TaxTMI 
TaxTMI 
2017 (5) TMI 1776
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....o maintain the books of account under sections 44AA and 44AF of the Income-tax Act, 1961 ?" 3. The counsel for the appellant contended that he does not want to press issue No. 2 and he has argued only issue No. 1. 4. That facts of the case are that the assessee has filed the return on December 6, 1999 where an investment in plot No. 31, R. K. Puram, Kota was shown at Rs. 1,31,000. The Assessing Officer processed the return under section 143(1)(a) of the Act on August 11, 2000. The assessee revised the balance-sheet and profit and loss account showing the investment in the said property at Rs. 5,22,936 on August 16, 2000. The Assessing Officer issued a notice under section 148 on September 14, 2000, on the basis of the revised balance-sheet filed by the assessee and then issued a notice under section 143(2) on October 3, 2000. 5. The counsel for the appellant stated that the original return was filed on December 6, 1999 and was accepted on the same day. He has produced on record the Income-tax return which was accepted by the Department being 7578 dated August 11, 2000. 6. He has pointed out the following provisions of law : "147. Income escaping assessment.-If ....
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.... served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time-limit for making the assessment, reassessment or re-computation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice : Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub- section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time-limit for making the assessment, re- assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this cla....
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....The Nizam's Supplemental Family Trust v. CIT [2000] 242 ITR 381 (SC) wherein the Supreme Court held as under (page 387 of 242 ITR) : "It is settled law that unless the return of income already filed is disposed of, notice for reassessment under section 148 cannot be issued, i. e., no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated. According to the Revenue it is immaterial whether the order is communicated or not and the only bar to the reassessment proceedings is that proceedings on the return already filed should have been terminated. In support of this contention reference was made to certain decisions of the High Courts and some observations made by this court in a case, which we note as under : In M. Ct. Muthuraman v. CIT MANU/TN/0556/1961 ; [1963] 50 ITR 656 (Mad), the assessment proceedings which had commenced with the returns filed by the assessee were lawfully terminated when they were closed with the entry 'N.A.' (not assessed) . The orders terminating the assessment proceedings were not communicated to the assessee. The Income-tax Officer issued n....
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....als) and directing the Assessing Officer to make fresh assessment vide its order dated January 8, 2002. The Tribunal has categorically reached a finding in these appeals that M/s. Jagdamba Griha Nirman Sahakari Samiti Ltd., Jodhpur, is a separate entity with the respondent-assessee. On the basis of this finding also, the reassessment order framed in favour of the respondent-assessee could not have been sustained. The finding that M/s. Jagdamba Griha Nirman Sahakari Samiti Ltd. and the respondent- assessee are two separate entities and independent of each other is a finding of fact and that finding has not been challenged before us. For that reason also assessment order dated March 30, 1998, cannot be sustained. Viewed from any angle, the questions raised in these appeals are of academic importance and cannot be considered as questions of law requiring consideration in these appeals." 7.3 In Jhunjhunwala Vanaspati Ltd. v. Asst. CIT (No. 2) [2004] 266 ITR 664 (All) wherein the Allahabad High Court held as under (page 666 of 266 ITR) : "Be that as it may, there is no dispute that once the Commissioner of Income-tax (Appeals) passed an order of remand on March 15, ....
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....affected party an opportunity of being heard. Section 143 deals with the dispatch of intimations specifying the sum payable as tax or interest that has been found by the Assessing Officer to be due on the basis of the return ; it deals with refunds payable to the assessee. The neat question which arises before us is whether on the commencement of assessment proceedings they must first be brought to their logical conclusion by framing an assessment before embarking on the proceedings as envisaged in section 147/148 of the Income-tax Act ; or more precisely stated, can resort to section 147 be made even whilst the normal assessment proceedings are pending conclusion. To find the answer we must keep in perspective that every return of income filed under section 139 may not result in its active and in-depth perusal or consideration by the Assessing Officer as it may receive an automatic onward passage under section 143(1). However, once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Offi....
