TMI Blog2005 (8) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act after 1962-63, moreso, when the plain reading of s. 147, Expln. 2(b) in respect of reassessment of income is as under: When a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance of relief in the return." 3. The facts, in brief leading to the dispute are that the assessee-firm is engaged in the business of manufacturing of note books and long books. The assessee has submitted the return declaring net loss at Rs. 4,22,259 on 31st Oct., 1998. The loss was assessed by passing an order under s. 143(1)(a) on 21st Dec., 2000. A notice under s. 148 was served on the assessee on 9th March, 2000. On 9th Aug., 2000, the assessee had also received one letter alongwith it a valuation report of the Government valuer estimating the cost of construction at Rs. 27,48,663 and the objections of the assessee were invited to the valuation estimated by the valuation officer within one month from the. date of receipt of the said letter. A survey operation under s. 133A was carried out on the business premises of the assessee on 13t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank FDR of Rs. 1,10,000. 3.6 The assessee had shown cost of construction in the books of account at Rs. 8,16,307. The assessee in the return submitted in response to notice under s. 148 on 14th March, 2002 offered additional sum bf Rs. 2,50,000 which included part sum of Rs. 75,727 which on account of inadvertent mistake was shown as revenue expenditure in the books of account. The total cost of construction thus according to assessee was Rs. 10,66,037. The assessee, in the course of the assessment proceedings, also submitted the valuation report from the approved valuer. The assessee filed the objections to the estimated cost of construction by the valuation officer. The contentions of the assessee before the AO were that the valuation officer had not given any opportunity before rejecting the objection of the approved valuer of the assessee and the valuation officer has not valued the property as per itemwise cost of construction. The AO taking the estimated cost as per valuation report at Rs. 27,48,663 and reducing therefrom only Rs. 8,16,307 made an addition of Rs. 19,32,235. 3.7 The AO in para 12 has held that the depreciation cannot be entertained and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act, 1961, was obtained and kept on record. I have carefully gone through the facts of the case and submissions made by the appellant. It is noticed that return of income was furnished on 31st Oct., 1998 declaring loss at Rs. 4,22,259. The order under s. 143(1)(a) of the IT Act, 1961 was passed on 21st Dec., 2000. It is noticed that proceedings under s. 147 were initiated and notice was issued on 9th March, 2000. Since the proceedings were pending with the AO, no valid notice under s. 148 of the IT Act can be issued to the assessee. Respectfully relying upon the decision of the apex Court reported in Trustees of H.E.H. The Nizam's Supplemental Family Trust VS. CIT (2000) 159 CTR (Sc) 114 : (2000) 242 ITR 381 (SC), I hold that the ratio as laid down by the apex Court squarely applies to the facts of the assessee's case and a notice issued under s. 148 is bad in law and invalid. I therefore, hold that the consequential assessment framed thereon is also bad in law. The AO's order passed under s. 143(3) r/w s. 147 of the IT Act is, therefore, invalid and hence cancelled. The appeal on ground Nos. 1 and 2 is, therefore, allowed." Since the learned CIT(A) cancelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 143(3) r/w s. 147. Further, he invited our attention to the finding given by the learned CIT(A) in para 4 of his order and submitted that the learned CIT(A) has decided the case purely an technical viewpoint and not on merit. He further submitted that the decision of the apex Court relied (on) by the learned CIT(A), reported in (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC), was not applicable to the facts of the present assessee at all. He submitted that in that case, the assessment year involved was 1962-63 and the assessee had claimed a refund for which order under s. 143(1), under the old provisions of the Act, (i.e., prior to asst. yr 1989-90) was very much required but in the case of this assessee, the assessment year involved is 1998-99 and (in) this case, neither the refund was claimed by the assessee nor the tax was shown as payable in the return. He submitted that the AO was to process the return of the assessee if required under s. 143(1). He further submitted that the copy of intimation if required was not issued to the assessee by the AO at all. Inviting our attention to amendment made to s. 143(1), he submitted that s. 143(1) of the IT Act has been amended by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO, submitted