TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 1449
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 24.12.2007 in determining the income of the appellant at Rs.3,79,00,000/-. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and also the assessment framed under section 144/148 of the Act without appreciating that there was no material on record much less valid material to allege that income of the appellant had escaped assessment and as such, initiation of proceedings and assessment framed were without jurisdiction and therefore, deserve to be quashed as such. 2.1 That the learned Commissioner of income Tax (Appeals) has failed to appreciate that in absence of any valid approval from the learned Additional Commissioner of Income Tax for initiation of proceedings under section 148 of the Act, initiation of proceedings was otherwise not in accordance with law and therefore, deserve to be quashed as such. 3. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in upholding the assessment framed under section 144/148 of the Act without appreciating that since no notice under section 143 of the Act had been served....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax Act vide order of registration dated 12.01.2006 by Director of Income Tax (Exemptions), DIT(E) New Delhi. The said registration was granted w.e.f. 01.04.2005 and, accordingly applies for Assessment Year 2006-07 onwards. From the application filed by the assessee for registration before DIT(E), it came to light that, appellant society was established as a result of Cabinet decision No. 125 dated 16.03.1995, whereby an amount of Rs. 38.74 crores out of the erstwhile lottery fund (which was lying as fixed deposit) was transferred to the Welfare Fund of the assessee society. Noticing this fact, the Assessing Officer was of the opinion that, the amount transferred from Delhi Lottery was available in all the subsequent years, as was also evident from the copies of account for the year ended 31.03.2002 to 31.03.2004, wherein, liability of Rs. 53.26 crores on account of "Deposit transferred from Delhi Lotteries" appears in the balance sheet for the year ended 31.03.2002, 31.03.2003 and 31.03.2004. These accounts had been enclosed along with the application for registration u/s 12A filed by the assessee before DIT(E). AO, therefore, was of the belief that, income of the appellant society....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o a conclusion of the escapement of income and they are merely presumptuous in nature. In other words, according to the ld AR the proceedings initiated are based on mere suspicion and that 'reason to suspect' is not the same thing as 'reason to believe" and relied on the case of Hon'ble Supreme Court, in the case of CIT Vs Indian Oil Corporation reported in 159 ITR 956, wherein, it has been held that the, "reason to believe" is not the same thing as "reason to suspect". In view of the aforesaid, contentions, Id AR prayed that the proceedings initiated by invoking" the provisions of section 147 of the Act and, assessments framed thereafter are non-est in law and, without jurisdiction and therefore it needs to be quashed. 8. The Id DR relied on the order of the Id CIT(A). 9. We have heard both the parties and have perused the records and have gone through the case laws cited before us. It is no longer res-integra, that before issuing a notice u/s 148, the AO must have reasons to believe that any income chargeable to tax has escaped assessment for any assessment year which he intends to reopen/reassess. Unless the AO records the reason to believe that income chargeable to tax ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sit was to be transferred to the Welfare Fund of the assessee society. The assessee has continued to hold the amount transferred from Delhi Lottery in all subsequent years as evident from the copies of account for the year ended 31.03.2002 to 31.03.2004 wherein a liability of Rs. 53.26 crores on account of "Deposit transferred from Delhi Lotteries "appears in the balance sheet for the Y.E. 31.03.02, 31.03.03 and 31.03.04. These amounts have been enclosed along with the application for registration u/s 12A filed by the assessee on 13.07.2005. Income by way of interest @ 10% on the above fund of Rs. 38.79 crores, held during A.Y. 2000-01, alone comes to 3.97 crores. Further, a perusal of the Income & Expenditure Account for the year ended 31.03.2002, 31.03.2003 and 31.03.2004 show expenditure, other than by way of grants, as under: Financial Year Expenditure 2001-02 10.351akhs 2002-03 12.311akhs 2003-04 11.191akhs The expenditure for A.Y. 2000-01, on the basis of information available on record, as above, is estimated at Rs. 8 lakhs. Accordingly income for A.Y. is estimated at 3.79 crores. Since the society is not registered u/s 12A of the Income Tax Act for the A.Y. 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....round of the assessee is rejected. 12. The next ground is that since no notice u/s 143(2) of the Act was issued to the assessee after the assessee has filed return of income on 19.12.2007 in response to a notice u/s 148/ 142(1) of the Act and prior to framing the impugned order dated 24.12.2007, the assessment thus framed was without jurisdiction. 