TMI Blog2017 (5) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... inion that the Tribunal has seriously committed an error in upholding the notice under section 148 when the officer has regularly framed assessment. The view taken by the Commissioner of Income-tax (Appeals) is required to be accepted. - Decided in favour of assessee. - D. B. Income Tax Appeal No. 142 of 2006. - - - Dated:- 3-5-2017 - K. S. Jhaveri And Vijay Kumar Vyas JJ. For the Appellant : Naresh Gupta For the Respondent : Mrs. Parinitoo Jain JUDGMENT 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the Department. 2. This court while admitting the appeal on March 26, 2007 framed the following substantial question of law : 1. Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in upholding the issuance of notice under section 148 though the Assessing Officer could have issued a notice under section 143(2) to frame the regular assessment under section 143(3) ? 2. Whether the provisions of section 145 of the Income-tax Act, 1961, in the facts and circumstances of the case could have been app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year : Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is charge able to tax and has escaped assessment. 148(1). Before making the assessment, reassessment or re-computation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest ; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c) ; and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee : Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or no refund is due to, him : Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made. 7. In support of his arguments, he has relied upon the following decisions :- 7.1 In Trustees of H.E.H. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on March 28, 2003. Apparently, two assessment proceedings could not have continued together and at parallel length. The original reassessment proceedings have already been restored to the file of the Assessing Officer, consequently, the second reassessment proceedings become infructuous as the orders can be passed on the basis of the available mate rial including information received later on while finalising the proceedings under section 143(3) read with section 147 in pursuance of the reassessment proceedings commenced earlier to one in question. While the first reassessment proceedings were pending, there cannot be second reassessment proceeding. It is also settled that once the reassessment proceedings are pending, the entire assessment is open and is not confined to scope of reasons recorded by the Assessing Officer before assuming jurisdiction. The setting aside of the reassessment proceedings commenced vide notice dated March 28, 1996, could not have been resurrected and all material must be taken into consideration in making final assessment in terms of the directions of the Tribunal while setting aside the order of the Commissioner of Income-tax (Appeals) and directin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the opinion that the impugned notice dated March 18, 1994, under section 148 is invalid and it is hereby quashed. The petition is allowed. No order as to costs. 7.4 In KLM Royal Dutch Airlines v. Asst. DIT [2007] 292 ITR 49 (Delhi) wherein the Delhi High Court held as under (page 56 of 292 ITR) : In our opinion section 147/148 cannot be interpreted in isolation of the other provisions of Chapter-XIV of the Income-tax Act which is the fasciculus dealing with the procedure for assessment. Section 139 makes it mandatory for every person whose total income exceeds the maximum amount which is not chargeable to Income-tax, to furnish a return of income by the due date. Section 142 deals with the inquiry before assessment. The first sub-section thereof empowers the Assessing Officer to issue a notice to any person to file a return or to produce its accounts or any documents or to provide any information as the Assessing Officer may require. Sub-section (2) empowers the Assessing Officer to make any inquiry he considers necessary. Sub- section (3) incorporates the audialteram partem rule of natural jus tice, viz., providing to the affected party an opportunity of being he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontemplates making the 'assessment', reassessment or recomputation under section 147. Keeping the factual matrix before us in perspective, it becomes critical to define the word assess since the Assessing Officer is avowedly not reassessing or recomputing the income presented by the assessee for taxation in the form of its return. It is trite that the words assess, reassess or recompute are not synonymous with each other. It seems to us that an assessment must entail a conscious and concerted calculation carried out by the concerned officer with a view to deter mine the amount of tax payable by any person. The exercise commencing with section 139 and ending at section 145A cannot be interpreted as identical to or overlapping section 147/148/149. They are predicated on different circumstances and operate in disparate dimensions. The Income-tax Act makes it incumbent upon every per son whose total income exceeds the maximum amount which is not chargeable to Income-tax to file a return of income in order to kick- start the normal assessment procedure. However, it may happen that a person fails to file a return of income, say for the assessment year 2000-01, even though he is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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, faced with severe paucity of time, the Assessing Officer had attempted to travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law. 7.5 In CESC Ltd. v. Dy. CIT (No. 2) [2003] 263 ITR 402 (Cal) wherein the Calcutta High Court held as under (page 412 of 263 ITR) : It is an admitted proposition that the jurisdiction for assessment of non-residents has been conferred only upon the authorities at Mumbai. All non-residents are assessed at Mumbai. The jurisdiction relating to such assessment by the Deputy Commissioner of Income- tax, Mumbai, cannot be questioned. The said proceeding cannot be taken up anywhere else in India. In connection with such proceedings, the Deputy Commissioner of Income-tax, Mumbai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer left the matter at the stage of consideration even with regard to refund in the hands of the beneficiaries. This note was also not communicated to the trustees. When we examine the note dated November 10, 1965, on the file of 1963-64 nothing flows from that as well. In any case if it is an order, it would be appealable under section 249 of the Act. Since the period of limitation starts from the date of intimation of such an order, it is 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, what we find is that the note dated November 10, 1965, is merely an internal endorsement on the file without there being an indication if the refund application has been finally rejected. By merely recording that in his opinion, no credit for tax deducted at source is to be allowed, the Income-tax Officer cannot be said to have closed the proceedings finally. The decisions referred to by the Revenue are of no help in the present case. We are, thus, of the opinion that during the pendency of the return filed under section 139 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [2010] 323 ITR 346 (Mad) wherein the Madras High Court held as under (page 348 of 323 ITR) : We heard learned counsel for the Revenue, who fairly submitted that the issue is covered by the decision in the case of Trustees of H. E. H. The Nizam's Supplemental Family Trust v. CIT [2000] 242 ITR 381 (SC) in which case, the Supreme Court considered the scope of reopening of the assessment and held as follows (page 387 of 242 ITR) : 'It is settled law that unless the return of income already filed is disposed of, notice 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 the proceedings on the return already filed should have been terminated . . . A mere glance at the note of the Income-tax Officer would show that it could not be said that the Income-tax Officer gave finality to the refund since no refund was granted either in the hands of the trust or in the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, faced with severe paucity of time, the Assessing Officer had attempted to travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law. ' In the light of the decisions cited supra and on the facts of this case, we are of the view that the order of the Tribunal is not against any statutory provision or the law declared by the Supreme Court. The tax case appeal stands dismissed. No costs. 