Cause title — parties, addresses and appearances
\
HJGH COURT OF CHHATTISGARH AT BILASPUR
INCOME TAX APPEAL N0.04 OF 2006
APPELLANT
RESPOMDENT
Assistant Commissioner Income Tax, 1
(1) Raipur
VERSUS
Major Deepak Mehta
A-F^
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Judgment for consideration
Hon'ble Shri Justice Radhe Shvam Sharma
Sd/-
Satish K. Agnihotri
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R.S. Sharma
Judge
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Post for pronouncement of the judgment on the <S^dav of November, 2011
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HIGH COURT OF CHHATTISGARH AT BILASPUR
INCOME TAX APPEAL N0.04 0^2006
APPELLANT
RESPONDENT
Assistant Commissioner Income Tax, 1
(1) Raipur
VERSUS
Major Deepak Mehta
APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT. 1961
Coram :
Hon'ble Shri Satish K. Agnihotri &
Hon'ble Shri Radhe Shyam Sharma, JJ.
Present:
Shri
Rajeev Shrivastava with
Shri
Sameer Shrivastava,
Advocate for the appellant.
Shri
Shashank Dubey,
Sr. Advocate with
Shri
Neelabh
Dubey, Advocate for the respondent.
^.
(Delivered on ...^..day of November, 2011)
Per SATISH K. AGNIHOTRI. J.
1.
The instant appeal filed by the Revenue under Section 260A of the
Income Tax Act, 1961 (for short "the Act, 1961") is against the order
dated 7-10-2005 passed by the Income Tax Appellate Tribunal (for
short "the Tribunal")wherein the Tribunal has dismissed the appeal
filed by the Revenue and partly allowed the cross objection filed by
the assessee.
2.
This Court vide order dated 18-8-2011 admitted the appeal on the
following substantial question of law :
"Whether
on
facts
and
in
the
circumstances of the case the Tribunal
was
justified
in
annulling
the
assessment framed u/s 143 (3)/147 by
the assessing officer."
3.
The facts, in brief, are that the assessee was engaged in the
business of poultry farming in the name & style of Royal Poultry
Farm. The assessee filed the income return for the AY 1997 - 98
on 22-12-1997 declaring its income of Rs.1,49,854/-.
The return
was processed under Section 143 (1) on the finding that the capital
work in progress under the head building as per scheduled 'c'
shown
in the balance sheet as
on
31-3-1996 for a sum of
Rs.15,35,551/- was not carried forward to the balance sheet as on
1-4-1996.
The total fixed
assets
on
closing
balance
as
on
31-3-1996 was Rs.52,51,6297- whereas the opening balance as on
1-4-1996 was shown at Rs.31,35,246/-, showing the difference of
Rs.20,16,383/- (sic Rs.21,16,383/-).
With regard to validity of the notice, as reasons were not informed
to the assessee a notice under Section 143 (2) (i) of the Act, 1961
was served on the assessee on 28-2-2001.
As projected by the
Revenue, none appeared on behalf of the assessee in compliance
with the said notice.
The assessee along with its Chartered
Accountant appeared before the Assessing Officer (for shori: "the
AO") on 12-3-2001 wherein the assessee was directed to file reply
on the basis ofthe return. Thereafter, several notices were issued.
The assessee failed to appear and, as such, a detailed enquiry wa$
conducted and it was found that there was the total income of
Rs.12,13,240/- and accordingly the order under Section 143 (3)
read with Section 147 was passed on 28-3-2002 by the AO.
Being aggrieved, the assessee preferred an appeal before the
Commissioner, Income Tax (Appeals) {for short "the CIT (A)"}
wherein it was contended that notice under Section 148 was bad in
law and the proceedings so initiated against the assessee be
dropped under sub-section (2) Section 152 ofthe ITAct, 1961.
The CIT (A) held that "taking the whole view of the case, if the
appellant is able to prove that there was no under assessment,
then alone provisions of Section 152 (2) will come into play and the
AO will be obliged to drop the proceedings. In the present case, the
AO found items of under assessment other than the one for which
he had issued notice.
