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Income Tax Appellate Tribunal, GAUHATI ‘VIRTUAL’COURT, ATKOLKATA
Before: SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A. L. Saini:
The captioned appeal filed by the assessee, pertaining to assessment year 2012-13, is directed against the order passed by the Commissioner of Income Tax (Appeal)—Dibrugarh, in appeal no. CIT(A), Dibrugarh/10004/2016-17, dated 13.11.2018,which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3)/147 of the Income Tax Act, 1961 (in short the ‘Act’) dated 09.03.2016.
2 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 2. The grounds of appeal raised by the assessee are as follows:
For that the Learned CIT(Appeals) is not justified in upholding the validity of assessment even though reassessment proceedings was initiated when the time limit for issue of notice u/s 143(2) has not expired and regular assessment could have been made. 2. For that the learned Assessing Officer has grossly erred in facts and in law in making an addition of Rs. 5,50,17,042/- by holding the assessee as an absolute owner of the property being leasehold and encumbered property and, by applying provisions of section 50C of the Income Tax Act, 1961 while computing capital gain arising from transfer of such a property as the transfer of the leasehold and encumbered property is not covered under the provisions of section 50C. 3. For that the learned Assessing Officer has grossly erred in facts and in law in making an addition of Rs. 5,50,17,042/- in complete disregard to the actual sale price realized by the assessee without any evidence of the receipt of the alleged sales consideration by the assessee. 4. For that the learned Assessing Officer has grossly failed in applying basic principles of law and natural justice while framing the assessment order u/s 147 / 143(3) of the Income Tax Act, 1961. 5. The appellant craves the leave to take additional grounds as the time of hearing of appeal.
Although, in this appeal, the assessee has raised multiple grounds of appeal but at the time of hearing, the solitary grievance of the assessee has been confined to the issue that reassessment proceedings initiated by the Assessing Officer u/s 147/ 148 was bad in law.
Brief facts qua the issue are that the assesses filed his return of income electronically on 29.06.2013 showing total, income at Rs.8,01,550/-. The assessee had shown income from three sources viz. income from Business’, income from House Property’ and ‘Income from Other Sources’ only. However, information alongwith a copy of sale deed dated 10.09.2011was received regarding sale of commercialbuilding and land appurtenant thereto by the assessee during the
3 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 previous year relevant to the assessment year 2012-13. On perusal of the above Sale Deed dated 10.09.2011, the assessing officer noticed that the assessee,(Shree Prakash Singh) sold commercial building and land appurtenant thereto known as ‘Jublee Commercial Complex’ situated at Gorokhpur in UP at an agreed price of Rs. 60 lakh,by two separate registered instruments (Rs. 40 lakh and for Rs, 20 lakh). However, Local Stamp Valuation Authority of the State Government valued the property at Rs.9,65,53,675/- andRs. l,62,27,881/- respectively for the purpose of levy of Stamp Duty.Assessing officer had gone through the provisions of section 50C(1) of the Income Tax Act, 1961 and was of the view that in assessee`s case under consideration the Stamp Duty Valuation is Rs. 11,27,81,556/- (Rs. 9,65,53,675 + Rs.1,62,27,881, for both properties respectively) which is much higher than the agreed Sale Price of Rs. 60,00,000/- (Rs. 40,00,000 + Rs. 20,00,000, for both properties respectively). As per the information received, the property was ancestral. Therefore, the cost of acquisition is bound to be much lower than the valuation made for stamp duty purposes at the present date and it is obvious that the assessee by not declaring any income under the head “Capital Gain” in the return had suppressed substantial income chargeable to tax under the said head. In view of the above facts, it was sufficient reason to believe that the income of the assessee chargeable to tax had escaped assessment within the meaning of Section 147 of the Act. Accordingly, the assessing officer issued a notice u/s 148 of the Act on 20.06.2014.
In response to the notice, the assesses filed a written submissiondated 19.06.2014, stating therein to treat the e-filed return of income dated 29.06.2013 as return filed in compliance to the notice u/s148 of the Act.The assessing officer again issued a letter dated 20.06.2014 to the assessee asking him tofile a fresh return of income electronically in response to the notice u/s 148 of the Act. In compliance, the assessee filed return electronically vide e-filing
4 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 Acknowledgement Number 198367710210614 on 21.06.2014. The return so filed had been selected for scrutiny and notice u/s 143(2) of the Act was issued on 07.01.2015. Later on, the assessee vide his letter dated 27.03.2015 requested for the reasons for issuing notice u/s 148 of the Act. The assessing officer, by his letter dated 06.04.2015 informed the assessee regarding the reasons for re- opening of assessment u/s 147 of the Act. During the reassessment proceedings the assessee submitted written submissions before the assessing officer to substantiate his claim, however, the assessing officer rejected the same and taking into account the valuation report of DVO had computed the long term capital gain of Rs.5,50,17,042/-.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has held that the re-assessment proceedings initiated by the Assessing Officer was valid in the eye of law. Aggrieved, the assessee is in appeal before us.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record.First of all, the assessee has raised legal issue before the Bench which goes to the root of the assessment itself and therefore we admit the same by relying on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner Of Income Tax, reported in 229 ITR 383( SC) (1998). Since, there was no new facts required to be looked into and the facts required for adjudicating the legal issue is in the assessment order as well as in the order of ld. CIT(A). Therefore, we are inclined to admit and adjudicate the legal issue in respect of validity of reopening of the assessment under section 147 of the Act.