7.8 In Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC) wherein the Supreme Court held as under (page 505 of 291 ITR) : Section 143(1) as it stood at the point of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 necessarily amount to disclosure within the meaning of the fore going proviso. Explanation 2.-For the purposes of this section, the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry inquiries, the officer had power to make assessment under section 143(3). With effect from April 1, 1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from June 1, 1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent, without prejudice to the provisions of section 143(2), to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows : (a) any arithmetical errors in the return, accounts and documents accompanying it were to be rectified ; (b) any loss carried forward, deduction, allowance or relief which on the basis of the informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 144 on account of non- compliance with the notice issued under section 148. It was on account of the issue of notice under section 143(2) that the information/statement which was not submitted along with the return were subsequently submitted and, therefore, the assessment was framed under section 143(3). Mere writing of section 148 'will not escape the assessee of the liability' to pay tax in accordance with the return which was submitted by him. 7.10 In Punjab Tractors Ltd. v. Joint CIT [2002] 254 ITR 242 (P H) wherein it has been held as under (page 247 of 254 ITR) : We are unable to accept this contention. Firstly, it is the petitioner's own case that the assessment under section 143(3) could be made up to March 19, 2002. In the present case, the impugned notice was issued to the petitioner on March 29, 2001. It was almost a year before the date on which an order could be passed under section 143(3). The notice having been given well in advance, it cannot be said that any prejudice had been caused to the petitioner. Secondly, we find that the reasons were conveyed. It has not been suggested by counsel that these were not relevant. There is no injustice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 147 is issued to bring to tax the aforesaid amount. Notice signed may issue.' This cannot be said to be a case where initiation of proceedings in terms of notice under section 148 can be said to be without jurisdiction or foundation. The reasons indicated cannot be said to be non- relevant. While deciding the validity of a notice under section 148, the permissible limit of consideration is the existence of reasons and, as indicated above not sufficiency thereof. 7.12 In Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 (All) wherein it has been held as under (page 58 of 229 ITR) : In the case at hand, the Assessing Officer proceeded on a wrong footing by making the adjustment not permissible by the proviso to section 143(1)(a). He might have proceeded under section 143(2) as well to bring the profits of the petitioner to tax by making a regular assessment under section 143(3), but failure on his part in doing so before the processing of the return was completed under section 143(1)(a) will not take away the jurisdiction of the Assessing Officer to proceed under section 147, if the Assessing Officer is able to establish the requisite condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. The inevitable conclusion is that the High Court has wrongly applied Adani Exports v. Dy. CIT (Assessment) [1999] 240 ITR 224 (Guj) which has no application to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act. 9.1 She also relied on the observations made in para 19 of the Delhi High Court judgment in KLM Royal Dutch Airlines (supra) which reads as under (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 mate rial' 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3). 8. In our view, the power that can be exercised under section 143(2) to correct the assessment made under section 143(1) does not exclude the power of the Assessing Officer to 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, not withstanding 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. 9.4 In Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 (All) it has been held as under (page 56 of 229 ITR) : Therefore, the question is whether the failure of the Assessing Officer in having issued the notice under section 143(2) precluded the Assessing Officer from issuing the impugned notice under section 148 after the proceedings under section 143(1)(a) having been completed. In Jorawar Singh Baid v. Asst. CIT [1992] 198 ITR 47 (Cal) ; MANU/ WB/0140/1992, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a notice under section 143(2) of the Act'. 9.5 In Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173 (Delhi) wherein it has been held as under (pages 181, 182 and 185 of 246 ITR) : 8. What were permissible under the first proviso to section 143(1)(a) to 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. . . . 13. The scope and effect of section 147 as substituted wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1)(a) of the Act. Then notice was issued under section 148 and finally, the order was passed under section 143(3) of the Act. The contention of the assessee is that since no order was passed under section 143(3) of the Act before the notice was issued under section 148, the procedure under section 148 of the Act is invalid. We are not able to appreciate the contention of learned counsel for the assessee. 9.7 The counsel for the respondent Ms. Jain contended that the order is appealable and also revisable under section 264. In our considered opinion that against the appealable order or revision, it will not confer jurisdiction to the Assessing Officer to issue notice under section 148. 10. We have heard counsel for the parties. 10.1 Before proceeding with the matter, it will not be out of place to mention that order under section 143 was confirmed on August 11, 2000 when the return was filed and the notice which is impugned under section 148 came to be issued before the assessment could have been done. 10.2 The contention of the assessee that in the notice which has been issued under section 148, ingredients under section 148 are not fulfilled, in our consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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