1. In this appeal, the assessee has objected to the order of CIT(A)-II, Agra dt. 25th March, 2001 for block period 1st April, 1987 to 17th Oct., 1997, 'by way of following grounds : 1. not quashing the assessment order dt. 26th Oct., 1999 passed under Section 158BC read with Section 143(3) of the IT Act, 1961, against the appellant for the block period 1st April, 1987 to 17th Oct., 1997 as illegal and without jurisdiction because the Director of IT (Inv.), New Delhi, had no jurisdiction and authority to issue warrant of authorization under Section 132A of the IT Act, 1961, on 17th Oct., 1997 in the case of appellant.
2. not quashing the assessment order dt. 26th Oct., 1999 passed under Section 158BC read with Section 143(3) of the IT Act, 1961, against the appellant for the block period 1st April, 1987 to 17th Oct., 1997 as illegal and without jurisdiction in absence of proper notice to file the return of block assessment and is holding that the notice was substantially in conformity to the law.
3. The CIT(A) has erred in the facts and circumstances of the case in upholding the charging of interest under Section 158BFA of the IT Act, 1961.
4. Because the assessment made against the appellant is bad in law, without jurisdiction, illegal, contrary to the law." 3. The brief facts relating to the issues involved in this appeal and as have been revealed from the records are that the Trade Tax Authorities (Mobile Squad) Mathura, UP, had apprehended the assessee, Shri Kishore Agrawal along with one Shri Jagmohan Yadav, while travelling in a vehicle and had seized silver ornaments weighing 361.643 kgs. valued at Rs. 14,21,224.
3.1 Thereupon, it seems that the Trade Tax Authorities (Mobile Squad), Mathura, had passed this information to the Director of IT (Inv.), New Delhi, who, on 17th Oct.. 1997, issued a warrant of requisition in exercise of his powers under Section 132A of the Act, 1961, and seized the silver ornaments.
3.2 Notices under Section 158BC of the Act were issued by the Dy. CIT, Circle-I, Mathura, in the case of Shri Kishore Kumar Agrawal and in the case of Shri Jagmohan Yadav separately on 6th Jan., 1998 and 9th April, 1999, respectively. Notice under Section 158BC issued in the case of Kishore Kumar Agrawal was served on him on 19th Jan., 1998.
3.3 The assessee, Shri Kishore Kumar Agrawal, first of all furnished a return of undisclosed income on 26th Feb., 1998, wherein he owned the ownership of 75.355 kgs. ornaments, but subsequently revised the same on 22nd Sept., 1999 owning the silver ornaments valued at Rs. 11,76,003. Assessment under Section 158BC of the Act was completed in the case of appellant-assessee, Shri Kishore Agrawal on 26th Oct., 1999, where the value of total silver jewellery apprehended by the sales-tax authorities (Mobile Squad), Mathura, was considered as assessee's undisclosed income.
3.4 The assessee challenged the assessment before the CIT(A) wherein the addition was challenged on merits, the assessee had challenged the jurisdiction of Director of IT (Inv.), New Delhi, and also the validity of the notice under Section 158BC issued to him.
3.5 The relevant part of his objections raised before the CIT(A) and as contained in para Nos. 1.3.1 and 1.3.2 of the appellate order were in the following terms : "1.3.1. For the hearing of this appeal, Shri M.M. Agarwal, chartered accountant, appeared. At the outset, it is claimed that the assessment was void, illegal and without jurisdiction as there was no valid warrant of authorization as well as notice as required by law. It is submitted that warrant of authorization under Section 132A of the IT Act had been issued by Director of IT (Inv.), New Delhi (to be referred subsequently as DI, in short), on 17th Oct., 1997. The appellant stressfully submits that DI, New Delhi, had no territorial jurisdiction to issue a warrant of authorization under Section 132A in this case. The matter of jurisdiction was governed by Section 120 and the directions/order of CBDT under that section.
In this regard, a reference has been made to Notifications Nos. S.O. 703 (E), dt. 6th Sept., 1989 and S.O. 708 (EE) dt. 8th Sept., 1989.
According to which, the territorial area under the jurisdiction of Director of IT, New Delhi, was only Union Territory of Delhi with reference to authorization under Section 132A. Since the person concerned was out of jurisdiction of this Director of IT, the warrant of authorization was without jurisdiction and, therefore, proceedings on the basis of such warrant could not be sustained under law. The block assessment in the present case was, therefore, illegal. Furthermore, it is submitted that the provisions of Rule 112D had not been followed in this case. The appellant was not given a copy of requisition along with the copy of warrant as required by Rule 112D(2). The appellant was not afforded any opportunity to be present at the time of seizure and to place his seal as required by Sub-rule (3). Nor he was furnished the list as required in the sub-rule. These were not mere insignificant lapses but had serious impact not only on the right of citizen but even otherwise on assessment proceedings, the action in the case was liable to be annulled on this ground also.
1.3.2. The appellant has also referred to the mistakes in the notice issued under Section 158BC on 6th Jan., 1998. The appellant has expressed reservations against notice of the AO requiring to file the return within 15 days because according to him, Section 158BC(a) clearly provided such time to be not less than 15 days and not more than 45 days. It is the case of the appellant that the period of not less than 15 days could not be equal to the period within 15 days, as had been provided by the AO in his notice requiring assessee to file his return for the block period." 3.6 The assessee after submitting as above, had relied upon the decisions in following cases :Monga Metals (P) Ltd. v. Asstt. CIT (iii) Verma Roadways v. Asstt. CIT (2001) 70 TTJ (All) 728 : (2000) 75 ITD 183 (All); (iv) Dr. A.K. Bansal v. Asstt. CIT (2000) 67 TTJ (All)(TM) 721 : (2000) 73 ITD 49 (All)(TM).
