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TMI Blog2011 (3) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for certified copies of the reasons recorded by the Assessing Officer and paying the necessary charges is valid? 2. Even though T.C.Nos.672 to 675 of 2009 were filed along with T.C.Nos.886 to 889 of 2005, they got numbered long after the admission of T.C.Nos.886 to 889 of 2005 and are yet to be admitted. As the issues arise out of the common order of the Tribunal dated 18.08.2004 relating to the assessee and other co-owners and the learned counsel appearing for the assessee in the above said appeals are one and the same, these appeals are formally admitted on the questions of law raised as above. 3. T.C.Nos.672 to 675 of 2009 relate to assessment years 1996-97, 1993-94, 1994-95 and 1995-96. T.C.Nos.886 to 889 of 2005 relate to assessment years 1989-90, 1990-91, 1991-92 and 1992-93. All these appeals arise out of the common order of the Tribunal, wherein, apart from this assessee, 9 other co-owners' appeals were also considered. 4. It must be pointed out herein that on an earlier occasion, in respect of the questions of law raised by the Revenue in the case of G.Palaniappan, this Court considered the identical questions of law raised by the Revenue arising in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby the claim for deduction under Section 24(vi) of the Income Tax Act (hereinafter referred to as 'the Act') on the proportionate share of interest payable on the capital borrowed from numerous parties aggregating Rs.1,78,09,878.91 towards the cost of construction of the building Kannammai Buildings was granted to the assessee. However, on information coming to his possession that the cost of construction of the building was about Rs.60,00,000/- in 1965, carried on entirely through borrowed funds and that the co-owners had withdrawn huge amounts of the borrowed funds for purposes other than for payment of creditors who lent money for the construction of the building, the Assessing Officer found that the co-owners claimed excess deductions towards interest on borrowed capital, leading to escapement of income. Since the cost of construction of the building was at Rs.60 lakhs, that the borrowed funds were nearly 3 to 5 times more than the total cost of construction, the interest admissible under Section 24(1)(vi) of the Act could be worked out only on the above-said amount and nothing more. Thus based on the cost, the Assessing Authority viewed that there was a strong indication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Authority not furnishing the copies of the reasons recorded for reopening the assessment under Section 148 of the Act. As regards the non-furnishing of the copies of the reasons recorded for reopening of the case, in spite of the request made by the assessee, the Tribunal pointed out that as admitted by the Revenue, the Assessing Authority furnished the gist of the reasons recorded and not the entire reasons recorded by the Assessing Officer. The Revenue's contention that the assessee had to apply for certified copies along with the copying fee, however, was rejected by the Tribunal, since there was no confidentiality attached to the reasons recorded for reopening the case. Consequently, the Tribunal held that there was violation of the statutory provisions and the order passed suffered an illegality. 8. Coming to the question of applicability of Section 143(2) of the Act and the aspect of limitation, the Tribunal held that the provisions applicable for a regular assessment, as regards the return filed under Section 139 of the Act, would be applicable to the extent possible, while processing the return filed in pursuance of a notice under Section 148 of the Act. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40 37984 15481 8 1989-1990 62119 14803 100410 30928 16125 Considering the circulars issued by the Board setting the monetary limit for filing the appeal under Section 260-A of the Act, learned counsel appearing for the respondent submitted that the Department's appeals have to be, in limine, rejected. Secondly, this Court had already considered the issue on merits on the claim for deduction under Section 24(1)(vi) of the Act in the appeals preferred by the Revenue in respect of more than one co-owner, in the decision reported in [2006] 284 ITR 257 (Commissioner of Income-tax v. C. Palaniappan) (to be read as G.Palaniappan - (2005) 198 CTR (Mad) 490 (The Commissioner of Income Tax Vs. M. Chellappan and P.L. Gandhi), which related to the case of one of the co-owners - Chellappan. T.C.No.843 of 2004, relating to P.L.Gandhi, one of the co-owners, was dismissed by this Court by order dated 28.4.2009, on account of low tax effect. T.C.Nos.686 to 690 and 707 to 709 of 2004, in the case of Chellappan and Gandhi, were dismissed by this Court on 9.11.2004. Thus when the issue is already concluded, no useful purpose would be served in considering afresh the question of law now raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment or recomputation under Section 148 of the Act. Considering