TaxTMI 
TaxTMI 
2012 (6) TMI 57
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.... till 30th September, 2011. However, as per the petitioner, the Assessing Officer wrongly issued notice for reassessment under Section 147/148 of the Act on 5th July, 2011, and that on, before, or even after the said date, the Assessing Officer could have issued notice under Section 143(2). Accordingly, the notice under Section 147 is bad/invalid, as the return of the income could have been taken up for scrutiny by issue of notice under Section 143(2) of the Act. It is further submitted that if the Assessing Officer had issued notice under Section 143(2) on or before 30th September, 2011, the assessment would have become barred by limitation on 31st December, 2011 as per second proviso to Section 153(1). Thus, the proceedings that are now pending should be set aside/quashed. 3. In support of the contention that the Assessing Officer cannot issue reassessment notice under Section 147/148 of the Act during the period when the Assessing Officer could have issued notice under Section 143(2) of the Act, the petitioner has placed reliance on Commissioner of Income Tax, Bombay City II vs. Ranchhoddas Karnsondas (1959) 36 ITR 569 (SC), which relates to Income Tax Act, 1922. The petitioner....
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....in termination of the proceedings. It was held that "note" in question was ambiguous and inconclusive and that it did not terminate the proceedings. It was observed: - "There is a difference between clauses (b) and (c) of sub-section (2) of section 249 of the Act. A return of income filed in the form prescribed along with an application for refund under section 237 of the Act is a valid return. There is no stopping the Income-tax Officer to complete the assessment on the basis of the return so filed. It may be that the Income-tax Officer may limit the scope of examination of the return to satisfy himself regarding the correct- ness of the amount claimed as refund. For that purpose, he will examine if the tax paid by the assessee exceeds the amount of tax with which he is chargeable. If it is found that the income was "nil", he will direct that refund be granted to the assessee of any amount of tax paid. That will certainly be assessment. The filing of a return in the form prescribed under section 139 of the Act along with the application for refund is not an empty formality. It assumes importance if such return had not been filed earlier. We have reproduced the note/order dated N....
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....versus K. H. Parameshwara Bhat [1954] 97 ITR 190 (Ker.)). 9. The Delhi High Court in KLM Royal Dutch Airlines (supra), has referred to and quoted from Nizam's Supplemental Family Trust's case (supra). In the said case, the Assessing Officer had issued notice under Section 143(2) and enquiries were initiated. It was accordingly held that it was mandatory that the notice should have culminated in an order under Section 143(3). We are not required to examine or apply the said ratio as notice under Section 143(2) in respect of the original return was never issued in the present case. Learned counsel for the Revenue has submitted that some observations may not be good and correct law in view of the decision of the Supreme Court in Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC), CIT vs. Kelvinator of India Ltd. (2010) 2 SCC 723 and the full Bench decision of this Court in Kelvinator of India Ltd. v. CIT (2002) 256 ITR 1 (FB)(Del). We are not required to examine the said aspects in this writ petition, as the Division Bench in KLM Royal Dutch Airlines (supra) has held as under:- "13. A 'clearance' or notice or intimation under Section 143(1) ....
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....be issued, if a return of income can be made subject matter of scrutiny and regular assessment by issue of notice under Section 143(2). Ld. counsel for the Revenue disputes the legal proposition raised by Mr. C S Aggarwal, but states that to put the controversy to an end and to avoid any legal dispute, he will file a short affidavit stating that the Assessing Officer will drop the proceedings pursuant to notice under Section 148 dated 5th July, 2011 and after recording fresh reasons will issue notice under Section 148. 2. Ld. senior counsel for the petitioner submits that he would have no objection but fresh notice can be issued only if it is permissible in law. 3. Let the respondents file an affidavit within 10 days. Liberty is granted to the petitioner to file response within 3 days thereafter. 4. Till the next date of hearing assessment proceedings can go on but final order will not be passed. List on 18thMay, 2012. Dasti." 11. In terms of the said order, the respondents have filed an affidavit of Dr. Prashant Khambra, Deputy Commissioner of Income Tax, Circle1(1), who is the Assessing Officer. He has stated that the case was taken up for scrutiny pursuant to the information....
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....ng observations have been made:- "10. We are of the opinion that in view of the decisions that we have mentioned above, for the purpose of initiating reassessment proceedings, the Assessing Officer could not have made up his mind that the income of the assessee has escaped assessment while a valid return was still pending before him. If the Assessing Officer had allowed the time to elapse for taking action under section 143(2) of the Act, it was entirely his own doing. What the Assessing Officer is now trying to do in an indirect (and incorrect) manner is what he could not have done directly. 11. The further contention raised on behalf of the Revenue is that even if no assessment order was framed, the Assessing Officer could issue a notice for reassessment. We are of the view that if no assessment had been made, there was no occasion for the Assessing Officer to conclude that income had already escaped assessment." We have examined the said contention of the petitioner but do not find any merit in the same. 14. In the case of Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14 SCC 208, it has been held as under:- "19. Section 147 authorises and perm....
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.... omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the assessing officer could have jurisdiction to issue notice under Section 148 read with Section 147(a) but under the substituted Section 147 existence of only the first condition suffices. In other words if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to Section 147. The case at hand is covered by the main provision and not the proviso." 15. A Division Bench of the Delhi High Court in Mahanagar Telephone Nigam Ltd. Vs. Chairman, Central Board of Direct Taxes and Another(2000) 246 ITR 173 had specifically examined the question whether an Assessing Officer can initiate re-assessment action even when the Assessing Officer has not exercised option to issue scrutiny notice under Section 143(2) within the time limit prescribed. The said contention was rejected ....
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....order under Section 143(1) of the Act was earlier passed. 18. The petitioner claims that on 30th March, 2012, they were for the first time served with the reasons to believe recorded by the Assessing Officer before issuing notice dated 5th July, 2011 under Section 147. It appears that the petitioner had earlier on 9th August, 2011, written to the Income Tax Officer, Ward 1(1) to furnish copy of the reasons to believe. In the writ petition, it is stated that the petitioner had submitted that return of income filed on 6th October, 2010, may be treated as return filed in response to the notice under Section 148. This is not stated in the letter dated 9th August, 2011. Learned counsel for the petitioner has stated that this submission was made orally. We may note that there is no such written averment or statement in any letter/communication by the petitioner which has been brought to our notice. Reasons to believe are to be supplied only after the return of income is filed or statement is made that the return filed earlier may be treated as a return in response to the notice under Section 148. We may record that the petitioner during this period from 9th August, 2011 till 30th March,....
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....titioner that in the reasons to believe, it has been incorrectly and falsely stated that vide agreement finalized in October, 2008, the petitioner had sold equity shares of "F.V." of Rs.10/- each for Rs.159/- per share and had failed to show any income as short term capital gains on transfer of the equity shares. It was stated by the counsel for the petitioner that this is factually incorrect and false and this aspect was highlighted in the objections filed before the Assessing Officer dated 9th April, 2012 and has also been accepted by the Assessing Officer in the reasoned order dated 10th April, 2012. In the reasoned order, the Assessing Officer has referred to the first paragraph of the reasons to believe and has recorded that the assessee had invested Rs.45,65,38,500/- in equity shares but no income had been declared by the assessee. The Assessing Officer, it is pointed out, has not dealt with the objections raised to the second paragraph of the reasons to believe. With regard to the first paragraph, it is stated that it is merely a conjecture or suspicion and not a valid and good satisfaction. It is further stated that in the order dated 10th April, 2012, it is stated that the....