3.7 The CIT(A) referred the assessee's submissions to the AO and called for his comments. The comments sent by the AO and as have been recorded by the learned CIT(A) in para No. 1.4 of the appellate order read as under : "1.4 On being forwarded with a copy of appellant's submissions, the AO has sent his report. It is the case of the AO that the reason assigned by the appellant for alleged procedural lapses in the notice, etc.
would not make the block assessment invalid, in view of the provisions of Section 292B of the IT Act. The notice under Section 158BC dt. 6th Jan., 1998 had called for return of the assessee for the block period in question within 15 days of service of notice. This implies that 15th day from the service of notice was also to be counted in the time allowed for filing the return of income. Since the provisions under Section 158BC required the time to be allowed for not less than 15 days, the AO could validly allow time of 15 days for filing such return. Thus, there was no infirmity in the notice issued under Section 158BC. On the issue of assets belonging to Shri Haresh Kumar Natwarlal Adesara of Rajkot amounting to Rs. 2,45,221 as undisclosed income of the assessee, the AO has referred to the records wherein this party had made the claim for owning silver ornaments weighing 70.176 kgs. This party was also examined by Rajkot ITO who had reported that seized silver ornaments weighing 70.176 kgs. appeared to be reflected in that party's books of account. The AO has commented that the report of the ITO, Ward-2(5), Rajkot, and the statement on oath of Shri Haresh Kumar Natwarlal Adesara, dt. 2nd July, 1999 were contained in his records which have been submitted for perusal." 3.8 The CIT(A), after considering the submissions from both the sides, rejected the assessee's legal objection as per his findings contained in para 1.5 which read as under : "1.5 The facts and circumstances of the case have been considered.
It may be remarked that though the appellant has made specific objections against issue of warrant of authorization of Section 132A by Director of IT (Inv.), Delhi, but in this regard, it may suffice to observe that since there was no provision in Section 246A to challenge the validity of such a warrant, no adjudication on the same could be made in this appellate order. So far as errors and omissions in the issue of notice for the block assessment are concerned, I am in agreement with the AO that in view of the Section 292B and there being no reason for which such notice may have created irreparable harm to the assessee, it could not be said that there was any such grave error on the part of the AO on account of which the proceedings deserved to be annulled. With these remarks, the appeal is proceeded to be disposed of on its merit." 5.1 It was in view of the above facts and circumstances of the case, that the learned Counsel for the assessee, after drawing our attention to the provisions of Section 132A and the Notification No. S.O. 703 (E) (F. No. 187/4/1989-ITA-I) dt. 6th Sept., 1989 and Notification F. No.415/11/1986-IT (Inv. I) dt. 5th Oct., 1989--photocopies as well as the typed copies of which have been placed by the assessee at page Nos. 9 to 11-A of the paper book, submitted that so far as jurisdiction over the persons residing and assessable in the territory of UP was concerned, it was with the Director of IT (Inv.), Kanpur. According to him, the jurisdiction of the Director of IT (Inv.), Delhi, so far as Section 132A of the Act is concerned, was only with respect to the Union Territory of Delhi and in view of these facts, the learned Counsel for the assessee submitted that the warrant of requisition issued by the Director of IT (Inv.), Delhi, in exercise of his power under Section 132A on 17th Oct., 1997 was illegal and bad in law for want of jurisdiction. He further submitted that once the warrant issued under Section 132A is held to be illegal and bad in law, all consequential proceedings are bound to be termed as illegal and bad in law.
5.2 The learned Counsel for the assessee, further proceeds to challenge the validity of notice under Section 158BC issued in assessee's case (a copy of which is placed at page No. 7 of assessee's paper book) which reads as under : In pursuance of the provisions of Section 158BC of the IT Act, 1961, you are requested to prepare a true and correct return of your total income including the undisclosed income in respect of which you as individual/HUF/firm/ company/AOP/BOI/local authority are assessable for the block period mentioned in Section 158H of the IT Act, 1961.
(Relating to seizure of silver ornaments on 16th Dec., 1997).
2. The return should be in the prescribed form No. 2B and be delivered in this office within 15 days of service in accordance with the provisions of Section 14B of the IT Act, 1961.
5.3 Referring to the aforesaid notice, the learned Counsel for the assessee submitted that since this notice does not contain the status of the assessee's correct block period and also the person in respect of whom or whose income was to be declared (because the AO has not struck down the irrelevant words, out of the words appearing "as individual HUF/firm/company/AOP/BOI/local authority", the notice in question is invalid notice and for this purpose, relied on the decision of Tribunal, Allahabad Bench, in the case of Monga Metals (P) Ltd. v.Asstt. CIT 5.4 Validity of notice under Section 158BC of the Act, since reproduced above, was further challenged on the ground that the AO by requiring the assessee to furnish the return for undisclosed income "within 15 days of the service of notice" has contravened the mandatory requirement of provisions of Section 158BC(a), according to which a period of not being less than 15 days is to be allowed. Explaining further, the learned Counsel for the assessee submitted that the terms "within 15 days" and "not being less than 15 days" are different and they represent different terms. According to the earlier term, the 'act' is to be done before the expiry of 15 days, whereas according to the second type of term, is to be done after the expiry of a period of 15 days. In view of this explanation, the learned Counsel for the assessee submitted that since in the notice under Section 158BC of the Act issued to the assessee, the period allowed is less than 15 days (because the AO has mentioned the period is "within 15 days"), the notice in question is invalid and bad in law.
