TaxTMI 
TaxTMI 
2009 (3) TMI 642
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsider Ground No. 1 in assessee's appeal which reads as under : "1. On facts, in law and in the peculiar circumstances of the present case, the learned Commissioner of Income-tax (Appeals)-I, Kanpur [hereinafter referred to as the ld. CIT(A)] erred in confirming the action of the Assessing Officer in initiating proceedings under section 147 of the Act which were illegal, bad in law and void ab initio because : (a)On the date of issue of notice under section 147, i.e., 18-5-2005, a valid return was pending assessment and time period for issuance of section 143(2) was available, hences no income had escaped assessment. (b)There was no material, noticed by the Assessing Officer to conclude that any income at all had escaped assessment, hence issuance of notice on perusal of the return and annexure enclosed therewith is invalid. Hence the Assessing Officer never acquired any legal or valid jurisdiction to pass any order in the present case, therefore; the order of the Assessing Officer so confirmed by CIT(A) be ordered to be quashed." 4. The gist of this ground is that the Assessing Officer had issued notice under section 148(1) during the period when he could have issue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment exists, so as to justify issue of notice under section 148. 6. Thus, it can be seen that the argument of the appellant of 'change of opinion' is misplaced. It is also argued that reason for reopening the case under section 147/148 are not sufficient. It is well-settled position that the "sufficiency of reason" is not justiciable. It was held in the case of ITO v. Lakhmani Mewalala Das that the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons of the belief in 103 ITR (SC) (1976). Case laws cited by the ld. AR are not applicable to the fact of this case because no assessment proceedings were pending at the time of issue of notice under section 147/148. There is no infirmity or irregularity in the jurisdiction acquired by the Assessing Officer under section 147/148 of the Income-tax Act. As per the facts and circumstances of the case, hence ground No. 1 of appeal is 'dismissed'." 7. The ld. CIT(A), in fact relied on the decision of ITAT Hyderabad Bench in the case of Elegant Chemical Enterprises (P.) Ltd. v. Asstt. CIT [2004] 91 ITD 85 and the decision of Hon'ble Delhi High Court in the case of Mahanagar Telephone Nigam Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 143(3). The notice under section 148(1) can only be issued after expiry of the period available for issuance of notice under section 143(2) which is presently twelve months from filing of the return. 10. The ld. AR relied on the following decisions of the Lucknow Bench of the Tribunal : "Shri Sachidanand Gupta v. ITO in [IT Appeal No. 740/Luck./05 for the assessment year 2000-01 decided on 31-1-2007] Shri Chandra Prakash Gupta v. ITO in [IT Appeal No. 351/Luck./05 for the assessment year 2003-04 decided on 17-11-2006] Shri Masihulla Khan v. ITO in [IT Appeal No. 514/Luck./06 for the assessment year 2002-03 decided on 8-12-2006]." 11. He further relied on the decision of Hon'ble Madras High Court in the case of CIT v. K.M. Pachayappan [2008] 304 ITR 264 . The ld. AR then sought to distinguish the decision of Hon'ble Allahabad High Court in the case of Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 and the decision of Hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 , on the ground that in both the cases, time period to issue notice under section 143(2) had expired when notice unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were terminated by processing the return on 26-2-2005, therefore, it could not be said that the return is pending. The ld. DR then submitted that it is not necessary for the officer to issue notice under section 143(2) in each and every case and issuance of notice under section 143(2) is under the administrative control of the CBDT and Chief Commissioner and only when the conditions laid down in the instructions of the CBDT are satisfied, the Assessing Officer can issue notice under section 143(2). Therefore, it cannot be said that in proceedings for assessment is pending. Once return is accepted by the Department by processing or by sending intimation or by treating an acknowledgement as intimation then Department accepts the income returned by the assessee. If the taxes are correctly paid on the income returned then no notice is issued. But where there is a variation in tax as per returned income then either refund is issued or intimation is separately issued which is treated as demand notice. Thus, the process of assessment is completed. It is subsequently when Department considers to verify the return it issues notice under section 143(2). Therefore, when processing is complet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing Officer cannot initiate reassessment proceedings. This is the gist of argument. In this connection, we examine the concept of pendency of proceedings as under : 16. The term 'pending' means 'undecided', i.e., something which is not concluded. An action is considered as pending from the time of commencement of the proceedings. Thus, a legal proceeding is pending as soon as commenced and until it is concluded. As per Advanced Law Lexicon, third Edition of 2005, page 3521/3522, following are the definitions of the word 'pending' : "A suit is pending until final judgment is rendered. See 3 IC61:5NLR88. An action is pending until the judgment is fully satisfied. A pending action is an action which has been commenced, and in which some proceeding may be taken (Sherwood v. Ray) (1837) I Moo. PC 353; Hart v. Hart, (1881) 18 Ch. D. 670, 680; Fordham v. Clagett (1882) 20 Ch. D. 637, 653. So long as it is possible for any proceeding to be taken in a case, such cause is still pending (per JESSEL, M.R., in Fordham v. Clagett supra p. 653). For the purposes of section 24(5) and (7) of the Judicature Act, 1873, and action is pending after final judgment so long as the judgment r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... processed the return, determined the tax payable including the interest on the returned income and also where return filed by the assessee is accepted by way of issuing acknowledgement. Merely because the Assessing Officer is prohibited from issuing notice under section 143(2) after twelve months of filing of the return, it does not mean that proceedings commenced with filing of a return, are pending before him. In fact and in law, proceedings arising after filing of the return is a separate proceeding and proceedings initiated after issuance of notice under section 143(2) are separate proceedings. If