Is There Time Limit For Issuing Notice For Search Assessment?
Assessment of searched person is done us/ 158BC . However, the assessment of any person who were not searched ,but any materials has been seized or A.O is satisfied that any undisclosed income belongs to some other person , the procedure to be followed is given under section 158BD of the I T Act. Since you are admitting that some papers belonging to you were found by the search party , the A.O has initiated action as per section 158BD which states that the your A.O will proceed according to section 158BC.
You have written that search was conducted in 2002 and you are getting notice in 2006 which is no doubt inordinate delay. It is a fact that section 158BC does not provide for any limitation for issuing notice , that is why the department interprets that the notice for persons covered u/s 158BD can be issued at any time. But this interpretation is very much disputed and is liable to be challenged before any court of law more so after the Gujarat High Court’s judgment in Khandubhai Vasanji Desai vs Deputy CIT [1999] 236 ITR 73 . The High Court heard
the petition challenging the constitutional validity of the provision of the section 158BD of the I T Act . The court held that no fundamental right of a citizen is violated by such provision but in course of such decision, the Court also delved on the issue of inordinate delay in issuing notice u/s 158 in following words:The period of limitation for completion of the block assessment in the case of such other person was required to be computed from the end of the month in which a notice to such other person was given because the Assessing Officer who first received the material and could straightaway proceed on the strength of presumption under section 132(4A) against the person found in possession or control of the material and for whom the last authorisation was executed, while proceeding with the block assessment against him may be satisfied that a part of the undisclosed income belongs to some other person for whom authorisation was not issued, that is, the person other than the one found in possession or control of the material seized. It is only when the Assessing Officer is satisfied that any undisclosed income belongs to any other person that the occasion to proceed against such other person for the block assessment of the undisclosed year belonging to him can arise. Necessarily, therefore, a different starting point of commencement of limitation for making the assessment of the block period in case of such other person was required to be fixed and the obvious starting point was the serving of the notice to such person after the requisite satisfaction was reached by the Assessing Officer that any undisclosed income belonged to such other person. Once the satisfaction under section 158BD is reached by the Assessing Officer, there would be no valid reason for him to delay the issuance of the notice which ought to be issued soon after the satisfaction is reached and if the Assessing Officer is different, he ought to immediately transmit the relevant material to the Assessing Officer, having jurisdiction to enable him to proceed against such other person by issuing notice under section 158BC requiring him to file the return. Since the satisfaction that any undisclosed income belongs to any person other than the one with respect to whom search was made or books of account, documents or assets requisitioned, may, in many cases be reached after the Assessing Officer starts the proceedings under section 158BC against the person with respect to whom the search was made, the shift of the commencement point of the limitation to the date of the notice, which could be issued to such other person only after it comes to light leading to the satisfaction of the Assessing Officer that any undisclosed income belongs to him, was fully justified and it was germane to the object of making block assessment of the undisclosed income of such other person who is now known as a person to whom that undisclosed income belongs. The Assessing Officer, once he reaches the requisite satisfaction, is bound to act swiftly to proceed against such other person as soon as may be in reasonable time. The speed and dispatch with which he should act is writ large on the connected provisions of section 132(9A) of the Act under which the authorised officer who has no jurisdiction over the person referred to in clause (a), (b) or (c) of sub-section (1) of section 132 has to hand over the books of account, documents and assets seized to the Income-tax Officer having jurisdiction over such person within 15 days of such seizure and the Assessing Officer is required to serve a notice to such person under section 158BC requiring him to furnish a return in the prescribed Form No. 2B and to complete the block assessment in one year from the end of the month in which the last authorisation for search or requisition was executed. Thus, the apprehension that a notice can be issued under section 158BD read with section 158BC by the Assessing Officer in the case of such "other person" at any time is ill-founded.”
It should be understood that the assessing officer of the searched person has to satisfy himself about action lying against another person . The moment he satisfies himself, he has to hand over the papers, documents or other materials to the A.O having jurisdiction over the assessee , if he himself is not the A.O.
The object of introduction of chapter XIV –B is to minimise the litigation and complete assessment of undisclosed income of an assessee swiftly and comprehensively on all the materials found from his possession or premises or other place belonging to him. Such being the objective behind the scheme of block assessment , the inordinate delay should certainly be challenged on law point.
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