the above-said aspects, the Tribunal is not correct in holding that the notice issued under Section 148 of the Act has to fail, by reason of the limitation prescribed under Section 143(2) of the Act. 11. He pointed out that that apart from the procedure to be followed on the notice given under Section 148 of the Act, when specific provisions are brought under Section 148 of the Act to deal with the notice issued to make the assessment under Section 147 of the Act, it is no longer open to the assessee to state that the proceedings are hit by limitation. As regards the furnishing of copies, he pointed out that when the gist of the reasons are already given, the Tribunal is not correct in observing that the reasons were not disclosed to the assessee. As regards the tax effect in all these cases, he pointed out that considering the question of law raised, the tax effect has no significance in considering the maintainability of the appeal. 12. Per contra, learned counsel appearing for the assessee pointed out that when there is a failure to follow the procedure under the provisions of Section 143(2) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conformity with Section 143(2) of the Act, the question of even saving the proceedings by referring to the proviso under Section 148 of the Act, does not arise. He further emphasized that going by the Board's circular, fixing the monetary limit for filing tax cases applicable herein, when the other co-owners' appeals were dismissed by this Court and some of the co-owners' appeals were not even appealed against by the Revenue, the contention advanced by the Revenue does not deserve any countenance. 13. Heard the learned counsel appearing for both sides and perused the material on record. 14. It is not denied herein that in respect of one of the co-owners G.Palaniappan (cause title given wrongly as C.Palaniappan), this Court had considered the identical question on limitation on the reopening of assessment on the disallowance of the claim of interest on borrowed capital. Referring to the decision given in the case of a co-owner by name Chellappan, reported in [2006] 281 ITR 444 (Commissioner of Income-tax v. M. Chellappan), which followed the decision of the Punjab and Haryana High Court reported in [2002] 255 ITR 220 (Vipan Khanna v. Commissioner of Income-tax), this Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice: Provided further that in a case -- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.-- For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served in this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. " 16. The explanation to the said Section was also added under Finance Act 2006, with effect from 01.10.2005, that by way of removal of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside the other provisions on the filing of the return and self-assessment which are not relevant for the purpose of our case, the next relevant provision herein is Section 143 of the Act, dealing with assessment. Where a return has been furnished under Section 139 of the Act or in response to a notice under Section 142(1) of the Act, in order to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, under Section 143(2) of the Act, the Assessing Authority has to serve a notice on the assessee, requiring him either to attend his office or to produce or caused to be produced therein, on a date to be specified therein, such evidence that the assessee relies upon in support of the return. Proviso to sub section (2) of Section 143 of the Act states that a notice under the Section has to be served within a period of 12 months from the end of the month in which the return is furnished and any notice that has been served beyond the period of 12 months would make the entire proceedings herein, invalid and illegal. Sub Section (2) of Section 143 of the Act, as stated above, was subsequently amended under the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation in a case of filing a return on a notice issued under Section 148 of the Act would be the one provided under the proviso to Section 148 and limitation available for making an assessment or reassessment or recomputation, as specified under Section 153(2) of the Act and nothing beyond. Hence, in respect of the returns filed between the period 1.10.1991 and 30.9.2005 pursuant to the proceedings under Section 148 would not be hit by limitation on the issuance of notice under Section 143(2) of the Act. The only limitation that has to be seen to confer validity to the proceedings under Section 148, would be the time limit given under Section 153(2) for making the assessment, reassessment, recomputation and nothing beyond. Thus even though under normal circumstances, for a regular assessment falling under Section 143 proceedings, a notice issued after the expiry of 12 months would make the proceedings illegal; yet, as regards the notice issued under Section 148 of the Act leading to the filing of return, the returns filed during the period commencing from 1.10.1991 to 30.9.2005 fall under the proviso to Section 148(1) of the Act. The only requirement for compliance of the procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act under the Finance Act 2006, with the notice issued under Section 143(2) beyond 12 months and other requirements as regards the period covered and the limitation available for passing the order under Section 153 of the Act, we do not find any ground to uphold the order of the Tribunal on the aspect of limitation. We agree with the submission of the Revenue that the notices are saved by reason of the proviso to Section 148 of the Act, introduced under the Finance Act, 2006. Consequently, the first question raised, has to be answered in favour of the Revenue. 