TaxTMI 
TaxTMI 
2009 (12) TMI 625
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....come-tax (Appeals) erred in retaining addition of Rs. 20,000 out of expense claimed in the profit and loss account. (vi) Then issues regarding charging of interest under sections 234B, 234C, initiating penalty proceedings under section 271C. 2. In the Departmental appeal, the Department has challenged deletion of additions of Rs. 80,000 made on opening capital and of Rs. 1,13,080 made on account of unexplained repayment of loan and finally against deletion of addition of Rs. 39,455 out of Rs. 59,455 made on account of disallowance of expenses. 3. The facts of the case are that the assessee has earned income from electrical labour contract. The return of income was filed on April 7, 2000 on an income of Rs. 52,560. Subsequently, notice under section 148(1) was issued on May 31, 2001 in response to which the assessee did not file any return of income. The Assessing Officer issued notice under section 142(1) on May 2, 2002 requiring the assessee again to furnish return of income on or before May 13, 2002 and further details as per its letter issued on June 19, 2002. It seems that no details were filed on the ground that the assessee was confined in sub-jail Daman. In any case....
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....oner of Income-tax (Appeals) noted that total expenses claimed were Rs.1,18,910 and the Assessing Officer has disallowed 50 per cent. thereof at Rs. 59,455. Considering the overall circumstances, the learned Commissioner of Income-tax (Appeals) confirmed the addition of Rs. 20,000 and deleted the rest. 5. The learned authorised representative for the assessee submitted that reopening of the assessment is bad, because return filed by the assessee on April 7, 2000 remained pending and in the meantime notice under section 148 has been issued. Thus, the valid return was on record for making assessment under section 143(3) which could be done by March 31, 2003. Therefore notice issued on May 31, 2001 was not legal. He referred to the following judgments. (1) Trustees of H. E. H. The Nizam's Supplemental Family Trust v. CIT [2000] 242 ITR 381/109 Taxman 193 (SC) ; (2) Kesrimal v. ITO [2003] 264 ITR 119/129 Taxman 694 (MP) ; (3) Indian Oil Corpn. v. ITO [1986] 159 ITR 956/26 Taxman 336 (SC) ; and (4) Jhunjhunwala Vanaspati Ltd. v. Asst. CIT (No. 2) [2004] 266 ITR 664/137 Taxman 336 (All.). 6. Once return filed on under section 139(4) on April 7, 2000 was pending as no as....
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....ly by May 31, 2001. Since, the notice under section 148(1) was issued on May 31, 2001, it is not hit by the authorities referred to by the assessee. Further we agree with the learned Departmental representative that those authorities are applicable to the factual matrix when limitation for issuance of notice under section 143(2) was not in the statute. Under the present scheme of section 147 a notice under section 148(1) can be issued on the basis of deemed escapement of income which is provided in Explanation 2 to section 147. For the sake of convenience, we reproduce Explanation 2 to section 147 as under : "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 ....
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.... : 'A suit is pending until final judgment is rendered. See 3 IC 61 : 5 NLR 88. 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] 1 Moo. P. C. C. 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 [1882] 20 Ch D 637 page 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 remains unsatisfied. (Salt v. Cooper [1880] 16 Ch D 544). A legal proceeding is "pending" as soon as commenced (on which see 5 Rep. 47, 48 ; 7 Rep. 30), and until it is concluded, i.e., so long as the court having original cognizance of it can make an order on the matters in issue, or to be dealt with, therein. Pending judicial proceeding. A judicial proceeding is said to be pending. (A) in the case of a civil proceeding, when it is instituted by the filing of a plaint or otherwise ; (B) in the case of ....
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.... is a separate proceeding and proceedings initialled 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 acknowledgement is issued deeming it to be intimation. It cannot be deemed to be pending after processing or issuance of acknowledgement. Thus, the proceedings for assessment has two methods of initiation, one is when return of income is filed and the other is when notice under section 143(2) is issued. When return of income is filed and subsequently notice under section 143(2) is issued without processing or issuing acknowledgement, then the two proceedings merged into each other and ....
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....vered 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 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....
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....rn 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/acknowledgement 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 under section 143(2) is issued. If the Assessing Officer still finds escapement of income then he has two options. He can cover such escaped income in the proceedings initiated under section 143(2) or he can initiate proceedings under section 147 read with Explanation 2(b) as assessment is not complete and there is a case of deemed escapement of income. (iv) Return of in....
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....hat 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 learned Departmental representative further pointed out that the hon'ble Madras High Court has passed the order relying on the judgment of the hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust [2000] 242 ITR 381 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 [2000] 242 ITR 381 (SC), the provisions of section 147 and the Explanation thereto as introduced with effect from April 1, 1989 had altered the situation and concept of deemed escapement of income has come into place. We entirely agree with these submissions of the learned Departmental representative. A precedence becomes binding only when it is similar on all four corners of facts and law. A slight difference in fact or in law will not make a val....
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....s P. Ltd. v. Asstt. CIT [2004] 271 ITR (AT) 56 (Hyd) the Tribunal, relying on the decision of the hon'ble Andhra Pradesh High Court in the case of A. Pusa Lal v. CIT [1988] 169 ITR 215 held as under (headnote of 271 ITR (AT)) : '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 CIT v. Abad Fisheries [2002] 258 ITR 641, the hon'ble Kerala High Court has held as under (headnote) : '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 un....
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.... will not render the Assessing Officer powerless to initiate the reassessment proceedings.' 30. The hon'ble Patna High Court (Ranchi Bench) in the case of Deepak Kumar Poddar v. Union of India [1997] 224 ITR 95, has held as under (headnote) : '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 pro....
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....e 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 ; Jorawar Singh Baid v. Asstt. CIT [1992] 198 ITR 47 (Cal.) and Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 (All).' 34. The decision of the hon'ble Madras High Court (Single Member) in the case of Sri Krishna Mahal v. Asstt. CIT [2001] 250 ITR 333 (Mad.) was affirmed by the Division Bench in the judgment reported in Sri Krishna Mahal v. Asst. CIT [2002] 257 ITR 283 (Mad). 35. The Income-tax Appellate Tribunal, Delhi (Special Bench) in the case of Motorola Inc. v. Deputy CIT [2005] 95 ITD 269, also did not have the benefit of the decision of the hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500. Further, it was on a different proposition. It was held that if an assessee files return voluntarily within the time period under sub-section (4) of section 149 then the 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 sec....
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.... opening words of section 147 'if the Assessing Officer has reason to believe that any income chargeable to tax has escaped the assessment for any assessment year' cannot be read without considering Explanation 2 which defines and prescribes the scope and limit of all deemed escapement of income under the situation mentioned in three clauses. 37. Thus, we reject the contention of the learned authorised representative for the assessee that the Assessing Officer could not have issued the notice under section 148(1) within twelve months of filing of the return which is the period when the Assessing Officer should have issued notice under section 143(2) which has not been issued. 38. There is one more aspect in this issue which requires consideration. One more condition is apparently proposed to be inserted in section 147 by reading into it the provisions of section 143(2) that, if the time period for issuance of notice under section 143(2) has not expired then notice under section 148(1) could not be issued. Section 147 is a procedure for assessing escaped income (original or deemed) and for this, it has prescribed condition for conferring jurisdiction on the Assessing Officer. ....