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TMI Blog2017 (5) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... 44AF of the Income-tax Act, 1961 ?" 3. The counsel for the appellant contended that he does not want to press issue No. 2 and he has argued only issue No. 1. 4. That facts of the case are that the assessee has filed the return on December 6, 1999 where an investment in plot No. 31, R. K. Puram, Kota was shown at Rs. 1,31,000. The Assessing Officer processed the return under section 143(1)(a) of the Act on August 11, 2000. The assessee revised the balance-sheet and profit and loss account showing the investment in the said property at Rs. 5,22,936 on August 16, 2000. The Assessing Officer issued a notice under section 148 on September 14, 2000, on the basis of the revised balance-sheet filed by the assessee and then issued a notice under section 143(2) on October 3, 2000. 5. The counsel for the appellant stated that the original return was filed on December 6, 1999 and was accepted on the same day. He has produced on record the Income-tax return which was accepted by the Department being 7578 dated August 11, 2000. 6. He has pointed out the following provisions of law : "147. Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time-limit for making the assessment, reassessment or re-computation 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 : 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, re- assessment 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for reassessment under section 148 cannot be issued, i. e., no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated. According to the Revenue it is immaterial whether the order is communicated or not and the only bar to the reassessment proceedings is that proceedings on the return already filed should have been terminated. In support of this contention reference was made to certain decisions of the High Courts and some observations made by this court in a case, which we note as under : In M. Ct. Muthuraman v. CIT MANU/TN/0556/1961 ; [1963] 50 ITR 656 (Mad), the assessment proceedings which had commenced with the returns filed by the assessee were lawfully terminated when they were closed with the entry 'N.A.' (not assessed) . The orders terminating the assessment proceedings were not communicated to the assessee. The Income-tax Officer issued notices under section 34 of the Indian Income-tax Act, 1922 (corresponding to section 147 of the Income-tax Act, 1961). The court held that the assessment proceedings were lawfully terminated and that (page 660) : 'the orders terminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the respondent-assessee. On the basis of this finding also, the reassessment order framed in favour of the respondent-assessee could not have been sustained. The finding that M/s. Jagdamba Griha Nirman Sahakari Samiti Ltd. and the respondent- assessee are two separate entities and independent of each other is a finding of fact and that finding has not been challenged before us. For that reason also assessment order dated March 30, 1998, cannot be sustained. Viewed from any angle, the questions raised in these appeals are of academic importance and cannot be considered as questions of law requiring consideration in these appeals." 7.3 In Jhunjhunwala Vanaspati Ltd. v. Asst. CIT (No. 2) [2004] 266 ITR 664 (All) wherein the Allahabad High Court held as under (page 666 of 266 ITR) : "Be that as it may, there is no dispute that once the Commissioner of Income-tax (Appeals) passed an order of remand on March 15, 1994, the assessment proceedings became pending before the Assessing Officer. It is well settled that the notice under section 148 cannot be issued when assessment proceedings are pending vide CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569 (SC) ; CIT v. S. Raman Chettiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us is whether on the commencement of assessment proceedings they must first be brought to their logical conclusion by framing an assessment before embarking on the proceedings as envisaged in section 147/148 of the Income-tax Act ; or more precisely stated, can resort to section 147 be made even whilst the normal assessment proceedings are pending conclusion. To find the answer we must keep in perspective that every return of income filed under section 139 may not result in its active and in-depth perusal or consideration by the Assessing Officer as it may receive an automatic onward passage under section 143(1). However, once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Officer. The provisions of section 147 would have no role to play at this stage of the proceedings. Once a return of income attracts the attention and scrutiny of the Assessing Officer, it is his bounden duty to delve into every aspect thereof. The Assessing Officer is sufficiently empowered to ask for all inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts clauses (a) and (b). In either event the Assessing Officer would invoke the powers conferred upon him by section 147 of the Income-tax Act culminating in the completion of the assessment. It is also conceivable that the incorrectness of the return may not be detected or noticed within the time period set down in section 153. In these