Ranjan Gogoi, J.
1. This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) is directed against an order dated 17.1.2006 passed by the Income Tax Appellate Tribunal, Guwahati Bench (hereinafter referred to as the Tribunal). By the aforesaid order the learned Tribunal has interfered with the addition of undisclosed income of the respondent assessee to the extent of Rs. 13,66,715/- for the block period 1986-87 to 1996-97 as made by the Assessing Officer.
2. The brief facts relevant to the present adjudication may be noticed at this stage. There was a search in the Baid Group of Companies on 13.9.1995. The respondent-assessee, a HUF, as the proprietor of one of the group companies, filed the block return for the period 1986-87 to 1996-97 showing undisclosed income of Rs. 60 lakhs. The assessment was completed under Section 158BC of the Act on 30.9.96 determining an undisclosed income of Rs. 1,17,25,416/-. The respondent assessee filed a first appeal before the learned Tribunal against the aforesaid order of assessment which was partly allowed by order dated 28.8.2000. In terms of the direction of the learned Tribunal the undisclosed income for the block period was revised to Rs. 24,37,850/- by order dated 30.7.2001 of the Assessing Officer. Subsequently it was found by the Assessing Officer that in the case of another group company i.e. M/S Baid Commercial Enterprises, for the same block period i.e. 1986-87 to 1996- 97, the learned Tribunal by order dated 27.2.2002 had observed that some of the documents seized in the said case pertained to the respondent assessee. Accordingly, the Assessing Officer issued a letter dated 12.12.2002 asking the assessee to explain why the amount of Rs. 59,18,246/- covered by the aforesaid seized documents or any part thereof should not be added to the total income of the assessee for the block period. The explanation given by the respondent assessee having been found to be unsatisfactory the Assessing Officer added a sum of Rs. 13,66,715/- to the undisclosed income of the assessee for the block period revising the same to Rs. 38,04,570/- This was so done by the order of the Assessing Officer dated 26.3.2003. Aggrieved, the assessee moved the learned Tribunal in appeal in which the order dated 17.1.2006, impugned in the present proceeding, was passed by the learned Tribunal.
3. The principal contention of the respondent assessee before the learned Tribunal was to the effect that the addition of Rs. 13,66,715/- was made without following the provisions of Section 148 of the Act. The learned Tribunal after due consideration of the case of the respondent assessee came to the following conclusion:
Since the A.O. has failed to initiate proceeding in terms of the provisions of Section 153 read with Explanation 3 of the I.T.Act and keeping in view that the direction of the Tribunal was not in the case of the assessee or in a proceeding in which the assessee is not a party and opportunity of being heard was provided to the assessee, therefore, we are of the view that the addition of Rs. 13,66,7145/- made by the A.O. is not sustainable in law and accordingly the same is directed to be deleted. The grounds taken by the assessee are, therefore, allowed.
4. In view of the arguments that have been raised before us and the issues that have been stuck by the parties, it will be necessary to amplify the order of the learned Tribunal and understand the basis of the conclusion arrived at. The finding of the learned Tribunal that the Assessing Officer had failed to initiate proceedings in terms of Section 153 of the Act read with Explanation 3 necessarily follows a conclusion that in the present case notice under Section 148 of the Act was necessary and no such notice having been given to the assessee the provisions of Section 153 did not authorise such notice to be issued any further.