that the reopening was not bad in law and the CIT(A) has wrongly held the notice under s. 148 as bad in law and invalid and consequential assessment framed as bad in law. 7. On the other hand, the learned counsel for the assessee, Shri K.P. Dewani, submitted that the assessee filed the return of income on 31st Oct, 1998 and the return was processed under s. 143(1)(a) on 21st Dec., 2000. A notice under s. 148 of the Act was issued on 9th March, 2000 and the proceedings were pending on the date of issue of notice under s. 148 of the IT Act, 1961. He further submitted that the assessee submitted valid return and it is inconceivable to commence reassessment proceedings without terminating the valid return submitted by the assessee. Relying on the decisions reported in (2000) 159 CTR (SC;) 114 : (2000) 242 ITR 381 (SC), CIT vs. Ranchhoddas Karsondas (1959) 36 ITR 569 (SC), Satishchandra Arya vs. ITO (1983) 37 CTR (MP) 237 : (1984) 146 ITR 334 (MP), (2001) 116 Taxman 178 (Chd)(Mag), CIT vs. Rajendra G. Shah and Jhunjhunwa1a Vanaspati Ltd. vs. Asstt. CIT (2004) 189 CTR (All) 46 : (2004) 266 ITR 664 (All), he submitted that reopening of assessment when val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument sake, if at all the plea of the assessee is acceptable, then the proceedings in the case of the assessee stood concluded on the very day, the return of income Was filed and no demand or refund was due on this return of income. This is very clear in view of ss. 143(1) and 143(1)(a) of the IT Act, read with the first proviso. He, therefore, submitted that the AO was well within his jurisdiction to issue the notice under s. 148 of the Act when the time-limit for issuance of notice under s. 143(2) had expired. He, therefore, submitted that the order of the CIT(A) is erroneous both on law and the facts of the case and, hence the same may kindly be reversed and the order of the AO be restored. 9. We have considered the facts and circumstances of the case, submissions made by both the parties and carefully gone through the orders of the lower authorities. We have also deliberated upon the case laws cited at Bar on behalf of both the parties and the case laws relied upon by the 10weL authorities in their respective orders. The assessee submitted the return of income on 31st Oct., 1998 declaring loss of Rs. 4,22,259. According to the assessee, the order under s. 143(1)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed by the assessee but no assessment has been made and it is noticed by the AO that the assessee had understated the income, notice under s. 148 can be issued. The judgments reported in (2000) 162 CTR (Ker) 357 : (2000) 245 ITR 353 (Ker), (1997) 141 CTR (All) 37 : (1998) 229 ITR 46 (All), (1991) 95 CTR (MP) 274 : (1991) 189 ITR 339 (MP) and (2004) 85 ITJ (Hyd) 441 have held that the intimation cannot be equated with the assessment. Now it is a well-settled law that the proceeding cannot be treated as assessment. Here in the case of the assessee, nothing was intimated and the AO only affixed his seal on page NO.2 of the return which was not served upon the assessee at all and hence, there was no intimation at all. We also do not find any substance in the contention of the assessee's counsel that Expln. 2(b) of s. 147 only raises a fiction that there is escapement of income and it does not authorise that the reassessment proceedings can be commenced during the pendency of the proceedings in view of the fact that in this case no proceedings were pending for disposal when the AO issued notice under s. 148. We also do not agree with the conclusion of the learned CIT(A) that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after affording reasonable opportunity of being heard to the assessee. 16. In the result, the appeal of the Revenue is allowed and the matter is restored to the file of the CIT(A) for decision on merits. C.O. No. 51/Nag/2003: 17. The grounds raised by the assessee in its cross-objection read as under: "1. The learned CIT(A) ought to have decided the various grounds raised in the memo of appeal challenging the additions made by the AO. 2. The learned CIT(A) ought to have deleted the following additions made by AO: (a) Rs. 5,000 out of shop expenses. (b) Rs. 57,125 out of shop expenses. (c) Rs. 9,530 out of expenses. (d) Rs. 10,850 on account of expenses for purchase of TV. (e) Rs. 13.467 and Rs. 5,500 under s. 69C. (f) Rs. 6,565 as interest accrued. (g) Rs. 57,125 and Rs. 9.530 addition made twice (h) Rs. 19,32,235 unexplained investment as per valuation report of DVO. 3. The learned CIT(A) ought to have directed to grant deduction under s. 80-IA as claimed in the assessment proceedings. 4. The learned CIT(A) ought to have directed to grant depreciation on the asset used for the purpose of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
