TaxTMI 
TaxTMI 
2022 (8) TMI 1523
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....a Singh 32 Taxmann.com 263 (2013) on an identical issue has held that issue of notice u/s 148 was valid even through time available for issuing notice u/s 143(2) has not expired. 3. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A), in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored." 2. The brief facts of the case are that a letter dated 25.07.2013 from the office of the Deputy Commissioner of Income Tax, Circle 9(1), Bangalore was served on the assessee to file return of income for AY 2012-13. In response to the said communication the assessee filed a manual return of income on 06.11.2013 along with a covering letter dated 05.11.2013 and he declared total income of Rs. 10,96,154/- comprising of Rs. 3,48,933/- being house property income, Rs. 3,12,000/- being income from business and Rs. 5,35,21/- being income from other sources. Apart from these the assessee also offered agricultural income of Rs. 9,00,000/- for the rate purposes. Notice under Section 148 of the Income Tax Act, 1961 (the Act) was issued on 11.02.2014 as per the findings in ....
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....ued notice under Section 143(2) of the Act dated 11.03.2014 and notice under Section 142(1) of the Act was also issued calling for details. The case was not selected for scrutiny under Section 143(2) of the Act for regular assessment. After receipt of the notice the assessee filed a letter dated 20.03.2014 seeking time for collecting requisite details and sought time of 15 days. Again the same letter was sent on 21.03.2014, but the assessee did not appear. A summon under Section 131(1) of the Act dated 09.04.2014 was also issued to the assessee seeking the assessee to personally appear on 24.04.2014 but the assessee did not appear and again notice under Section 142(1) was issued to the assessee giving last opportunity for substantiating his case, but the assessee did not appear. Accordingly the AO completed the assessment under Section 144 of the Act after considering the documents/material available before him and computed the gross total income at Rs. 3,73,98,834/- as under: - Income from House property Rs. 3,48,933 Income from Business Rs. 3,12,000 Add: Income from Other sources Rs. 5,35,221 Add: Unexplained cash credits in bank accounts Rs. 1,12,02,680 ....
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....eries 246 CTR 513 (Kerala HC); (vii) CIT vs Qatalys Software Software Technologies 308 ITR 249 (Madras HC); (viii) CIT vs TCP Ltd 323 ITR 346 (Madras HC); 10. In the case of Abad Fisheries 246 CTR 513 (Kerala),(2011) 16 taxman.com 398 (Kerala) 2012) 204 Taxman 267 (Kerala), the Hon'ble High Court of Kerala in its decision in IT Appeal Nos 243, 254, 258 & 263 of 201 dated September 2, 2011 held that within time provided for regular assessment under section 143(3) after issuing notice under section 143(2), no re- assessment is permissible under section 147. In the case of TCP Ltd (2010) 323 ITR 346 (Madras)/ (2010) 235 CTR (414) (Madras), the Hon'ble High Court of Madras in its decision in (Appeal) No 2427 of 2006 dated April 6, 2009 held that notice under section 148 cannot be issued for making an assessment under section 147 when time limit is available under section 143(3). In the case of Qatalys Software Technologies Ltd, (2010) 308 ITR 249 (Madras), the Hon'ble High Court of Madras in its decision in Appeal Nos 1026 and 1027 of 2008 dated July 29, 2008 held that in view of the decision in the case of CIT v KM Panchayappan (2008) 304 ITR 264....
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....f the Act.. The reasons has been reproduced by the AO in his assessment order and there was escapement of income and the AO had strong reasons to believe that income of the assessee has escaped assessment within the meaning and scope of Section 147 of the Act. He further submitted that the learned CIT(A) has wrongly accepted the plea of the assessee that notice under Section 148 of the Act cannot be issued if the period of notice under Section 143(2) of the Act has not expired in case of filing return under Section 139 of the Act. The return was processed under Section 143(1) of the Act and the AO had sufficient reason for assessing escapement of income as per AIR and CIB information. He further submitted that once the provisions of Section 147 of the Act is satisfied then the AO can issue notice under Section 148 of the Act at any time within the time period as prescribed in Section 147 of the Act. It is well established law that two independent proceedings cannot be initiated simultaneously for making assessment for the same assessment year, He also submitted that the period of issuing notice under Section 148 of the Act is to be counted from the relevant assessment year and not ....