13. The Id AR contended that it is now settled law that service of notice u/s 143(2) within the statutory time limit is mandatory and issuance of the said notice is necessary to proceedings even u/s 147/148 as held by the Hon'ble Delhi High court in the case of Alpine Electronics Asia Pte Ltd. Vs. DGIT & others, 341 ITR 247. The Id Counsel also relied on the judgment of Hon'ble Apex Court in the case of ACIT Vs. Hotel Blue Moon, (2010)321 ITR 362 (SC) and contended that since the assessing authority did not issue notice u/s 143(2) before framing assessment order, the said defect cannot be said to be a procedural irregularity and the same is not curable defect; and therefore framing the assessment order without the issuance of notice u/s 143(2) was without jurisdiction and therefore the order should be quashed. On the other hand, the Id ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 148 proceeding the notice u/s 143(2) shall be issued before the completion of assessment proceeding even though it is issued beyond the prescribed time limit prescribed u/s 143(2) of the Act. The explanation to section 148(1) clarifies that issuance of notice u/s 143(2) is mandatory in respect of returns filed on or after 1st October 2005 since it is clarified the first and second proviso to section 148(1) has no application on after 1st October 2005 onwards. A reading of section 143, contemplates two circumstances i.e. when return is filed u/s 139 and return filed in response to notice u/s 142(1), the said return should be processed in the manner prescribed u/s 143 of the Act. 15. Now we have to examine under which circumstances as stated above, the assessee case comes under, since the assessee has filed a belated return on 19.12.2007. The ld CIT(A) has recorded that notice u/s 148 was issued on 29.03.2007 and notices u/s 142(1)was issued on 12.09.2007, 15.11.2007 and 30.11.2007; and section 142(1) notice require the assessee to furnish return on a date to be therein specified, in other words, the only requirement of the section is that AO has to specify the date when the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat section, or having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143 and if such failure is there then, the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. 18. So admittedly since the assessee has filed return pursuant to section 142(1) notice on 19.12.2007, there is no failure to file return as contemplated u/s 144(1)(b) of the Act, for the AO to resort to best judgement assessment, so the said contention of the revenue also fails. In the light of the facts and circumstances, we find that AO failed to issue mandatory notice u/s 143)2), after the assessee has filed return on 19.12.2007 pursuant to notice issued u/s 142(1) of the Act, therefore, the impugned assessment cannot be upheld since the non-issuance of mandatory notice u/s 143(2) cannot be cured as held by the Apex Court and so we have no alternative but to quash it. So all the three appea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e proceedings u/s 147/148 were validity initiated as per the relevant provisions contained under the Act and the Id CIT(A) erred in not appreciating the fact that the assessee in spite of earning interest income from fixed deposit was not filing any return for the relevant assessment years and for Assessment Year 2000-01 to 2002-03 was completed on 24th December 2007. 23. On the other hand Id AR submitted that no reasons have been recorded prior to initiation of proceedings u/s 147 of the Act. It was submitted that, perusal of the purported reasons recorded would show that, no satisfaction has been recorded-that income of the appellant has escaped assessment. It was thus submitted that, in absence of any such satisfaction the initiation of proceedings is without jurisdiction and therefore void ab-initio. 24. We have heard both the parties and have perused the records. The issue before us is no longer res-integra, that before issuing a notice u/s 148, the AO must have reasons to believe that any income chargeable to tax has escaped assessment for any assessment year which he intends to reopen/reassess. Unless the AO records the reason to believe that income chargeable to tax has e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Year Expenditure 2002-03 2,64,30,606 2003-04 1,84,37,256 2004-05 2,64,30,000 Interest accrued has been estimated at the rate of 10% on total investment of Rs.83,00,00,000 and expenditure keeping in view the previous years expenditure. In view of the above facts you are requested to produce your books of Accounts relevant for AY 2003-04, 2004-05 and 2005-06 by the date given in the notice reverse. Please also produce documents if you had filed return of income for the for the above said period. 25. A perusal of the above satisfaction note reproduced by the ld CIT(A) at Page 5 of the impugned order does not records satisfaction of the AO, that income chargeable to tax has escaped assessment. However, we fail to comprehend as to why the AO has not specifically recorded satisfaction about escapement of income in his reasons recorded on 28.03.2008, when on similar facts he had recorded reasons before issuance of notice u/s 148 on 29.03.2007 for Assessment Year 2000-01 to 2003-04 which was decided by us to be valid and reproduced in Para 10 and 11 (supra). The said reasons (29.03.2007) wherein the satisfaction of escapement of income was recorded finally ended up with an as....