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1996 (6) TMI 349 - ITAT MUMBAI

1996 (6) TMI 349 - ITAT MUMBAI - TMI - Income-Tax Appeal Nos. 3552 and 3553 (BOM.) of 1994 - Dated:- 26-6-1996 - A. KALYANASUNDHARAM, ACCOUNTANT MEMBER AND K.C. SINGHAL, JUDICIAL MEMBER J.D. Mistry & M.L. Sharma for the Appellant. Tilaqchand & T.A. Pai for the Respondent ORDER A. Kalyanasundharam, Accountant Member - These are appeals by two assessees of the same group that involve common issues and, therefore, these appeals have been grouped and are being disposed of by this common orde .....

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reads, "the learned Commissioner (Appeals) failed to appreciate that the notice issued under section 148 is bad in law and the consequent assessment is, therefore, also bad in law and void". The appellants also had challenged the levy of interest under sections 234A and B of the Income-tax Act, 1961 (hereinafter referred to as the Act) in the like manner as was raised in their appeal for the assessment year 1990-91. 3. On the three common issues for the two assessment years, it is agre .....

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er (AO) to redo the assessment relating to these additions and while doing that, Assessing Officer would remember that all our directions, guidelines and observations would apply with equal force to the present two assessment years as well and would have to follow them in these two assessment years. 4. On the first of the additional ground of appeal Mr. Mistry, the learned counsel for the appellants, submitted that this is a pure question of law and does not need any verification of any fact exc .....

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uire any investigation of facts. 5. We have considered these preliminary arguments on the admission of the additional grounds of appeal. Though the question has not been happily worded but it does bring out the controversy that is the very basis of the assessment and his being a pure question of law that does not require any investigation into the facts other than the provisions of the section under the Act, consideration of the notice which was the basis of reopening of the assessment, date of .....

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not create any contradiction with the provisions of the section of the Act. 6. Mr. Mistry, the learned counsel, contended that the reopening of assessment is based upon a notice issued for the purpose and that he would show that the notice issued on the appellants is not in line with the intention of the Act and, therefore, such a notice that does not carry with it the intention of the provisions of the Act, is invalid and illegal. He pleaded that the provisions of section 148(1) of the Act be r .....

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ssessee to deliver to the Assessing Officer within thirty days from the date of service of the notice a return in the prescribed form in respect of which the assessee is assessable for the assessment year. 7. He pointed out that while the section allows furnishing of a return within such period not less than thirty days, the notice restricts the time for filing of the return by giving a direction to file the return within thirty days from the date on which the notice was served on the assessee. .....

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he return within thirty days, is an illegal notice. He contended that the Bombay High Court (supra) had observed that the words not less than thirty days' indicates clear thirty days while, within thirty days' talks of time within two points, the start and the end point, and therefore, does not allow thirty whole days. He accordingly pleaded that, in the light of the Bombay High Court decision (supra), the notice had to be held as invalid and illegal in the eye of law. 8. Mr. Mistry furt .....

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inafter referred to as 1922 Act) for purpose of initiating reassessment proceedings is not a procedural requirement but, the service of the prescribed notice on the assessee is a condition precedent to the validity of any assessment made under that section. He contended that Supreme Court in the said case had held that if no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the ITO without a notice or in pursuance of an invalid notice would be illegal .....

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a notice is found to be invalid, all proceedings based on such invalid notice must be quashed. He contended that the Revenue had realised their folly of the notice not bringing out the intention of the Act and this is clear from the fact of the withdrawing the notices issued in other cases when they were pointed as above and in a few other cases, they had modified the notice to read as within 31 days in place of the earlier within thirty days. He had placed on our records such notices in suppor .....

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r the purposes of that Act. The words not less than' appeared in relation to amount borrowed for the creation of a capital, the agreement of borrowal providing for repayment during a period not less than seven years. In the first case, the borrowal was repaid in exactly seven years and the Supreme Court upheld the denial of inclusion of the borrowal as part of the capital by observing that the words not less than seven years' meant seven years and more. The second case was also decided l .....