5.5 The learned Counsel for the assessee, further submitted that once the notice issued under Section 158 of the Act, is held to be illegal and bad in law on account of non-fulfilment of mandatory conditions, all subsequent proceedings including the block assessment are held to be illegal and bad in law, i.e., ah initio void. In support of above, the learned Counsel for the assessee relied upon the decision of Tribunal, Agra Bench "SMC", Agra, in the case of Vinod Kumar and Ors.
v. Asstt. CIT in IT(SS)A No. 1/Agr/2003, decided on 30th June, 2004 [reported at (2005) 98 TTJ (Agra) 769--Ed.] and also on another decision of Tribunal, Delhi Bench "E", New Delhi, in the case of Neera Agarwal v. Dy. CIT in IT(SS)A Nos. 142 and 143/Del/2003 for block period asst. yr. 1990-91 to 17th Dec., 1999 decided on 9th Feb., 2005.
5.6 Both the aforesaid decisions are unreported, but, the learned Counsel for the assessee has placed the copies of decisions on record.
6. On the other hand, the learned Departmental Representative supported the order of the Revenue authorities.
7. We have considered the rival submissions, facts and circumstances of the case, provisions relating to assessment of block period as contained in Chapter XIV-B of the Act and also various decisions relied upon by the learned Counsel for the assessee as well as the notifications referred to by the learned Counsel.
8.1 After careful consideration of the totality of the facts and circumstances of the case, we are of the opinion that so far as jurisdiction of Directors of IT with respect to carrying on the functions, with respect to the issues involved under Section 132A of the Act is concerned, the same is governed by para II of the Notification No. S.O. 703(E)(F. No. 187/4/1989-ITA-I) dt. 6th Sept., 1989 and the Schedule attached to it which are reproduced as under : In exercise of the powers conferred by Sub-section (1) and Sub-section (2) of Section 120 of the IT Act, 1961 (43 of 1961) and in suppression of any order issued by the Directors General as authorized under Clause (b) of the notification of Government of India in the Ministry of Finance, CBDT No. S.O. 358(E) dt. 30th March, 1988, so far it relates to the jurisdiction of Directors, the CBDT hereby : (i) directs that the Directors specified in column (2) of the Schedule hereto annexed shall exercise their powers vested in them under Section 132 of the said Act and perform their functions relating thereto in respect of the territorial areas of whole of India; (ii) directs that the Directors specified in column (2) of the Schedule hereto annexed shall exercise their powers vested in them under all other provisions of the said Act (other than Section 132) and perform their functions relating thereto in respect of the territorial areas specified in the corresponding entries in column (3) of the said Schedule; (iii) authorizes the Directors specified in column (2) of the Schedule hereto annexed to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the IT authorities who are subordinate to them, in respect of such territorial areas as may be specified in such orders.2.
Director of IT (Inv.), Chandigarh States of Haryana, Punjab, Himachal3.
Director of IT (Inv.), Calcutta States of West Bengal, Sikkim, Assam, Nagaland, Arunachal4.
Director of IT (Inv.), Kanpur States of Uttar Pradesh and Bihar6.
Director of IT (Inv.), Bangalore States of Karnataka, Goa and the territory under7.
Director of IT (Inv.), Ahmedabad States of Gujarat, Rajasthan and Union Territories of Daman and8.
Director of IT (Inv.), Pune States of Madhya Pradesh and Maharashtra9.
Director of IT (Inv.), Madras State of Kerala and the Union Territories10.
Director of IT (Inv.), Hyderabad States of Andhra Pradesh and Orissa" 8.2 From the aforesaid notification and the Schedule, it is quite clear that jurisdiction over the assessees in the States of UP and Bihar with respect to subject-matter involved in Section 132A of the Act was with the Director of IT (Inv.), Kanpur and not with Director of IT (Inv.), Delhi, who had the jurisdiction only over the assessees of Union Territory of Delhi, meaning thereby that the Director of IT (Inv.) of Delhi had no jurisdiction to issue warrant of requisition with respect to the assessees in the State of UP or with respect to material seized in the State of UP and by the authorities or the Courts situated in the State of UP.9. The aforesaid conclusion is further supported by a clarificatory Notification F. No. 415/11/1986-IT (Inv. I) dt. 5th Oct., 1989 in which it has been claimed that All India Jurisdiction given to Director General or Directors of IT (Inv.) is with reference to Section 132 of the Act only. This notification reads as under : Sub : Jurisdiction of the Directors General of IT (Inv.) and Directors of IT (Inv.)- Kindly refer to the Notifications No. S.O. 703 (E), dt. 6th Sept., 1989 and S.O. 708 (E) dt. 8th Sept., 1989 issued from Board's F. No. 137/4/1989-ITA-I dealing with the jurisdiction of the Directors of IT (Inv.) and the Directors General of IT (Inv.), respectively.
2. Provided in these notifications, the Directors of IT (Inv.) and the Directors General of IT (Inv.) will have All India Jurisdiction in exercising their powers under Section 132 of the IT Act and performing their functions relating thereto. For exercising powers and performing functions under other provisions of the Act, they will have jurisdiction over specified territorial areas.
