Ss. 147, 148 and Ch. XIV-B : Block period ending on 24-11-1995 : No jurisdiction to reopen block assessment by issuing notice u/s.148.

“(i) When one considers the entire scheme relating to the
procedure for assessment/reassessment as laid down in the group of Sections
from S. 147 to S. 153 and compares with the special procedure for assessment
of search cases under Chapter XIV-B of the Act, it becomes apparent that the
normal procedure laid down by the Chapter XIV of the Act has been given a
go-by when Chapter XIV-B itself lays down that the said Chapter provides for a
special procedure for assessment of search cases. Clause (f) under Ss.(1) of
S. 158BB of the Act provides for reducing the aggregate of the total income
computed for the block period by the aggregate of the total income, in a case
where an assessment for undisclosed income had been made earlier under clause
(c) of S. 158BC, on the basis of such assessment. In other words, it only
means that where a previous assessment has been framed under Chapter XIV-B of
the Act, the aggregate of such total income assessed for the block period in
case of a search where the block period is a different block from the earlier
block period, has to be deducted for assessing for a subsequent block period.

(ii) When this provision is read in the context of S.
158BC, more particularly the first proviso thereunder, it becomes clear that
the Legislature does not intend to reopen a block assessment. Any such
interpretation would run counter to the legislative intent as noted from the
contemporaneous exposition through the memorandum explaining the Finance Bill
as well as the various circulars issued by the Central Board of Direct Taxes
explaining different amendments. In S. 158BA of the Act, there is a positive
mandate to the Assessing Officer to assess the undisclosed income in
accordance with the provisions of Chapter XIV-B of the Act, notwithstanding
anything contained in any other provisions of the Act. As against that, S.
158BH states that except as otherwise provided in Chapter XIV-B of the Act,
all other provisions of the Act, shall apply to assessment made under Chapter
XIV-B. Therefore, once the period of limitation has been prescribed u/s.158BE
of the Act, the time limit for completion of assessment of undisclosed income
has to be as provided under the said section.

(iii) The entire Chapter XIV-B of the Act relates to
assessment of search cases, viz., undisclosed income found as a result
of search. One cannot envisage escapement of undisclosed income once a search
has taken place and material recovered, on processing of which undisclosed
income is brought to tax. S. 147 of the Act itself indicates that it is in
relation to income escaping assessment and applies in a case where either
income chargeable to tax has escaped assessment by virtue of either
non-disclosure by way of non-filing of the return, or non-disclosure by way of
omission to disclose fully and truly all material facts for the purpose of
assessment, or processing of material already available on record, if it is
within the stipulated period of limitation. Therefore, to contend that the
undisclosed income has escaped assessment despite an assessment having been
framed under Chapter XIV-B of the Act by adopting the special procedure
prescribed by the said Chapter, is to contend what is inherently not possible.

(iv) It cannot be a case of non-filing of return
considering the provisions of S. 158BC of the Act. It cannot be a case of
non-disclosure of material facts considering the fact that everything which
was undisclosed has already been unearthed at the time of search and the
definition of ‘undisclosed income’ itself indicates that not only what has
been seized or recovered, but even income or property which has not been or
would not have been disclosed for the purpose of the Act has been roped in.
Further-more, S. 158BB of the Act also provides not only for acquisition of
books of account or other documents, but on the basis of evidence found as a
result of search and such other materials or information as are available with
the Assessing Officer, undisclosed income of block period shall be computed.
Therefore, even if assuming that some income has not been disclosed in the
return furnished u/s. 158BC of the Act, the AO is bound to assess all
undisclosed income after processing the entire material available with the AO.
The AO could not be heard to state that undisclosed income has escaped
assessment because the officer failed to apply his mind to the material
available on record, there being no lack of disclosure.

(v) The entire scheme under Chapter XIV of the Act, more
particularly from S. 147 to S. 153 of the Act, pertaining to reassessment and
the special procedure for assessing the undisclosed income of the block period
under Chapter XIV-B of the Act are not only separate and distinct from each
other, but if an effort is made to incorporate the scheme under Chapter XIV of
the Act, for the purpose of assessment of block period there is a conflict
between the provisions which becomes apparent on a plain reading. In the
circumstances, by the established rules of interpretation, unless and until a
plain reading of the two streams of assessment procedure does not result in
the procedures being independently workable, the question of resolving the
conflict would not arise. But in the light of the provisions of S. 158BH of
the Act, once there is a conflict between the two streams of procedure the
provisions of Chapter XIV-B of the Act shall prevail and have primacy. Once
assessment has been framed u/s.158BA of the Act in relation to undisclosed
income for the block period as a result of search, there is no question of the
AO issuing notice u/s.148 of the Act for reopening such assessment as the said
concept is repugnant to the special scheme of assessment of of undisclosed income for the block period. The first proviso u/s.158BC(a) of the Act specifically provides that no notice u/ s. 148 of the Act is required to be issued for the purpose of proceedings under Chapter XIV-B.”