5. Chapter XIV of the Act deals with the procedure for assessment. Section 147 authorises reopening of a concluded assessment subject to a notice under Section 148 within the time prescribed by Section 149 which provision of the Act is further subject to those contained in Section 150. Section 153 deals with the period of time within which assessments, re-assessments/re-computations has to be completed. Section 153(2) of the Act deals with the period within which re-assessments under Section 147 are to be completed. Section 153(2a) removes the embargo imposed by Sub-sections (1),(1a), (1b) and (2) of Section 153 when an assessment is set aside or cancelled and a fresh assessment is required to be made in pursuance of an order under Sections 250, 254, 263 or 264 of the Act. Section 153(3) also removes the bar imposed by the Sub-sections (1),(1a), (1b) and (2) of Section 153 and permits assessments, re-assessments and re-computations to be completed at any time where such assessment, re- assessment or re-computation is required to be made in consequence of or to give effect to any finding or direction contained in an order under Sections 250, 254, 260, 262, 263 or 264 of the Act or in any order of the Court in a proceeding otherwise than by way of appeal or reference under the Act. Explanation 3 to Sub-section (3) of Section 153 of the Act contemplates that if an order under Sections 250, 254, 260, 262, 263 or 264 of the Act is passed excluding any income from the total income of one person and holding such income to be the income of another person and in such a proceeding such other person have been provided with an opportunity of hearing, the assessment of such income of such other person, for the purposes of Sections 150 and 153(3) of the Act, will be deemed to be one made in consequence of or to give effect to any finding or direction contained in such order.
6. Section 147 of the Act is the only provision for reopening of a concluded assessment by the Revenue on its own subject to the fulfillment of the conditions prescribed including those prescribed by Section 153(3). It is on account of our above understanding of the provisions of the Act we have arrived at the conclusion that the purport of the order of the learned Tribunal is what had been indicated by us earlier, namely, that the addition of Rs. 13,66,715/- to the undisclosed income of the assessee for the block period could have been made only by giving of a notice under Section 148 of the Act and no such notice having been given the provisions of Section 153 would operate as a legal bar for any such notice to the assessee.
7. The learned Tribunal having found that in the present case no notice under Section 148 of the Act was given/ issued to the respondent assessee though such notice was necessary, the aforesaid conclusion should have ended the controversy before the learned Tribunal. The further question that stood answered by the finding of the learned Tribunal that the provisions of Section 153 of the Act read with Explanation 3 was not followed while initiating the proceeding were really not necessary to be gone into by the learned Tribunal. Whether the limitation for issuing notice under Section 148 of the Act had expired and if so whether such bar of limitation stood lifted under Section 153 of the Act are questions that should have been left to be dealt with by the Revenue at an appropriate stage and time following the finding of the learned Tribunal. Notwithstanding the above as strenuous arguments have been made by the learned counsels for the parties in view of the conclusion recorded by the learned Tribunal, the same will have to be, at least, noticed by the Court.
8. The order of the learned Tribunal dated 22.7.2002 in the case of M/S Baid Commercial Enterprises Ltd. on the basis of which the addition of Rs. 13,66,715/- was made by the Assessing Officer has been extracted in the order dated 26.3.2003 of the Assessing Officer making the aforesaid addition. The aforesaid extract being relevant is conveniently reproduced herein below:
We have heard the rival submission and gone through the records. On a careful consideration of the facts of the case and the evidence on record we have noticed that the Ld. A. R. has tried to explain each components of the receipt as well as payment side of the seized document being CN 121, 122, 125 and 126. We have also found that at page 168 to 173 of the paper book summary of seized document giving the relevant page numbers of.comprises term like National Transport (N.T.)(C.T.)
It was brought to our notice by the Ld. Counsel that National Transport(NT) belongs to Shri Jodhraj Baid and Capital travel (CT) belongs to Peerchand Ratanlal Baid (HUF) who shares same office as the assessee company and searches were conducted and Punchnamas were drawn in their names along with that of the assessee company. Regard having beengiven to the contention and the facts of the case, we are of the opinion that the said sum of Rs. 5918246/- cannot be the subject matter of addition in the hands of the assessee company. We are of the further opinion that the presumption under Section 132(4A) will be clearly applicable in this case as the seized documents were found from the possession of the said parties who share same office as the assessee company. In view of the foregoing, we are of the considered opinion that these documents belong to the said parties and no addition should be made in the hands of the assessee company in respect of the said sum of Rs. 59,18,246/-.