Therefore, he could not take action u/s 152
(2) of the Act.
1 hold that the action of the AO in issuing notice u/s
148 and continuing with the re-assessment proceedings there-after
is valid and well within his jurisdiction.
This ground of appeal is,
accordingly, dismissed."
7.
The appeal was partly allowed, as on the question of preparation of
demand notice under Section 156 of the Act, 1961 the AO was
directed to recompute the interest under Sections 234-A, 234-B and
234-C after giving relief of Rs.7,83,047/-.
8 .
The Revenue preferred the appeal before the Tribunal wherein the
assessee also filed a cross-objection.
The main question raised by
the assessee was that the CIT (A) has considered the provisions of
Section 152 (2) of the Act, 1961 but without assigning any reason
considered that the AO was right in continuing with the proceedings
under Section
148 of the Act,
1961
as valid
and within
his
jurisdiction. Under the notice issued under Section 148 the reasons
supplied, which are as under :
"During the A.Yr. 97-98 the assessee
has filed
return
by
Dec.
1997.
This
return the (a' has enclosed audit report.
In this audit report
particulars of fixed
assets
has
been
mentioned
in
the
schedule 'D" Dherain
head
of Bldg.
shown
is
20,37,781/-
as
opening.
Whereas the details of fixed assets for
A.Yr. 96-97 closing was Rs.2037781/-
which
is
shown
in
fixed
assets
in
schedule
'c'
of
audit
report
for
A.Yr.96-97.
It is seen that bldg. (work-in-progress)
was Rs. 15,35,5517- in* above schedule
'c' for A.Yr. 96-97. This work-in-progress
is not carried forward in schedule 'D' of
fixed assets for A.Yr. 97-98.
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The total of fixed assets closing for A.Yr.
96-97 was Rs.52,51,629/- which should
be obviously carried forward for next
year but in A.Yr. 97-98 the total net
block
assets
(opening)
was
Rs.31,35,2467-.
So there is a difference
ofRs.20,16,383/-.
On the above facts
1 have reason to
believe that the above discrepancies of
fixed
assets
at
Rs.20,16,383/-
is
escaped from taxation.
Hence, notice
u/s 148 should be issued."
9.
The Tribunal held that tlthe assessee, therefore, rightly proceeded
fo invoke the provisions of Section 152 (2) in so far as having been
confronted with the notice under Section 147 to resist the AO to
reopen the whole assessment and show that income alleged to
have escaped assessment has in truth and in fact not escaped
assessment but has been brought in under some inappropriate
head."
It was further held that the AO proceeded in framing
assessment under Section 143 (3) read with Section 147 beyond
the provisions of law. The CIT (A) was also not able to adjudicate
asto how the provisions of Section 152 (2) of the Act, 1961 were
not applicable to the case of the assessee.
In any case the
addition to the building shown as work in progress has been
disposed of in the impugned assessment year, which fact was
noted otherwise by the AO as net block indicating the same in
assessment year 1996-97 not forming part ofthe block having been
disposed of was not in pursuance of records for assessment year
1996-97 not available to the AO but total of fixed assets remaining
the same.
The objection was accepted declaring the proceedings
of reopening of the assessment as invalid. Thus, this appeal.
10.
Shri Rajeev Shrivastava appearing with Shri Sameer Shrivastava,
learned counsel for the appellant, would submit that Explanation 2
to Section 147 provides that the following shall also be deemed to
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be cases where the income chargeable to tax has escaped
assessment:
Firstly; where no return of income has
been
furnished
by
the
assessee
although his total income or the total
income of any other person in respect of
which he is assessable under this Act
during the previous year exceeded the
maximum
amount,
which
is
not
chargeable to income tax;
Secondly; where a return of income has
been furnished by the assessee but no
assessment has been made and it is
noticed by the AO that the assessee has
understated the income or has claimed
excessive loss, deduction, allowance or
relief in the return;
Thirdly; where an assessment has been
made,but
(i) income chargeable to tax has been
under assessed; or
(ii) such income has been assessed at
too low a rate; or
(iii)such income has been made the
subject of excessive relief under
this Act; or
(iv)excessive
loss
or
depreciation
allowance or any other allowance
under
this
Act
has
been
computed."