5 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13
The legal issue raised by the assessee is that for A.Y. 2012-13, which is the assessment year under consideration, even though the Assessing Officer had time as per Statute to issue notice u/s 143(2) of the Act for scrutiny u/s 143(3) of the Act. The Assessing Officer did not issue notice under section 143(2), as required by the Statute, he however issued the notice under section 148 of the Act for reopening the assessment under section 147 of the Act, which action of the Assessing Officer according to the assessee is an erroneous act. Brief facts to adjudicate the legal issue is that the assessee had filed the return of income belatedly on 29.06.2013 (within the time limit prescribed u/s 139(4) of the Act(belated return). According to Shri S. P. Bhati,ld. Counsel for the assessee, the Assessing Officer had time to issue notice under section 143(2) of the Act on or before 30.09.2014. However, the Assessing Officer issued notice under section 148 of the Act, on 21.06.2014, which action of the Assessing Officer is illegal and invalid and therefore all consequential action taken by the assessing officer is bad in the eyes of law. For this proposition of law, Ld Counsel relied on the judgment of Hon’ble Bombay High Court, at Nagpur Bench, dated 12.07.2017 in the case of Smt. SumanVs.ITO, Income Tax Appeal No. 72 of 2003, order dated 12.07.2017 wherein the facts of the case are that assessee filed return of income on 14.12.1999, which was processed by the Department under section 143(1) of the Act on 07.01.2000. However, notice u/s 148 of the Act for reopening was issued on 25.01.2000 (before the expiry of time to issue notice under section 143(2) of the Act). The Hon’ble High Court framed the question of law as under: “Whether Assessing Officer can proceeds with extraordinary power u/s 147, particularly when normal procedure of assessment of income u/s 143(3) are available which are otherwise within time?”
The Hon’ble Bombay High Court of Nagpur Bench in the case of Smt. Suman vs. ITO(supra) answered the question of law in favour of assessee as follows:
6 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13
"12. Reliance is placed upon the decision of the Apex Court in Rajesh Jhaveri (supra) by the Revenue and in particular upon paragraph 18 thereof which reads as under:- "18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding 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." The aforesaid observation by the Apex Court is made in the context of the contention of the assessee that an Assessing officer cannot initiate reassessment proceedings, where intimation under Section 143(1) has been issued and the Revenue failed to take steps to issue notice under Section 143(2) and complete assessment under Section 143(3) of the Act. The aforesaid contention was negatived in the above referred para on the ground that in the context of the facts before it, the time to issue notice under Section 143(3) of the Act had expired. It is only thereafter that the Assessing Officer could have reason to believe that the income chargeable to tax has escaped assessment. It is in such cases that the Assessing Officer would not be prohibited under Section 147/148 of the Act from seeking to recover tax on income which has escaped assessment. It is clear that no reassessment proceedings can be initiated so long assessment proceedings on the basis of return of income filed by the assessee is pending. The assessment proceedings would cease to be pending either by passing of an order under Section 143(3) of the Act or by expiry of time to issue a notice under Section 143(2) of the Act, to complete an assessment under Section 143(3) of the Act. So long as the above event has not passed, the Assessing Officer cannot render the provision of Section 143(2) of the Act redundant/otiose by issuing a notice for reopening an assessment under Section 147/148 of the Act.”
Thus, in the light of the above judgment of the Hon’ble Bombay High Court of Nagpur Bench in the case of Smt. Suman vs. ITO(supra), it is abundantly clear that no reassessment proceedings can be initiated so long assessment proceedings on the basis of return of income filed by the assessee is pending. The assessment proceedings would seize to be pending either by passing an order u/s 143(3) of the Act or by expiry of time to issue a notice u/s 143(2) to complete the assessment proceedings u/s 143(3) of the Act. So long as the above event, has not passed, the Assessing Officer cannot render the provision of section 143(2) of
7 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 the Act redundant / otiose by issuing a notice for reopening u/s 147 / 148 of the Act. Therefore, in our view, the reassessment proceedings initiated in the case of assessee under consideration is bad in law.