9. It is argued that nowhere in the order of the learned Tribunal dated 22.7.2002 passed in the case of M/S Baid Commercial Enterprises any finding has been recorded or direction has been issued which obliged the Assessing Officer to make any assessment, re-assessment or re- computation of the escaped income of the respondent assessee which was completed on 30.7.2001. It is also argued that the only conclusion reached by the learned Tribunal in its order dated 22.7.2002 is that National Transport belonging to Jodraj Baid and Capital Travels belonging to the respondent assessee shared the same office as the assessee involved in the case before the learned Tribunal and that documents reflecting an amount of Rs. 59,18,246/- were seized from the aforesaid National Transport and Capital Travels which belonged to the said parties. Consequently, it was held that the assessee before the learned Tribunal cannot in any way be made liable in respect of the said amount of Rs. 59,18,246/-. That the aforesaid conclusion of the learned Tribunal did not amount to a finding or direction within the meaning of the said expressions appearing in Section 153(3)(ii) of the Act is sought to be contended on the basis of the decision of the Apex Court in Rajender Nath v. Commissioner of Income Tax, Delhi reported in : [1979]120ITR14(SC) , the relevant part of which, as placed before the Court, may be extracted below:
'The expressions 'finding' and 'direction' are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs or does not belong to B would be determinative of the issue whether it can be taxed as A's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression 'direction' in Section 153(3)(ii) of the Act, it is now well settled that it must be an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. The expressions 'finding' and 'direction' in Section 153(3)(ii) of the Act must be accordingly confined. SECTION 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. It is a provision which merely raises the bar of limitation for making an assessment order under Section 143 or Section 144 or Section 147: ITO v. Murlidhar Bhagwan Das : [1964]52ITR335(SC) and N.K.T. Sivalingam Chettiar v. CIT : [1967]66ITR586(SC) .
10. We have given our anxious consideration as to whether we are required to deal with the aforesaid issue dealt with by the learned Tribunal. If the addition made by the Assessing Officer by the order dated 26.3.2003 could have been made only after following the provisions of Section 148 of the Act, a position that we are inclined to accept and no such notice was issued to the respondent assessee it was inappropriate for the learned Tribunal and therefore would be equally inappropriate for the Court to go into the further question as to whether the notice under Section 148 stood barred by limitation. This is particularly so in a situation where the above question was not raised before the learned Tribunal by either of the parties and no arguments had been made on the said question, a fact, evident from a reading of the order dated 17.1.2006 passed by the learned Tribunal. In such circumstances we deem it appropriate not to enter into the said arena and record any finding in that regard.
11. The discussion above necessarily has to lead us to the conclusion that the ultimate conclusion reached by the learned Tribunal was correct, though for reasons different as indicated by us. Ordinarily and in the normal course, the present proceeding should have been terminated on the basis of the said conclusion. However, Sri Goenka, learned Counsel appearing for the respondent-assessee has raised a further question to the effect that it is not within the power and jurisdiction of the assessing authority to issue notice under Section 148 of the Act in respect of an assessment for a block period made under Chapter XIV-B of the Act. In this regard, Sri Goenka has placed before the Court a judgment of the Hon'ble High Court of Gujarat in Cargo Clearing Agency (Gujarat) v. Joint Commissioner of Income Tax, which is reported in : [2008]307ITR1(Guj) .
12. We have given our anxious consideration as to whether we would be really required, in the present case, to go into the question raised by Sri Goenka, learned Counsel for the respondent-assessee. On such consideration we are of the view that the present order, without recording our views in the matter raised, will be incomplete and therefore we have proceeded to answer the said question raised before us.
13. We have read the judgment of the Hon'ble High Court of Gujarat in the case of Cargo Clearing Agency (supra). We have noticed that the answer provided in the negative by the Hon'ble High Court of Gujarat in the aforesaid case proceeds on the following basis.
(1) While Section 147 of the Act permits re- assessment of income that has escaped assessment for any assessment year, assessment under Chapter XIV-B of the Act is for a block period of 10/6 years without reference to any particular assessment year.
(2) Re-assessment of escaped income under Section 147 of the Act is made where income chargeable to tax has escaped assessment either due to the failure of the assessee to file return or failure to disclose fully or truly all material facts for the purposes of assessment or where material already on record had not been processed. In a case of block assessment under Chapter XIV-B of the Act escapement of undisclosed income, following a search, cannot be envisaged as all the materials recovered in the course of the search are available with the Assessing Officer and there can be no case of non-disclosure of material facts by the assessee.