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....observed from the order of the CIT(A) that the CIT(A) has decided on the legal issues and allowed the appeal of the assessee by holdings as noted above. On going through the order of authorities below we found that the assessee was not filing regularly his return of income and a communication was issued to the assessee for filing return of income, thereafter the assessee filed manual return which was treated by the AO as incorrect return. On going through the order of the CIT(A), he has accepted the plea of the assessee that notice under Section 148 of the Act cannot be issued if there was time available for issuing notice under Section 143(2) for regular assessment u/s 143(3) of the Act as per the return filed by the assessee under Section 139 of the Act. Similar issue has been decided by the coordinate Bench of the ITAT Lucknow reported in the case of Kailash Auto Finance Ltd. vs. Assistant Commissioner of Income Tax-4, Kanpur (2009) 32 SOT 80 (Lucknow). After going through this judgement, we would like to reproduce the relevant part as under: - "4. The gist of this ground is that the Assessing Officer had issued notice under section 148(1) during the period when he coul....
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....ief that income has escaped assessment exists, so as to justify issue of notice under section 148. 6. Thus, it can be seen that the argument of the appellant of 'change of opinion' is misplaced. It is also argued that reason for reopening the case under section 147/148 are not sufficient. It is well-settled position that the "sufficiency of reason" is not justiciable. It was held in the case of ITO v. Lakhmani Mewalala Das that the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons of the belief in 103 ITR (SC) (1976). Case laws cited by the ld. AR are not applicable to the fact of this case because no assessment proceedings were pending at the time of issue of notice under section 147/148. There is no infirmity or irregularity in the jurisdiction acquired by the Assessing Officer under section 147/148 of the Income-tax Act. As per the facts and circumstances of the case, hence ground No. 1 of appeal is 'dismissed'." 7. The ld. CIT(A), in fact relied on the decision of ITAT Hyderabad Bench in the case of Elegant Chemical Enterprises (P.) Ltd. v. Asstt. CIT [2004] 91 ITD 85 and the decision of Hon'bl....
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....ent by issuing of notice under section 143(2) and completing the assessment under section 143(3). The notice under section 148(1) can only be issued after expiry of the period available for issuance of notice under section 143(2) which is presently twelve months from filing of the return. 10. The ld. AR relied on the following decisions of the Lucknow Bench of the Tribunal : "Shri Sachidanand Gupta v. ITO in [IT Appeal No. 740/Luck./05 for the assessment year 2000-01 decided on 31-1-2007] Shri Chandra Prakash Gupta v. ITO in [IT Appeal No. 351/Luck./05 for the assessment year 2003-04 decided on 17-11-2006] Shri Masihulla Khan v. ITO in [IT Appeal No. 514/Luck./06 for the assessment year 2002-03 decided on 8-12-2006]." 11. He further relied on the decision of Hon'ble Madras High Court in the case of CIT v. K.M. Pachayappan [2008] 304 ITR 264. The ld. AR then sought to distinguish the decision of Hon'ble Allahabad High Court in the case of Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 and the decision of Hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR....
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....ntal Family Trust v. CIT [2000] 242 ITR 381 where the return filed was pending. There was neither any assessment under section 143(1) or 143(3). In the present case, the proceedings for assessment were terminated by processing the return on 26-2-2005, therefore, it could not be said that the return is pending. The ld. DR then submitted that it is not necessary for the officer to issue notice under section 143(2) in each and every case and issuance of notice under section 143(2) is under the administrative control of the CBDT and Chief Commissioner and only when the conditions laid down in the instructions of the CBDT are satisfied, the Assessing Officer can issue notice under section 143(2). Therefore, it cannot be said that in proceedings for assessment is pending. Once return is accepted by the Department by processing or by sending intimation or by treating an acknowledgement as intimation then Department accepts the income returned by the assessee. If the taxes are correctly paid on the income returned then no notice is issued. But where there is a variation in tax as per returned income then either refund is issued or intimation is separately issued which is treated as demand ....
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....notice under section 148(1). Further, a processing or sending of intimation is not an assessment, therefore, proceedings initiated because of filing of return remain pending. Once proceedings are pending, the Assessing Officer cannot initiate reassessment proceedings. This is the gist of argument. In this connection, we examine the concept of pendency of proceedings as under 16. The term 'pending' means 'undecided', i.e., something which is not concluded. An action is considered as pending from the time of commencement of the proceedings. Thus, a legal proceeding is pending as soon as commenced and until it is concluded. As per Advanced Law Lexicon, third Edition of 2005, page 3521/3522, following are the definitions of the word 'pending' : "A suit is pending until final judgment is rendered. See 3 IC61:5NLR88. 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) I Moo. PC 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 an....
