TMI Blog2004 (5) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... debarred the assessee from the benefit of the carry forward of the business loss. The assessee also revised return on 29-3-1988 showing business loss of Rs. 8,29,500. That return was not accepted by the department considering the same as invalid return. The first assessment was framed on 31-3-1989 on an income of Rs. 5,50,82,560. The assessee challenged the validity of the assessment before the ld. CIT(A) in its appeal No. 212/89-90 which was decided vide order dated 9-1-1990 and the ground for challenging the validity was dismissed. However, the assessment was set aside. The Assessing Officer framed second assessment vide order dated 10-3-1992 on an income of Rs. 5,38,14,438 which was again set aside by the ld. CIT(A) vide order dated 28-10-1992. Consequently, third assessment was framed by the Assessing Officer on 27-3-1995 at an income of Rs. 20,62,263 which was challenged by the assessee before the ld. CIT (A) who decided the same vide order dated 12-8-1995. Now the assessee is in appeal against the orders of the ld. CIT(A) i.e., 9-1-1990 and 21-8-1995. 3. We will deal first with the appeal against the order of the ld. CIT(A) dated 9-1-1990 i.e., ITA No. 226/JP/90. In this ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revised return on 29-3-1988 which could not be accepted in view of the penalty proceedings under section 27l(1)(c) of the Income-tax Act having been initiated prior to the date of filing of the said returns. He, therefore, treated the return as belated return filed by the assessee. However, return filed on 31-10-1985 was treated as return filed under section 139(5) of the Income-tax Act. The Assessing Officer also mentioned that the assessee had not produced any books of account for the period from 28-7-1984 to 31-10-1984 i.e., for the period subsequent to the search. A reference was also given to the computation of total income made by the assessee in its return of income as also to the notes furnished therein. The Assessing Officer completed assessment by making certain additions which we need not to discuss here because we are dealing with the legal issue relating to the validity of the assessment order. 5. Before the ld. CIT(A), the primary objection of the assessee was that assessment in question had become barred by limitation and was made beyond the time available under the provisions of section 153(1)(b). It was stated that the return of loss was filed for Rs. 6,28,696 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... staying locally and service would not have taken a period of 13 days. Accordingly, it was submitted that the assessment was barred by limitation. 7. After considering the submissions of the assessee, the ld. CIT(A) observed that the acknowledgement dated 17-3-1988 was having the signature and the letter issued was also dated 17-3-1988. As such, there was no material on record to show that the notice in connection with the initiation of penalty was not served on 17-3-1988. He further observed that it was true that the said person on whom this notice was served at Jodhpur was stated to have been present as per the finding in the sales tax order at the relevant point of time at Udaipur. But on that basis, a corollary could not be drawn that the said person could not have been available on the said date at Jodhpur because Udaipur is not at such a distance from Jodhpur so as to construe that it would not be practicable for the said person to be present at Jodhpur on the same date. He also pointed out that usually in the month of March, the proceedings continued late in the evening also due to the financial year coming to a close and limitation matters involved. Therefore, in such a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to that I was working in the said company as Internal Auditor, Accountant and in various other capacities since 1973. 2. That I was constantly attending to Income-tax, Sales-tax proceedings and company matters etc. of the said company from time to time before various authorities. 3. That I was constantly attending the assessment proceedings for 1985-86 before Shri Ashwini Kumar, DCIT [Assessment], Jodhpur either alone or alongwith Shri R.S. Dani, C.A. and Shri U.C. Jain, Advocate. 4. That I further state on oath as under: (a) That return was filed on 31-10-1985 showing loss of Rs. 6,28,696. (b) That this return was revised on 29th March, 1988 increasing the loss to Rs. 8,29,500. This revised return was filed at the instance and suggestion of the then IAC [Assessment] as according to him filing of revised return would extend the time-limit of passing the assessment order. (c) That the revised return was asked by him because upto end of March, 1988 examination of account was required by him was not possible to be done. (d) That no notice under section 271(1)(c) of the Income-tax Act was served upon me on 17-3-1988. (e) That on 9-3-1989, Shri Ashwini Kumar, DCIT [A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employment of another company belonging to other groups at Kota." 10. In another affidavit, attested by Notary on 17-3-1994, Shri Raj Kumar Garg, Sales-tax counsel of the assessee, deposed as under: "I, Raj Kumar Garg S/o Late Shri Jawahar Lai aged 63 years by profession an advocate and at present residing at Vakil Colony, Bhilwara hereby state on oath as under: 1. That I am practising as an advocate particularly in the sales-tax side since last more than 27 years. 