(3) Section 158BA and Section 158BH, read in juxtaposition, leads to the conclusion that in the absence of any provision for re-assessment under Chapter XIV-B of the Act the provisions contained in Section 147 under Chapter XIV will not apply to assessments made for the block period.
(4) The period of limitation for completion of block assessment provided for by Section 158BE of the Act is shorter than the period of limitation prescribed by Section 153 of the Act. It, therefore, cannot be envisaged that the period of limitation under Section 153 of the Act would apply to block assessment. Any such application of the provisions contained in Section 153 will make the scheme visualized under Section 158BE unworkable.
(5) Under Chapter XIV-B of the Act certain provisions contained in Chapter-XIV have been specifically incorporated whereas certain other provisions have been specifically excluded. Section 148 has been excluded by the first proviso to Section 158BC(a) whereas Sections 142, 143, 144 and 145 have been specifically incorporated by Sub-clause (b) of Section 158BC.
14. We have given our anxious consideration to the views expressed by the Hon'ble High Court of Gujarat and the reasons contained in support thereof. On such consideration we regret our inability to subscribe to the view recorded by the Hon'ble High Court of Gujarat. In reaching the aforesaid conclusion we rely on a judgment of the Apex Court reported in : [2008]297ITR322(SC) [Commissioner of Income Tax v. Suresh N. Gupta]. The following extract from the judgment of the Apex Court would succinctly sum up the situation and provide adequate justification for our respectful disagreement with the views of the Hon'ble High Court of Gujarat expressed in Cargo Clearing Agency (supra) except in the matters specifically dealt with in this order.
12. Reading of the relevant provisions of Chapter XIV-B one finds that Section 158BA deals with assessment of 'undisclosed income' as a result of search whereas computation of such income falls under Section 158BB. The procedure for block assessment falls in Section 158BC. Section 158BA begins with a non obstante clause. It states that nothing contained in any other provisions of the 1961 Act, where search is initiated after June 30, 1995, under Section 132 or in cases of requisition under Section 132A after the cut off date, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B.
13. Relying on Section 158BA(1) the assessee claims that Chapter XIV-B is a special procedure for assessment of cases; that it constitutes a self-contained mechanism and, hence, it falls outside the scope of Section 4(1) of the 1961 Act, particularly when Section 4(1) imposes a charge on the 'total income' and not on the undisclosed income and, particularly when Section 158BA(2) is an independent charging section in contrast to Section 4(1) of the 1961 Act, which imposes a charge on the 'total income' of the previous year. According to the assessee, the charge under Section 158BA(2) is on the 'block period' and not on the total income of the 'previous year'. Therefore, according to the assessee, Chapter XIV-B is a self-contained mechanism.