11.
Shri Shrivastava would further submit that the Income Tax Officer
may
bring
to
charge
items
of
income
which
had
escaped
assessment other than or in addition to that item or items which
have led to the issuance of notice under Section
148.
The
jurisdiction of the AO is not confined to only such income,but other
incomes
also,
which
have
escaped
tax.
Thus,
reopening
or
reconsidering the whole assessment was just and proper.
12.
In support of his contention, Shri Shrivastava placed reliance upon
the decision ofthe Supreme Court in Commissioner of Income Tax
v. Sun Engineering Works (P) Ltd.1.
13.
On the other hand, Shri Shashank Dubey, learned senior counsel
appearing with
Shri
Neelabh
Dubey,
learned
counsel for the
respondent, would submit that in the present case the department
issued notice under Section 148 against the assessee for income
under a particular head. The notice did not pertain to income under
different heads,
but which were discovered
in the course of
reassessment
proceedings.
The
original
ground
for
issuing
reassessment notice was no where taken up and was in effect
dropped.
14.
Shri Dubey would further submit that in the case on hand the case
was reopened on the basis of a belief that income Y had escaped
assessment.
But in the reassessment order passed under Section
147 by the AO no addition was made in respect of the 'x' income,
but an addition was made for 'y' income, which was said to have
escaped assessment.
Such addition of 'y' income cannot be
sustained when no addition was made for 'x' income.
There is
indeed a power with for AO to assess escaped income other than
those on the basis ofwhich notice under Section 148 is issued.
15.
Shri Dubey would next submit that as per the assessment order,
notice under Section 148 dated 4-1-2001 was issued because in
1 (1992)48cc 363
^^
the audit report of the years 1996-97 & 1997-98 there was a
difference in figures relating to work in progress.
However, the
assessment order does not point out that reply to this was already
submitted on 12-3-2001.
Nowhere in the assessment order has
any mention being made about this head of income nor has any
assessment been made or any addition made on this count and, as
such, the assessment order is totally silent on this issue. Thus, it is
clear that it did not constitute reason to believe. The reassessment
was bad since it related to all other items except those on the basis
ofwhich the reassessment notice was issued.
16.
Shri Dubey would next submit that Tribunal was right in holding that
the AO had the jurisdiction to reassess the issues other than the
issues in respect of which proceedings are initiated but he was not
so justified when the reasons for initiation of those proceedings
ceased to survive.
Learned counsel placed reliance upon the
decision of the Supreme Court rendered in S. Sundaram Pillai and
Others v. V.R. Pattabiraman and Others2 and upon the decision of
Bombay High Court in Commissioner of Income-Tax v. Jet Airways
(1) Ltd.3 & upon the decision of High Court of Delhi in Ranbaxy
Laboratories Limited v. Commissioner of Income Tax4.
17.
We have heard learned counsel appearing for the parties, perused
the pleadings and the documents appended thereto.
18.
Sections 147, 148 & 152 (2) of the Act, 1961 read as under:
"147. Income escaping assessment.-
If the Assessing Officer, has reason to
believe that any income chargeable to
tax has escaped assessment for any
assessment year, he may, subject to the
provisions
of
Sections
148
to
153,
assess or reassess such income and
also any other income chargeable to tax
2 (1985)1 SCC591
3 [2011] 331 ITR236(Bom)]
4 ITA No. 148 of 2008 (3-6-2011)
which
has
escaped
assessment
and
which comes to his notice subsequently
in the course of the proceedings under
this section, or recompute the loss or
the depreciation allowance or any. other
allowance, as the case may be, for the
assessment year concerned (hereafter
in this section and in Sections 148 to
153
referred
to
as
the
relevant
assessment year):
Provided
that where
an
assessment
under sub-section (3) of Section 143 or
this section
has
been
made for the
relevant
assessment year,
no
action
shall be taken under this section after
the expiry of four years from the end of
the relevant assessment year,
unless
any
income
chargeable
to
tax
has
escaped
assessment
for
such
assessment
year
by
reason
of
the
failure on the part of the assessee to
make a return under Section 139 or in
response to a notice issued under sub-
section (1) of Section 142 or Section
148 or to disclose fully and truly all
material
facts
necessary
for
his
assessment, for that assessment year:
Provided
further
that
the
Assessing
Officer may assess or reassess such
income, other than the income involving
matters which are the subject matters of
any appeal, reference or revision, which
is chargeable to tax and has escaped
assessment.