2. That I am the sales-tax counsel in the case of M/s. Rajasthan Vanaspati Products Ltd. and attended the sales-tax proceedings before the CTO Range Udaipur for the year 1983-84 at Udaipur on 17-3-1988 with Shri S.K. Khandelwal, the Finance Manager of M/s. Rajasthan Vanaspati Products Ltd., Bhilwara. 3. That the sales-tax hearing of M/s. Rajasthan Vanaspati Products Ltd., Bhilwara for the year 1983-84 was fixed for 17-3-1988 and to attend the same, I alongwith Shri S.K. Khandelwal left Bhilwara for Udaipur about 7.30 a.m. by bus and attended the hearing upto 3 p.m. on that date. Therefore, I alongwith Shri S.K. Khandelwal left Udaipur at 4.00 p.m. by bus and reached Bhilwara at about 8.30 p.m. The tickets were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153(1)(b) of the Act at the relevant point of time. Further, yet another Income-tax return for assessment year 1985-86 purported to be revised return was filed on behalf of the assessee company on its own on 29-3-1988 in the office of the IAC [Assessment], Jodhpur. However, cognizance was ever taken by me as to the so called revised return at any point of time subsequently which appears to have been filed with deliberate and mischievous intentions as may be inferred from the allegations made by Shri S.K. Khandelwal in his several averments as contained in his affidavit herein: The averment made herein by Sri S.K. Khandelwal insofar as service of "notice under section 271(1)(c)" on 17th March, 1988 "is not disputed. In fact a detailed" show cause for initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 for "assessment year 1985-86" as contained in my letter dated 17th March, 1988 was issued by me in my erstwhile capacity as Inspecting Assistant Commissioner of Income-tax (Assessment), Jodhpur and duly served upon Sri S.K. Khandelwal personally as is evident from the order sheet entry dated 17-3-1988 and also from the acknowledgement slip duly fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for his presence at Jodhpur on 10-3-1989. It is further to be stated that notice under section 143(2)/142(1) of the Income-tax Act for assessment year 1985-86 and detailed show cause letter dated 3-3-1989 (Exhibit Nos. 9,10 and 11) were personally served upon Sri U.C. Jain, one of the authorized representatives of the assessee company on the said date itself i.e., 3-3-1989. The hearing was fixed for 10-3-1989 as per the said notices. It may further be stated in this context that the assessee company had been regularly avoiding any hearing for the impugned assessment proceedings right from the beginning. Hearing by my predecessor in Office and also by me vide notice/letters dated 10-4-1986, 23-4-1986, 29-8/12-9-1986, 17-9-1986, 13-11-1987 and 7-3-1988 for hearing on 23-4-1986, 15-5-1986, 17-9-1986, 29 30-9-1986, 21-12-1987 and 17-3-1988 which had been followed either by total non-compliance or else adjournment applications by the assessee company or its authorized representatives. The partly heard proceedings on 17th and 21-3-1988 as adjourned to 29-3-1988 also could not be completed in view of non-appearance by the representatives of the assessee company who deliberately chose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act dated 21-3-1988 as again issued by me in my erstwhile capacity as IAC (Assessment), Jodhpur, was duly served upon Sri S.K. Khandelwal on 21-3-1988 itself in the wake of the non-compliance of the show-cause notice dated 17-3-1988 as referred to above. Sri S.K. Khandelwal had signed on the Office copy of the impugned notice while acknowledging the receipt of the said notice in original (Exhibit No. 8). The fact of the service of the said notice was duly noted in the order sheet entry dated 21-3-1988 which too was again signed by Sri S.K Khandelwal on his own free will as is the usual practice. In this view of the matter, the averments made by Sri S.K. Khandelwal as to the service of the impugned notice through "blank slips as acknowledgement of notice under section 271(1)(c) etc." are totally incorrect and false inasmuch as he had acknowledged the receipt of the impugned notice duly filled in by the Office of the then IAC (Assessment), Jodhpur on the Office Copy of the same. The later parts of the averment made herein by Sri S.K. Khandelwal i.e., "I never realized...........good faith" being irrelevant, as it is, does not call for any comment whatsoever. (G) The av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri S.K. Khandelwal with reference to the said I.T. assessment proceedings] and also the acknowledgement slip for having received the show-cause notice issued by the undersigned in my erstwhile capacity as the then IAC [Assessment], Jodhpur vide letter dated 17-3-1988 [Vide Exht. No. 3 of the counter-affidavit on the affidavit of Shri S.K. Khandelwal]. 