3. It may be clarified here that the Directors General (Inv.) and the Directors (Inv.) have been given All India Jurisdiction in respect of Section 132 of the Act only in order to facilities expeditious authorization inter-State and inter-region searches, while conducting searches in groups of connected cases. Hence, they are expected to exercise their powers and perform their functions under Section 132 of the Act ordinarily in respect of their respective territorial jurisdiction as specified in the aforesaid notifications in relation to exercise of power and performance of functions under other provisions of the Act.
10. So far as the present case is concerned, it is an admitted fact that the jurisdiction with respect to assessability of Shri Kishore Agrawal under the IT Act was with the IT authorities at Mathura, he was intercepted by the Trade Tax Authorities (Mobile Squad) of Mathura (UP) while he was within the State of UP. The goods in question were also not sent by anybody who could be said to be assessable in Delhi, meaning thereby that for all intents and purposes of the IT Act, the jurisdiction over the assessees case was with the authorities who had jurisdiction with respect to assessee's of State of UP and since it was the Director of IT (Inv.), Kanpur, as per notification dt. 6th Sept., 1989, who had jurisdiction over the assessees of UP so far as Section 132A is concerned; the warrant of requisition issued by the Director of IT (Inv.), Delhi, on 17th Oct., 1997 for requisition of silver ornaments seized from the assessee by the Trade Tax Authorities at Mathura requiring the Trade Tax Authority (Mathura) to handover the goods to him was illegal and bad in law for want of jurisdiction.
11. Having held the warrant of requisition as bad in law for want of jurisdiction, we have no option, but to hold, in view of the settled principles of law, that all subsequent proceedings including the proceedings under Section 158BC of the Act as well as consequential assessment of block period were illegal and bad in law and void ab initio.
12. Coming to the validity of notice under Section 158BC of the Act, we would like to discuss the validity of notice in the light of assessee's objection that a mandatory period of more than 15 days has not been allowed.
13. We have considered the rival submissions and facts and circumstances of the case. Similar issue had come up for consideration of Tribunal, Agra Bench, "SMC" Agra and also by the Tribunal, Delhi Bench "E", which we would like to discuss as below.Vinod Kumar, Ram Kumar Agarwal, Kishan Lal, Subhash Chand Sharma & Satish Chand v. Asstt. CIT in IT(SS)A Nos. 1, 2, 3, 4 and 5/Agr/2003, for block period 1st April, 1991 to 16th Feb., 2001, dt. 30th June, 2004 (unreported) [reported (supra)] The issue relating to validity of notices under Section 158BC of the Act issued in the case of aforesaid five persons requiring them to furnish the return of undisclosed income "within a period of 15 days" was dealt with by the Tribunal in para Nos. 12.1 to 19 which are in the following terms : "12.1 So far as question relating to the period of 'not being less than 15 days' required to be allowed for furnishing the return of undisclosed income, (by virtue of provisions of Section 158BC(a)(ii) is concerned, the assessee's case is that the requirement is of allowing a complete period of more than 15 days and not even a single second less than 15 days whereas Revenue's case is that there is no infirmity in the notice.
12.2 I have considered the rival submissions, facts and circumstances of the case and various decisions relating to the issue in hand. In my opinion, to resolve this issue, answers to following questions should be found : (i) What is the nature of notice under Section 158BC of the Act, i.e., is the service of valid notice a mandatory requirement or a procedural one, and to know the answer to this it is further necessary to find as to whether the assessee can waive the notice under Section 158BC of the Act or can waive any of the defects in notice under Section 158BC of the Act (ii) Is there any difference between the terms 'a period not being less than 15 days' and ' within a period of 15 days' and what is the effect (iii) Can further time allowed (subsequent to issuance of a notice asking the assessee to furnish return of income within a period of 15 days) be taken as to mean that the assessee had been allowed a period of not being less than 15 days 13.1 So far as first question is concerned, I am of the opinion that, as have been held in the case of Monga Metals (P) Ltd. (supra), the notice under Section 158BC of the Act being akin to notice under Section 148 of the Act, its nature is the same as that of notice under Section 148 and therefore, as the assessee cannot waive either the notice under Section 148 or the defects in notice under Section 148, the assessee cannot waive the notice under Section 158BC or the defects therein and consequently as in the case of assessment under Section 147 the service of a valid notice under Section 148 is the prerequisite mandatory condition, the service of valid notice under Section 158BC of the Act is prerequisite mandatory condition meaning thereby that unless and until a valid notice under Section 158BC of the Act is served upon the assessee (in accordance with the provisions of law) the AO cannot have jurisdiction to proceed to make assessment of block period. I am, therefore, of the opinion that the requirement of service of a valid notice under Section 158BC is a prerequisite mandatory condition for the AO to proceed to make an assessment of block period.
13.2 Even otherwise, I am of the opinion that every notice requiring the assessee to furnish the return of income or of wealth is of mandatory nature, i.e., the valid service of a valid notice, requiring the assessee to furnish the return of income or wealth is prerequisite mandatory requirement for an AO to proceed with the assessment proceedings. Meaning thereby that unless and until this requirement is fulfilled, the AO has no jurisdiction to proceed further for making an assessment.
