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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI ANIKESH BANERJEE, HONBLE
ORDER \nPER NARENDRA KUMAR BILLAIYA, AM:\nThis appeal by the assesse is preferred against the order of the ld.\nCIT(A) – 24, Mumbai [hereinafter “the ld. CIT(A)"] dated 09/06/2017,\npertaining to AY 2009-10.\n2. The grievance of the assessee can be summarized as under:-\n\"1. Rejection of additional evidence application.\n2. Reassessment proceedings without jurisdiction.\n3. Addition on basis of wrong balance sheet.\n4. Denial of Telescoping.\n5. Taxation of Directors remuneration.\n6. Capital gain on sale of agricultural land treated as business income.\n7. Addition based on loose papers.\n8. Addition under section 68.\n9. Addition on account of non-compete receipt.\n10. Addition on account of capital account.\n3. The assessee has challenged the legality of notice u/s 148 of the\nAct on the ground that it is bad in law.\n4. Representatives were heard at length. Case records carefully\nperused.\n5. Briefly stated the facts of the case are that the assessee is an\nindividual and is managing director of U.S. Roofs Limited, who filed is\nreturn of income belatedly on 14/06/2010 declaring total income of Rs.\n62,96,500/- which was subsequently revised on 16/06/2010 revising the\ntotal income at Rs.80,96,500/-.\n6. The belated return so filed was a valid return and as per the\nproviso to Section 143(2) of the Act, the time limit available to the AO\nfor issuance of notice u/s 143(2) of the Act was till 30/09/2011 i.e., six\nmonths from the end of the financial year in which the return of income\nwas filed.\n6.
1. Instead of selecting the return for scrutiny assessment, the AO\nissued a notice u/s 148 of the Act dated 24/11/2010 alleging that\nincome chargeable to tax has escaped assessment. The validity of this\nnotice dated 24/11/2010 issued u/s 148 of the Act is under challenge\non the ground that the AO failed to appreciate that a valid return of\nincome was filed and the time limit to issue a notice u/s 143(2) of the\nAct was available, therefore, the AO grossly erred in issuing notice u/s\n148 of the Act.\n7. In our considered opinion, when a valid return is available with\nthe AO, the said return of income can be selected for scrutiny\nassessment under regular assessment and, therefore, the question of\nany escapement of income does not arise. In our humble opinion, unless\nthe return of income is scrutinized by the AO or the time limit to\nscrutinize the return of income is over, he cannot come to a conclusion\nof any escapement of income.\n8. On identical facts, the Hon'ble High Court of Madras in the case\nof Commissioner of Income Tax Vs K.M. Pachayappan (2008) 304 ITR 264,\nquashed the reassessment proceedings. In the facts before the Hon'ble\nHigh Court, the Assessee filed a return of income under section 139(4)\nof the Act on March 15, 2000 and the time limit for issuance of notice\nunder section 143(2) of the Act was expiring on March 31, 2000. The\nassessing officer instead of issuing a notice under section 143(2) of the\nAct directly issued a notice under section 148 of the Act dated March 15,\n2000. The Hon'ble Madras High Court held that when a return of\nincome has been filed and the same is pending, the proceedings are still\npending. In such a situation, revenue could not have issued a notice for\nreopening under section 147 of the Act. The Hon'ble Court relied upon\nthe decision of the Hon'ble Supreme Court in the case of Trustees of HEH\nThe Nizam's Supplemental Family Trust Vs. CIT (242 ITR 381), wherein the\nHon'ble Supreme Court held that unless the return of income already\nfiled is disposed of, a notice for reassessment under section 148 cannot\nbe issued. No reassessment proceedings can be initiated so long as\nassessment proceedings pending on the basis of the return already filed\nare not terminated.\n9. Similar is the view taken by the Hon'ble Jurisdictional High Court\nin the case of Smt. Suman [2017] 84 taxmann.com 267 (Bombay), wherein\nthe Hon'ble High Court was seized with the following substantial\nquestion of law:-\n\"2. This appeal was admitted on 04.04.2007 on the following substantial\nquestion of law :\n'Whether AO can proceeds with extraordinary power U/s.147, particularly\nwhen normal procedure of assessment of Income U/s.143(3) are available\nwhich are otherwise within time?'\"\n9.
