TMI Blog2001 (2) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1988-89 which is presently under appeal, the Assessing Officer noticed that no return of income had been filed. Being of the view that income of the assessee for assessment year 1988-89 had escaped assessment within the meaning of section 147, a notice dated 7th March, 1991 was served upon the assessee on 8th March, 1991. In response to the said notice, the assessee filed return of income on 30th March, 1991 declaring an income of Rs.55,70,000 which had been worked out on the basis of unaudited proforma accounts. On the ground that the return was not accompanied by the statutory audit report as required under section 44AB and there were certain other defects, the Assessing Officer by means of a letter dated 26th July, 1991 asked the assessee to remove the "defects" within 15 days. As the defect regarding the requirement of section 44AB was not removed by the assessee, the return filed on 30th March, 1991 was held to be invalid by means of an order passed under section 139(9) dated 3rd June, 1992. 3. The assessee filed a writ petition in the High Court of Himachal Pradesh against the said order of the Assessing Officer and the Hon'ble High Court as per order dated 20th Augu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer thereafter issued notice under section 148 dated 18-11-1997 which was served upon the assessee but no return of income was filed in response thereto. The Assessing Officer thereafter issued a notice under section 142(1) calling for the return of income as also audited accounts which was issued on 8-1-1998 and subsequently return declaring an income of Rs.1.59 crores was filed on 17-3-1998. 6. The other relevant facts are that the assessment proceedings continued and statutory notices were issued from time to time and ultimately an assessment order was passed on 31st December, 1999 computing the assessee's taxable income at Rs.10.85 crores. Being aggrieved, the assessee filed an appeal to the CIT(Appeals) and at which stage alongwith various other grounds raised pertaining to the additions and disallowances, it took up a legal issue contending that the order under section 148 was bad in law since the assessment proceedings commenced from the second notice issued under section 148 on 18-11-1997 whereas the first notice issued under section 148 on 7-3-1991 was barred by limitation and assessment made on the basis of the second notice was invalid. In the course of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-3-1991. Since this return filed by the appellant was not accompanied by statutory audit report as required under section 44AB of Income-tax Act, 1961 and there were also some other defects therein, the appellant was required to remove these defects within 15 days vide letter dated 26-7-1991. The appellant failed to remove these defects and, therefore this return was held to be an invalid return vide order under section 139(9) dated 3-6-1992. Aggrieved by this order, the appellant filed writ petition in the Hon'ble High Court of Himachal Pradesh, who stayed this order vide order dated 3-6-1992 but allowed the Assessing Officer to frame the assessment, recover the taxes treating it as valid return subject to final determination of Annexure P-I at later stage. The assessments were, therefore, framed on 31-3-1994 and meanwhile the appellant had also filed a revised return on 10-2-1991 duly accompanied by the audited accounts. The Hon'ble High Court vide their order dated 5th May, 1997 held that the return filed on 30-9-1991 was an invalid return and, therefore, all subsequent orders of assessment were invalid consequently. The Hon'ble Allahabad High Court in the case of Kunwar Bishwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the arguments already advanced before the CIT(Appeals). It was stressed that the notice under section 148 issued on 7-3-1991 was valid in law and the same had not been declared invalid by the Hon'ble High Court and since this was still pending and had not culminated in an assessment order or the proceedings dropped the second notice issued on 18-11-1997 was invalid in the eyes of law and this would also make invalid the subsequent asstt. order framed by the Assessing Officer. In support of the aforesaid arguments, the learned counsel for the assessee placed reliance on the two decisions cited before the CIT(Appeals) namely, Mahendra's case and Jai Dev Jain Co.'s case. According to the learned counsel, the decision of the Allahabad High Court in the case of Kunwar Bishwanath Singh v. CIT [1942] 10 ITR 322 relied on by the CIT(Appeals) was distinguishable as in that case, the notice for re-assessment issued had itself been quashed. It was the further plea that section 148 proceedings on the first notice were pending for all intents and purposes even though the invalid return filed and the subsequent proceedings before the Assessing Officer and CIT(Appeals) had been quashed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers v. Union of India [1978] 111 ITR 161 (Punj. Har.); (viii) Atma Ram Bindra Ban v. CIT [1960] 39 ITR 418 (Punj.); 12. In his short reply, the learned Counsel sought to distinguish the various decisions relied on by the learned D.R. contending that insofar as Bidhu Bhusan Sarkar's case was concerned, that was a case in which the initial notice had already been dealt with i.e., terminated. To the same effect i.e., the decisions being distinguishable were the arguments of the learned Counsel in respect of Atma Ram Bindra Ban's case and Smt. Adarsh Kaur's case as according to him, in the latter case, the initial notice had not been served on the assessee. On a specific query from the Bench, the learned Counsel for the assessee accepted that the second notice was within the period of limitation and he also accepted that the first notice issued in March, 1991 was also valid. A reference was made to the judgment of the Hon'ble Supreme Court in Comunidado of Chicalim v. ITO [2001] 247 ITR 271. 