TMI Blog2009 (12) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... any evidence regarding cash credits, therefore the addition was justified. Regarding opening capital, to meet the ends of justice some relief is granted to assessee. Decided partly in favor of Assessee. - ITA NOS. 1022 & 1118 (AHD.) OF 2003 - - - Dated:- 11-12-2009 - T.K. SHARMA, AND D.C. AGRAWAL, JJ. Smt. Vinod Tanwani for the Appellant. N.C. Amin for the Respondent. ORDER D.C. Agrawal, Accountant Member These are two cross-appeals, one filed by the assessee and another filed by the Revenue against the order of the learned Commissioner of Income-tax (Appeals) passed on December 27, 2002 for the assessment year 1999-2000. In its appeal, the assessee has raised the following issues. (i) The reopening under section 147/148 is bad. (ii) Reasonable opportunity is not provided while passing order under section 143/147. (iii) The learned Commissioner of Income-tax (Appeals) has erred in only deleting the addition of Rs. 80,000 out of the total addition of Rs.2,10,520 made on account of opening capital. (iv) The learned Commissioner of Income-tax (Appeals) erred in confirming the addition of Rs. 1,40,000 out of unsecured loans. (v) The learned Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of closing stock of electric goods. He accordingly, deleted the addition of Rs. 80,000 and confirmed the addition of Rs. 1,30,520. 4.2 Regarding addition of Rs. 30,000 made under section 68, the learned Commissioner of Income-tax (Appeals) confirmed the addition on the ground that no explanation in respect of 7 parties from whom loan was shown to have been taken was filed in support of the identity of the lenders and their financial capacity and genuineness of the transactions. 4.3 Regarding addition of Rs. 1,13,080 made under section 69C being the unexplained repayment of loan, the learned Commissioner of Income-tax (Appeals) found that the assessee has received Rs. 30,000 from seller of the jeep car through cheque as refund, further the assessee has received a sum of Rs. 26,540 in cash being cash flow from the business of the assessee. This sum was deposited by the assessee in Goa State Co-operative Bank. Further, the assessee had declared an income of Rs. 52,560 in the current year. Thus, both the sums together would explain the return of money to the creditors. He, accordingly, deleted the addition. 4.4 Regarding disallowance out of expenses, the learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 148(1) therefore, he has no right to challenge the issuance of notice so issued. The decisions relied on by the assessee pertained to the period when limitation for issue of notice under section 143(2) was not prescribed. Therefore, those authorities will not be applicable. The learned Departmental representative also relied on the judgment of the Tribunal in Kailash Auto Finance Ltd. v. Asstt. CIT [2009] 32 SOT 80 (Lucknow) for the proposition that once return is processed, the Assessing Officer has authority to either issue notice under section 143(2) or notice under section 148(1) if the conditions laid down in those sections are satisfied. On the merits the learned Departmental representative submitted that the learned Commissioner of Income-tax (Appeals) was not justified in giving the relief as no evidence was furnished. 8. We have considered the rival submissions and perused the material on record. In our considered view, reopening of the case is justified. It is because the time period for issuance of notice under section 143(2) has expired, and the return was filed April 7, 2000 and, therefore, notice under section 143(2) could have been issued only by Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such proceedings can only be terminated by issuance of notice under section 143(2) and passing of order under section 143(3) or after expiry of time of twelve months from the date of filing of the return. The reasoning advanced by the learned authorised representative is that a proceeding is pending by virtue of return filed and unless such proceedings are concluded, the Assessing Officer could not issue notice under section 148(1). Further, a processing or sending of intimation is not an assessment, therefore, proceedings initiated because of filing of return remain pending. Once proceedings are pending, the Assessing Officer cannot initiate reassessment proceedings. This is the gist of argument. In this connection, we examine the concept of pendency of proceedings as under : 16. The term 'pending' means 'undecided', i.e., something which is not concluded. An action is considered as pending from the time of commencement of the proceedings. Thus, a legal proceeding is pending as soon as commenced and until it is concluded. As per Advanced Law Lexicon, third edition of 2005, pages 3521 and 3522, following are the definitions of the word 'pending' : 'A suit is pending until f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess the return. Such return which has commenced a proceeding before the Assessing Officer would be said to be pending, but when return is processed or even where acknowledgement of return is treated as intimation, in that situation, the Assessing Officer is not required to conclude the assessment proceedings necessarily. Therefore, it could not be said that a proceeding is pending because of the return filed by the assessee. A fresh proceedings would commence and be pending when notice under section 143(2) is issued. Thus, the proceedings cannot be deemed to be pending before the Assessing Officer by virtue of return filed after the Assessing Officer has processed the return, determined the tax payable including the interest on the returned income and also where the return filed by the assessee is accepted by way of issuing acknowledgement. Merely because the Assessing Officer is prohibited from issuing notice under section 143(2) after twelve months of filing of the return, it does not mean that proceedings commenced with filing of a return, are pending before him. In fact and in law, proceedings arising after filing of the return is a separate proceeding and proceedings initiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1. Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(2) is expired and assessment is not made, is not acceptable as this will put another condition in Explanation 2(b) which is otherwise not inserted by the Legislature. As pointed out earlier, statute provides commencement of assessment proceedings in at least three ways. They can merge into each other but they do not cancel each other. Ultimate object is to make assessment of correct income and, therefore, the Legislature has thought it fit to consider commencement of assessment or reassessment proceedings in at least three streams which can subsequently merge into one, if they are pending at the same time. They will ultimately result in an order under section 143(3). A case where assessment proceeding is completed would fall in clause (c). In the present case, we are only concerned with the operation of clause (b) to Explanation 2 and this clearly provides that where assessment is not completed, still then there could be a case of deemed escapement of income and notice under section 148(1) can be issued irrespective of the fact whether assessment proceedings initiated by virtue of filing the return or assessment proceedings by way of issuance of notice under section 143(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1997-98, return of income was filed on March 30, 1999, the return was processed under section 143(1) on March 15, 2000 and, therefore, the Assessing Officer had issued notice under section 148(1) on March 15, 2000. It was claimed that the Assessing Officer could have issued notice under section 143(2) up to March 31, 2000, therefore, issuance of notice under section 148(1) on March 15, 2000 was not valid as proceedings were pending. The hon'ble Madras High Court relied on the decision of the hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust [2000] 242 ITR 381, wherein it was held that if concerned return of income is not disposed of then notice under section 148 could not be issued and no reassessment proceedings can be initiated. 22. The learned Departmental representative sought to distinguish this judgment by submitting that the hon'ble Madras High Court did not consider the decision of the hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500, wherein it is held that failure to take steps under section 143(3) will not render the Assessing Officer powerless to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arred after expiry of twelve months available for issuance of notice under section 143(2). Therefore, we are not able to persuade ourselves to follow those decisions. 25. The learned Departmental representative, on the other hand, referred to the decision of the hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 wherein the hon'ble Supreme Court has held as under (page 512) : 'So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.' 26. This view was also held by the hon'ble Punjab and Haryana High Court in the case of Aditya and Co. v. CIT [2005] 279 ITR 47. In this case, it was held that where the Assessing Officer has sent only an intimation under section 143(1) then issuance of notice under section 148(1) would be valid. 27. In the case of Elegant Chemicals Enterprises P. Ltd. v. Asstt. CIT [2004] 271 ITR (AT) 56 (Hyd) the Tribunal, relying on the decision of the hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g but an acknowledgement slip to the effect that the return filed has been accepted and the Assessing Officer has acted upon that and for the purposes of recovery, that shall be deemed to be a notice of demand as if issued under section 156. Jurisdiction to make adjustment under the provisions of section 143(1)(a) is co-extensive and coterminous with the jurisdiction vested in the Assessing Officer under section 154 for making obvious corrections, as no item of debatable nature can be corrected under section 154 of the Act. Similarly, the Assessing Officer cannot enter into any controversial item to make permissible adjustments under the proviso to section 143(1)(a). The only requirement of section 147 is that the Assessing Officer must have good reason to believe that some income had escaped assessment. Once this belief is well-founded, recourse to reassessment proceedings cannot be said to be illegal. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate reassessment proceedings and failure to take steps under section 143(2) will not render the Assessing Officer powerless to initiate the reassessment proceedings.' 30. The hon'ble P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen the assessment under section 147 if the ingredients of section 147 are satisfied. It is open to the Assessing Officer to invoke the jurisdiction under section 147, notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under section 147 is vitiated because the Assessing Officer failed to invoke his power to correct the assessment already completed under section 143(1) by issuing a notice under section 143(2) of the Act.' 33. In the case of Mahanagar Telephone Nigam Ltd. v. Chairman, Central Board of Direct Taxes [2000] 246 ITR 173 (Delhi) it was held as under (page 185) : 'Another plea taken by the petitioner was that within that prescribed time limit action for assessment under section 143(3) was not taken. We find no substance in this plea. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate to proceed under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. A similar view has been taken in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, reassessment could not be initiated is not acceptable because deeming provision of Explanation 2(b) to section 147 does not contemplate that an assessment of the nature as done under section 143(3) should be completed for invoking that clause of the Explanation. It only says that the assessee has under stated the income or has claimed excessive loss, deduction, allowance or relief in the return. Thus, the Assessing Officer has to only point out, or it should come to his notice on the basis of examination of the return that the assessee has understated the income or claimed excessive loss, deduction, allowance or relief. It nowhere presupposes that assessment of the type prescribed under section 143(3) should have been completed for deeming escapement of income. The word 'assessment' has not been used at all in Explanation 2(b), therefore, it will over all the situations where assessment is not framed. This situation will include the situation where only intimation is sent or processing is done or even nothing is done after filing the return. The opening words of section 147 'if the Assessing Officer has reason to believe that any income chargeable to tax has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X
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