circumstances if the Assessing Officer has reason to believe, predicated on information received by him, that income chargeable to tax has escaped assessment, he would invoke the powers under section 147. On the other hand, where a return of income has been filed but has been taken at its face value, without any proceedings under sections 143(2) and 143(3) having been con ducted, no assessment exercise would obviously have been under taken. After the expiry of the time period set down in section 153, this situation can be remedied by the Assessing Officer by invoking section 147. The word 'assessment' has been defined in the Act in a most unsatisfactory manner, merely by stating that it includes reassessment. A more comprehensive definition is readily available in the Australian decision titled Batagol v. Federal Commissioner of Taxation [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of action to such an extent enabling the High Court having territorial jurisdiction where such notices were served to exercise its discretion to assume jurisdiction even if such service of notice is an integral part of the cause of action or even if it prima facie appears to be without jurisdiction." 7.6 In CIT v. K. M. Pachayappan [2008] 304 ITR 264 (Mad) wherein the Madras High Court held as under (page 266 of 304 ITR) : "Heard counsel. In this case, return of income was filed under section 139(4) of the Act on March 15, 2000, and notice under section 143(2) for framing assessment under section 143(3) could have been issued up to March 31, 2000. Therefore, a valid return of income was pending as on March 15, 2000. The Assessing Officer issued notice under section 148 on March 15, 2000 when a valid return under section 139(4) was pending. In this case, the return was filed and the same is pending, which means that the proceeding is still pending. In such a situation, the Revenue could not have issued notice for the purpose of reopening under section 147 of the Act. In the case of Trustees of H. E. H. The Nizam's Supplemental Family Trust v. CIT [2000] 242 ITR 381 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax [2007] 292 ITR 49 (Delhi), the Delhi High Court, following the above Supreme Court judgment, considered the scope of the pro vision of sections 139 and 147 of the Act and held as follows (page 63 of 292 ITR) : 'Applying this line of decisions to the facts of the present case, the inescapable conclusion that would have to be reached is that while assessment proceedings remain inchoate, no "fresh evidence or material" could possibly be unearthed. If any such material or evidence is available, there would be no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not been opened under section 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147, provided fresh material had been received by the Assessing Officer after the expiry of limitation fixed for framing the original assessment. So far as the present case is concerned, we are of the view that it is evident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In any case if it was an order, it would be appeal able under section 249 of the Act. Since the period of limitation starts from the date of intimation of such an order, it was imperative that such an order be communicated to the assessee. Had the Income-tax Officer passed any final order, it would have been communicated to the assessee within a reasonable period. In any case, the note dated November 10, 1965, was merely an internal endorsement on the file without there being an indication if the refund application had been finally rejected. By merely recording that in his opinion, no credit for tax deducted at source was to be allowed, the Income-tax Officer could not be said to have closed the proceedings finally. During the pendency of the return filed under section 139 of the Act along with the refund application under section 237 of the Act, action could not have been taken under section 147/148 of the Act (headnote).' Following the abovesaid judgment, a Division Bench of this court in the case of CIT v. K. M. Pachayappan [2008] 304 ITR 264 (Mad) and the subsequent Division Bench of this court, in which one of us is a party (Raviraja Pandian J.) in the case of CIT v. Qat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly ; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee : Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :- (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified ; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed ; (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.' I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction, allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie in admissible, were to be rectified/allowed/disallowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief." 7.9 In CIT v. Abdul Gani Mohd. Ismail [1993] 203 ITR 627 (Raj) wherein the Rajasthan High Court held as under (page 629 of 203 ITR) : ". . . the return was submitted under section 139 and, therefore, the Income-tax Officer had jurisdiction to issue the notice under section 143(2). The notice which has been issued under section 143(2) has resulted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (page 185 of 246 ITR) : "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. Pusa