Full Judgment Text
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CASE NO.:
Appeal (civil) 2946-2956 of 2008
PETITIONER:
K.P. Mohammed Salim
RESPONDENT:
Commissioner of Income-tax, Cochin
DATE OF JUDGMENT: 24/04/2008
BENCH:
S.B. SINHA & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NOS. 2946-2956 OF 2008
(Arising out of SLP (C) Nos.11296-11306 of 2005)
S.B. SINHA, J.
1. Leave granted.
2. Interpretation/ application of Section 127 of the Income Tax Act,
1961 (for short, "the Act") vis-‘-vis the provision regarding Block
Assessment is in question in this appeal which arises out of a judgment and
order dated 2.4.2004 passed by the High Court of Kerala at Ernakulam in
ITA No. 172 of 2000 and WPC No. 23449 of 2003.
A search was conducted by the Officers of the Income Tax
Department in the residence as also in the business premises of the assessee,
his sons and other associates, consequent whereupon, it was proposed to
transfer the cases pertaining to the assessee to the Income Tax (Inv.) Circle,
Calicut to facilitate effective and coordinate investigation. An order was
passed to that effect by the Chief Commissioner of Income Tax, Bangalore
under Section 127(2) of the Act. A notice was issued by the Assessing
Officer under Section 158BC of the Act to file a return setting forth the total
income including the undisclosed income for the block period.
The assessee filed a writ petition in the High Court of Karnataka
challenging the said order of transfer of cases passed by the Chief
Commissioner of Income Tax. The said writ petition was dismissed. Writ
Appeals preferred thereagainst were also dismissed.
A notice was thereafter issued by the assessing authority asking the
assessee to file a return setting forth the total income including the
undisclosed income for the block period. Pursuant thereto, the return was
filed. The purported undisclosed income of the assessee was determined.
The said order of the Assessing Officer, Calicut was challenged on the
ground that he had no jurisdiction to make the block assessment as the
authority therefor remained with the Assessing Officer originally having the
jurisdiction over the assessee.
3. A Division Bench of the High Court by reason of the impugned
judgment opined that the provisions of Section 127 of the Act can also be
resorted to for a block assessment.
4. Mr. TLV Iyer, learned Senior Counsel appearing on behalf of the
petitioner would submit that having regard to the definition of block
assessment occurring in Chapter XIV-B of the Act, Section 127 thereof ex
facie cannot have any application thereto.
5. Mr. Gopal Subramaniam, the learned Additional Solicitor General
appearing on behalf of the Revenue, however, would support the impugned
judgment.
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6. The power to conduct a search by the authorities of the Income Tax
Department in terms of Section 132 of the Act is not in dispute. It is further
not in dispute that Chapter XIV-B shall apply in a case of this nature.
Clause (a) of Section 158 B defines ’block period’, which reads as under:
"(a) "block period" means the period comprising
previous years relevant to six assessment
years preceding the previous year in which
the search was conducted under Section 132
or any requisition was made under Section
132A and also includes the period upto the
date of the commencement of such search or
date of such requisition in the previous year
in which the said search was conducted or
requisition was made:
Provided that where the search is initiated or
the requisition is made before the 1st day of
June, 2001, the provisions of this clause
shall have effect as if for the words "six
assessment years", the words "ten
assessment years" had been substituted;"
A block period, therefore, not only would include ten years of
assessment but also that portion of the assessment year in which assessment
was to take place as on the date of the search.
7. Chapter XIV-B provides for special procedure. Section 158 BC lays
down the procedure for block assessment. Section 158 BD provides for
taking into consideration undisclosed income of any other person. Section
158 BE provides for the time limit for completion of block assessment.
Section 158 BH of the Act reads as under:
"158BH. Application of other provisions of
this Act. Save as otherwise provided in this
Chapter, all other provisions of this Act shall apply
to assessment made under this Chapter."
Chapter XIV-B only lays down special procedure for assessment but
thereby the effect and purport for which the assessment of income tax is
done does not stand obliterated.
8. An order of transfer as noticed hereinbefore can be passed by the
appropriate authority in terms of Section 127 of the Act, which reads as
under:
"127. Power to transfer cases\027(1) The Director
General or Chief Commissioner or Commissioner
may, after giving the assessee a reasonable
opportunity of being heard in the matter, wherever
it is possible to do so, and after recording his
reasons for doing so, transfer any case from one or
more Assessing Officers subordinate to him
(whether with or without concurrent jurisdiction)
to any other Assessing Officer or Assessing
Officers (whether with or without concurrent
jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing
Officers from whom the case is to be transferred
and the Assessing Officer or Assessing Officers to
whom the case is to be transferred are not
subordinate to the same Director General or Chief
Commissioner or Commissioner,-
(a) Where the Directors General or Chief
Commissioners or Commissioners to whom such
Assessing Officers are subordinate are in agreement, then
the Director General or Chief Commissioner or
Commissioner from whose jurisdiction the case is to be
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transferred may, after giving the assessee a reasonable
opportunity of being heard in the matter, wherever it is
possible to do so, and after recording his reasons for
doing so, pass the order;
(b) Where the Directors General or Chief
Commissioners or Commissioners aforesaid are not in
agreement, the order transferring the case may, similarly,
be passed by the Board or any such Director General or
Chief Commissioner or Commissioner as the Board may,
by notification in the Official Gazette, authorize in this
behalf.
xxx xxx xxx
Explanation: In Section 120 and this Section, the
word "case", in relation to any person whose name
is specified in any order or direction issued
thereunder, means all proceedings under this Act
in respect of any year which may be pending on
the date of such order or direction or which may
have been completed on or before such date, and
includes also all proceedings under this Act which
may be commenced after the date of such order or
direction in respect of any year.