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.... assessment year 2000-01, even though he is liable to pay tax. It could also happen that a person may file a return of income incorrectly offering for purposes of taxation a sum lower than the correctly calculated income. Both these situations have been obviously kept in view in Explanation 2 to section 147 and in its clauses (a) and (b). In either event the Assessing Officer would invoke the powers conferred upon him by section 147 of the Income-tax Act culminating in the completion of the assessment. It is also conceivable that the incorrectness of the return may not be detected or noticed within the time period set down in section 153. In these circumstances if the Assessing Officer has reason to believe, predicated on information received by him, that income chargeable to tax has escaped assessment, he would invoke the powers under section 147. On the other hand, where a return of income has been filed but has been taken at its face value, without any proceedings under sections 143(2) and 143(3) having been con ducted, no assessment exercise would obviously have been under taken. After the expiry of the time period set down in section 153, this situation can be remedied by the ....
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....eedings, the Deputy Commissioner of Income-tax, Mumbai, had authority to summon or ask for information from any person throughout India in connection with such proceedings. Now it is to be considered whether issue of a notice in connection with a proceeding pending before the Deputy Commissioner of Income-tax, Mumbai, would give rise to a cause of action to such an extent enabling the High Court having territorial jurisdiction where such notices were served to exercise its discretion to assume jurisdiction even if such service of notice is an integral part of the cause of action or even if it prima facie appears to be without jurisdiction." 7.6 In CIT v. K. M. Pachayappan [2008] 304 ITR 264 (Mad) wherein the Madras High Court held as under (page 266 of 304 ITR) : "Heard counsel. In this case, return of income was filed under section 139(4) of the Act on March 15, 2000, and notice under section 143(2) for framing assessment under section 143(3) could have been issued up to March 31, 2000. Therefore, a valid return of income was pending as on March 15, 2000. The Assessing Officer issued notice under section 148 on March 15, 2000 when a valid return under section 139(4) wa....
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....t during the pendency of the return filed under section 139 of the Act along with the refund application under section 237 of the Act, action could not have been taken under section 147/148 of the Act. Our answer to the question, therefore, is in the negative, i. e., against the Revenue.' In the case of KLM Royal Dutch Airlines v. Asst. Director of Income-tax [2007] 292 ITR 49 (Delhi), the Delhi High Court, following the above Supreme Court judgment, considered the scope of the pro vision of sections 139 and 147 of the Act and held as follows (page 63 of 292 ITR) : 'Applying this line of decisions to the facts of the present case, the inescapable conclusion that would have to be reached is that while assessment proceedings remain inchoate, no "fresh evidence or material" could possibly be unearthed. If any such material or evidence is available, there would be no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had....
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....he refund since no refund was granted either in the hands of the trust or in the hands of the beneficiaries. It was an inconclusive note where the Income-tax Officer left the matter at the stage of con sideration even with regard to refund in the hands of the beneficiaries. This note was also not communicated to the trustees. Nothing flowed from the note dated November 10, 1965, on the file of 1963-64 as well. In any case if it was an order, it would be appeal able under section 249 of the Act. Since the period of limitation starts from the date of intimation of such an order, it was imperative that such an order be communicated to the assessee. Had the Income-tax Officer passed any final order, it would have been communicated to the assessee within a reasonable period. In any case, the note dated November 10, 1965, was merely an internal endorsement on the file without there being an indication if the refund application had been finally rejected. By merely recording that in his opinion, no credit for tax deducted at source was to be allowed, the Income-tax Officer could not be said to have closed the proceedings finally. During the pendency of the return filed under section 139 of....
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....preme Court held as under (page 505 of 291 ITR) : "Section 143(1) as it stood at the point of time when the intimation was given under the said provision, so far as relevant, read as follows : '143. (1)(a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly ; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee : Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely :- (i) any arithmetical errors in the return, accounts or docu....
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....cer will not necessarily amount to disclosure within the meaning of the fore going 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 c....
