Mohammed Salim Vs. Commissioner of Income-Tax, Cochin  INSC 704 (24 April 2008)
S.B. SINHA & LOKESHWAR SINGH PANTA CIVIL APPEAL NOS. 2946-2956 OF 2008 (Arising out of SLP (C) Nos.11296-11306
of 2005) S.B. SINHA, J.
1. Leave granted.
2. Interpretation/ application of Section 127 of the Income Tax Act, 1961
(for short, "the Act") vis-`-vis the provision regarding Block
Assessment is in question in this appeal which arises out of a judgment and
order dated 2.4.2004 passed by the High Court of Kerala at Ernakulam in ITA No.
172 of 2000 and WPC No. 23449 of 2003. A search was conducted by the Officers of the Income Tax Department in the
residence as also in the business premises of the assessee, his sons and other
associates, consequent whereupon, it was proposed to transfer the cases
pertaining to the assessee to the Income Tax (Inv.) Circle, Calicut to
facilitate effective and coordinate investigation. An order was passed to that
effect by the Chief Commissioner of Income Tax, Bangalore under Section 127(2)
of the Act. A notice was issued by the Assessing Officer under Section 158BC of
the Act to file a return setting forth the total income including the
undisclosed income for the block period. The assessee filed a writ petition in the High Court of Karnataka
challenging the said order of transfer of cases passed by the Chief
Commissioner of Income Tax. The said writ petition was dismissed. Writ Appeals
preferred thereagainst were also dismissed. A notice was thereafter issued by the assessing authority asking the
assessee to file a return setting forth the total income including the
undisclosed income for the block period. Pursuant thereto, the return was
filed. The purported undisclosed income of the assessee was determined. The said order of the Assessing Officer, Calicut was challenged on the
ground that he had no jurisdiction to make the block assessment as the
authority therefor remained with the Assessing Officer originally having the
jurisdiction over the assessee.
3. A Division Bench of the High Court by reason of the impugned judgment
opined that the provisions of Section 127 of the Act can also be resorted to
for a block assessment.
4. Mr. TLV Iyer, learned Senior Counsel appearing on behalf of the
petitioner would submit that having regard to the definition of block
assessment occurring in Chapter XIV-B of the Act, Section 127 thereof ex facie
cannot have any application thereto.
5. Mr. Gopal Subramaniam, the learned Additional Solicitor General appearing
on behalf of the Revenue, however, would support the impugned judgment.
6. The power to conduct a search by the authorities of the Income Tax
Department in terms of Section 132 of the Act is not in dispute. It is further
not in dispute that Chapter XIV-B shall apply in a case of this nature. Clause (a) of Section 158 B defines 'block period', which reads as under:
"(a) "block period" means the period comprising previous
years relevant to six assessment years preceding the previous year in which the
search was conducted under Section 132 or any requisition was made under
Section 132A and also includes the period upto the date of the commencement of
such search or date of such requisition in the previous year in which the said
search was conducted or requisition was made:
Provided that where the search is initiated or the requisition is made
before the 1st day of June, 2001, the provisions of this clause shall have
effect as if for the words "six assessment years", the words
"ten assessment years" had been substituted;" A block period, therefore, not only would include ten years of assessment
but also that portion of the assessment year in which assessment was to take
place as on the date of the search.
7. Chapter XIV-B provides for special procedure. Section 158 BC lays down
the procedure for block assessment. Section 158 BD provides for taking into
consideration undisclosed income of any other person. Section 158 BE provides
for the time limit for completion of block assessment. Section 158 BH of the Act reads as under:
"158BH. Application of other provisions of this Act. Save as otherwise
provided in this Chapter, all other provisions of this Act shall apply to
assessment made under this Chapter."
Chapter XIV-B only lays down special procedure for assessment but thereby
the effect and purport for which the assessment of income tax is done does not
8. An order of transfer as noticed hereinbefore can be passed by the
appropriate authority in terms of Section 127 of the Act, which reads as under:
"127. Power to transfer cases(1) The Director General or Chief
Commissioner or Commissioner may, after giving the assessee a reasonable
opportunity of being heard in the matter, wherever it is possible to do so, and
after recording his reasons for doing so, transfer any case from one or more Assessing
Officers subordinate to him (whether with or without concurrent jurisdiction)
to any other Assessing Officer or Assessing Officers (whether with or without
concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is
to be transferred and the Assessing Officer or Assessing Officers to whom the
case is to be transferred are not subordinate to the same Director General or
Chief Commissioner or Commissioner,-
(a) Where the Directors General or Chief
Commissioners or Commissioners to whom such Assessing Officers are subordinate
are in agreement, then the Director General or Chief Commissioner or
Commissioner from whose jurisdiction the case is to be transferred may, after
giving the assessee a reasonable opportunity of being heard in the matter,
wherever it is possible to do so, and after recording his reasons for doing so,
pass the order;
(b) Where the Directors General or Chief Commissioners or Commissioners
aforesaid are not in agreement, the order transferring the case may, similarly,
be passed by the Board or any such Director General or Chief Commissioner or
Commissioner as the Board may, by notification in the Official Gazette,
authorize in this behalf. xxx xxx xxx Explanation: In Section 120 and this Section, the word
"case", in relation to any person whose name is specified in any
order or direction issued thereunder, means all proceedings under this Act in
respect of any year which may be pending on the date of such order or direction
or which may have been completed on or before such date, and includes also all
proceedings under this Act which may be commenced after the date of such order
or direction in respect of any year.