Lal v. CIT [1988] 169 ITR 215 (AP) ; Jorawar Singh Baid v. Asst. CIT [1992] 198 ITR 47 (Cal) and Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 (All). In the instant case, though statutorily reasons were not required to be com municated to the assessee prior to the submission of the return in response to a notice under section 148, pursuant to the directions of this court, reasons for proceeding under section 147 have been indicated. They are as follows : 'Mahanagar Telephone Ltd. with its office at Jeevan Bharati Tower No. 1, 12th Floor, Connaught Circus, New Delhi, filed its return of income for the assessment year 1994-95 on a total income of Rs. 7,78,01,90,342. The return so filed on November 30, 1994, was processed under section 143(1)(a) on March 28, 1995. Examination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse to the reassessment proceedings. It is to be borne in mind that there was no appeal against the intimation sent to the petitioner by the Assessing Officer. After the intimation having been sent, the petitioner made an application for rectification under section 154, which was rejected on February 16, 1990, and it is that order against which the appeal was filed by the petitioner before the Commissioner of Income-tax (Appeals). It is, therefore, incorrect to say that the intimation stood merged in the appeal order. Even if the submission of counsel for the petitioner that after the appeal order, the order appealed against merged, is taken to be correct, still however, not the intimation but the order dated February 16, 1990, rejecting the application made under section 154 could, at the most, be said to have merged in the order of the appellate authority. So the merger if at all it is there, is limited to the proposition that the scope of the proviso to section 143(1)(a) and of section 154 telescoping into each other, no debatable addition by way of adjustment is permissible under section 143(1)(a). It does not create estoppel against the department to make reassessment. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttempt to enlarge the time available for framing the assessment. This is not permissible in law." 9.2 She has also relied upon the following decisions : 9.3 In Jorawar Singh Baid v. Asst. CIT reported in [1992] 198 ITR 47 (Cal) wherein it has been held as under (pages 51 and 52 of 198 ITR) : "6. We have not been able to persuade ourselves to accept any such plea, howsoever novel. In our view, a return after its acceptance, whether in a summary manner or after scrutiny, may itself lead to reassessment proceedings provided the conditions for reassessment under section 147 exist. 7. The major consideration in reassessment is whether the assessee has disclosed truly and fully all materials necessary for assessment. Such disclosure is primarily to be made in the return itself. Therefore, any enquiry as to the question of non-disclosure necessarily directs one's attention to the contents of the return. The return may be accepted with or without scrutiny, that is immaterial. The only difference that may arise in a scrutiny assessment under section 143(2) is that the non-disclosure in the return may be removed by the assessee in the proceeding under section 143(3). But, in all ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee for the following reasons (page 51 of 198 ITR) : 'Simply because the return of the assessee has been accepted without scrutiny and in good faith the Assessing Officer is not precluded from initiating a proceeding satisfying the conditions therefor where the income has escaped assessment. There is nothing either in section 143 or in section 147 that can support such a view. The pro visions of a tax statute should be interpreted in a manner leading to the result that everybody pays his due tax. . . . In our view, a return after its acceptance, whether in a summary manner or after scrutiny, may itself lead to reassessment proceedings provided the conditions for reassessment under section 147 exist. . . . It is not the summary acceptance of the return under section 143(1)(a) that can operate as a bar against reassessment. It is, rather, the further disclosure made by the assessee in the course of proceedings under section 143(3) whereby the assessee may take out his case from the mischief of section 147. Therefore, the scope for initiating reassessment proceedings in an assessment made under section 143(1)(a) is far wider than in an assessment under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Income-tax have escaped assessment, and secondly, he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions are condition precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147, existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment, if confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled, if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 14. Another plea taken by the petitioner was that within that pre scribed time limit action for assessment under section 143(3) was not taken. We find no substance in this plea." 9.6 In CIT v. Abad Fisheries [2002] 258 ITR 641 (Ker) wherein it has been held as under (page ..... X X X X Extracts X X X X X X X X Extracts X X X X
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