13. We have examined the rival submissions, going minutely into the various decisions relied on by both the parties during the course of the hearing. At the outset, we would refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi High Court in the case of R. Dalmia v. CIT[1992] 194 ITR 700 and the other of the Hon'ble Calcutta High Court in the case of CIT v. Bansidhar Jalan [1994] 207 ITR 488. We have gone through these cases and we do not find them to be applicable to either the facts of the present case or to the point at issue which is whether the Assessing Officer is empowered to issue a second notice under section 148 when the first notice issued under the same section stands and proceedings relating thereto have still to attain finality/conclusion. In none of the aforesaid two decisions relied on by the CIT(Appeals) were the aforesaid facts under consideration. 16. Before we come to the decisions relied on by the learned Counsel for the assessee, we would like to refer to various other judgments relied on by the learned D.R. during the course of the hearing. (i) In the judgment in Chatturam Horilram Ltd. v. CIT [1955] 27 ITR 709 (SC), the facts were that the assessee-company carrying on business in Chota Nagpur was assessed to tax for the year 1939-40 but the assessment was set aside by the Tribunal on 28th March, 1942 on the ground that the Indian Finance Act, 1939 was not in force dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be ignored and could not operate as a bar to assessment proceedings directly against the non-resident i.e. the appellant/assessee in that case. (iv) In the decision in Industrial Trust Ltd.'s case, the facts were that for the assessment year 1946-47 and two other assessment years i.e., 1947-48 and 1949-50, the Income-tax Officer at Ajmer issued notices under section 34(1)(a) of the Income-tax Act, 1922 and in response thereto the company filed its returns. Pending those returns, the Income-tax Officer, Central Circle IV, Delhi issued another set of notices under section 34 for the same three years. The Company did not submit any returns to the Income-tax Officer at Delhi but wrote back saying that it had already submitted its returns to the earlier Income-tax Officer at Ajmer and hence it could not be called upon to file fresh returns. The Income-tax Officer rejected the objections and made assessments which were confirmed by the AAC. On appeal, the Tribunal held that since the Officer at Ajmer had already initiated proceedings under section 34(1)(a), the Income-tax Officer at Delhi could not initiate fresh proceedings and consequentially the notices issued by him were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vi) Two other judgments were relied on by the learned D.R. i.e., Auto Metal Engineers case and Atma Ram Bindra Ban's case which are found to be distinguishable on facts and, therefore, held to be inapplicable. Another judgment of the Tribunal in Smt. Adarsh Kaur's case is also held to be inapplicable as in that case the initial notice under section 148 had not been served on the assessee and this would automatically lead to the conclusion that no proceedings were pending. (vii) The learned D.R. had also placed reliance on the judgment in the case of Anil Kumar Upadhayay v. AAC contending that their Lordships of the Hon'ble Supreme Court had dismissed the SLP filed by the assessee against the judgment of the Hon'ble Allahabad High Court dismissing a Writ Petition challenging notice under section 148 on the ground that no assessment had been made and the return filed by the assessee was pending. It is noticed that the SLP was rejected with the observation that the High Court had found on facts that the return was not pending and, therefore, reassessment under section 148 was permissible even when no assessment had been made. In the present case, there is no such finding pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years 1971-72 and 1972-73, notices under section 148 were issued to the assessee firm and these were served on 9th October, 1973 on the receiver who was appointed on 28-7-1972 on a suit for rendition of accounts filed by one of the partners. No assessment orders were passed on the basis of these notices and thereafter another set of notices under section 148 was issued for both the assessment years on 31-3-1980 and 17-3-1981 respectively. The assessment for the assessment year 1971-72 was completed under section 144 on 29th March, 1984 while for the assessment year 1972-73, the assessment was completed under section 143(3) on 20-2-1985. On appeal, the assessee contended before the first appellate authority that assessments had become time barred as they could not have been framed on the aforesaid dates on the basis of first set of notices issued on 9,th October, 1973. The first appellate authority took the view that perusal of record did not reveal that any notice under section 148 had been issued on 9th October, 1973 and the photo copies of the notices produced did not give reasons for initiating the proceedings. Therefore, it was held that initiation of proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee and the relevant facts being that the Tribunal set aside the asstt. and remanded the matter back to the Income-tax Officer for making a fresh assessment and on the matter travelling to the Hon'ble High Court at the instance of the assessee, their Lordships took the view that so long as the assessment is pending, the Assessing Officer cannot have reason to believe that income for the relevant assessment year has