TMI Blog1994 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceedings and vide his order dated 21-11-1987 imposed a penalty of Rs. 1,10,000 under section 271(1)(a). The assessee challenged the quantum assessment as also the penalty so imposed before the ld. CIT(A). The assessee did not succeed against the quantum appeal. However, he succeeded in his appeal against imposition of penalty before the ld. CIT(A). Thus, both the assessee and the revenue are before us by way of second appeal. 3. The assessee challenged the order dated 5-5-1987 of the ld. CIT(A) on the following grounds : 1. That on the facts and circumstances of the case the ld. CIT(A) have erred in confirming the order of the ITO and holding that provisions of section 153(1)(b) are applicable in this case for the purpose of limitation. 2. That the appellant furnished voluntary return of income and produced the photocopy of the acknowledgement before the ITO and also before the CIT(A) and therefore for the purpose of limitation provisions of section 153(1)(a)(iii) of the Income-tax Act, 1961, are applicable as the notice was issued under section 148/147(a) of the Income-tax Act, 1961. This fact can also be verified from the registers maintained by the Income-tax Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153(1)(b) and thereby impliedly held that the ITO got the extended time limit of eight years for completing the assessment and as the assessment was completed within such time limit, the same was valid in the eyes of law. It is against this finding of the ld. CIT(A) that the assessee is before us by way of second appeal. 5. During the course of hearing before us, the assessee sought to take the following additional grounds vide his petition dated 20-4-1994 : "(a) That the ld. CIT(A) has erred in confirming the assessment which was in pursuance of notice under section 147, which itself was illegal, bad in law and without jurisdiction. (b) That the notice issued by ITO was bad in law and void ab initio for want of satisfaction of the conditions precedent laid down under that section, as there was neither a failure to file the return on the part of the assessee nor the assessee had failed to disclose material facts necessary for making the assessment. (c) That the notice under section 147/148 also vitiated in law on the ground no assessment in the case of assessee was made by ITO in pursuance of the return filed on 29-8-1975 and hence there could be no reassessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was non-fulfilment of conditions precedent at the time of initiation of reassessment proceedings on the ground that during the pendency of return filed under section 139 reassessment proceedings could not commence. However, no authority was cited by him. 10. The ld. counsel for the assessee further argued that if his arguments raised in the preliminary objections happen to be overruled, even then the assessee deserved to succeed on the ground that the impugned assessment has been framed beyond the statutory time limit prescribed under section 153(1)(a)(iii) of the Act and the ld. CIT(A) was not justified in holding that in the facts and circumstances of the case of the assessee the ITO could take recourse to the provisions of section 153(1)(b), while framing the impugned assessment order dated 20-3-1984. The ld. counsel invited our attention to the assessee's letter dated 28-2-1984 addressed to the ITO, A Ward, Bhopal (copy at page 1 of the compilation) and argued that in spite of bringing it to the kind notice of the ITO, A Ward, Bhopal, about filing of voluntary return by the assessee on 29-8-1975 for the assessment year 1975-76 disclosing income of Rs. 18,700 and payment of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time limit as provided in section 153(1)(b) read with Explanation 1(i), which has been sustained by the ld. CIT(A), for the reasons recorded by him in the impugned order. He argued that the findings recorded by the ld. CIT(A) on page 2 of his penalty order dated 17-5-1988 to the effect that the version of the assessee, having filed the return on 29-8-1975 is correct has absolutely no bearing in deciding the quantum appeal, wherein ld. CIT(A) agreed with the ITO that even presuming that the return filed by the assessee on 29-8-1975 was pending for assessment, the assessee's case was covered by the limitation of eight years for the reasons recorded by the ITO in his order dated 20-3-1984, which was within time as prescribed under section 153(1)(b) read with Explanation 1(i) and deserves to be upheld. 12. Coming to the revenue's appeal against deletion of penalty levied by the ITO at Rs. 1,10,000 under section 271(1)(c) of the Act for the assessment year 1975-76 by the ld. CIT(A), the ld. Departmental representative referred to para 2 of the penalty order dated 21-11-1987 and the observations of the ld. CIT(A) contained in his order dated 5-5-1987 in quantum appeal and argued that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 15. It is, thus, evident that the assessment, reassessment or recomputation under section 147 can commence with the service of notice under section 148 of the Act after recording reasons by the ITO. There is no dispute that in the case before us, notice dated 1-8-1978 was issued for the assessment year 1975-76 and served on the assessee on 3-8-1978. In response thereto, no return was filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above statement, there is no doubt in our mind that the assessee filed the return suo motu for the assessment year 1975-76 on 29-8-1975 declaring income from liquor business, truck plying and property income and his income from the above declared sources as per his version aggregated to Rs. 18,700 on which he paid advance tax of Rs. 1,850. We may state that the revenue has not alleged at any stage that the above return was filed by the assessee before the ITO, who did not exercise jurisdiction over the assessee either territorial or otherwise. 18. Now, in the above backdrop, let us go back to the provisions of section 147 of the Act. "S. 147. Income escaping assessment, If-- (a) the ITO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee filed return for the assessment year 1975-76 under section 139 of the Act voluntarily, which was pending for disposal by the ITO having jurisdiction over the assessee. In similar circumstances, their Lordships of the Hon'ble Supreme Court held in the cases of Estate of the Late A.M.K.M. Karuppan Chettiar v. CIT [1969] 72 ITR 403 and CIT v. M.K.K.R. Muthukaruppan Chettiar [1970] 78 ITR 69 that if returns filed voluntarily, which are ignored and are not disposed of by completing the assessments, the conditions precedent for assuming jurisdiction for issue of notice under section 148 cannot be said to have been fulfilled. Respectfully following the decisions supra, we hold that the impugned reassessment dated 20-3-1984 made as a consequence to issue of a notice under section 148 of the Act is invalid and is liable to be quashed. We order accordingly. Thus, the assessee succeeds in his preliminary objection itself. The order dated 5-5-1987 of the ld. CIT(A) is hereby set aside. 23. We have pursued the authorities cited on behalf of the assessee in respect of the impugned assessment having been made by availing the extended limitation provided under section 153(1)(b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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