TaxTMI 
TaxTMI 
2011 (7) TMI 586
X X X X Extracts X X X X
X X X X Extracts X X X X
....4 was valid when the proceedings initiated under first notice dated 14.12.1992 was not concluded- by way of an assessment ? 25. Whether the reason recorded for issue of notice under section 148 of Income-tax Act, dated 24.11.1994 are sufficient and relevant to assume jurisdiction to make a reassessment ? 26. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the mandatory conditions for issuance of notice dated 24.11.1994 have been complied when the reason recorded are mere surmise and presumption and reappreciation of an already existing information? 27. Whether the assessment order dated 27.3.97 is barred by limitation under the provisions of section 153 of the Income-tax Act on the facts and circumstances of the case ? 28. Whether on the facts and circumstances of the case, is Tribunal right in law in not canceling the assessment ?" 3. It is the case of the appellant that he is an individual carrying on real estate development and that for the Assessment Year 1991-92 he filed his original return of income on 22/12/1992 declaring total income of Rs.3 lakhs. Thereafter, return was fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the appellant on this aspect of the matter, while allowing the appeal on certain other aspects. The said order is in challenge in this appeal. By order dated 26/2/2004, this appeal was admitted to consider the aforementioned substantial questions of law. 6. We have heard the learned counsel for the appellant and learned counsel for the respondent - revenue. 7. It is submitted on behalf of the appellant that in the instant case, notice dated 14/12/1992 was issued under Section 148 of the Act, which was served on the assessee on 24/12/1992 whereas, even prior to the receipt of the said notice on 22/12/1992, the appellant had filed hid return of income. Therefore, by 31/3/1995 i.e., two years from the end of the assessment year, the assessment had to be completed by the Assessing Officer whereas, in the instant case, the assessment order is passed on 27/3/1997, which is well beyond the two year period and is therefore invalid. He has also contended that the second notice dated 24/11/1994 is invalid in law as the said notice was issued during the pendency of the first notice; Also that the second notice is barred in law in as much as; that the conditions mentioned unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der Section 148 of the Act did not reach its logical conclusion in as much as there was no assessment order passed, a second notice could not have been issued. Having regard to the scheme of the Act under Section 143 to 153, he submitted that under proviso to Section 147, unless there is an assessment order passed which is a condition precedent, there cannot be any reassessment. He therefore, reiterated that the appeal has to be allowed and the order of the authorities below have to be set aside. 10. Having heard the counsel on both sides and on perusal of the material on record, the points that would arise for our consideration are as follows:- 1) Whether the authority was competent to issue notice, dated 24/11/1994 issued under Section 14S of the Act? 2) If the answer to point Nod is in the affirmative, whether the reasons recorded for the issuance of such a notice has a nexus to the material on record? 3) Whether the assessment completed, on 31.3.1997 is valid in the eye of law? 11. At this stage, ft can be said that if the answer to Point No. 1 is in the negative, then the other points for consideration would only be academic in nature. &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Annexure-D. After receipt of notice dated 24,12.1992 reply was given by the petitioner on 29.12.1992 stating that return has been filed on 22.12.1992. After verifying the said return notice under Section 148 of the Act was issued on 24.11.1994 stating that there has been escapement of income. In response to the said notice, the appellant filed another statement of Return of Income on 18.10.1995. The case was taken up for scrutiny by issue of notice under Section 143(2) on 15.5.1996 and thereafter various details were called for and the assessment order was passed on 27.3.1997. 14. Under explanation to Section 147 certain situations which are deemed to be cases of income escaping assessment are stated as follows: a) where no return of income is furnished by an assessee, although total income is above the taxable limit; b) where a return of income has been furnished, but no assessment has been made, and the assessee is found to have understated his income or claimed, excessive loss, deduction, etc., in the return; and c) where an assessment has been made, but income chargeable to tax has been under assessed or has been assessed at too low a rate or any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....20.10.1995. In fact, in the return filed on 22.12.1992, the assessee had declared a total income of Rs.3.00 lakh without profit and loss account and balance sheet. 17. Having regard to the position of law and the peculiar facts of the case, in the absence of any return being filed notice under Section 148 of the Act dated 14/12/1992 was rightly issued by the Assessing officer. When the return was filed by the assessee on 22/12/1992 the Assessing officer had time till 31/3/1995 to complete the assessment, when he considered the return dated 22/12/1992 and found that there was escapement of income, he issued notice dated 24/11/1994 which was also responded to by the appellant-assessee only on 20/10/1995 by filing a revised return therefore the not ice dated 24/11/1994 is infact not a "second notice", under Section 148 of the Act during the pendency of an earlier or first notice under Section 148 of the Act. The circumstances under which the two notices have been sent have to be borne in mind. The first notice dated 14/12/1992 was issued under Section 148 of the Act, when there was no return filed and the said notice was validly issued. When a return was filed on 22/12/1992, e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase, since in the instant case, two notices have been issued under Section 148 of the Act, whereas in the aforesaid case, the earlier notice was issued under Section 142(1) of the Act and the subsequent notice was issued under Section 148 of the Act. 20. In the case of Commissioner of Income-Tax v, Jaideo Jain and Co., reported in 227 ITR 302 (RAJ.), it has been held that fresh assessment proceedings initiated for the same assessment years were invalid because they were completed on the basis of the fresh notice issued under Section 148 of the Act and the notices were issued on March 31, 1980, and March 17, 1981, i.e., at the time when the original proceedings initiated under Section 148 were still pending and the original assessments were barred by time and therefore, the tribunal was justified in annulling the assessments made under Section 147/148. Having explained the circumstances under which the notices have been issued in the present case the aforesaid decision is not applicable. 