escaped asstt. and, therefore, proceedings under section 147 and consequent issue of notice under section 148 are not valid. (iii) In the judgment of the Hon'ble Bombay High Court in Hargovindsing Narainsing's case, the facts were that the karta of the assessee HUF died in September, 1954 and thereafter disputes arose among the members of the family and a court receiver was appointed. For the assessment year 1956-57, the Income-tax Officer issued a notice under section 22(2) of the Income-tax Act, 1922 in the name of the family on the court receiver and in response thereto, the receiver filed returns. The Income-tax Officer did not pass any orders on the ground that the notices served on the court receiver and the returns submitted by him were invalid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould issue any number of notices under section 148 provided conditions stipulated in section 147 were satisfied and if the same were within the period specified under section 149 read with section 151. This was, however, subject to no assessment being pending either by way of original assessment or by way of reassessment proceedings. In other words, every notice issued under section 148 within the period of limitation has first to be concluded or taken to its logical conclusion before a second notice is issued. As already stated and now reiterated in the present case, the notice issued under section 148 on 7th March, 1991 stands and before taking the same to its logical conclusion, the Assessing Officer issued a second notice in 1997. The aforesaid judgment of the Hon'ble Kerala High Court deals with the facts which are quite akin to the facts of the present case. 19. We now come to the judgment of the Hon'ble Supreme Court in Comunidado of Chicalim's case which was relied on by the learned Counsel for the assessee. At pages 272 and 273 of the report, their Lordships on the facts of the case observed as under: "We are afraid that the High Court was in error on both counts. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the proceedings initiated under section 147 of the Act were invalid. They also claimed that the assessment made pursuant to the notice under section 148 was equally invalid. To this, the Income-tax Officer sent his reply on July 16, 1970, stating that the return filed on April 2, 1964 was disposed of on November 10, 1965, but a note recorded by the Income-tax Officer in his file. This note was recorded on November 10, 1965 in the file pertaining to the assessment year 1963-64 and was to the following effect: 'In view of the Supreme Court judgment in the case of H.E.H. Nizam, the question of giving credit for tax deducted at source can be considered in the hands of the beneficiaries. Hence no credit for the tax deducted at source is to be allowed here. The question of refunding the additional surcharge will have to be considered.' The Appellate Assistant Commissioner and the Tribunal held that the reassessment was not valid. However, the High Court was of the view that the order dated November 10, 1965 of the Income-tax Officer on the note sheet was an order of disposal of the tax return filed by the trustees. It held that the return filed by the trustees on April 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, a notice already issued under section 148 which is still to be concluded or disposed of. 23. As a result of the detailed discussion in the preceding paras, it becomes quite clear that the position of law is settled, inasmuch as, subsequent proceedings under section 148 cannot be commenced unless and until there is a disposal of the earlier proceedings and in the present appeal, the notice issued under the same section in March, 1991 remains un-disposed of. We had summoned the record during the course of the hearing of the present appeal and perused the reasons recorded for the issue of the notice in 1997 and these are as under:- "Reasons for the asst. year 1988-89.-The return of income for this asst. year was filed on 30th March, 1991 declaring income at Rs.55,10,000 in response to notice under section 148 dated 7th March, 1991 served upon the assessee corporation on 8th March, 1991. The return was filed without enclosing auditors report as required under section 44AB of the Income-tax Act, 1961. 2. The defects in the return were pointed out to the assessee vide letters dated 26th July, 1991 and 8th January, 1992 but the defects so pointed out were not removed and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenge to it on the part of the assessee. We have already referred in the present order to a number of reported decisions which hold that even where the proceedings have got barred by limitation, it does not tantamount to a conclusion of the proceedings initiated by the Assessing Officer and something more is required to be done. In the final analysis, we quash the assessment order passed by the Assessing Officer on 31st December, 1999 pursuant to the initiation of proceedings by issue of the second notice under section 148 on 18-11-1997. In the view that we have taken to quash the assessment order itself we do not find it necessary to adjudicate upon any of the other grounds raised and argued in the appeal including the additional ground. 25. Before we part with this appeal, we would like to mention that provisions for reopening/reassessment underwent a sea change w.e.f. 1-4-1989 and there are decisions both ways of the Hon'ble High Court's, some taking the view that the new provisions are applicable to all the proceedings where notices for reopening have been issued after 1-4-1989 although the assessment years involved are earlier ones whereas some decisions are to the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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