TMI Blog2004 (7) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... ality of notice under s. 143(2) of the Act having been issued after the expiry of a period of 12 months from the end of the month in which the returns for all the three assessment years were filed in response to notice under s. 148 of the Act and the consequential validity of assessments framed thereupon. Issue No. 3: According to the learned counsel the third issue was against the taxing of rental income from the property in the name of the assessee's wife, in the assessee' hands. Issue No. 4: The fourth issue, according to the learned counsel, was against the taxing of investments in FDRs in the names of assessee's wife and minor daughter, and interest thereon. 5.1 The facts relating to the aforesaid issues which are common in all the three assessment years and as have been revealed from the record are that the assessee was working as SDO, PWD, at Tikamgarh, M.P. The S.P, S.P.E., Lokayakta, carried on a search at the residential premises of the assessee on 27th July, 1997, thereupon; they seemed to have informed the IT authorities. The AO having jurisdiction over the assessee's case initiated proceedings under s. 147 of the Act for the asst. yrs. 1994-95, 1995-96 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der s. 143(2) and consequential assessments arises out of the order of the CIT(A) and may be considered. The learned counsel for the assessee further submitted that even if it is assumed that these grounds do not arise out of the order of the CIT(A) then also the same being of legal nature, the assessee is entitled to raise the same in any stage of the matter and, therefore, this ground, even it is considered as fresh or additional ground, is liable to be admitted and for that purpose he heavily relied on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC), wherein the Hon'ble Supreme Court after observing that "undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised, but where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee" has held as under: "That the Tribunal had jurisdiction to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded the reasons before issuing notice under s. 148 of the Act and if that is the case then the proceedings under s. 147 are bad in law. The second line of argument by the learned counsel for the assessee was that before the assessee had furnished the returns of income in response to notice under s. 148 of the Act, the Revenue had issued only two notices, i.e., (1) one notice was issued under s. 143(1) of the Act by the ITO, Chhatarpur, on 15th Sept., 1999; (2) second notice was issued under s. 143(2) of the Act by the Dy. CIT, Inv. Circle, Gwalior, on 8th Feb., 2000. According to the learned counsel, both these notices had been issued after the expiry of a period of 12 months from the end of the month in which the returns of income were furnished in response to notice under s. 148 of the Act (returns were furnished on 26th Dec., 1997). The learned counsel, therefore, submitted that since notices were issued after the expiry of the limitation period, the same were illegal, bad in law and so were the assessments framed in consequence upon the proceedings initiated by such notices. In support of his submissions the counsel for the assessee relied on the decision of the Tribunal, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to initiation under s. 148, in our opinion, in view of our above reasons, we necessarily are not in a position to treat the decision as placing some rule of law. There being no restriction of any kind and further there being no other section under the Act prescribing the procedure for framing of an assessment, in view of our detailed reasons mentioned above, we have to hold that the notice that was issued on the assessee as claimed by the Department (though it was insisted that it was not served on the assessee) on 16th Oct., 1999, is clearly beyond the time and thereby the assessment framed is bad in law, and is hereby quashed. The other points on merits at this point of time, in our opinion, are not necessarily to be gone into because on the basic point of validity of assessment itself we found that the assessment cannot stand. The appeal is allowed." 12.2 The learned counsel further submitted that the decision of Tribunal, Agra Bench, in the case of Chandra Bhan Bansal vs. Dy. CIT has further been discussed and overruled by the Tribunal, Agra Bench, Agra, itself in the case of Asstt. CIT vs. Baikunth Nath Singhal and to support his case he referred to the following observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec., 1991. It was in view of these facts that the assessee had challenged the validity of notice under s. 143(2) of the Act and validity of consequential assessment. The Tribunal, Agra Bench, after considering the provisions of s. 143(2) and the proviso thereto, as existed after 12th Dec., 1991, rejected the assessee's objection as per observations contained in para 2.14 of the order which reads as under: "2.14. Above provisions make it amply clear that proviso to s. 143(2) did not include a return filed in response to notice under s. 148. It has limited itself to the returns filed under s. 139 or in response to notice under s. 142(1). This is significant to note that ss. 139, 142(1) and 148, all these sections provide for filing of returns in their response. By including ss. 139 and 142(1) within the scope of proviso to s. 142(2), the law makers have made it abundantly clear that the limitation period imposed in proviso to s. 142(2) was not applicable to the returns filed in response to notice under s. 148 of the Act. As this is substantive provision of law, we hold that the learned counsel's submissions in this regard have no force and the same are rejected. Accordingly, we ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the return is furnished. In the instant case, the return was filed on 16th July, 1998. Twelve months from the end of the month, namely, 31st July, 1998, would