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.... any arithmetical errors in the return, accounts and documents accompanying it were to be rectified ; (b) any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return was to be allowed ; (c) any loss carried forward, relief claimed in the return which on the basis of the information as available in such return accounts or documents was prima facie inadmissible was to be disallowed. What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction, allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie in admissible, were to be rectified/allowed/disallowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the retu....
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....vance, it cannot be said that any prejudice had been caused to the petitioner. Secondly, we find that the reasons were conveyed. It has not been suggested by counsel that these were not relevant. There is no injustice. We find no ground to interfere under article 226. In view of the above, we answer the question posed at the outset against the petitioner. It is held that the notice under section 147/148 issued to the petitioner is not vitiated merely for the reason that notice under section 143(2) had not been issued to it." 7.11 In Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173 (Delhi) wherein it has been held as under (page 185 of 246 ITR) : "So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate to proceed 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) had been issued. A similar view has been taken in A. Pusa Lal v. CIT [1988] 169 ITR 215 (AP) ; Jorawar Singh Baid v. Asst. CIT [1992] 198 ITR 47 (Cal) and Pradeep Kumar Har Saran Lal v. Assessing Officer....
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....e processing of the return was completed under section 143(1)(a) will not take away the jurisdiction of the Assessing Officer to proceed under section 147, if the Assessing Officer is able to establish the requisite conditions of section 147. For these reasons, the second submission is rejected. 28. Lastly, Sri Gulati submits that after the appeal order, the intimation sent by the Assessing Officer to the petitioner, had merged in the appeal order and the only remedy open to the Assessing Officer was to appeal against the order of the Commissioner of Income-tax (Appeals) and that after the merger of the intimation in the appeal order, it was not open to the Assessing Officer to take recourse to the reassessment proceedings. It is to be borne in mind that there was no appeal against the intimation sent to the petitioner by the Assessing Officer. After the intimation having been sent, the petitioner made an application for rectification under section 154, which was rejected on February 16, 1990, and it is that order against which the appeal was filed by the petitioner before the Commissioner of Income-tax (Appeals). It is, therefore, incorrect to say that the intimation stoo....
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....n by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not been opened under section 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147, provided fresh material had been received by the Assessing Officer after the expiry of limitation fixed for framing the original assessment. So far as the pre sent case is concerned we are of the view that it is evident that, faced with severe paucity of time, the Assessing Officer had attempted to travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law." 9.2 She has also relied upon the following decisions : 9.3 In Jorawar Singh Baid v. Asst. CIT reported in [1992] 198 ITR 47 (Cal) wherein it has been held as under (pages 51 and 52 of 198 ITR) : "6. We have not been able to persuade ourselves to accept any such plea, howsoever novel. In our view, a return after its acceptance, whether in a summary manner....
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....tion 143(2) precluded the Assessing Officer from issuing the impugned notice under section 148 after the proceedings under section 143(1)(a) having been completed. In Jorawar Singh Baid v. Asst. CIT [1992] 198 ITR 47 (Cal) ; MANU/ WB/0140/1992, the processing of the return filed had been completed under section 143(1)(a), but such completion was not followed by initiation of proceedings under section 143(2). Counsel for the assessee then contended before the Calcutta High Court that completion of the assessment under section 143(1)(a) coupled with the expiration of the period of limitation for invoking the proviso to section 143(2) precluded the Assessing Officer from issuing a notice under section 148. The Calcutta High Court rejected such submission of counsel for the assessee for the following reasons (page 51 of 198 ITR) : 'Simply because the return of the assessee has been accepted without scrutiny and in good faith the Assessing Officer is not precluded from initiating a proceeding satisfying the conditions therefor where the income has escaped assessment. There is nothing either in section 143 or in section 147 that can support such a view. The pro visions of a ....
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....table issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief. . . . 13. The scope and effect of section 147 as substituted with effect from April 1, 1989 as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied, firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to Income-tax have escaped assessment, and secondly, he must also have reason to believe that such escapement has occurred by reason of either (i) 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 are condition precedent to be satisfied before the Assessing Officer could have jurisdiction to issue noti....