14.1 Coming to the question No. 2, the terms 'not being less than ... days' and 'within ... Days' had been the subject-matter of discussion by the Hon'ble Supreme Court as well as various High Courts in the following cases : 14.1 (a) In case of Braithwaite & Co. Ltd. (supra), the Hon'ble Supreme Court was to define the term 'period of not less than seven years' as appearing in the proviso to Rule 1(v) of Schedule II to the Companies (Profits) Surtax Act, 1964 and was pleased to hold, after relying on the decision of Bombay High Court in case of CIT v. Ramsukh Motilal that the only interpretation which can be given to the expression 'during a period of not less than seven years' in the proviso is that the period should go beyond seven years.
'On a plain reading of the proviso to Rule 1(v) of Schedule II to the Companies (Profits) Surtax Act, 1964, it is clear that in order to claim the benefit of Rule 1(v), the borrowed money has to be repaid during a period of more than seven years. The only interpretation which can be given to the expression 'during a period of not less than seven years' in the proviso is that the period should go beyond seven years. The period of seven years would not be complete till the last minute or even the last second is counted. In other words, till the last minute of the seven years period is completed, the period remains less than seven years (see p. 347A, B).
The respondent-company obtained a term loan of Rs. 50 lakhs from a bank. The agreement dt. 1st Aug., 1961, provided for the repayment of the loan in five annual instalments. The last of the instalments of Rs. 16 lakhs was to be paid on 31st July, 1971. The question was whether the repayment under the agreement was 'during a period of not less than seven years' as contemplated by the proviso to Rule 1(v) of Schedule II to the Companies (Profits) Surtax Act, 1964, and the entire sum of Rs. 50 lakhs could be included in the capital base for the purpose of surtax. The Tribunal held that only the last instalment of Rs. 16 lakhs could be included in the capital base. On a reference at the instance of the respondent-company, the High Court held that the entire amount of Rs. 50 lakhs could be included in the capital base. On appeal to the Supreme Court : Held, reversing the decision of the High Court, (i) that the whole of the term loan of Rs. 50 lakhs was repayable within a period of seven years and the term loan did not qualify for inclusion in the capital base under Rule 1(v) (see p. 347H) : (ii) that, however, since the Department had not challenged the order of the Tribunal granting relief to the respondent to the extent of Rs. 16 lakhs, only the balance of Rs. 34 lakhs could not be included in the capital base of the respondent-company (see p.
348B, C).
Decision of the Calcutta High Court in Braithwaite & Co. (India) Ltd. v. CIT reversed on this point.' 14.1 (b) In case of New India Industries Ltd. (supra), the Hon'ble Supreme Court again had a chance to consider the term 'during a period of not less than seven years' as appearing in the proviso to Clause v of Rule 1 of Schedule II to the Companies (Profits) Surtax Act, 1964. The headnote reads as under : 'The decision of the Gujarat High Court in New India Industries Ltd. v. CIT , was, inter alia, to the effect that the legislature had in the proviso to Clause (v) of Rule 1 of Schedule II to the Companies (Profits) Surtax Act, 1964, provided an outer limit to the repayment of the loan (to be included in the computation of capital) by using the words 'not less than seven years' and that 'therefore, if the spreadover of the repayment has been provided in the terms of the agreement in such a manner that the repayment is completed by a date beyond seven years from the first advance made under the agreement under which the moneys are borrowed, the loan in question will qualify for inclusion in the capital of the company computed for the purposes of surtax. However, once it is found that the date for the repayment of the entire amount falls beyond the period of seven years counting from the date of the first advance under the agreement, the loan would qualify for inclusion in the capital. In the instance case, the first advance of Rs. 10 lakhs under the agreement was paid in the month of July, 1961. The second amount was paid sometime in the month of September, 1961. That too was of Rs. 10 lakhs. These two items aggregating to Rs. 20 lakhs were subsequently adjusted by mutual agreement between the parties against the loan of Rs. 50 lakhs and, therefore, they must be deemed to have been made by agreement between the parties under the loan agreement of 1st Dec., 1961. The terms of the agreement as modified provided for repayment by 1st Dec., 1968, and thus, the repayment of this loan was during a period of not less than seven years counting from the date of the first advance under this agreement of 1st Dec., 1961. In view of this conclusion, so far as the facts of the present case are concerned, the loan of Rs. 50 lakhs was to be repaid not within a period of seven years but during a period of not less than seven years'. And accordingly, the High Court had held that the entire loan of Rs. 50 lakhs qualified for inclusion in the computation of the capital of the respondent-company for the purpose of surtax chargeable under the Companies (Profits) Surtax Act, 1964. The Department preferred appeals to the Supreme Court : Held, dismissing the appeals, that the findings reached by the High Court on the basis of the subsequent correspondence between the parties which resulted in the modification of the agreement did not suffer from any infirmity and that the decision of the High Court was correct (see p. 655H)' 14.1 (c) In case of Mir Iqbal Husain (supra), the Hon'ble High Court has held a notice under Section 25 read with Section 15(3) of the UP Agrl. IT Act providing a period of not being less than thirty days to be invalid and the requirement of notice as mandatory requirement. The headnote reads as under : 'A notice requiring a person to furnish a return the next day when the provision of the statute under which the notice is served is that the assessing authority may serve a notice on a person requiring such person to furnish a return within such period, not less than thirty days, as may be specified in the notice, is not a valid notice.
The mere fact that the person upon whom such a notice was served, furnished a return the next day, would not prevent him from objecting to the validity of the notice on the ground that it did not comply with the law.