14. As stated above, these arguments advanced on behalf of the assessee have no merit. Section 158B defines 'block period' to mean the period comprising the previous years relevant to 10/6 assessment years preceding the previous year in which the search was conducted under Section 132. It also includes the period up to the date of commencement of such search or date of requisition. Under Section 4, the subject of charge is the income of the previous year and not the income of the assessment year. Thus, tax is levied on the actual income of the previous year. Each 'previous year' is a distinct unit of time for the purposes of assessment. However, when we come to Section 158BA, we find that Parliament has taken the block period to mean the period comprising previous years relevant to 10/6 assessment years preceding the previous year in which the search is conducted. In other words, Parliament has in search cases expanded the unit of time for block assessment purposes from 1 year to 10/6 previous years. However, it is important to note that the unit of time remains constant. It is open to Parliament to treat the unit of time as one year in normal assessment cases and, at the same time, it is also open to Parliament to treat 10/6 previous years as a unit of time for the block assessment period. The important thing to be noted is that the block assessment computation in Section 158BB does not exclude the concept of 'previous years' as well as the concept of 'total income'. Those concepts are retained. Further, we need to examine the scheme of Chapter XIV-B. The said Chapter has three parts consisting of assessment, computation and procedure for making block assessment. Assessment of undisclosed income as a result of search stands covered by Section 158BA whereas computation of undisclosed income of the block period falls in Section 158BB and procedure for block assessment falls in Section 158BC. In this case, we are mainly concerned with computation of undisclosed income under Section 158BB(1). This Section incorporates the principle of aggregation of total income of the previous years falling within the block period computed in accordance with the provisions of Chapter IV. The important thing to be noted is that the computation has to be done even under Section 158BB of 'undisclosed income' in the manner provided for in Chapter IV of the 1961 Act which deals with 'computation of total income'. Chapter IV deals with computation in cases of normal assessment. Chapter IV is not ruled out by the provisions of Chapter XIV-B. In this connection, we may also take note of Section 158BH which deals with application of other provisions of the 1961 Act to the block assessment procedure in Chapter XIV-B. Section 158BH makes it clear that save as otherwise provided in Chapter XIV-B, all other provisions of the 1961 Act shall equally apply to block assessment. Therefore, one has to read the non obstante clause in Section 158BA in juxtaposition with Section 158BH. Keeping in mind the provisions of Section 158BB and keeping in mind the Chapter XIV-B, we are of the view that Chapter IV is not ruled out from block assessment procedure and, therefore, one has to read Section 158BB with Section 4 of the 1961 Act.
15. There is one more fact which needs to be noted. A bare reading of the provisions of Section 158BA and Section 158BB indicates that the searches conducted by the Department are an important means of unearthing black money. However, undisclosed income has to be related to the different years in which the income was earned. The essence of the block assessment procedure, therefore, is a separate single assessment of undisclosed income, detected as a result of a search. This separate assessment is in addition to normal or regular assessment covering the same period. A separate return is a pre-requisite for making a 'block-assessment'. However, in the matter of computation, the principle of aggregation of total incomes, is inbuilt into Section 158BB. We have to subtract one aggregate from the other. Further, while applying the principle of aggregation of the total incomes, computation is required to be done in accordance with the provisions of Chapter IV. Therefore, in our view, Section 4 has to be read with Section 158BB. That section is not ruled out by Section 158BB. If Section 4 has to be read with Section 158BB for computing undisclosed income then the provisions of the relevant Finance Act have got to be read into the block assessment scheme under Chapter XIV-B, even prior to June 1, 2002.
16. Under Section 158BB, there is the theory of 'block period'. It is based on 'the principle of aggregation of total incomes'. Under that section, the first aggregate to be computed is the total income of the previous years falling within the block period including returned/assessed incomes as per regular returns and regular assessments. The second aggregate to be computed is the aggregate of the total incomes/losses of the previous years determined in terms of Clauses (a) to (f) of Section 158BB(1). The difference between the first aggregate and the second aggregate is described in Section 158B(b) as the 'undisclosed income' to be taxed under the provisions of Section 113 of the 1961 Act at the special rates prescribed. Further, Clause (a) of the Explanation to Section 158BB clarifies that the total income/loss of each previous years shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of Chapter IV without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under Section 32(2) of the 1961 Act. Hence, one has to read Section 158BB with Section 4 of the 1961 Act. There is no conflict between the computation machinery under Chapter XIV-B and normal computation machinery under Chapter IV. This is the importance behind enactment of Section 158BH which inter alia states that if there is no conflict between the provisions of Chapter XIV-B and any other provisions of the 1961 Act, then the latter will operate. There is a fallacy in the argument of the assessee that the concepts of 'total income' and 'previous year' are given a go by in Chapter XIV-B. The above analysis of Section 158BB indicates that both the concepts are retained in Chapter XIV-B. The only difference is that Section 4 of the 1961 Act charges the total income of a person of one single previous year (unit of assessment) whereas Section 158BA(2) levies a charge on the income of a person for the block period of previous years relevant to 10/6 assessment years. In our view, the words 'block period', as defined in Section 158B(a), comprises previous years relevant to 10/6 assessment years as one unit of time for the purposes of assessment. As stated above, the object behind the enactment of Chapter XIV-B is to assess and compute 'undisclosed incomes' relatable to different accounting years in which the income is earned. Therefore, if the block period comprising of previous years relevant to 10/6 assessment years is treated by Parliament as one unit of time for assessment purposes, one has to correlate 'undisclosed income' to each of the years in which income was earned by the assessee. It is true that under Chapter XIV-B, computation of regular income and computation of undisclosed income has to be worked out separately. However, to arrive at the figure of undisclosed income, the said parallel calculations have to converge in order to work out the difference between the first and the second aggregates of the total incomes/losses of the previous year, in which undisclosed income is taxed under Section 113. Therefore, in our view, the concept of a charge on the 'total income' of the previous year under the 1961 Act is retained even under Chapter XIV-B. Therefore, Section 158BB which deals with computation of undisclosed income of the block period has to be read with computation of total income under Chapter IV of the 1961 Act.