4. The averments made by Shri R.K. Garg as to Shri S.K. Khandelwal having discontinued his journey at Bhilwara on 17-3-1988 at about 8.30 p.m. is strongly contested and rebutted in view of his personal appearance having been made at Jodhpur to attend to I.T. assessment proceedings of the aforesaid company for assessment year 1985-86 vide order sheet entry dated 17-3-1988 and also the acknowledgement slip, both having been signed by him in my presence at Jodhpur in my office on the said date [Exh. Nos. 2 and 3 of the counter-affidavit signed by me with reference to the affidavit of Shri S.K. Khandelwal in regard to the said I.T. assessment proceedings of M/s. Rajasthan Vanaspati Products Ltd., Bhilwara]. 14. Similarly, the relevant portions of the contents of the counter-replies to the affidavit of Shri U.C. Jain vide counter-af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned notices had been personally served upon Shri S.K. Khandelwal way back on 17-3-1988 and 21-3-1988 respectively as are evident from the order sheet entries for the said dates and the acknowledgement slip as well as office copy of the proforma notice under section 271(1)(c) of the I.T. Act as enclosed with my counter-affidavit in relation to yet another affidavit of Shri S.K. Khandelwal containing identical allegations against me [Exts. 2, 3 and 8 respectively of the said counter-affidavit]. 3. No comments are called for as to the averments made herein by Shri U.C. Jain inasmuch as there could not be any possibility by any stretch of imagination of his sending the impugned notices to the party concerned alongwith his "forwarding letter of same on 13-3-1989" which could be at the best a mere figment of his own imagination and distortion of real facts on his part for mala fide purposes with dubious intentions. Being an interested deponent, Shri U.C. Jain's acceptance of the contention of Shri S.K. Khandelwal, is meaningless and notworthy of reliance." 15. Before us, the ld. counsel for the assessee reiterated the submissions made before the authorities below. It has been fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's voucher, respectively. It was vehemently argued that the affidavits of Shri S.K. Khandelwal, Shri Raj Kumar Garg and Shri U.C. Jain would clarify the complete facts and circumstances under which the receipts were obtained by the Assessing Officer in respect of notices which were handed over to Shri U.C. Jain on 13-3-1989, who immediately sent these to the assessee. Our attention was drawn towards pages 24 to 32 of the PB of the assessee which are the copies of the letter alongwith notices, etc. sent by Shri U.C. Jain on 13-3-1989 to the assessee. On the basis of the above, it was stated that no notice under section 271(1)(c) of the I.T. Act was served on 17-3-1988 but the same was served on 13-3-1989. It was emphasized that no entry for issuance of show-cause notice under section 271(1)(c) of the I.T. Act had been made in the order sheet entry dated 17-3-1988 and further entry for issuance of notice under section 271(1)(c) of the I.T. Act on 21-3-1988 appears to be inserted subsequently, particularly when the notice dated 21-3-1988 alleged to have been served to the assessee was not having any entry/dispatch number while the copy furnished by the department available at pg. 8 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. In his rival submissions, the ld. D.R. strongly supported the impugned order passed by the ld. CIT(A). He further submitted that there are certain provisions in the Act, which cast legal obligation on the officer for recording reasons for his action e.g. section 148(2) mentions that the Assessing Officer shall record his reasons before issuing notice under section 148 and similarly section 281B(2) clearly mentions that the Chief Commissioner/Commissioner/Director General may extend the period of provisional attachment only after recording the reasons for doing so. However, the provisions of section 153(1)(b) do not cast such legal obligation on the part of the Assessing Officer to record his satisfaction about the concealment of income and communicate the same to the assessee for acquiring larger period provided for finalization of assessments where provisions of section 271(1)(c) are attracted. He also stated that no doubt that the provisions of section 271(1)(c) of the I.T. Act cast legal obligation on the part of the Assessing Officer for recording his satisfaction about the concealment but the same is only regard to the imposition of actual penalty. It was stated that fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the instant case, it is not disputed that the accounting year of the assessee for assessment year under consideration ended on 31-10-1984 and the due date for filing of the return under section 139(1) was 30-6-1985 and the assessee sought extension of time for filing the return which was granted upto 30-9-1985. However, the return was filed on 31-10-1985. As such, the return was not filed either under section 139(1) or under section 139(3). In fact, the return was filed under section 139(4) of the I.T. Act. The assessee also furnished revised return