The issue of a valid notice is a condition precedent to the assumption of jurisdiction to reassess escaped income under Section 15.1 These two terms were also the subject-matter of consideration by the Hon'ble High Court of Bombay in case of Asstt. CIT v. Ekbal & Co. (1945) 13 ITR 154 (Bom) during the course of consideration of validity of notice under Section 22(2) of 1992 Act. The question for consideration of the Hon'ble High Court was as to whether a notice given under Section 22(2) of the Act requiring the assessee to furnish the return of income 'within thirty days' of the receipt of the notice as against the required period of 'not being less than thirty days' was an invalid notice 15.2 The facts of the case were that the provisions of Section 22(2) Indian IT Act, 1922, required the ITO, in the case of any person whose total income was of such an amount as to render such person liable to income-tax to serve a notice upon such person requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total income and total world income during the previous year. The ITO issued a notice under Section 22(2) of the Act to the assessee on 22nd July, 1942 wherein the assessee was required to furnish the return of income 'within thirty days' of the receipt of the notice.
The assessee challenged the validity of the assessment on the ground of validity of the notice and matter went to the Tribunal. The Tribunal, by its judgment, after referring to certain passages from Maxwell on "Interpretation of Statutes" 8th Edition, stated as under : The learned author proceeds to observe that where 'not less than' or such other expression is used specifying the time for doing an act, the ending terminal must also be excluded from the computation.
Section 22(2) clearly lays down that an assessee must be given a period of 'not less than thirty days' from the receipt of the notice to furnish the return of his total income. It would, therefore, follow that he must have thirty clear days and the thirty days must be excluded from the computation. In the present case, as we have already pointed out, the assessee was asked to furnish the return within thirty days. Such a requirement did not amount to giving him thirty clear days for the purpose. We, therefore, think that the notice in this case is illegal. The fact that the assessee submitted a return later on or that it was accepted for the purpose of making the assessment does not, in our opinion, cure the defect that initially lay in the notice.' 15.3. (a) It was in view of above facts and circumstances that the Hon'ble, the then C.J. Sir Leonard Stone answered the question referred to the Court in the negative by observing as under : 'I agree with that statement in the judgment of the Tribunal, computation of period of time has given rise to a great many cases, both in this country and in England. Time can be infinitely divided.
There is no fraction of second, which is so short in duration that it cannot be divided into something smaller. In my judgment, expressions 'within thirty days' and 'not less than thirty days' are two quite different things. 'Within thirty days' is within two points of time, one at which the period begins and the other at which it expires. On the other hand, 'not less than thirty days' is outside these two points of time. There must be an interval of not less than thirty days and that means thirty days clear [see Railway Sleepers Supply Company, In re (1985) 29 Ch. D. 204]. The period must continue beyond the expiration of the stated time. Whereas 'within' the stated period must mean what it says, something less than the moment of expiration. In my opinion, therefore, the notice is invalid and the question referred to must be answered in the negative. The CIT must pay the costs of the reference.' 15.3 (b) Justice Kania agreed with the findings of Hon'ble Chief Justice by observing as under : '1. I agree Section 22(2) provides that in the notice given to the assessee to furnish his return, a particular period must be given to him. The sub-section further provides for such period 'not being less than thirty days'. Reading the section by itself, therefore, clearly means that the period with which the assessee has to send his return must neither at the beginning nor at the end encroach upon the thirty days. To put it in other words, thirty clear days must elapse before his obligation to send the return becomes effective. The notice given in the case is to send the return 'within thirty days', that being treated as a period of time given to the assessee to send his return. It seems to me clear that when a party is called upon to do an act 'within' a stated number of days, he necessarily cannot get that number of days as 'clear' days. In other words, according to the terms of the notice, the assessee does not get thirty clear days' period, before his obligation to send the return arises. I, therefore, agree that the notice is not in accordance with Section 22(2).
2. It was urged that what was intended to be conveyed by the notice is the same as what was prescribed by the section. We are not concerned with what was intended to be conveyed. The question is, by the words used by the authorities have they carried out their obligation to give to assessee a period 'not less than thirty days' to furnish his return The answer is in the negative because the notice calls upon him to send the return 'within' that number of days.' 16. Answer to question No. 2 (para 11.2), therefore, is that the two terms have different meanings and lead to different results.
