Supreme Court of India
K.P. MOHAMMED SALIMversusCOMMISSIONER OF INCOME-TAX, COCHIN
- Citation
- 2008 INSC 526
- Decided
- 24 April 2008
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The power under Section 127 of the Income Tax Act can be exercised for a block assessment.
Summary
The Income Tax Department conducted searches at the premises of K.P. Mohammed Salim and his associates and, to facilitate coordinated investigation, the Chief Commissioner transferred the cases to the Calicut Investigation Circle under Section 127(2) of the Income Tax Act. The Assessing Officer then issued a notice under Section 158BC for a block assessment covering the block period defined in Section 158(a). Salim challenged the transfer, arguing that Section 127 could not be applied to a block assessment. The High Court held that Section 127 could be used for block assessments, and the Supreme Court affirmed this view, emphasizing purposive construction and the need to make the statute workable. The Court held that the word "any" in Section 127 must be read in context to mean "all" and that Section 127 operates as a machinery provision complementing Chapter XIV‑B. Consequently, the appeals were dismissed.
Issues considered
- Whether the power to transfer cases under Section 127 of the Income Tax Act, 1961 can be exercised in respect of a block assessment under Chapter XIV‑B.
- Whether the term "any case" in Section 127 excludes cases involving multiple assessment years or block assessments.
- Whether the provisions of Section 127 are inconsistent with, or displaced by, the special procedures of Chapter XIV‑B.
Legislation cited
- Income Tax Act, 1961s. 120, s. 127, s. 132, s. 132A, s. 158(a), s. 158BC, s. 158BG, s. 158BH
Subjects
Income TaxSection 127Block assessmentStatutory interpretationPurposive constructionTransfer of casesJurisdiction
Judgment
[2008] 6 S.C.R. 949
K.P. MOHAMMED SALIM A
V.
COMMISSIONER OF INCOME-TAX, COCHIN
(Civil Appeal Nos.2946-2956 of 2008)
APRIL 24, 2008
B
[S.B. SINHA AND LOKESHWAR SINGH. PANTA, JJ.]
Income Tax Act, 1961 - s.127 - Power under - Held:
Can be exercised in respect of block assessment.
Interpretation of Statutes - Purposive construction '."'" c
Taxing statute - Held: To be construed in such manner so as
to make it workable.
A search was conducted by the officers of the Income
Tax Department in the residence as also in the business
D
.,. 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 E.
s.127(2) of the Income Tax Act. A notice was issued by the
Assessing Officer under s.158BC of the Act to file a return
setting forth the total income including the undisclosed
income for the block period.
F
. The assessee filed writ petition before High Court
which was dismissed. Thereafter the return was filed. The
assessment order was passed determining the purported
undisclosed income of the assessee. The said order of
the Assessing Officer, Calicut was challenged on the G
ground that he had no jurisdiction to make the block
assessment as the authority remained with the Assessing
.J
Officer originally having the jurisdiction over the
assessee. The High Court held that the provisions of s.127
949 H
950 SUPREME COURT REPORTS [2008] 6 S.C.R.
~
A of the Act can also be resorted to for a block assessment.
In appeal to this Court, assessee contended that
having regard to the definition of block assessment
occurring in Chapter XIV-8 of the Act, s. 127 thereof ex
facie cannot have any application thereto. .-
B
Dismissing the appeal, the Court
HELD: 1. The power under s.127 of Income Tax Act,
1961 can be exercised in respect of a block assessment.
[Para 12) [958-E]
c
2.1 In terms of Clause (a) of s.1588 of the Act, a block
period, not only includes 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. An order of
transfer is passed for the purpose of assessment of
D
income. It serves a larger purpose. Such an order has to
be passed in public interest. Only because in s.127 the "
words "any case" has been mentioned, the same would
not mean that an order of transfer cannot be passed in
respect of cases involving more than one assessment
E year. [Paras 6, 9) [953-D; 954-A; 955-F, G]
2.2 It would not be correct to contend that only
because explanation appended to s.127 refers to the word
'case' for the purpose of the said Section as also s.120,
F the source of power for transfer of the case involving block
assessment is relatable only to s.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. The word 'any' must be read in the context of
the statute and for the said purpose, it may in a situation
G
of this nature, means all. The principles of purposive
construction for the said purpose may be resorted to.