notice under section 143(2) is not issued by the Assessing Officer, and twelve months of the filing of the return is expired, it could not be said that conclusion of any proceeding is time-barred because such proceedings were not at all initiated. It is only the commencement of proceedings under section 143(2) are barred by limitation after expiry of twelve months. So far as the proceedings initiated by filing the return of income is concerned, it has to be viewed independently. It will commence with the filing of the return and will come to an end when processing is done or acknowle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt 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 foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a)where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (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 understat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ould fall in clause (c). In the present case, we are only concerned with the operation of clause (b) to Explanation 2 and this clearly provides that where assessment is not completed, still then there could be a case of deemed escapement of income and notice under section 148(1) can be issued irrespective of the fact whether assessment proceedings initiated by virtue of filing the return or assessment proceedings by way of issuance of notice under section 143(2) are concluded or not. Thus, in fact, following situation emerged from the above discussion : (i)after filing the return of income, processing is not done/acknowledgement is not issued, i.e., return filed is pending. Thus, there is a case of assessment having not done. This will fall in clause (b) to Explanation 2. (ii)Where return of income is filed, processing is done/ acknowledge-ment issued. The proceedings initiated by way of filing of return is concluded though technically, it may not be said to be an assessment completed as held in various Court judgments. This will also fall in clause (b) to Explanation 2. (iii)Where return of income is filed, processing is not done/acknowledgement is not issued but notice u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o distinguish this judgment by submitting that the Hon'ble Madras High Court did not consider the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), wherein it is held that failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate assessment proceedings even where intimation under section 143(1) has been issued. The ld. DR further pointed out that the Hon'ble Madras High Court has passed the order relying on the judgment of Hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust (supra) which related to the assessment year 1962-63 wherein the concept of assessment was some what different as compared to that which was in vogue in the relevant assessment year. Further, subsequent to the assessment year involved in judgment of Trustees of H.E.H. The Nizam's Supplemental Family Trust's case (supra), the provisions of section 147 and Explanation thereto as introduced with effect from 1-4-1989 had altered the situation and concept of deemed escapement of income has come into place. We entirely agree with these submissions of the ld. DR. A precedence becomes bin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....relying on the decision of Hon'ble Andhra Pradesh High Court in the case of A. Pusa Lal (supra), held as under : "The Legislature in its wisdom has given two options to the Assessing Officer to reopen assessments : (a) accepting the return of income by merely processing it under section 143(1) of the Income-tax Act, 1961, without making investigation, and (b) taking up the case for scrutiny and completing the assessment under section 143(3) of the Act. Merely because the Assessing Officer has two options for reopening the matter processed under section 143(1), non-exercise of option under section 143(2) to correct the assessment made under section 143(1), does not exclude the Assessing Officer's power to reopen the assessment under section 147 of the Act." 28. In the case of Abad Fisheries (supra), the Hon'ble Kerala High Court has held as under : "So long as the ingredients of section 147 of the Income-tax Act, 1961, are fulfilled, the Assessing Officer is free to initiate proceedings 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as under : "Following the filing of returns by the assessees for the assessment year 1992-93, notices were issued to them under section 143(2) of the Income-tax Act, 1961. While the proceedings in terms of section 143(3) of the Act were pending pursuant to the notices, on the basis of the materials seized in the course of a search at the petitioners' premises, the Assessing Officer found that there were sufficient grounds for initiating proceedings under section 147 and, hence, notices under section 148 of the Act were issued to the petitioners. In writ petitions, the petitioners contended that it was not open to the Assessing Officer to initiate proceedings under section 147 and issue notices under section 148 of the Act before concluding the proceedings under section 143(3) and without passing a final order in those proceedings; and that Explanation 2(b) to section 147 did not apply to scrutiny cases : Held, dismissing the petitions, that a provision cannot, contrary to its plain meaning, be given a limited meaning on the basis of the explanatory note submitted before Parliament at the time of presentation of the Bill. Explanation 2(b), therefore, was applicable to scrutiny....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gle Member) in the case of Sri Krishna Mahal v. Asstt. CIT [2001] 250 ITR 333 was affirmed by Division Bench in the judgment reported in Sri Krishna Mehal v. Asstt. CIT [2002] 257 ITR 283 (Mad.). 35. The ITAT Delhi (Special Bench) in the case of Motorola lnc. (supra), also did not have the benefit of decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra). Further, it was on a different proposition. It was held that if an assessee files return voluntarily within time period under sub-section (4) of section 149 then Assessing Officer cannot proceed under section 147/148 against such assessee. 36. On the basis of overwhelming authorities on the subject as referred to above, we hold that notice issued under section 148(1) can be issued even where notice under section 143(2) has been pending and not closed. We hold that by processing the return and by issuing acknowledgement as token of accepting the return, the proceedings initiated by filing the return are terminated and no proceedings, therefore, remain pending. It has been held by the Hon'ble Supreme Court in the case of Rajesh Jhaveri (supra) itself that intimation is not an assessment....