UTTRAKHAND POORV SAINIK KALYAN NIGAM LTD.,DEHRADUN vs. ITO, WARD- 2(5), DEHRADUN

The has raised the following grounds of appeal:

The Ld. CIT(A) erred in holding that the appellant corporation was not set up by a central, state or provisional act for the welfare and economic upliftment of ex-serviceman being the citizen of India as required u/s 10(26BBB) of the Income Tax Act, 1961.

We deem it fit to address the ground no. 4 first as it challenges the validity of assumption of jurisdiction by learned Assessing Officer in the reassessment proceedings.

We have heard rival submissions and perused the materials on record. We find that the assessee has filed its return of income for the assessment year 2014-15 belatedly under section 139(4) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) on 06.10.2015 declaring total income of Rs. Nil, after claiming exemption for the profit of Rs.5,11,44,966/- under section 10(26BBB) of the Act. This return was not selected for scrutiny by learned Assessing Officer. But we find very strangely, the learned Assessing Officer issued a notice under section 148 of the Act on 22.01.2015 itself, which is prior to the date of filing of return of income by the assessee. We find that the assessee has got time to file the return belatedly in terms of section 139(4) of the Act till 31.03.2016. While this is so, there is absolutely no need for learned AO to issue reopening notice under section 148 of the Act. The learned Assessing Officer could have as well selected the belated return filed by the assessee for scrutiny and proceeded to determine the total income of the assessee in the manner known to law.

Learned DR before us vehemently argued that since the assessee had not filed the original return of income under section 139(1) of the Act, the learned Assessing Officer was duly justified in 147 of the Act. We are unable to comprehend ourselves to accept these arguments of the learned DR in view of the fact that when the return of income is not filed within the due date prescribed under section 139(1) of the Act, learned Assessing Officer is entitled as per the statute to issue notice under section 142(1) of the Act calling for the return of income. Without resorting to this statutory provision, the learned AO cannot directly proceed to reopen the assessment. In any case, when the due date for filing the return of income is available in terms of section 139(4) of the Act to the assessee, how there could be any satisfaction on the part of the learned AO to conclude that the income of the assessee has escaped assessment. Hence, the very basis of reopening deserves to be quashed for want of any satisfaction that could be legally recorded. The reopening made by learned AO deserves to be quashed on this count also.

We find that the assessee has raised this issue of reopening notice, being issued before the end of the assessment year itself before the learned CIT(A), which is evident from the written

As stated earlier, the return filed by the assessee on 06.10.2015 is a return filed belatedly u/s 139(4) of the Act. Nothing prevented the learned Assessing Officer to select this return for scrutiny and frame the assessment in accordance with law. When this provision is available with the learned Assessing Officer, where is the need for him to issue reopening notice that too before the end of the assessment year itself. Hence the reopening notice issued u/s 148 of the Act in the instant case is to be declared premature. In any case, the revenue cannot resort to reopening proceedings merely because a particular return is not selected for scrutiny. Reopening of an assessment cannot be resorted to as an alternative for not selecting a case for scrutiny. There should be conscious formation of belief based on tangible information that income of an assessee had escaped assessment. This is conspicuously absent in the instant case before us. With regard to the legal issue raised by the assessee vide ground no. 4, we find that the issue in dispute has already been adjudicated by the Coordinate Bench of Delhi Tribunal in the case of ITO Vs. Momentum Technologies Pvt. Ltd. in dated 31.03.2021 for assessment year 2011-12, wherein, the Tribunal held as under:

Similar view was also addressed by the Coordinate Bench of Bombay Tribunal in the case of Bakimchandra Laxmikant Vs. Income-tax Officer, reported in [1986] 19 ITD 527 (Bombay), wherein it was held as under: 9. Question now remains what is the effect of the notice under section 148. Does the return filed after issue of notice under section 148 cease to be a return under section 139 or any loss determine in pursuance of such a return could be denied to be carried forward and set off ? The department’s contention is that recourse to section 148 is a remedy available to the department to assess or reassess the income which had escaped assessment and in such a recourse the assessee cannot be granted a benefit to the prejudice of the revenue. It may be true that the assessee cannot be benefited in a proceeding under section 148 as this provision is meant to safeguard the interests of the revenue. It is an enabling provision to assess or reassess the income which escaped assessment. But at the same time we cannot overrule the right of the assessee to file the return within two years from the end of the assessment year under section 139(4). This right of the assessee, in our opinion, cannot be taken away or whittle down by the revenue by issuing a notice under section 148. We would have agreed with the contention of the department if the return in this case was filed beyond the prescribed limit under section 139(4). The notice under section 148 as aforesaid is issued to assess or reassess the escaped income and the notice should be deemed invalid if ultimately the alleged income is found to have not escaped. If in the case of income having escaped it is found ultimately that there was a loss, the whole basis of issue of notice under section 148 falls down and the notice, therefore, becomes for all practical purposes invalid. It should be deemed as if it were never issued. As a natural consequence, therefore, it is to be assumed that there was no notice under section, 148 in this case and the return filed on 15-12-1982 was not a return in pursuance of the notice under section 148. We, therefore, hold that it was a return under section 139(4) and in view of the Bombay High Court decision (supra), the assessee would be entitled to carry forward the loss.

In view of the above, respectfully following the judicial precedents relied upon hereinabove, we have no hesitation to quash the reassessment proceedings framed by learned AO as void abinitio. Accordingly, ground no. 4 raised by the assessee on legal issue is allowed.

In the result, appeal of the assessee is allowed.