TaxTMI 
TaxTMI 
2025 (2) TMI 1931
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....tice dated 11.02.2008 issued under section 148 of the Act, as the said letter was filed by the appellant after the time limit of 30 days provided to do so in terms of notice dated 11.02.208 issued under section 148 of the Act. 2. BECAUSE the CIT(A) has erred in law as well as on facts in observing that the appellant could not have demand for issuance of notice under section 143(2) of the Act as the 'return' filed by the appellant in terms of letter dated 10.11.2008 is not a proper return. 3. BECAUSE furnishing of letter requesting to treat the return filed originally as return in compliance to notice under section 148 is a valid return and the CIT(A) has erred in law in observing that the same in not compliance of notice issued under section 148 of the Act. 4. BECAUSRE the CIT(A) has grievously erred in law as well as on facts in observing that the judgment passed by Hon'ble Allahabad High Court in the case CIT vs. Rajiv Sharma reported in 336 ITR 678 on the issue relating to non-issuance of notice under section 143(2) after filing of return, not applicable in the case of the appellant as in the present case no additional time limit was given ....
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....g the provisions of section 69C of the Act. 10. BECAUSE the CIT(A) should have deleted the addition of Rs. 10,06,644/- made by the Id. Assessing Officer towards alleged investment in making payment of 'free hold changes' in the assessment order dated 26.12.2008, as the addition itself is erroneous keeping with the principle laid down by the Hon'ble apex court in the case of CIT Vs Smt. PK. Noorjahan reported in (1999) 237 ITR 570, after the observations made by the Id. Assessing Officer himself to the effect that the appellant did not have any source of income (other than salary income). 11. BECAUSE without prejudice to the contentions raised in grounds No. 8 & 10 above, payment of 'free hold charges' should have been considered as 'cost of improvement of the 'Capital asset' and the same should have entered into the computation of 'Capital Gain' under section 48 of the Act. 12. BECAUSE the authorities below have erred in law and on facts in not allowing full deduction of expenses claimed (other than freehold charges) at Rs. 15,73,360/- and in restricting the same to Rs. 14,16,024/- (being 90% of the claimed amount).....
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....produce Shri. Rajat Kamal Mitra. First, the assessee replied that Shri. Rajat Kamal Mitra had shifted to Kolkata and he did not have his current postal address. Then he replied that Shri. Rajat Kamal Mitra had passed away. The ld. AO then made enquiries with the Additional District Magistrate (Nazul), Allahabad to enquire whether during the financial year 2000-01 and 2001-02, on payment of free hold charges, the title of the land was transferred to the lessee or to the nominated person. He also enquired about the buyer and seller of the land. In turn, he was informed that the title for freehold was made in name of the nominated person (i.e. the assessee) and the seller of the land was the Additional District Magistrate. In such a situation, the ld. AO concluded that Shri. Surendra Kumar Mishra (i.e. the assessee) was himself the beneficiary of this transaction and therefore, he added back a sum of Rs. 10,06,644/- paid as free hold charges, to the income of the assessee under section 69C, since the assessee had only declared income from salary in his return dated 13.07.2003 and the receipt from Shri. Rajat Kamal Mitra was unproved. The ld. AO also noticed that, subsequent to convers....
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....148 during the stipulated period. Thereafter, notice under section 142(1) was issued to the assessee requiring him to produce information and documents necessary for completing the assessment. The assessee sought adjournment on 10.09.2008, which was granted to him up till 16.09.2008, on the condition that he would furnish a return of income under section 148 for the assessment years 2001-02 and 2002-03 by 16.09.2008. On 16.09.2008, the assessee furnished copies of acknowledgments of income tax returns for the assessment years 2001-02 and 2002-03 in compliance to the notice issued under section 142(1) dated 25.08.2008. Subsequently, on 10.11.2008, the assessee furnished a letter, that the return filed by him for the assessment year 2002-03, may be treated as the return filed by him in response to notice under section 148. The ld. AO replied, that because the assessee did not file a return of income in compliance to notice under section 148, dated 11.02.2008, then there was no need to issue a notice under section 143(2) to the assessee before completing the assessment. On consideration of the matter, the ld. CIT(A) held that the assessee had not furnished a return in response to noti....