on 29-3-1988 which was not a valid return in view of the provisions of section 139(5) of the I.T. Act which reads as under: "If any person having furnished a return under sub-section (1) or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier." 20. From the facts of the case, it would be clear that the original return was neither furnished under sub-section (1) of section 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an assessment year commencing on or after 1st day of April, 1969. In the instant case, the assessment year was 1985-86. Therefore, the assessment could have been completed before 31-3-1988, if the provisions of section 153(1)(a) were applicable. However, the case of the Assessing Officer is that the provisions of section 153(1)(b) were applicable. Therefore, the time for completing the assessment was 8 years from the end of assessment year because this case was falling within clause (c) of sub-section (1) of section 271 of the I.T. Act. Considering those provisions, the Assessing Officer framed the assessment on 31-3-1989. On the contrary, the claim of the assessee is that the assessment completed by Assessing Officer was barred by limitation because section 153(1)(a) was applicable and not clause (b) of section 153(1) of the I.T. Act. The case of the department is that the assessee was informed about the concealment of income by issuing show-cause notice dated 17-3-1988 which was served upon Shri S.K Khandelwal on 17-3-1988 and subsequently notice under section 271(1)(c) of the I.T. Act dated 21-3-1988 also served upon the same person. On the contrary, the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nand Agarwal but stated that Shri S.K. Khandelwal appeared before him and show-cause notice was served upon him. It is also stated that Shri S.K. Khandelwal received the notice and furnished acknowledgement slip which is available at Exh. 3 at pg. 23 of the department's compilation. On perusing that acknowledgement slip, it would be clear that no assessment year had been mentioned therein and even nothing is stated about the section under which show-cause notice had been issued. The claim of the assessee is that that blank slip was got signed from Shri S.K. Khandelwal not on 17-3-1988 but on 10-3-1989 when he was asked to appear in person by the Assessing Officer after making a telephone call on 9-3-1989. The claim of the assessee is that the so called show-cause notice had been issued on 10-3-1989 but the signature was taken on back date i.e., 17-3-1988. It was also contended by the ld. counsel for the assessee that the notice issued under section 271 dated 21-3-1988 was never served on 21-3-1988 because the same was served on 10-3-1989 to Shri S.K Khandelwal. It is also brought to our notice that on the said notice, there was no number. It is seen that in the copy furnished by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show-cause notice dated 17-3-1988, no diary number is given which creates a doubt against the department. 22. Similarly, notice issued to the assessee dated 21-3-1988 is without number. However, in the copy of the department, number 17/20 had been given which shows that the said number was written later on. From the above narrated facts, it seems that Shri S.K. Khandelwal was not present before Assessing Officer on 17-3-1988, the position had been clarified in his affidavit vide paras (i) to (k) which we have already reproduced in the upper part of this order. That contention of Shri S.K. Khandelwal is supported by the affidavit of Shri R.K. Garg, Advocate who was present with him before the Sales-tax Authorities at Udaipur upto 3 p.m. Shri U.C. Jain, the then counsel for the assessee also stated in his affidavit that the show cause for initiation of penalty under section 271(1)(c) of the Act dated 17-3-1988 addressed to Shri K.K. Mansinghka, Managing Director of the assessee along with prof orma show-cause notice under section 271(1)(c) of the I.T. Act dated 21-3-1988 was handed over to him by the DCIT Spl. Range, Jodhpur on 13-3-1989 for sending it to the party concerned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter shown to be handed over on 17-3-1988 may be an afterthought because that does not bear the complete signature of the Assessing Officer. It is also noticed that in the letter dated 17-3-1988, the Assessing Officer asked the assessee to submit the explanation as to why the cash found from the different premises during the course of search should not be treated as income from undisclosed sources. From the above observation of the Assessing Officer, it would be clear that he was not sure as to whether there was concealment on the part of the assessee and if that was the position, notice under section 271(1)(c) of the I.T. Act was not a valid notice because concealment had not been proved. Similarly, the Assessing Officer asked the assessee as regards to on money i.e., premium on sale of finished goods. But nothing had been brought on record that a particular amount was received by the assessee as a premium of sale of finished goods and that there was concealed income which was liable to be penalized under