And answered as under:-\n“8. Before dealing with the rival contentions, it may be useful to reproduce Section 143 of the Act as\nexisting, when notice dated 25.01.2000 was issued under Section 147/148 of the Act and it read as\nunder:\n\"143[(1) Where a return has been made under section 139, or in response to a notice under\nsub-section (1) of section 142, –\n(i) if any tax or interest is found due on the basis of such return, after adjustment of any\ntax deducted at source, any advance tax paid, any tax paid on self-assessment and any\namount paid otherwise by way of tax or interest, then, without prejudice to the provisions of\nsub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and\nsuch intimation shall be deemed to be a notice of demand issued under section 156 and all\nthe provisions of this Act shall apply accordingly; and\n(ii)\nProvided that except as otherwise provided in this sub-section, the acknowledgment of\nthe return shall be deemed to be an intimation under this sub-section where either no sum is\npayable by the assessee or no refund is due to him :\nProvided further that no intimation under this sub-section shall be sent after the expiry\nof two years from the end of the assessment year in which the income was first assessable.]\n(2)\nWhere a return has been made under section 139, or in response to a notice\nunder sub-section(1) of section 142, the Assessing Office shall, if he] considers it necessary\nor expedient to ensure that the assessee has not understated the income or has not computed\nexcessive loss or has not underpaid the tax in any manner, serve on the assessee a notice\nrequiring him, on a date to be specified therein, either to attend his office or to produce, or\ncause to be produced there, any evidence on which the assessee may rely in support of the\nreturn :\nProvided that no notice under this sub-section shall be served on the assessee after the\nexpiry of twelve months from the end of the month in which the return is furnished.]\n3\n4\n(emphasis supplied).\n9. It is an undisputed position before us that on 25.01.2000 when the Assessing Officer issued a notice\nunder Section 148 of the Act to reopen the assessment for Assessment Year 1999-2000, even before\nthe time to issue notice under Section 143(2) of the Act to assess under section 143(3) of the Act had\nexpired. It is clear from Section 143(1)(i) of the Act as in force at the relevant time that the intimation\nthereunder is without prejudice to the right of the Revenue to proceed under Section 143(2) of the\nAct. Thus, issue of intimation by itself does not bring to an end an assessment proceeding. It comes\nto an end only when the time to issue a notice under Section 143(2) of the Act expires/come to an end.\n10. On the other hand, Section 147/148 of the Act empowers an Assessing Officer to reopen an\nassessment wherever he has reason to believe that income chargeable to tax has escaped assessment.\nThis power under Section 147/148 of the Act is subject to various limitation provided therein. The\npower of reopening of assessment can be exercised where assessment has not been completed under\nSection 143(3) of the Act or even where intimation under Section 143(1)(i) of the Act has been issued\nprovided the time to take further proceeding by issuing notice under Section 143(2) of the Act to\ncomplete assessment under Section 143(3) have already expired. So long the time is available to\ncomplete an assessment under Section 143(3) of the Act after having issued intimation under Section\n143(1) of the Act, there can be no occasion for the Assessing Officer to have reason to believe the\nincome chargeable had escaped assessment, for the reason that the Assessing Officer can issue notice\nunder Section 143(2) of the Act, to complete assessment under Section 143(3) of the Act. Thus, it is\na power vested in the Assessing Officer to disturb a concluded issue within a specified period by\nreopening an assessment. Therefore, it cannot be exercised till the period for completion of assessment\nhas expired. Section 147/148 of the Act is not a power to be exercised to abort the regular assessment\nproceeding by issuing notice for reopening an assessment. The proceedings under Section 147/148 are\nnot parallel to regular assessment proceedings under Section 143(2) & (3) of the Act.\n11. The impugned order relies upon Explanation 2(b) to Section 147 of the Act to sustain the\nreopening notice. Explanation 2(b) to Section 147 reads as under : –\n\"Section 147\n2:\nExplanation: For the purpose of this section, the following shall also be deemed to\nbe cases where income chargeable to tax has been escaped assessment, namely : –\n(a)\n(b) where a return of income has been furnished by the assessee but no assessment\nhas been made and it is noticed by the Assessing Officer that the assessee has understated\nthe income or has claimed excessive loss, deduction, allowance or relief in the return;\"\nThe aforesaid explanation deals with case where income chargeable to tax escapes assessment\nincluding a case where a return of income has been filed, but no assessment has been made. The\naforesaid explanation seeks to clarify that merely because no assessment has been made even after\nfiling a return, it will not be open to suggest that no income chargeable to tax has escaped assessment.