20. Learned Counsel appearing for the assessee pointed out that the intention of the Legislature in saving limitation as regards the notice issued beyond the time limit under Section 143(2) in respect of the proceedings under Section 148 of the Act cannot be fully achieved, so long as the provisions under Section 143(2) remained unaltered. Thus Section 143(2) remaining as it is, and with no ambiguity in the provision, the amendment in the year 2006, cannot be called a curative legislation to remove any illegality in the Section to result in the validation of the proceedings. In this connection, learned counsel relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 955 SC 661 (The Bengal Immunity Company Ltd. Vs. The State of Bihar and others) and AIR 2007 SC 2129 (UCO Bank and Anr. Vs. Rajinder Lal Capoor). In so providing a specific treatment for cases falling under Section 148 of the Act, the question of considering the amendment as a curative legislation does not arise, or for that matter, the amendment failing to meet the avowed object by reason of not carrying out a corresponding amendment to Section 143(2) of the Act. 22. In this connection, the decisions cited by the learned counsel appearing for the assessee as regards the amendment not meeting up the object with which it was made, needs to be seen. The first of the decisions is the Bombay High Court decision reported in [1977] 109 ITR 602 (Bom.) (Yogindraprasad N. Mafatlal Vs. Commissioner of Income-tax, Bombay City-I). The said decision was concerned about Section 64(1) of the Act, particularly with reference to the phrase "deferred". The question therein was as to whether the income of the minor daughter of the settlor could be included in the assessee's total income during the period of minority only. The Bombay High Court pointed out that the word "immediate" or "deferred" has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenged on the score that the law had undergone a change thereafter, after the passing of the assessment order. The Karnataka High Court, in the decision reported in [2010] 325 ITR 219 (KAR) (Shriram Chits (Bangalore) Limited. v. The Joint Commissioner of Income-tax), applied the said decision. The said decision related to an order of rectification passed by the Officer in view of the subsequent retrospective amendment to Section 234 of the Income Tax Act under the Finance Act, allowing the appeal filed by the assessee. By following the decision reported in [2007] 295 ITR 282 (SC) (CIT Vs. Max India Ltd.), the Karnataka High Court held that it was not possible for the Assessing Officer to reopen the case, since, at the time of passing of the order, the Officer had followed the decision reported in [2001] 247 ITR 209 (Commissioner of Income-tax Vs. Ranchi Club Ltd.). Thus the subsequent amendment, by itself, would not allow the Officer to reopen the assessment. It must be noted herein that the scope of Section 154 of the Act is not the same as under Section 148 of the Act, to touch on the fact of an amendment of the provisions brought therein. Given the scope of Section 263 as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied for certified copies of the reasons recorded by the Assessing Officer by paying the necessary charges. 27. We do not appreciate this line of reasoning of the Revenue herein, particularly when the Revenue is duty bound to furnish the reasons on which the assessment proceedings are initiated. The Revenue contended that the gist of reasons were furnished. It must be pointed out that it is not the same as indicating the grounds on which the proceedings have been initiated under Section 148 of the Act. It is a well settled proposition of law that furnishing of grounds for reopening of assessment is a compliance of the principles of natural justice. Quite apart, while Section 148 of the Act contemplates that the Assessing Officer has to serve a notice on the assessee requiring him to file a return, such notice is not just a formality that the assessee may follow up by a ritualistic manner of filing a return, since it is not called as of assumption of jurisdiction under Section 148 of the Act which would enable the Assessing Authority to assess the escaped income, reassess or recompute the income, to state the ground on which the Assessing Authority based its proceedings und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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