9. An order of transfer is passed for the purpose of assessment of income.
It serves a larger purpose. Such an order has to be passed in public interest. Only because in the said provision the words "any case" has been
mentioned, the same, in our opinion, would not mean that an order of transfer
cannot be passed in respect of cases involving more than one assessment year.
It would not be correct to contend that only because explanation appended to
Section 127 refers to the word 'case' for the purpose of the said Section as
also Section 120, the source of power for transfer of the case involving block
assessment is relatable only to Section 120 of the Act. It is a well-settled
principle of interpretation of statute that a provision must be construed in
such a manner so as to make it workable. When the Income Tax Act was originally
enacted, Chapter XIVB was not in the statute book. It was brought in the
statute book only in the year 1996.
10. The power of transfer is in effect provides for a machinery provision. It must be given its full effect. It must be construed in a manner so as to
make it workable. Even Section 127 of the Act is a machinery provision. It
should be construed to effectuate a charging Section so as to allow the
authorities concerned to do so in a manner wherefor the statute was enacted. The question came up for consideration before a Division Bench of the Andhra
Pradesh High Court in Mukutla Lalita vs. Commissioner of Income Tax & ors.
Reported in  ITR 226 23 wherein it was held:
"Hence it can be imagined that an order has to be passed as to who
shall be the Assessing Officer under Section 158BG in the case of a search.
Such an order can be passed only by a higher officer who may be either the
Commissioner or the Chief Commissioner, as the case may be. Hence, unless such
an order has been passed, the Assessing Officer to whom the records have been
handed over under section 158BD cannot ipso facto hand over the records to the
Assistant Commissioner, until he has been chosen to act as the Assessing
Officer under Section 158BG. For doing so, a procedure for transfer of the
records and the passing of orders to that effect is necessary for the records
to be transferred to the officer selected under section 158BG. It is in this
context that the provisions of Section 127 have to be resorted to. It is for
such reason, we are unable to agree with learned standing counsel that Chapter
XIV-B is a self-contained special provision relating to search procedures and
assessments to which Section 127 has no application. The submission would have
been correct if Section 127 and Chapter XIV-B were inconsistent with each other
and it has to be held because of such reason that a specific provision like
Chapter XIV-B would displace a general provision like section 127. But as we
see it, both provisions are supplemental to each other and that the provisions
of section 127 fill in the gap between the stage of sections 158BD and 158BG.
The impugned order passed under Section 127 hence cannot be faulted by saying
that the section was not applicable. It is also not correct, as has been
contended, that giving a notice under Section 127 in the event of a proceeding
under Chapter XIV-B would be a mere formality without any substance as records
are to be compulsorily handed over to the officer under section 158BG.
While in most of the cases the submission may be correct, yet it is
conceivable that in some cases, reasonable opportunity being given as
contemplated under Section 127(1) or (2) of the Act, the person concerned may
be able to convince the authority giving the notice that he is actually
unrelated or unconnected to the proceeding started under Chapter XIV-B. If such
conclusion is reached, the authority at that stage may disassociate the person
concerned from the specific proceeding in Chapter XIV-B and may not transfer the
papers to the other officer. As has been fairly pointed out by learned standing
counsel himself, the provisions of section 127(1) apply when the transfer is
contemplated not only between the officers of the subordinate rank but also
officers either with or without concurrent jurisdiction.
Hence, even when the records are to be transmitted to the officer not higher
in rank than the officer to whom the papers are handed over in the first
instance under section 158BD, the provisions of section 127 are to be complied
with to give notice."
11. We agree with the opinion of the Division Bench, but we may also notice
that the provisions of Section 158BH had not been brought to its notice, which
categorically states that all other provisions of the Act shall apply to
assessment made under the said Chapter. Section 127 of the Act, which falls
under Chapter XIII would therefore mutatis mutandis apply to Chapter XIVB
particularly when the jurisdiction of the Income Tax Authorities, inter alia,
relates to passing an order of assessment.
The word 'any' must be read in the context of the statute and for the said
purpose, it may in a situation of this nature, means all. The principles of
purposive construction for the said purpose may be resorted to. [See New India
Insurance vs. Nusli Neville Wadia [(2007) 13 S.C.R. 598]. Thus, in the context
of a statute, the word 'any' may be read as all in the context of the Income
Tax Act for which the power of transfer has been conferred upon the authorities
specified under Section 127.
10. We have no hesitation in arriving at the conclusion that the power under
Section 127 can also be exercised in respect of a block assessment. For the reasons aforementioned, we find no merit in these appeals. The
appeals are dismissed accordingly with costs. Counsel's fee assessed at
Rs.25,000/- (Rupees twenty five thousand only).