Explanation
1 .—Productionbefore the
Assessing Officer of account books or
other
evidence
from
which
material
evidence could with due diligence have
been
discovered
by
the
Assessing
Officer will not necessarily amount to
disclosure within the meaning of the
foregoing proviso.
Explanation 2.—Forthe purposes of this
section,
the
following
shall
also
be
deemed
to
be
cases
where
income
chargeable
to
tax
has
escaped
assessment, namely:—
(a)
where no return of income
has been furnished by the
assessee
although
his
total income or the total
income
of
any
other
person in respect of which
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specified in the notice, a return of his
income
or the
income
of any other
person
in
respect
of
which
he
is
assessable under this Act during the
previous
year
corresponding
to
the
relevant
assessment
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
shall,
so far as
may
be,
apply
accordingly as if such
return were a
return required to be furnished under
Section 139:
Provided that in a case—
(a)
where a return has been
furnished during the period
commencing
on
the
1st
day of October, 1991 and
ending on the 30th day of
September,
2005
in
response
to
a
notice
served under this section,
and
(b)
subsequently a notice has
been
served
under sub-
section (2) of Section 143
after the expiry of twelve
months
specified
in
the
proviso to sub-section (2)
of Section 143, as it stood
immediately
before
the
amendment of said
sub-
section
by
the
Finance
Act, 2002 (20 of 2002) but
before the expiry of the
time limit for making the
assessment,
reassessment
or
recomputation
as
specified in sub-section (2)
of Section 153, every such
notice referred to in this
clause shall be deemed to
be a valid notice:
Provided further that in a case—
(a)
where a return has been
furnished during the period
commencing
on
the
1st
day of October, 1991 and
ending on the 30th day of
September,
2005,
in
response
to
a
notice
served under this section,
and
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(b)
subsequently a notice has
been served under clause
(ii) of sub-section
(2) of
Section
143
after
the
expiry
of twelve
months
specified in the proviso to
clause
(ii) of sub-section
(2)
of
Section
143,
but
before the expiry of the
time limit for making the
assessment,
reassessment
or
recomputation
as
specified in sub-section (2)
of Section 153, every such
notice referred to
in this
clause shall be deemed to
be a valid notice.
Explanation.—For the
removal
of
doubts,
it
is
hereby
declared
that
nothing contained in the first proviso or
the second proviso shall apply to any
return which has been furnished on or
after the 1st day of October, 2005 in
response to a notice served under this
section.
(2) The Assessing Officer shall, before
issuing any notice under this section,
record his reasons for doing so."
"152. Other provisions.—
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(2) Where an assessment is reopened
under Section 147, the assessee may, if
he has not impugned any part of the
original assessment order for that year
either under Sections 246 to 248 or
under
Section
264,
claim
that
the
proceedings under Section 147 shall be
dropped on his showing that he had
been assessed on an amount or to a
sum not lower than what he would be
rightly
liable for even
if the
income
alleged to have escaped assessment
had been taken into account, or the
assessment or computation had been
properly made:
Provided that in so doing he shall not be
entitled to reopen matters concluded by
an order under Sections 154, 155, 260,
262 or 263."
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19.
Provisions of Section 147 of the Act, 1961 makes it clear that the
AO may reassess any income chargeable to tax, which
has
escaped assessment for any assessment or there was under
assessment or the claimed excessive loss, deduction, allowance or
relief in the return, subject to provisions of Sections 148 to 153.