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, the date on which the notice is received has to be excluded and in support of this contention, he relied on the Supreme Court decision in AIR 1972 SC 1293. 12. Mr. Tilaqchand submitted that with the introduction of the Income-tax Act, 1961, there had been complete overhaul of the 1922 Act and because of the provisions of section 292B of the Act, the decision of the Bombay High Court in Ekbal & Co. (supra) is no longer applicable. He pleaded that Calcutta High Court in its two decisions, na .....

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isaria in their book on Income-tax Law, 4th Edn. Vol. 7 at pages 56 & 57. He contended that the section and the notice must be read together and this reading indicates that there is no contradiction at all and submitted that the notice is only a communication of the section and is a procedural issue. In support of this contention, he placed reliance on Orissa High Court decision in Commissioner v. Orissa State Warehousing Corpn. (1993) 201 ITR 729 (Ori.) and on a sales-tax case. He contended .....

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ally held that the filing of the return does not mean waiver of the right to challenge the validity of the notice and had upheld the invalidity of the notice. 14. We have heard the rival submissions and have given them our very careful consideration. The issue raised by the assessee is rather intriguing and in the light of the submissions of the Departmental Representative that there had been a total overhaul of the 1922 Act it has aroused sufficient excitement too. We have, therefore, to examin .....

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nish, within such period, not being less than thirty days as may be specified a return in the prescribed form Before Amendment (Upto 31st March, 1989) In the case of any person who, in the AO's opinion, is assessable under this Act, whether on his own total income or the Assessing Officer may before the end of the relevant assessment issue a notice to him and serve the same upon him requiring him furnish, within thirty days from the date of service of the notice. 34 (1) 148 (1) After 1st Apr .....

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notice containing all or any of the requirement which may be included in a notice under sub-section (2) of section 139 and the provisions of this Act shall apply accordingly as if the notice were a notice issued under that sub- section He may in cases falling under clause (a) (b), serve on the assessee, a notice containing all or any of the requirement which may be included in a notice under sub-section (2) of section 22 and the provisions of this Act shall apply accordingly as if the notice wer .....

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oss/depreciation allowance) for the said assessment year and I hereby require you to deliver to me within thirty days from the date of service of this notice a return in the prescribed form of your income/the income or in respect of which you are assessable for the said assessment year." 15. The law maker while overhauling the 1922 Act by the Income-tax Act, 1961, had apparently kept in view the contradiction between the language of the section and the notice under the 1922 Act and in order .....

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n Ekbal & Co. (supra). The claim of the Departmental Representative that there was overhaul of the provisions under the 1961 Act, in view of the above, is found to be correct. 16. However, the amendment by the Direct Tax Laws (Amendment) Act, 1987, killed the uniformity that existed between the section and the notice and brought back to life the buried conflict as existed under the 1922 Act by using the words, the Assessing Officer shall serve on the assessee a notice requiring him to furnis .....

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s that, while introducing the amendment to the section, he overlooked that the notice also needed amendment so that it speaks the same language as the section itself. It is an unfortunate creation by the law maker which may be unintended but, all the same it has given rise to a poser in the like manner as was considered by the jurisdictional High Court in Ekbal & Co. (supra). 17. We shall now proceed to examine the issue and the decision in Ekbal & Co. (supra). The question that was cons .....

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of the Indian Income-tax Act, 1922, you are hereby required to prepare a true and correct statement of total income and your world income during the previous year in the attached form (along with such other particulars as are required to complete the form) and to deliver it to me at my office duly signed by you within thirty days of the receipt of the notice (should the former date be less than 30 days after the receipt of the notice)." The section 22(2) was also reproduced and this is extr .....

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n the words, in the attached form duly signed by you within thirty days of the receipt of the notice.' The Tribunal in its judgment after referring to certain passages from Maxwell on Interpretation of Statutes', 8th Edn., stated as follows The learned author proceeds to observe that where not less than' or such other expression is used specifying the time for doing an act the ending terminal must also be excluded from the computation. Section 22(2) clearly lays down that an assessee .....

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The fact that the assessee submitted a return later or that it was accepted for the purpose of making the assessment does not, in our opinion, cure the defect that initially lay in the notice. I agree with the statement of the Tribunal In my judgment expressions within thirty days' and not less than thirty days' are two quite different things. Within thirty days' is within two points of time, one at which the period begins and the other at which it expires. On the other hand, not les .....

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