BD of IT Act, 19 6 1. Yours faithfully, Sd/- Asstt. CIT Central Circle II(1), Madras -34." Central Circle II(1), Madras -34." 7 . question before us is, which is starting point of time for purpose of computation of limitation under s. 158BE(2)(a). letter dt. 9th March, 199 6 which was reproduced above clarifies position that notice under s. 158BC to be taken as notice as issued under s. 158BD. If that being case, that notice under s. 158BD must be 8th July, 199 6 . Under no stretch of imagination, it can be taken as notice dt. 9th Aug., 199 6 as notice issued under s. 158BD. This 9th Aug., 199 6 letter is only clarificatory in nature admitting mistake that it was issued only on impression that it was notice under s. 158BD and however it was by mistake issued styling as s. 158BC notice. Misquoting of provision is not fatal in general eye of law. However, when it decides period of limitation, it has to be construed strictly as limitation plays very important role particularly in case of block assessments. It is not case of Department that purported notice under s. 158BC isnon estandnotice under s. 158BD was issued only on 9th Aug., 199 6 . notice under s. 158BC originally issued by Department bears dt. 8th July, 199 6 . In our view this is starting point of limitation. Reason being, there was no separate notice under s. 158BD either before or after this notice. notice dt. 9th Aug., 199 6 is continuation of purported s. 158BC notice dt. 8th July, 198 6 . In other words notice dt. 9th Aug., 199 6 substituted s. 158BD in place of s. 158BC. It denotes nothing more. It explains mistake committed by AO while initiating proceedings under s. 158BD. parties are not in dispute that appeals relate to s. 158BD assessment only and there is no chance of s. 158BC assessment as there was no search in case of these assessees. In view of these facts, starting point of limitation for s. 158BD assessment is 8th July, 199 6 . That being case, assessment has to be concluded on or before 31st July, 1997. However, assessments were framed under s. 158BD on 27th Aug, 1997 only. This is barred by limitation. In our view) .therefore, assessment is invalid and which cannot stand in eye of law and which can be cured under curable provisions of IT Act. It is null and void and which is not curable irregularity as it is not just clerical mistake. defects cannot be curable under s. 292B and this section cannot be attracted and section does not come to rescue of Department. action of AO cannot be justified by taking recourse of s. 292B of IT Act as this is not procedural mistake and time-barring assessment does not come within purview of mistake, defect or omission referred in s. 292B of IT Act, 19 6 1. Therefore, assessment order is erroneous and order with body having no soul cannot be stood on its own. AO has specifically asked assessees to treat notice dt. 8th July, 199 6 as notice issued under s. 158BD vide letter dt. 9th Aug., 199 6 . Now, Department is stating that letter dt. 9th Aug., 199 6 is notice issued under s. 158BD. As seen from letter dt. 9th Aug., 199 6 , it is nothing but continuation of earlier notice and it is not independent notice which cannot be treated itself as notice issued under s. 158BD. 8. (Considering totality of facts, we hold that notice dt. 8th July, 199 6 is date of initiation of s. 158BD proceedings and assessment was framed only on 27th Aug., 1997, whereas law required to complete assessment within one year from end of month in which notice under Chapter XIV-B was served on assessees, which falls on 31st July, 1997. Any assessment order passed after 31st July, 1997 is not valid assessment order Under these circumstances, we hereby quash assessment order as null and void in respect of both assessees pertaining to block assessments. 9. Although arguments were advanced by both parties on merits of additions in assessment orders, we need not adjudicate on these issues as we have quashed assessment on point of limitation and those issues are only academic in nature which does not require any further adjudication. superstructure attempted to be built in form of additions on unsecured foundation of assessment order has to collapse as foundation itself is sunk down. 10. In result, both appeals of assessees are allowed. *** M. TIRUPATI REDDY (HUF) v. ASSISTANT COMMISSIONER OF INCOME TAX
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