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....ad held that section 292BB inserted by the Finance Act, 2008 had no retrospective effect and was to be construed prospectively. Therefore, the above provisions would not be applicable to the assessment year under appeal i.e. AY 2002-03. They noted that the ld. CIT(A) had not disputed the orders of the Hon'ble Allahabad High Court in the case of CIT vs. Rajiv Sharma (supra), but had not followed them on account of 292BB. They further observed that the Hon'ble Allahabad High Court in the case of CIT vs. Mukesh Kumar Agarwal 345 ITR 29 had considered the issue of section 292BB and held that it would have no effect on the judgment of the Hon'ble Supreme Court in the case of Hotel Blue Moon [2010] 321 ITR 362 (SC). The Hon'ble Bench held that the ld. CIT(A's) could therefore not be sustained. Examining the finding of the ld. CIT(A), that the return under section 148 had not been filed within time, the ld. Bench observed that the ld. AO acted upon the reply of the assessee dated 10.11.2008 and considered the earlier return of income filed by the assessee on 13.07.2003 declaring income of Rs. 1,68,000/- for the purposes of computing the income of the assessee and had taken the income disc....
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.... were different from the present case, because in that case, the ld. AO had written to the assessee giving the assessee a last opportunity to file a return upto 8.01.2002, while in this case, the last opportunity was 30 days from the issue of notice under section 148. Since the ld. AO gave no such opportunity, the assessee could not claim the benefit of extended time and seek shelter under the judgment of CIT vs. Rajiv Sharma (supra). He further observed that in case there was no return leading to issue of notice under section 143(2), the assessment could be completed under section 147/144 after issue of notice under section 142(1) only. He therefore held that the concerns of the Hon'ble ITAT regarding the completion of the order on 26.12.2008 when assessee filed reply on 10.11.2008, were addressed. Moving on to look into the issue on merits, the ld. CIT(A) held that it was clear from the order of the ld. AO that the investment in the name of Shri. Rajat Kamal Mitra was facade. The assessee could not prove that the investment was made by Shri. Rajat Kamal Mitra. He, therefore, confirmed the addition of undisclosed investment under section 69C on free hold charges amounting to Rs. 1....
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....High Court had observed in the case of CIT vs. Rajiv Sharma (supra) that the issue of notice under section 143(2) was mandatory after the filing of the return and in the present case, the ld. AO had himself issued a notice under section 142(1) of the Act, after the issue of notice under section 148, requiring the assessee to prepare a true and correct return and file the same before him. Thus, the judgment of the Hon'ble Allahabad High Court in the case of CIT vs. Rajiv Sharma (supra) was squarely applicable to the facts of the assessee's case. He also placed reliance on the decision in the case of CIT vs. Salarpur Cold Storage in Income Tax Appeal No. 24 of 2014 (Allahabad).It was submitted that in view of the admitted fact on record, that the assessee had filed a return in compliance to notice dated 11.02.2008 vide its letter dated 10.11.2008 and no notice under section 143(2) of the Act had been issued, the ld. CIT(A) should have followed the binding precedents of various judicial pronouncement of the Hon'ble Supreme Court and the Hon'ble High Courts on the subject and quashed the proceedings as void ab initio in the absence of notice under section 143(2) having been issued. It ....
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....o file the return at any time of his choosing. Therefore, the letter dated 10.11.2008, which was clearly filed beyond the time allowed to the assessee to make compliance, could not be held to constitute a valid return in response to notice under section 148 or the extended time allowed by the ld. AO in response to his notice under section 142(1). This return was non-est and therefore, the assessee cannot seek a notice under section 143(2) as a matter of right on a return which was non-est. The ld. Sr. DR further argued that if one were to consider the purpose and intent of the notice under section 143(2), then it was that nobody should go unheard. However, in the present case, no prejudice had been caused to the assessee due to the fact, that the assessee was constantly present during the assessment proceedings. The ld. Sr. DR, in support of his arguments placed reliance on the following case laws:- i. CIT vs. Umang Agarwal, (2014) 365 ITR 164 ii. Smt. Parvati Devi vs. CIT (1970) 75 ITR 625 iii. Bhola Dutt In re (1981) 130 ITR 468 iv. PCIT vs. Broadway Shoe Company (2018) 259 taxman 223 J & K. 9. The ld. Sr. DR also submitted that the observat....