9. An order of transfer is passed for the purpose of assessment of
income. It serves a larger purpose. Such an order has to be passed in public
interest.
Only because in the said provision the words "any case" has been
mentioned, the same, in our opinion, would not mean that an order of
transfer cannot be passed in respect of cases involving more than one
assessment year.
It would not be correct to contend that only because explanation
appended to Section 127 refers to the word ’case’ for the purpose of the said
Section as also Section 120, the source of power for transfer of the case
involving block assessment is relatable only to Section 120 of the Act. It is
a well-settled principle of interpretation of statute that a provision must be
construed in such a manner so as to make it workable. When the Income Tax
Act was originally enacted, Chapter XIVB was not in the statute book. It
was brought in the statute book only in the year 1996.
10. The power of transfer is in effect provides for a machinery provision.
It must be given its full effect. It must be construed in a manner so as to
make it workable. Even Section 127 of the Act is a machinery provision. It
should be construed to effectuate a charging Section so as to allow the
authorities concerned to do so in a manner wherefor the statute was enacted.
The question came up for consideration before a Division Bench of
the Andhra Pradesh High Court in Mukutla Lalita vs. Commissioner of
Income Tax & ors. Reported in [1997] ITR 226 23 wherein it was held:
"Hence it can be imagined that an order has to be
passed as to who shall be the Assessing Officer
under Section 158BG in the case of a search. Such
an order can be passed only by a higher officer
who may be either the Commissioner or the Chief
Commissioner, as the case may be. Hence, unless
such an order has been passed, the Assessing
Officer to whom the records have been handed
over under section 158BD cannot ipso facto hand
over the records to the Assistant Commissioner,
until he has been chosen to act as the Assessing
Officer under Section 158BG. For doing so, a
procedure for transfer of the records and the
passing of orders to that effect is necessary for the
records to be transferred to the officer selected
under section 158BG. It is in this context that the
provisions of Section 127 have to be resorted to. It
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is for such reason, we are unable to agree with
learned standing counsel that Chapter XIV-B is a
self-contained special provision relating to search
procedures and assessments to which Section 127
has no application. The submission would have
been correct if Section 127 and Chapter XIV-B
were inconsistent with each other and it has to be
held because of such reason that a specific
provision like Chapter XIV-B would displace a
general provision like section 127. But as we see
it, both provisions are supplemental to each other
and that the provisions of section 127 fill in the
gap between the stage of sections 158BD and
158BG. The impugned order passed under Section
127 hence cannot be faulted by saying that the
section was not applicable. It is also not correct, as
has been contended, that giving a notice under
Section 127 in the event of a proceeding under
Chapter XIV-B would be a mere formality without
any substance as records are to be compulsorily
handed over to the officer under section 158BG.
While in most of the cases the submission may be
correct, yet it is conceivable that in some cases,
reasonable opportunity being given as
contemplated under Section 127(1) or (2) of the
Act, the person concerned may be able to convince
the authority giving the notice that he is actually
unrelated or unconnected to the proceeding started
under Chapter XIV-B. If such conclusion is
reached, the authority at that stage may
disassociate the person concerned from the specific
proceeding in Chapter XIV-B and may not transfer
the papers to the other officer. As has been fairly
pointed out by learned standing counsel himself,
the provisions of section 127(1) apply when the
transfer is contemplated not only between the
officers of the subordinate rank but also officers
either with or without concurrent jurisdiction.
Hence, even when the records are to be transmitted
to the officer not higher in rank than the officer to
whom the papers are handed over in the first
instance under section 158BD, the provisions of
section 127 are to be complied with to give
notice."
11. We agree with the opinion of the Division Bench, but we may also
notice that the provisions of Section 158BH had not been brought to its
notice, which categorically states that all other provisions of the Act shall
apply to assessment made under the said Chapter. Section 127 of the Act,
which falls under Chapter XIII would therefore mutatis mutandis apply to
Chapter XIVB particularly when the jurisdiction of the Income Tax
Authorities, inter alia, relates to passing an order of assessment.
The word ’any’ must be read in the context of the statute and for the
said purpose, it may in a situation of this nature, means all. The principles
of purposive construction for the said purpose may be resorted to. [See New
India Insurance vs. Nusli Neville Wadia [(2007) 13 S.C.R. 598]. Thus, in
the context of a statute, the word ’any’ may be read as all in the context of
the Income Tax Act for which the power of transfer has been conferred upon
the authorities specified under Section 127.
10. We have no hesitation in arriving at the conclusion that the power
under Section 127 can also be exercised in respect of a block assessment.
For the reasons aforementioned, we find no merit in these appeals. The
appeals are dismissed accordingly with costs. Counsel’s fee assessed at
Rs.25,000/- (Rupees twenty five thousand only).