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....d not be said that a proceeding is pending because of the return filed by the assessee. A fresh proceedings would commence and be pending when notice under section 143(2) is issued. Thus, proceedings cannot be deemed to be pending before the Assessing Officer by virtue of return filed after Assessing Officer has processed the return, determined the tax payable including the interest on the returned income and also where return filed by the assessee is accepted by way of issuing acknowledgement. Merely because the Assessing Officer is prohibited from issuing notice under section 143(2) after twelve months of filing of the return, it does not mean that proceedings commenced with filing of a return, are pending before him. In fact and in law, proceedings arising after filing of the return is a separate proceeding and proceedings initiated 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 o....
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....r) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered 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 tota....
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.... but they do not cancel each other. Ultimate object is to make assessment of correct income and, therefore, Legislature has thought it fit to consider commencement of assessment or reassessment proceedings in at least three streams which can subsequently merge into one, if they are pending at the same time. They will ultimately result in an order under section 143(3). A case where assessment proceeding is completed would fall in clause (c). In the present case, we are only concerned with the operation of clause (b) to Explanation 2 and this clearly provides that where assessment is not completed, still then there could be a case of deemed escapement of income and notice under section 148(1) can be issued irrespective of the fact whether assessment proceedings initiated by virtue of filing the return 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 Exp....
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....p to 31-3-2000, therefore, issuance of notice under section 148(1) on 15-3-2000 was not valid as proceedings were pending. The Hon'ble Madras High Court relied on the decision of Hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust (supra ), wherein it was held that if concerned return of income is not disposed of then notice under section 148 could not be issued and no reassessment proceedings can be initiated. 22. The ld. DR sought to distinguish this judgment by submitting that the Hon'ble Madras High Court did not consider the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), wherein it is held that 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 ld. DR further pointed out that the Hon'ble Madras High Court has passed the order relying on the judgment of Hon'ble Supreme Court in the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust (supra) which related to the assessment year 1962- 63 wherein the ....
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.... 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." 26. This view was also held by the Hon'ble Punjab and Haryana High Court in the case of Aditya & Co. (supra). In this case, it was held that where Assessing Officer has sent only an intimation under section 143(1) then issuance of notice under section 148(1) would be valid. 27. In the case of Elegent Chemicals Enterprises (P.) Ltd. (supra), the Tribunal, relying on the decision of Hon'ble Andhra Pradesh High Court in the case of A. Pusa Lal (supra), held as under : "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 s....
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....proviso to section 143(1)(a). The only requirement of section 147 is that Assessing Officer must have good reason to believe that some income had escaped assessment. One this belief is well-founded, recourse to reassessment proceedings cannot be said to be illegal. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate reassessment proceedings and failure to take steps under section 143(2) 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 (supra), has held as under : "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 t....
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....scribed time-limit action for assessment under section 143(3) was not taken. We find no substance in this plea. 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. 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 was affirmed by Division Bench in the judgment reported in Sri Krishna Mehal v. Asstt. CIT[2002] 257 ITR 283 (Mad.). 35. The ITAT Delhi (Special Bench) in the case of Motorola lnc. (supra), also did not have the benefit of decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra). Further, it was on a different proposition. It was held that if an a....
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.... all in Explanation 2(b), therefore, it will over all the situations where assessment is not framed. This situation will include the situation where only intimation is sent or processing is done or even nothing is done after filing the return. The 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 ld. AR for the assessee that 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 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 time period for issuance of notice under section 143(2) has not expired th....
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....ssessment is not made, is not acceptable as this will put another condition in Explanation 2(b) which is otherwise not inserted by the Legislature. As pointed out earlier, statute provides commencement of assessment proceedings in at least three ways. They can merge into each other but they do not cancel each other. Ultimate object is to make assessment of correct income and, therefore, Legislature has thought it fit to consider commencement of assessment or reassessment proceedings in at least three streams which can subsequently merge into one, if they are pending at the same time. They will ultimately result in an order under section 143(3). A case where assessment proceeding is completed would fall in clause (c). In the present case, we are only concerned with the operation of clause (b) to Explanation 2 and this clearly provides that where assessment is not completed, still then there could be a case of deemed escapement of income and notice under section 148(1) can be issued irrespective of the fact whether assessment proceedings initiated by virtue of filing the return or assessment proceedings by way of issuance of notice under section 143(2) are concluded or not. Thus, in ....