15.The following principles relevant to the present case can be culled out from the above observations of the Apex Court in Commissioner of Income Tax v. Suresh N. Gupta (supra):
A. Each 'previous year' under the Act is a distinct unit of time for the purpose of assessment. For the scheme under Chapter XIV-B, block period is an expanded unit of time comprising of 10/6 assessment years preceding the previous years.
B. The unit of time in both situations above remains constant.
C. It is open for Parliament to treat 10/6 previous years as one unit of time for the purposes of assessment for the block period.
D. The concept of previous year is retained in Chapter XIV-B of the Act.
E. The non-obstante clause in Section 158BA has to be read, in juxtaposition with Section 158BH. If so read other provisions of the Act will be applicable to the scheme under Chapter XIV-B, if no conflict arises upon such application.
16. The above principles adequately take care the view adopted by the Hon'ble High Court of Gujarat that as Section 147 of the Act provides for reassessment of escaped income of any assessment year the said Section cannot have any application to a block assessment which is made for 10/6 years without reference to any particular assessment year.
17. Insofar as the view expressed by the Hon'ble High Court of Gujarat that in course of block assessment following a search all materials are available with the Assessing Officer and therefore the conditions precedent for the exercise of power under Sections 147/148 are not present, we may straightway point out that the aforesaid view does not take care of the situation that has arisen in the present case, details of which have been set out herein above. We, therefore, deem it appropriate to understand that the view expressed in Cargo Clearing Agency (supra) cannot be considered to be comprehensive covering all situations to justify exclusion of the power under Section 147/148 from the provision of the special procedure for block assessments contemplated by Chapter XIV-B of the Act.
18. The question of limitation dealt with by the Hon'ble High Court of Gujarat, in our considered view, has to be understood in the context of the separate period of limitation provided by Section 158BE of the Act for completion of block assessments and not for reopening such assessment for the block period. In the absence of any separate and specific period of limitation for reopening of block assessments in Chapter XIV-B, on the ratio of the judgment in Commissioner of Income Tax v. Suresh N. Gupta (supra), the provisions contained in Chapter XIV prescribing the period of limitation for reopening of assessment must be understood to be applicable to assessments under Chapter XIV-B of the Act. Such application will not bring in any conflict between the provision of Chapter XIV-B and those contained in Chapter XIV.
19. The exclusion of Section 148 by the first proviso to Section 158BC(a) of the Act has been understood by us to be in the context of the notice that is required to be issued by the Assessing Officer following action taken under Section 132 and/or Section 132A of the Act, as may be. Such notice, in the fact of a concluded assessment for any of the assessment years included in the block period, may partake the character of reopening such an assessment, to clarify which the first proviso to Section 158BC(a) has been inserted. The question that confronts the Court in the present case is a stage after conclusion of the assessment for the block period whereas the aforesaid proviso deals with the stage of initiation of the block assessment proceeding.
20. Consequently and in the light of the foregoing discussions while dismissing the appeal of the Revenue we deem it proper and appropriate to record our conclusion that the provisions of Section 147/148 will apply to an assessment for a block period made under Chapter XIV-B of the Act. The appeal is consequently dismissed subject to our views as made above.