17. So far as answer to question No. 3 (para 11.2), which has arisen as a result of submission made by the learned Departmental Representative that the four appellants having furnished their returns of income on 22nd June, 2002, i.e., after a period of more than two months of the service of notices under Section 158BC of the Act, no damage/harm/loss was caused to them by requiring them to furnish returns of undisclosed income 'within a period of 15 days' as against 'a period of not being less than fifteen days' is concerned, I am of the opinion that answer to this question/Departmental Representative's plea is clear from the decision of Hon'ble High Court of Allahabad in case of Mil Iqbal Husain (supra) and of High Court of Bombay in the case of Commr. of Agrl. IT v. Ramkuvar and Ors. and in the case of Asstt. CIT v. Ekbal & Co. (supra) as well as of the Hon'ble Supreme Court, which are discussed as under : The facts of this case were that a notice under Section 41 was issued to the assessee in respect of the asst. yr. 1962-63 on 7th March, 1967, and was enclosed along with another notice bearing the same date. As per the notice, the assessee was called upon to produce his books and other documents on 25th March, 1967 and to show cause as to why he should not be assessed under Section 41 and why penalty for non-submission of returns should not be imposed. The assessee attended before the Agrl. ITO on the 25th March, with his books and documents. On the 27th of March, 1967, he submitted his returns. On 31st March, 1967, the Agrl. ITO passed an order of assessment. In express terms it began by stating that it was an order of assessment under Section 41 read with Section 23 of the said Act for the accounting period in question. Throughout the order for the purpose of arriving at the taxable agricultural income of the assessee what was referred to were the books of account produced by the assessee in pursuance of the first of the said two notices dt. 7th March, 1967. It was only after the agricultural income of the assessee had been assessed and the amount of tax payable by him determined that, while discussing the question whether penalty should be levied or not, the said officer had referred to the return filed by the assessee on 27th March, 1967. He had referred to it solely for the purpose of considering whether the filing of the return could be said to be an extenuating circumstance for non-levy of penalty. On the question whether the order of assessment was valid, the Hon'ble High Court after observing that : 'Section 41 of the Maharashtra Agrl. IT Act, 1962, corresponds to Section 34 of the Indian IT Act, 1922, and Section 148 of the IT Act, 1961. The conditions prescribed by Section 41 as in the case of the said Sections 34 and 148 are conditions which affect the validity of the jurisdiction to be exercised under that section and if any of the conditions is not complied with, the Agrl. ITO would have no jurisdiction to pass the order under Section 41. Section 22 of Maharashtra Agrl. IT Act is in pari materia with Section 22 of the Indian IT Act, 1922. If a notice under Section 41 embodies any of the requirements under Section 22(2), it must at the same time permit the assessee to comply with the requirements within a period, which is not less than thirty days. Whereas Section 22(2) is a procedural section and the failure to give notice or a defect in a notice under that section is a procedural defect, in the case of Section 34 it is not a procedural defect but a failure to comply with a condition precedent to the assumption of jurisdiction.
Illegality in a notice under Section 41 cannot be waived by the assessee', held as under : 'that the notice under Section 41 did not give the prescribed time.
The period given in the notice being less than thirty days, the notice was invalid, and consequently the assessment was invalid. The return had not been filed by the assessee voluntarily. It was filed subsequent to the notice under Section 41 with a view to escaping the levy of penalty. Assuming that the assessment had been made on the basis of the return, the assessment should have been made under Section 23. It was, however, made under Section 41 and was, therefore, invalid. The order of assessment was invalid whichever way it was considered.' (ii) Decision in case of Asstt. CIT v. Ekbal & Co. (supra) has been discussed in para Nos. 15.1 to 15.3 (b) above.
(iii) Decision in case of Mir Iqbal Hussain (supra) has been discussed in para 14.1 (c) above.
18. After having considered the facts and circumstances of the case and aforesaid decision, I have no hesitation to hold that the term 'a period not being less than fifteen days' and the term 'within a period of fifteen days' are altogether not only different but effect the jurisdiction of the authorities as well as the rights of subjects. The earlier term, i.e., the term 'a period not being less than ... days' specifies that the period allowed will be more than the number of days, i.e., it will start after the expiry of the number of days mentioned therein whereas the later term, i.e., 'within a period of... days' specifies that the period allowed will end at the click of last minute of the last day. This difference, in my opinion, in these two terminologies is of a great significance because it may affect the jurisdiction of the authorities and also the rights of the subjects. If an authority is permitted to do an act or to initiate a proceeding 'within' a certain period, the moment the period is over the authority get divested of his powers to do that act or to initiate that proceeding. Similarly if an assessee is to act 'within' a certain period and fails to act, the moment the period is over the assessee loses right to act. For example if the AO fails to serve a notice under Sub-section (2) of Section 143 before the expiry of twelve months from the end of the month in which the return is furnished, he gets divested of his jurisdiction to frame an assessment under Section 143(3) and similarly if the assessee fails to furnish the appeal under Section 246A or under Section 253, as a case may be, within the prescribed period of thirty days and sixty days, respectively, the assessee loses the right to furnish the appeal. The discretion to the authorities to admit delayed appeals is an altogether different issue.
19. In view of above facts and circumstances, I am of the opinion that so far as the cases of present four appellants, other than Vinod Kumar, are concerned, the notices under Section 158BC requiring them to furnish the returns of undisclosed income 'within fifteen days' from the date of service of the notices were invalid and bad in law. I am further of the opinion that in view of various decisions discussed above, the factum of appellants having furnished their returns of undisclosed income on 22nd June, 2002 or acceptance of those returns by the Revenue cannot cure the defect that initially lay in the notices."Neera Agarwal & Anil Kumar Agarwal v. Dy. CIT in IT(SS)A Nos. 142 and 143/Del/2003, for block period asst. yr. 1990-91 to 11th Dec., 1999 (unreported), but copies placed on file.