21. In case of Commissioner of income-Tax v. P.Krishnakutty Menon [181 ITR 237], it has been held that when notices were issued under Section 147 (b) on 31/3/1975 and served on the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thority has the jurisdiction to complete on its basis, the proceedings for reassessment within time from the date of the first notice and that the illegality of the second notice would not vitiate the assessment order. 24. In 247 ITR 772 (Commissioner of Income-Tax v. Rajendra G Shah) the Bombay High Court held that when after the assessee files a return, a notice is issued under Section 148 of the Act and the assessee was assessed, accordingly the reopening of the assessment when the return was pending assessment was bad in law. Keeping in mind the facts of the present case, the aforesaid two decisions are not applicable. 25. In case of A.S.S.P. and Co., v. Commissioner of Income-Tax, (172 ITR 274), it has been held that when a return is filed by the assessee in response to a notice under Section 148 of the Act, it is not open to the Income-tax Officer to ignore that return and issue a fresh notice under Section 148. After the reassessment order is made in pursuance of the first notice is issued under Section 148, if the Income-tax Officer has any reason to believe that there is any escapement of income which can be roped in under section 147, he can issue a fresh ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ail material facts necessary for assessment for that year, income, profits or gains chargeable to tax to have escaped assessment and the Assessing Officer has, therefore, jurisdiction to issue notice for re-assessment. In conclusion, it was held in the said decision that if an assessee filed a return after her return had been disposed of, then the said second return is of no consequence after (he assessment being made and it cannot, be treated as revised return. 28. In the case of Commissioner of Income Tax V/s. Bidhu Bhusan Sarkar (1967)63 ITR 278 (SC) it has been held that where the Income Tax Officer passed an order with remarks "filed", it would imply that there is termination of proceedings and the only way in which such an order can be vacated is by authority having jurisdiction to intervene. 29. In the case of Commissioner of Income Tax v/s. M.P.Davis (1986)162 ITR 251 (Kar) it has been held that the words "no proceeding" used by the ITOs in assessment proceedings to signify that there is nil assessment or to close or drop them, it would not mean that there was no termination or completion of assessment proceedings. 30. In the case of S.K.V.Selvaraj ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pinion by the Assessing Officer would not confer jurisdiction for re-assessment. Where a notice under Section 148 is received by the assessee, the proper course would be to file a return in response to the same. On the basis of the material available and the return submitted by the assessee, the Assessing Officer can complete the assessment within the time limit prescribed under Section 153(2) of the Act-Therefore, the Assessing Officer can assess or re-assess income in respect of re-computing under Section 147 by serving on the assessee a notice required to furnish a return of income and before issuing a notice the Assessing Officer has to record reasons for doing so, in case, where assessment under Section 147 is to take place after expiry of two years time from the end of the relevant assessment year. If an assessment is made for the relevant assessment year under Section 147, action can be taken under Section 147 after the expiry of four years from the end of the relevant assessment year in the following cases: a) income has escaped assessment due to the failure on the port of the assessee to file a return under Section 139 or in response to a notice under Section 142(1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Assessing Officer for issuing notice was not recorded in accordance with law. To the same effect is the decision in the case of Commissioner of Income-tax V/s, Mahesh Gum and Oil Industries (2007)292 ITR 397 (Raj) where it has been held that the reason to belief that the income had escaped assessment on mere suspicion and if there is no material to infer escapement of assessment, reassessment proceedings are not valid. d. In the case of Commissioner of Income-tax. V/s. Smt. Maniben Valji Shah, (2006) 283 ITR 453 (Bom) it is held that the issuance of notice under Section 147 read with Section 148 was held to be invalid as there were no reason to issue notice for reassessment. "in the said case, the Assessing Officer had no material to entertain a plea that any part of the income of the assessee had escaped assessment and that such escapement was by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts. e. In the case of Yakub All Gopal Singh 81 Party V/s. Deputy Commissioner of Income-tax and another, (2007) 295 ITR (Raj) it was held that the assumption of jurisdiction by the Assessing Officer after the expiry of fou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the formation of his opinion that there has been escapement of income of the assessee from assessment in the particular year. It is not a case where there are no reasons stated at all or that there was no material to entertain a belief that there has been escapement of income from assessment. Therefore, the assumption of jurisdiction by the Assessing Officer by recording the said reasons and issuance of the said notice dated 24.11.1994 in our view is in accordance with law. Accordingly Point No.2 is answered. 37. In order to answer Point No.3, having regard to the position of law and taking into consideration the facts of the case it becomes clear that pursuant to the search made under Section 132 of the Act in the residential and business premises of the assessee on 24.2.1992, the Assessing Officer issued notice under Section 148 of the Act on 14.12.1992 as no return of income had been filed till then by the appellant. Since return had not been filed till then the appellant-assessee filed a return only on 22.12.1992 the Assessing Officer. Thereafter, the Assessing Officer by recording reasons on 24.11.1994 issued notice under Section 148 of the Act on the ground that the i....