section 271(1)(c) of the Income-tax Act. The Assessing Officer also mentioned the name of some of the sister concerns of the assessee in para 5 of the letter dated 17-3-1988 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m no such notice was served. From the above facts, it would be clear that there is some force in the contention of the assessee that the letter dated 17-3-1988 and show-cause notice dated 21-3-1988 were handed over to Shri U.C. Jain, the then counsel of the assessee on 13-3-1989 and Shri U.C. Jain vide letter dated 13-3-1989 sent the same to the assessee by mentioning that the show cause letter dated 17-3-1988 addressed in the name of Shri K.K. Mansinghka, Managing Director of Rajasthan Vanaspati Products Ltd., Bhilwara for assessment year 1985-86 alongwith proforma show-cause notice under section 271(1)(c) of the Income-tax Act dated 21-3-1988 were handed over to him by Shri Ashwini Kumar, DCIT, Spl. Range, Jodhpur on 13-3-1989 and his signature had not been taken in the acknowledgement stating that Shri S.K. Khandelwal had already given his acknowledgement on 10-3-1989. The aforesaid submissions had been furnished by Shri U.C. Jain in his affidavit attested by notary on 19-10-1994. 24. Against the above contention, a counter-affidavit had been filed by the department wherein it had been stated that the averments made by Shri U.C. Jain were totally false, frivolous and mischievo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings on 21-3-1988 and office is directed to issue demand notice and challan and also fresh notice under section 271(1)(c) of the Act while completing the assessment proceedings notwithstanding the proceedings already initiated. The above observation of the Assessing Officer also shows uncertainty in the mind of the Assessing Officer and inference can be drawn that the penalty proceedings under section 271(1)(c) of the Act were initiated only after completion of the assessment on 31-3-1989. Moreover, it is a fact as per the discussion made in the former part of this order that on 21-3-1988 the Assessing Officer was not in a position to know as to whether there was any concealment by the assessee for which it became liable for penalty under section 271(1)(c) of the Income-tax Act. The Hon'ble Guwahati High Court in the case of Smt. Savitri Rani Malik v. CIT [1990] 186 ITR 701 held as under that: "Statutes of limitation are jurisprudential necessities. They achieve peace and good administration and do not advance morals and good conduct. If the result of the satisfaction of statutory authorities result in evil or civil consequences, the affected persons must be informed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the ITO in the present case had not made the assessment under section 143 r/w section 271(1)(c). But that apart, in my opinion, the major obstacle to the application of section 271(1)(c) is the fact that in order to bring it within the said provisions, the ITO has to satisfy himself that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof. Such a satisfaction had never been recorded in the proceeding and I entertain a great doubt whether such a satisfaction could have been recorded at all without giving an appropriate opportunity to the petitioner to have his say in the matter. In the circumstances, I am unable to uphold the assessment as proposed in the manner suggested by Mr. Pal and as indicated by the ld. Additional Commissioner or to hold that even if the assessment was not within the sanction of section 155, it will be within the sanction of section 143 r/w section 271(1)(c)." 27. In the instant case also, at the time of issuing the notice under section 271(1)(c) of the Income-tax Act dated 21-3-1988 there was no order made under section 143(3) which, in fact, was passed on 31-3-1989. Therefore, the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department. In the case of Suraj Pal Singh it has been observed that: "The High Court on a detailed consideration of the facts and circumstances of the case held that Tribunal was right in holding that the case was not one to which the provisions under section 271(1)(c) of the Income-tax Act, 1961 corresponding to section 28(1)(c) of the old Act applied inasmuch as the ITO had not recorded any finding or brought any material on record within a period of 4 years to show that it was a case of concealment. The High Court agreed with the findings recorded by the Tribunal that the assessment was clearly time barred. After hearing ld. counsel for the appellant, we do not find any good reason to take a different view. The appeal fails and is accordingly, dismissed. There will no order as to costs." From the above, it would be clear that the observations made therein supports the case of the assessee and not of the department. 31. Similarly, in the case of Kumar Jagdish Chandra Sinha v. CIT [1996] 220 ITR 67 the Hon'ble Supreme Court has held as under: "For clause (b) of sub-section (1) of section 153 to apply, the ITO must, within the period of 4 years (or whatever the applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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