The Hon'ble Tribunal, Delhi Bench "E" had also occasioned to consider the assessee's objections with respect to the mandatory compliance of the period of "not less than fifteen days" to be allowed under Section 158BC of the Act, 1961. In these cases, the assessee had raised the objection by way of additional grounds which were admitted by the Hon'ble Tribunal. The Tribunal, Delhi Bench "E" (supra), after hearing the parties came to the conclusion that notices issued under Section 158BC of the Act, not allowing the minimum required time prescribed in the relevant provisions to file their returns for block period were bad in law and consequentially the assessments made in pursuance of the same were invalid and are liable to be quashed. The relevant part of the order of the Tribunal, Delhi Bench "E" (supra) as contained in para Nos. 7 to 10 reads as under : 7. We have considered the rival submissions and also perused the materials on record. It is observed that Chapter XIV-B lays down the special provision for assessment of search cases and as per the provisions of Section 158BC contained in Chapter XIV-B, the AO was under statutory obligation to serve a notice to a person in whose case search had been initiated and books of account or other documents or any assets requisitioned on or after the first day of January, 1997, requiring him to furnish a return in the prescribed form and verified in the prescribed manner setting forth his total income including the undisclosed income for the block period within such time not being less than fifteen days but not more than forty-five days. In the present case, the AO, however, issued the notices under Section 158BC on 7th Dec., 2001 requiring the assessees to file their returns of undisclosed income for the block period within fifteen days of the service of the said notices. The expression used by the AO in the said notices is 'within fifteen days' and the question for consideration before us is whether there was a proper compliance by the AO of the statutory requirement contained in Section 158BC(a)(ii) which requires the AO to allow a period 'not being less than fifteen days'.
8. It is observed that similar issue arose for consideration before the Supreme Court in the case of CIT v. Braithwaite & Co. Ltd. (supra) and while interpreting the relevant provisions of the Companies (Profits) Surtax Act, 1964, providing that in order to claim the benefit of the relevant rule, the borrowed money has to be repaid 'during a period of not less than seven years', the Hon'ble Supreme Court held that the only interpretation which can be given to the expression 'during a period of not less than seven years' is that the period should go beyond seven years. Explaining further, the Hon'ble Supreme Court observed that the period of seven years would not be complete till the last minute or even the last second is counted and since the whole of the term-loan in the said case was payable 'within the period of seven years', their Lordships held that the same was not qualified for benefit as per the relevant provisions of the Companies (Profits) Surtax Act, 1964.
9. In the case of CIT v. Ekbal & Co. (supra), the Hon'ble Bombay High Court also had the occasion to consider similar issue in the context of notice issued under Section 22(2) of the 1922 Act and since it was provided in Section 22(2) of the 1922 Act that a notice may be served on an assessee requiring him to furnish a return of income 'within such period not being less than thirty days', the Hon'ble Bombay High Court held that a notice requiring an assessee to furnish a return of his income 'within thirty days' of the receipt thereof was not a valid notice within the meaning of the said sub-section that the expression 'within such period not being less than thirty days' used in the said provisions gave an assessee an interval of thirty clear days from the date of the receipt of such notice. To the similar effect is the decision of the Bangalore Bench of the Tribunal in the case of Prabhat Saw Mills & Timber Merchants v. ITO (1994) 51 ITD 548 (Bang) wherein it was held that a notice issued under Section 148 allowing a period less than thirty days was bad in law.
10. Before us the learned Departmental Representative has not disputed the factual position that the minimum period of fifteen days as required by Section 158BC had not been allowed by the AO to the assessees to file their returns for the block period in the present cases. His contention, however, is that the assessees having actually availed a period of more than fifteen days to file such returns, they could not be said to have caused any prejudice on this count. In this regard, we may usefully refer to the decision of the Hon'ble Bombay High Court in the case of CIT v. Ramsukh Motilal (1955) 27 ITR 54 (Bom) wherein it was held by their Lordships of the Bombay High Court that if a notice permitted the assessee to comply with the requirement of Section 22(2) of 1922 Act within a period which is less than thirty days, the same was clearly illegal and the assessee cannot be said to have waived such illegality merely because the return was actually filed by him after such a minimum period prescribed in the statute. As such, considering all the facts of the case as well as the legal position emanating from the aforesaid judicial pronouncements, we hold that the notices issued in the present cases under Section 158BC not allowing the assessees the minimum required time prescribed in the relevant provisions to file their returns for the block period were bad in law and consequently, the assessments made in pursuance of the same were invalid and are liable to be quashed." 14. In view of facts and circumstances of the case, provisions of Section 158BC of the Act and following the decisions of Tribunal, Agra Bench "SMC" and Tribunal, Delhi Bench "E" (supra), we are of the opinion that the notice under Section 158 of the Act issued in assessee's case on 6th Jan., 1998 (copy of which has been placed at page No. 7 of the assessee's paper book), was invalid and bad in law.
15. After having held the notice under Section 158BC of the Act, 1961, also as invalid and bad in law, the next question for our decision is as to the validity of the subsequent proceedings and block assessment completed on 26th Oct., 1999.
16. After having considered the settled law on this point, we are of the opinion that the consequential proceedings as well as the block assessment were also illegal, bad in law and ab initio (sic-void). In view of the aforesaid totality of the facts and circumstances of the case, the block assessment completed on 26th Oct., 1999 is illegal and void ab initio for want of jurisdiction of the Director of IT (Inv.) for issuing the requisition under Section 132A of the Act and also for want of validity of the notice under Section 158BC of the Act. The assessment order for block period is, therefore, quashed.
17. Since we have quashed the aforesaid block assessment on the ground that warrant of requisition issued under Section 132A by the Director of IT (Inv.) was illegal and bad in law and that notice under Section 158BC was also bad in law, the assessee's objection with respect to validity of notice under Section 158BC of the Act on the plea of non-mentioning of status, non-mentioning of correct block period or non-mentioning of person whose income was required to be returned, requires no adjudication at this stage.
18. In the result, the block assessment is quashed being ab initio void, and assessee's appeal is allowed.