The pre-condition to reopen the assessment or recomputation is
that the AO
should
have
reason
to
believe that
no
income
chargeable tax has escaped assessment or under assessment or
the claimed excessive loss, deduction, allowance or relief in the
return.
Thereafter, a notice under Section 148 shall be served on
the assessee requiring him to furnish return of the income or
income of any other person in respect of which he is assessable
under this Act.
20.
Sub-section (2) Section 148 provides that before issuing any notice
under Section 148 (1), the AO shall record his reasons for doing so.
Section 152 (2) provides that the assessee may claim that the
proceedings under Section 147 should be dropped on his showing
that he had been assessed not lower than what he would be rightly
liable for even if the income alleged to have escaped assessment
had been taken into account, or the assessment or computation
had been properly made.
21.
Explanation 3 to Section 147, which was inserted by Finance (No.2)
Act, 2009, w.e.r.f. 1-4-1989, provides that the AO may assess or
reassess the income in respect of any issue, which has escaped
assessment, and such issue comes to his notice subsequently in
the course of the proceedings under Section 147 of the Act, 1961,
notwithstanding that the reasons for such issue have not been
included
in
the
reasons
recorded
under
sub-section
(2)
of
Section 148.
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22.
From bare perusal of the entire provisions, it is clear that the AO
should have reason to believe to reopen assessment under the
provisions
of
Section
147
before
making
the
assessment,
reassessment or recomputation.
23.
The assessee has a right to inform the AO that the income which
has allegedly escaped assessment was shown and had been taken
into account and the assessment had been properly made.
In that
event the AO has an obligation to drop the proceedings of the said
income, underthe provisions ofSection 152 (2) oftheAct, 1961.
24.
Explanation 3 to Section 147 of the Act, 1961 provides that if the
proceedings on the basis of reasons recorded under sub-section
(2) Section 148 in the course of proceedings ofthe income reasons
have been recorded under Section 148 (2), the other income may
also be included, which has escaped assessment for the purpose
of assessment or re-assessment under Section 147 of the Act,
1961, in the same proceeding.
25.
The Supreme Court in Sun Engineering Works (P) Ltd. (supra) held
as under:
"41......we
find
that
in
proceedings under Section 147 of the
Act, the Income Tax Officer may bring to
charge
items
of
income
which
had
escaped assessment other than or in
addition to that item or items which have
led
to the
issuance of notice
under
Section 148 and where reassessment is
made under Section 147 in respect of
income
which
has
escaped
tax,
the
Income
Tax
Officer's
jurisdiction
is
confined to only such income which has
escaped
tax
or
has
been
under-
assessed
and
does
not
extend
to
revising, reopening or reconsidering the
whole
assessment
or
permitting
the
assessee to reagitate questions which
had
been
decided
in
the
original
assessment proceedings. It is only the
under-assessment which
is set aside
and
not the entire assessment when
reassessment proceedings are initiated.
•^
26.
The Income Tax Officer cannot make an
order of reassessment inconsistent with
the
original
order of assessment in respect of matters which are not the subject-matter of proceedings under Section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under Section 152(2). The words 'such income'in Section 147 clearly refer to the income which is chargeable to tax but has "escaped assessment" and the Income Tax Officers' juri iction under the section is confined only to such income which has escaped assessment......" In S. Sundaram Pillai (supra), relied on by the learned counsel appearing for the respondent, the Supreme Court has dealt with the Explanation to a statutory provision as under: "(a) (b) to explain the meaning intendment of the Act itself, and (c) (d) (e) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the obj'ect of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation ofthesame."
isss'y \^y V-T/-> 36. 37. 38. 39. case, proceedings of the other incomes may also be examined along with the said income. We are in respectful agreement with the view taken by the Bombay High Court in Jet Airways (supra) and the High Court of Delhi in Ranbaxy Laboratories Limited (supra). Applying the well settled principles of law to the facts of the present case and for the reasons mentioned hereinabove, the question raised herein is answered in affirmation. As an upshot, the appeal, being bereft of merit, is liable to be and is hereby dismissed. There shall be no order asto costs. Gowri Satish K. Agnihotri Judge R.S. Sharma Judge -/..