Now, we deal with main grievance of the ld DR for the Revenue. The learned DR argued before us that so long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings under section 147 of the Act. Therefore,ld DR relied on the judgment of the Hon`ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd 291 ITR 500 (SC), to support the action of the Assessing Officer to issue notice under section 148 of the Act before expiry of time limit to issue notice under section 143(2) of the Act. The above cited judgment by ld DR in the case of Rajesh Jhaveri in (2007) 291 ITR 500 (SC) is reproduced below for ready reference : “17. 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 the 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 were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.
8 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding 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.”
Thus, with help of the above cited judgment in the case of Rajesh Jhaveri (supra), the ld DR contended that assessing officer can issue notice under section 148 of the Act before expiry of time limit to issue notice under section 143(2) of the Act.
However, we do not agree with the above arguments and contention of the ld DR for the Revenue.We note that Hon`ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd (Supra) has dealt with the contention of the assessee that an Assessing officer cannot initiate reassessment proceedings, where intimation under Section 143(1) has been issued and the Revenue failed to take steps to issue notice under Section 143(2) and complete assessment under Section 143(3) of the Act.In the case of Rajesh JhaveriStock Brokers (P) Ltd (Supra) the time limit to issue notice under section 143(2) was expired therefore, the assessing officer could issue notice under section 148 of the Act. Whereas, in assessee`s case under consideration the time limit to issue notice under section 143(2) was not expired therefore assessing officer cannot issue the notice under section 148 to make the reassessment under section 147 of the Act. Therefore, we do not agree with the argument of ld DR to the effect that the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings under section 147 of the Act.
We note that in the assessee’s case, return of income for the year was filed by the assessee on 29.06.2013 and therefore notice under section 143(2) of the
9 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 Act could have been issued by the assessing officer up to 30.09.2014. In other words, in assessee`s case the time available for issue of notice under section 143(2) of the Act is on or before 30.09.2014 and after 30.09.2014, the assessing officer cannot issue notice under section 143(2) of the Act to frame the assessment under section 143(3) of the Act.However, in the assessee`s case, the assessing officer issued notice under section 148 of the Act on 21.06.2014. Thus, assessing officer issued notice under section 148 within the period available before him to issue notice under section 143(2) of the Act. That is, up to 30.09.2014, the assessing officer could have issued notice under section 143(2) of the Act to frame the assessment under section 143(3) of the Act and the assessing officer could have assessed all the income of the assessee including escaped income, thus there is no need to jump the queue and to issue notice under section 148 of the Act on 21.06.2014, [before the expiry of time limit under section 143(2) of the Act], that is, assessing officer should not have jumped the queue, as the time limit to issue notice under section 143(2) is available before the assessing officer, up to 30.09.2014. In the assessee`s case under consideration, the assessing officer jumped the queue and issued notice under section 148 of the Act within the time limit available to issue notice under section 143(2) of the Act and such action of the assessing officer is not acceptable in the light of the judgment of the Hon`ble Bombay High Court of Nagpur Bench in the case of Smt. Suman vs. ITO, Ward-1(1), Nagpur in ITA No. 72 of 2003 dated 12.07.2017(supra).
At the cost of repetition, we state that no reassessment proceedings can be initiated so long assessment proceedings on the basis of return of income filed by the assessee is pending. The assessment proceedings would cease to be pending either by passing of an order under Section 143(3) of the Act or by expiry of time to issue a notice under Section 143(2) of the Act, to complete an assessment under Section 143(3) of the Act. So long as the above event has not passed, the
10 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 Assessing Officer cannot render the provision of Section 143(2) of the Act redundant/otiose by issuing a notice for reopening an assessment under Section 147/148 of the Act.Therefore, in the light of the aforesaid ratio laid down by the Hon’ble Bombay High Courtin the case of Smt. Suman(supra) wherein the Hon’ble Bombay High Court agreed with the Hon’ble Madras High Court in CIT vs. Qatalyst Software Technologies Ltd. (308 ITR 249) and has allowed the question of law in favour of the assessee. Respectfully following the judgment of the Hon’ble Bombay High Court in the case of Smt. Suman(supra), wehold that reassessment proceedings initiated by the assessing officer is bad in law therefore we quash the reassessment proceedings under section 147/148 of the Act and allow the legal issue raised by the assessee.
13.Since we have allowed the appeal of the assessee on legal issuetherefore the other grounds raised by the assessee on merits become academic and do not require adjudication.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 09.10.2020
Sd/- Sd/- (A.T. VARKEY) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER
�दनांक/ Date: 09/10/2020 (SB, Sr.PS)
11 Shree Prakash Singh ITA No.14/Gau/2019 Assessment Year:2012-13 Copy of the order forwarded to: 1. Shree Prakash Singh 2. ITO, Ward-1, Digboi 3. C.I.T(A)- 4. C.I.T.- Guwahati. 5. CIT(DR), GauhatiBench, Guwahati. 6. Guard File.