TaxTMI 
TaxTMI 
2016 (8) TMI 1235
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.... Officer issued notice dated 11.1.2011. Briefly stated, the reasons recorded for issuing such notice were that the assessee was holding certain shares as stockintrade. On 1.4.2004, the assessee transferred such shares from stockintrade to investment. This was done at the cost price and not the market value. According to the Assessing Officer, the difference between the cost of acquisition of shares and the market value on the date of conversion was a profit to the business and such income had escaped assessment. 3. The petitioner challenged the said notice dated 11.1.2011 of reopening by filing Special Civil Application No.10217/2011 in which on 12.9.2011 while issuing rule, the Court by way of interim relief directed that till final disposal of the petition, there shall be stay of further proceedings pursuant to the notice. 4. When such petition was pending, the Assessing Officer issued yet another notice under section 147 of the Act seeking to reopen the petitioner's assessment for the same assessment year 2005-2006 which has been challenged in this petition. The Assessing Officer had after referring to the facts of the earlier reopening, recorded the following reasons ....
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.... into 'investment' on 1.4.2004. (vi) In computation of income filed by the assessee along with return of income, the computation of Long Term Capital gain assessee has shown as under: Nature of Security Nature of Equity shares dt of investment Purchase value dt of sale sale sale value index net capital gain Sun Pharma Preference share 40,20,396 02.11.2002 0 02.7.2004 41,41,008 4 1,41,008 The assessee had 40,20,396 numbers of 6% preferential redeemable shares of Sun Pharma Ind Ltd in its 'stockintrade' as on 31.03.2004 as disclosed by the assessee in its return of income, Balancesheet and other details and documents filed with it. However in the list of shares and securities, which will claimed to the converted into 'investment' on 1.4.2004 from 'stockintrade' submitted during course of assessment proceedings, these are absent; meaning thereby, that remained as 'stockintrade'. However, they were redeemed during this year only and instead instead of showing the receipt as "business income " or "short term capital gain (even the transfer from 'stock' to 'investmentment' treated as on 1.4.2004 as per assessee claim) they....
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....hich stage, the petitioner filed this petition. 6. Learned counsel for the petitioner raised the following contentions : 1) There was no failure on part of the assessee to disclose truly and fully all material facts, notice of reopening which was issued beyond a period of four years from the end of relevant assessment year was therefore, invalid. The issues mentioned in the reasons were also examined during original assessment. 2) There was no escapement of income chargeable to tax. 3) The second notice of reopening, when previously the assessment was already reopened, and when such assessment was pending, was not permissible. There cannot be reopening of an assessment which is already pending. When the Assessing Officer therefore, issued the earlier notice dated 11.1.2011 and the proceedings arising out of such notice were pending, he could not have issued fresh notice of reopening. In this context, counsel relied on the following judgements : 1) In case of Commissioner of Income-tax v. Ranchhoddas Karsondas reported in (1959) 36 ITR 569(SC). 2) In case of Estate of the Late A.M.K.M. Karuppan Chettiar v. Commissioner of Income-tax reported in (1969) 7....
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....ssee had thus paid tax at a lower rate and avoided tax on business income. Thus according to the Assessing Officer, the assessee had supplied wrong information and paid tax on the sale of shares claiming as long term capital gain which at best could have been short term capital gain. 10.With the petitioner's contention of the issues having been scrutinised during the original assessment and true and full disclosure, we are not impressed. Though vehemently argued before us, we do not notice any direct reference to this transaction in the original assessment proceedings either in form of queries, replies or in the order of assessment itself. Equally with respect to full and true disclosure, even the learned counsel for the petitioner agreed that there was a clear error on part of the petitioner to show only 20,10,198 shares during the earlier proceeding though the assessee had received redeemable preference shares on its original shareholdings. 11. In the details of long term and short term capital gain during the year the assessee had shown sales of 40,20,396 shares of Sun Pharma and claimed long term capital gain thereof. The date of sale was shown as 2.7.2004 and date of....
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....see to furnish the returns. Under subsection( 2) of section 148, the Assessing Officer is required to record his reasons before issuing the notice under section 148. Thus upon issuance of notice under section 148, the assessment is reopened and upon which the Assessing Officer would have the authority to assess or reassess any income of the assessee which has escaped assessment including that which may come to his notice during the assessment. Once such notice is issued and with that the assessment has been reopened, can there be another notice for reopening? In other words, during the pendency of the proceedings for reassessment, can there be another notice also for the same purpose, may be based on different reasons? 14. Let us examine how different Courts have viewed such a situation. In case of Ranchhoddas Karsondas (supra), the three Judge Bench of Supreme Court considered a case where the assessee had filed a return though according to him he did not have taxable income. Pending such return, the Assessing Officer issued notice under section 34 of the Income Tax Act, 1922 equivalent to section 147 of the present Act for reassessment and subsequently also framed assessment. ....