\nThis covers issue where there is no possibility of making an assessment on the date when the notice\nunder Section 147/148 of the Act is issued. So long as the time to issue notice under Section 143(2)\nof the Act is available, it cannot be said that no assessment has been made as the possibility of making\nan assessment is always available. The Assessing Officer is obliged to complete assessment under\nSection 143(3) of the Act by issuing a notice under Section 143(2) of the Act, if he is of the view that\nthe assessee has understated his income or computed excessive loss or understated his tax to the\nprejudice of the Revenue. Therefore, we are clear that in view of the provisions of Section 143(1)(i) of\nthe Act is in force at the relevant time, no notice under Section 148 of the Act can be issued, till the\nperiod to issue notice under Section 143(2) of the Act has expired.\n12. Reliance is placed upon the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd.\n(supra) by the Revenue and in particular upon paragraph 18 thereof which reads as under : –\n\"18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to\ninitiate proceeding under section 147 and failure to take steps under section 143(3) will not\nrender the Assessing Officer powerless to initiate reassessment proceedings even when\nintimation under section 143(1) had been issued.\"\nThe aforesaid observation by the Apex Court is made in the context of the contention of the assessee\nthat an Assessing officer cannot initiate reassessment proceedings, where intimation under Section\n143(1) has been issued and the Revenue failed to take steps to issue notice under Section 143(2) and\ncomplete assessment under Section 143(3) of the Act. The aforesaid contention was negatived in the\nabove referred para on the ground that in the context of the facts before it, the time to issue notice\nunder Section 143(3) of the Act had expired. It is only thereafter that the Assessing Officer could have\nreason to believe that the income chargeable to tax has escaped assessment. It is in such cases that the\nAssessing Officer would not be prohibited under Section 147/148 of the Act from seeking to recover\ntax on income which has escaped assessment. It is clear that no reassessment proceedings can be\ninitiated so long assessment proceedings on the basis of return of income filed by the assessee is\npending. The assessment proceedings would cease to be pending either by passing of an order under\nSection 143(3) of the Act or by expiry of time to issue a notice under Section 143(2) of the Act, to\ncomplete an assessment under Section 143(3) of the Act. So long as the above event has not passed,\nthe Assessing Officer cannot render the provision of Section 143(2) of the Act redundant/otiose by\nissuing a notice for reopening an assessment under Section 147/148 of the Act. Therefore, the above\ndecision of the Apex Court in Rajesh Jhaveri's Stock Brokers (P.) Ltd. case have no application to the\npresent facts, when admittedly the time to issue notice under Section 143(2) of the Act to complete\nthe regular assessment under Section 143(3) of the Act has not expired.\n13. Further, we note that the Hon'ble Madras High Court in CIT v. Qatalys Software Technologies\nLtd., [2009] 308 ITR 249 in identical fact situation dismissed the Revenue's appeal by holding that\nwhere the period of issuing notice under Section 143(2) of the Act has not expired, then reassessment\nnotice under Section 147/148 of the Act was invalid. Nothing has been shown to us as to why the\nview taken by the Hon'ble Madras High Court is required to be differed from.\n14. In the above view, the substantial question of law framed for our consideration is answered in the\nnegative i.e. in favour of the appellant/assessee and against the respondent/Revenue.”\n10. Considering the facts in totality in light of the judicial decisions\ndiscussed hereinabove, we set aside the impugned notice u/s 148 of the\nAct and quash the resultant assessment order. Since we have quashed\nthe assessment order, we do not find it necessary to delve into the merits\nof the case.\n11. In the result, appeal of the assessee is allowed.\nOrder pronounced in the Court on 9th October, 2025 at Mumbai.\nSd/-\n(ANIKESH BANERJEE)\nJUDICIAL MEMBER\nSd/-\n(NARENDRA KUMAR BILLAIYA)\nACCOUNTANT MEMBER\nMumbai, Dated 09/10/2025\n*SC SPS\nआदेश की प्रतिलिपि अग्रेषित/