end on 31st July, 1999. The AO, therefore, compulsorily and necessarily must issue a notice under s. 143(2) of the Act before 31st July, 1999, if the assessment is to be framed under s. 143(3) of the Act or under s. 144 of the Act. The AO, in the instant case, has apparently issued the notice as per the record shown by the Departmental Representative on 16th Oct., 1999 and is, therefore, clearly beyond the time-limit that expired on 31st July, 1999. The assessment framed on 29th March, 2001, is, therefore, not a valid assessment because it is not preceded by a valid notice. The Ahmedabad Bench of the Tribunal, to which our attention was drawn by the learned counsel, has also recognised this feature of the procedure for framing an assessment prescribed in s. 143 and that it is a mandatory prescription; failing to follow such prescription will lead to invalidation of the assessment framed." (ii) Before the Chennai Bench of the Tribunal, the Revenue had relied on the decision of the Tribunal, Agra Bench, in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of its claim that notice under s. 143(2), though had been issued after the expiry of a period of 12 months from the end of the month in which the returns in response to notice under s. 148 were filed but the same was valid, relied on the decision of the Tribunal, Jaipur Bench, in the case of P.C. Mundra vs. Asstt. CIT (ITA No. 239/Jp/1999) for the asst. yr. 1991-92 as well as on the decision of Tribunal, Agra Bench, in the case of Chandra Bhan Bansal, but the Tribunal, Agra Bench, overruled these decisions as per following observations in para 7 of its order: "The learned Departmental Representative in support of her contention relied upon the decision of Tribunal, Jaipur Bench, in the case of P.C. Mundra vs. Asstt. CIT (ITA No. 239/Jp/1999) for asst. yr. 1991-92. But, it is noted that the said decision was given following the decision of Agra Bench of Tribunal in the case of Chandra Bhan Bansal vs. Dy. CIT (2001) 79 ITD 639 (Agra). On going through the above decision, it is noted that while delivering that decision the mandatory provision of s. 148 was not brought to the notice of the Tribunal, Agra Bench, that the provision of s. 148 includes that return filed in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. The Hon'ble Supreme Court in the case of K. Govindan Sons vs. CIT (2000) 164 CTR (SC) 490 : (2001) 247 ITR 192 (SC) has held that the Kerala High Court in Mrs. Lally Jacob case 'referred above' laid down the correct position of law and they have our approval. The Hon'ble Gauhati High Court in the case of CIT vs. Triple Crown Agencies (1994) 116 CTR (Gau) 423 : (1993) 204 ITR 377 (Gau) has held: 'Assessment or reassessment under s. 147 can be made only after issue of a notice under s. 148. The provision in s. 148 declaring that, as far as may be the provisions of the Act shall apply as if the return were a return under s. 139 is a device adopted to indicate the procedure to be followed after issue of the notice under s. 148. The procedure contemplated in s. 143 is required to be followed as far as may be.' 14. In another case Tribunal, Mumbai Bench, in the case of Uma Polymers (P) Ltd. vs. Asstt. CIT (2002) 123 Taxman 226 (Mumbai)(Mag) held that: 'The notice under s. 143(2) is not merely procedural in nature but is a mandatory provision. Once the valid return under s. 148 is filed by the assessee, the provision on the assessment of return filed under s. 139 shall a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d after the expiry of a period of 3 (sic-12) months from the end of the month in which the returns of income were furnished in response to notices under s. 148 of the Act, were invalid and bad in law. 18. Having held as above, the natural further conclusion is that all the subsequent proceedings, i.e., proceedings based on such illegal and bad in law notices as well as the assessments were illegal and bad in law. I, therefore, quash the assessment orders for all the three assessment years being illegal and bad in law. 19.1 Coming to the merit of the case, the assessee's counsel submitted that insofar as taxing of rental income from the house property in the name of the assessee's wife is concerned, the Revenue could assess the same in the hands of the assessee only by establishing that the investment in the house was by the assessee or that the assessee's wife was the assessee's Benamidar and that purpose was to prove the following three ingredients: (i) Source of investment in the house; (ii) Control over the house; (iii) Enjoyment of fruits/profits/rental income by the assessee. So far as the investment is concerned, the learned counsel for the assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that so far as the taxing of rental income from the house is concerned, the Revenue has not discharged its onus to prove that the investment in the house was made by the assessee. On the contrary, the Revenue has accepted that the lady was carrying on the business of manufacturing of Achar, etc., whose annual turnover was Rs. 80,000 to Rs. 90,000. After acceptance of this factual position of the availability of income, at least equal to 20 per cent of the turnover, i.e., Rs. 20,000 to Rs. 25,000 per year cannot be ruled out and, therefore, so far as the investment in the house was concerned, the same having been made during the years 1983 to 1987 there was no question of considering the same as that of the assessee. The Revenue neither brought any evidence to prove that the investment in the house was made by the assessee or that the house was in the name of the assessee or was in the possession of the assessee or that the fruits/profits/income from the house was being received by the assessee. On the contrary, the assessee has established with documentary evidence that the investment in house was by his wife, the house was in the name of wife and the rental income was being re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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