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....hat where a person has not made a return within the time allowed under section 139(1) or before the end of the relevant assessment year, a notice may be served upon him to furnish a return of his income and finally the provisions of section 148(1) read, that before making any assessment or reassessment or re-computation under section 147, the ld. AO shall serve upon he assessee in notice requiring him to furnish within such period, as may be specified in the notice, a return of his income for which he is assessable under the Act during the previous year of the relevant year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act would thereafter apply as if such return were return required to be furnished under section 139(1). What emerges from the reading of these sections is that an assessee cannot file a return at any time of his choosing and claim it to be a valid return, unless it is in accordance with the timelines stipulated within these various sections. Be that as it may, the fact remains is that once a valid return is filed, even under section 148, since the said return is t....
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.... of the return filed by the accountable person, voluntarily but after the expiry of the prescribed period of five years, could not confer jurisdiction upon the Assistant Controller." In the case of CIT vs. Bhagwan Das Amersey (1963) 50 ITR 239 (Bombay), the Hon'ble High Court held that a voluntary return filed by the assessee after the expiry of four years from the end of the year in which the income was first assessable, was non-est in law and therefore, did not preclude the ITO from initiating proceedings under section 34(1)(a). Similarly, the Hon'ble High Court of Calcutta in the case of CIT vs. Meena Bati Agarwal (1971) 79 ITR 278 (AP) held that where returns were filed beyond the period of four years from the relevant assessment year, the returns were invalid and no fresh assessment orders could be made on the basis of the Commissioner's order under section 33B. In the case of Auto and Metal Engineers vs. Union of India (1978) 111 ITR 161 (P&H), the Hon'ble High Court held that where the assessee failed to file a return even within the outside limit and a return was filed beyond that period, the ITO was justified in treating the said return to be non-est and issuing notice und....
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....upon the return of income filed by the assessee belatedly as per his letter dated 10.11.2008. However, we are not in agreement with this understanding. In our view, the computation of escaped income under section 147, has to necessarily start either from the last returned income or the last assessed income. It cannot start from zero, where a return of income had been filed earlier. Therefore, the mere fact that the ld. AO recorded what had already been disclosed by the assessee earlier, as a starting point for computing the escaped income, does not mean that he acted upon any belated returned income and therefore, this cannot confer any legitimacy upon the letter dated 10.11.2008 as a valid return. Therefore, since there was no valid return, the ld. AO was not obliged to issue the notice under section 143(2), but was fully empowered to complete the assessment under section 144 r.w.s. 147. The judgment of the Hon'ble Allahabad High Court in the case of CIT vs. Rajiv Sharma (supra) would not be applicable to the facts of the case because in that case, the ld. AO had given additional time to the assessee to furnish a return while in this case the letter dated 10.11.2008 was clearly be....
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....o which the payments for the sale of the land were made, and subsequent expenditures towards compensation and improvements were made, but the assessee did not furnish those details before the ld. AO. In the circumstances, there was no verifiable evidence to back the submissions of the assessee, that he received money from Shri Rajat Kamal Mitra for paying the free hold charges, that he incurred expenditure to the extent that he did in paying compensation and in improvement of the property and that he remitted a sum of Rs. 4,50,000/- back to Shri. Rajat Kamal Mitra as the balance profit on the sale of the land. In the circumstances, the action of the ld. AO in treating the expenditure of Rs. 10,06,644/- as unexplained and as assessing of capital gain in his hands is seen to be justified and is accordingly upheld. We do not agree that the case of the assessee is covered by the judgment of the Hon'ble Supreme Court in P. K. Noorjehan (supra). In that case the court held that the Assessing Officer had not applied his discretion properly before considering the assessee's submission as unsatisfactory. In this case we find that the assessing officer had recorded the fact of the assessee b....