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
H
K.P. MOHAMMED SALIM v. COMMISSIONER OF 951
INCOME-TAX, COCHIN
authorities specified under s.127. [Paras 9, 11] [956-A, B; A
958-C, D]
New India Insurance v. Nusli Neville Wadia (2007) 13
S.C.R. 598 - relied on.
'·• 2.3. The power of transfer is in effect provides for a B
machinery provision. It must be given its full effect. It must
be construed in a manner so as to make it workable. Even
s.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. [Para 10] [956-C, D] c
3. 5.127 and Chapter XIVB are supplemental to each
other and the provisions of s.127 fill in the gap between
the stage of ss.15880 and 158BG. The provisions of
s.127(1) apply when the transfer is contemplated not only
D
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
s.15880, the provisions of s.127 are to be complied with E
to give notice. The provisions of s.158BH categorically
states that all other provisions of the Act shall apply to
assessment made under the said Chapter. S.127 of the
Act, which falls under Chapter XIII would therefore mutatis
mutandis apply to Chapter XIVB particularly when the F
jurisdiction of the Income Tax Authorities relates to
passing an order of assessment. [Para 11] [957-B-0, F-H;
958-A, B]
Mukutla Lalita v. Commissioner of Income Tax & Ors.
(1997) ITR 226 23 - affirmed. G
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
2946-2956 of 2008.
From the Judgment and Order dated 2.4.2004 of the High
Court of Kera la at Ernakulam in I. T.A. No. 172/2000. H
952 SUPREME COURT REPORTS [2008] 6 S.C.R.
A T.L.V. Iyer, Subramonium Prasad, Jay Kishor Singh, M.S.
Anant and Vivek Gupta for the Appellant.
Gopal Subramanian, Arijit Prasad, S. Balaji and B.V.
Blaram Das for the Respondent.
B The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
2. Interpretation/ application of Section 127 of the Income
Tax Act, 1961 (for short, "the Acf') vis-a-vis the provision regarding
c 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
D 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
E 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.
F 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.
G
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
H
K.P. MOHAMMED SALIM v. COMMISSIONER OF 953
INCOME-TAX, COCHIN [S.B. SINHA, J.]
Assessing Officer, Calicut was challenged on the ground that A
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 8
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-8 of c
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. D
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-8 shall
apply in a case of this nature. Clause (a) of Section 158 B defines
'block period', which reads as under: E
"(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 F
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 G
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;"
H
954 SUPREME COURT REPORTS [2008) 6 S.C.R.
A 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
B 158 BC lays down the procedure for block assessment. Section t'
158 BO 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:
c
"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."
D Chapter XIV-~ only lays down special procedure for
assessment but thereby the effect and purport for which the
assessment of income tax is done does not stand obliterated.
8. An order of transfer as noticed hereinbefore can be
E 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
F 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.
G
(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
H General or Chief Commissioner or Commissioner,-
K.P. MOHAMMED SALIM v. COMMISSIONER OF 955
INCOME-TAX, COCHIN [S.B. SINHA, J.)
(a) Where the Directors General or Chief A
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 B
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 C
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 D
Gazette, authorize in this behalf.
)()()( )()()( )()()(
Explanation: In Section 120 and this Section, the word
"case", in relation to any person whose name is specified E
in any order or dire.ction 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 F
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. G
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. ·
H
956 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
B 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.
C 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
D 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 [1997] ITR
E 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
F 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 15880 cannot ipso facto hand
over the records to the Assistant Commissioner, until he
G
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
H
K.P. MOHAMMED SALIM v. COMMISSIONER OF 957
INCOME-TAX, COCHIN [S.B. SINHA, J.)
provisions of Section 127 have to be resorted to. It is for A
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
"'-~.t
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 c
section 127 fill in the gap between the stage of sections
15880 and 158BG. The impugned order passed under
Section 127 hence cannot be faulted by saying that th~-
section was not applicable. It is also not correct, as has
--.
been contended, that giving a notice under Section 127 in
0
the event of a proceeding under Chapter XIV-B would be
t 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 E
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 F
.• 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 G
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 th<i papers
are handed over in the first instance under section 15880, H
958 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
8 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.
c
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.
Nus/i Neville Wadia [(2007) 13 S.C.R. 598]. Thus, in the context
0
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.
12. We have no hesitation in arriving atthe conclusion that
E 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).
F D.G Appeal dismissed.
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