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....er view of the two. In the earlier of the two Bombay cases, Chagla, C. J., and Tendolkar, J., held (as stated in the head note): " Notice under section 34 is only necessary if at the end of the assessment year no return has been made by the assessee, and the authorities wished to proceed under section 22(2), but where the assessee himself chooses voluntarily to make a return, no question can arise under section 34 of assessment escaping, and therefore there is no necessity to serve any notice under section 34." This represents the law applicable to the facts as they are to be found in this case. In the assessment year no return of income was filed, nor was any notice served under s.22(2). There was, however, the general notice under s.22(1). A return in answer to that notice could be filed under s.22(3) before assessment, and for this there is no limit of time. It was filed on January 5, 1950. There was nothing to prevent the Income-tax Officer from taking up the return and proceeding to assess the income of the assessee. It was open to him, if there was sufficient justification for it, to hold that the amount noted in the footnote was really the assessee's income, in whi....
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....essment. It was observed that before the assessment is completed, it cannot be predicted that the turnover had escaped assessment. It was observed as under : "As s.34 of the Income-tax Act had no application and as there was no other time limit prescribed or necessarily implied under that Act, it held that the assessment was not out of time. This decision is a clear authority for the position that if a return was duly made, the assessment could be made at any time unless the statute prescribed a time limit. This can only be for the reason that the proceedings duly initiated in time will be pending and can, therefore, be completed without time limit. A proceeding is said to be pending as soon as it is commenced and until it is concluded. On the said analogy, the assessment proceedings under the Salestax Act must be held to be pending from the time the said proceedings were initiated until they were terminated by a final order of assessment. Before the final order of assessment, it could not be said that the entire turnover or a part thereof of a dealer had escaped assessment, for the assessment was not completed and if, completed, it might be that the entire turnover would be cau....
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....to which the assessee had also filed the return. Thereafter, the Assessing Officer issued another notice under section 148 of the Act. It was held as under : "12. Applying the aforesaid principles to the fact of the case, it is clear that when the petitioner filed returns in compliance with the invalid notice dated 11th February, 1983 under section 148 of the 1961 Act, those returns should be treated as "return" and as such before making assessment on the basis of those returns, no further notice under section 148 of the Act could be passed. 14. In the case before us, the earlier notice has not been declared by any Tribunal as invalid and at the same time the returns submitted pursuant to earlier notices have not been assessed and thus the earlier proceedings were pending at the time of issuing second notice and as such the principle laid down in the said decision cannot have any application to the facts of the present case." 1. In case of Commissioner of Income Tax v. Rajendra G. Shah reported in (2001) 247 ITR 772 (Mad), Division Bench of Madras High Court held that reassessment proceedings could not have been instituted when the main return was pending assessment. 2.....
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....dence and we do not find any error or illegality in the order of the Tribunal so as to warrant interference." 1. It can thus be seen that majority of the High Courts of the country have proceeded on the basis that when the assessment proceedings are pending pursuant to the return filed by the assessee, there would be no authority in the Assessing Officer to issue notice under section 148 of the Act. Expressed in different thoughts and language, the central concept being that when a return is filed, assessment is either being done or could be carried out by issuing notice under section 143 of the Act for which time limit has not expired, in such a case, there would be no question of income chargeable to tax having escaped assessment. Only upon completion of the assessment, or if not taken in scrutiny, upon completion of the period during which it can be scrutinised, the question of income having escaped the assessment would arise. Since the invocation of power under section 147 of the Act depends on the Assessing Officer's reason to believe that income chargeable to tax had escaped assessment, no such belief could be formed till the return is pending assessment. 2. We may ....
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....mitted to take any turn to advance an argument that because of the existence of the first notice under Section 147 of the Act, the impugned notice issued on March 29, 1990, is bad in law. During the course of his argument, Shri M. S. Pipersani appearing for the petitioner has relied upon a Division Bench decision of this court in the case of STO v. Firm Ram Das Ram Dutt [1973] UPTC 20. It has been held in the said case where original assessment proceeding is pending, it cannot be said that any part of the turnover has escaped assessment. This position, however, does not operate at all in the present case. In the present case since the Tribunal has recorded a finding to the effect that the very initiation of the proceedings under Section 147 of the Act by the first notice was without jurisdiction, therefore, it cannot be said that the said proceedings were any proceedings in the eyes of law, what to say, that they were pending. Thus the said authority is of no avail to learned counsel for the petitioner. Moreover, we also find from a copy of annexure5 to the writ petition that the second notice dated March 29, 1990, was actually served on the assessee on March 30, 1990, on which dat....
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...., there is no distinction whether the pending assessment is pursuant to the return filed by the assessee originally or in response to the notice of reassessment issued by the Assessing Officer. In either case within the contours of the provisions for assessment, the assessment of the income of the assessee at the hands of the Revenue is at large. 8. We are conscious that the conclusion that we have arrived at, may lead to a piquant situation for the revenue. In a given case, it may so happen that notice for reopening may have been issued within the period of four years from the end of relevant assessment year, on the reasons recorded, which may have no relevance to non disclosure of material facts. After four years it is entirely possible that the Revenue may chance upon further materials not disclosed by the assessee in the original return or during the assessment proceedings which may have a bearing on income escaping assessment. The suggestion that if additional information is available with the Revenue later on, it is always open for the Assessing Officer to withdraw the first notice and issue second notice including both sets of reasons, would fail in such an example. In th....