C.I.T.PATIALA vs. MAJOR TLKKA KHUSHWANT SINGH

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ITR/52/1991HC Punjab & HaryanaPHHC01024524199114 November 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the earlier judgment of the High Court in Tikka Khushwant Singh’s case (1975) 101 ITR 106, which was inter partes and covered the assessment year in question, operated as res judicata on the question of the validity of the notice. In that earlier judgment, it was held that notice for reassessment would be valid only if service of notice had been effected on the assessee prior to 1970, and the authorities below had found that service had not been effected on the assessee within that period. The Court noted that the view taken in Tikka Khushwant Singh’s case was reversed by a Full Bench of the High Court in Jai Hanuman Trading Co. Pvt. Ltd. v. CIT (1977) 110 ITR 36 and by the Supreme Court in R.K. Upadhyaya v. Shanabhai P. Patel (1987) 166 ITR 163, which held that only the issuance of notice was required, not service within limitation. However, due to the principle of res judicata, the earlier binding decision on the parties for the specific assessment year was applied. Therefore, the question referred was answered against the revenue and in favour of the assessee. No issue was expressly left undecided.

What were the facts?

The Commissioner of Income Tax, Patiala (Revenue) is the applicant and M/s Major Tikka Khushwant Singh, Sangrur (Assessee) is the respondent. The assessment year in question is 1961-62. The High Court is considering a reference arising from an order of the Income Tax Appellate Tribunal (ITAT) dated 28.04.1977. The Assessing Officer issued a notice under Section 148 of the Income-tax Act, 1961 on 24.02.1970 for assessment year 1961-62. The assessee did not file a return. A notice under Section 142(1) was issued on 10.10.1973. The assessee contended that the Section 148 notice was never served, rendering reassessment proceedings under Section 147(a) read with Section 148 incompetent due to the passage of eight years. An order under Section 144 was passed. The assessee had previously filed a writ petition which was allowed by the High Court in Tikka Khushwant Singh v. Commissioner of Income-Tax, Patiala and another (1975) 101 ITR 106, holding that service of notice was a requirement. An application under Section 146 was dismissed. The ITAT held that since service of notice was not proved, the assessment was liable to be cancelled.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was no valid assessment framed in this case and that the one framed u/s 144 of the I.T. Act, was void ab initio having no legal sanctity behind it? (Question of law turning on Sections 144, 147, 148 of the Income-tax Act, 1961). Assessee's Contention: The assessee argued that the notice under Section 148 of the Act was never served, and therefore, proceedings under Section 147(a) read with Section 148 were not competent as a period of eight years had passed since the assessment year. The assessee relied on the High Court's earlier judgment in Tikka Khushwant Singh v. Commissioner of Income-Tax, Patiala and another (1975) 101 ITR 106, which held that service of notice was a requirement. Revenue's Contention: The revenue contended that the requirement under Section 148 of the Act was only of issuing the notice, and the requirement of service of notice within limitation was not necessary. The revenue relied on the Supreme Court's decision in R.K. Upadhyaya v. Shanabhai P. Patel (1987) 166 ITR 163 and a Full Bench decision of the High Court in Jai Hanuman Trading Co. Pvt. Ltd. v. CIT (1977) 110 ITR 36, which reversed the earlier view.

Which sections of the Income-tax Act were involved?

Section 144,Section 147,Section 148,Section 142(1),Section 146

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.52 of 1991 Date of decision: 14.11.2006 The Commissioner of Income Tax, Patiala. ---Applicant Vs. M/s Major Tikka Khushwant Singh, Sangrur. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Dr. N.L. Sharda, Advocate for the revenue. -----

ORDER: Following question of law has been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 28.04.1977 in I.T.A. No.819 of 1975-76 in respect of assessment year 1961-62:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was no valid assessment framed in this case and that the one framed u/s 144 of the I.T. Act, was void ab initio having no legal sanctity behind it?” The Assessing Officer issued notice of the assessment on 24.02.1970 under Section 148 of the Income-tax Act, 1961 (for short, “the Act”) relating to assessment year 1961-62. The assessee did not file return in response thereto. Thereafter, notice under Section 142(1) of Act was issued on 10.10.1973. The assessee took the stand that notice under Section 148 of the Act was never served on him and, therefore, proceedings under Section 147(a) read with section 148 of the Act were not competent as a period of eight years had passed. The assessee, thereafter, did not appear and an order under Section 144 of the Act was passed. The assessee filed a writ petition which was allowed vide judgment of this Court in I.T.R. No.52 of 1991 Tikka Khushwant Singh v. Commissioner of Income-Tax, Patiala and another (1975) 101 ITR 106, holding that the requirement of issuing notice was to be taken as requirement of service of notice. The assessee had also filed an application under Section 146 of the Act, which was dismissed.

On appeal, the Tribunal held that since service of notice was not proved, assessment was liable to be cancelled.

We have heard learned counsel for the revenue and perused the record.

We find that the view taken by this Court in Tikka Khushwant Singh’s case (supra), was reversed by the Full Bench of this Court in Jai Hanuman Trading Co. Pvt. Ltd. v. CIT (1977) 110 ITR 36 and the Hon’ble Supreme Court in R.K. Upadhyaya v. Shanabhai P. Patel (1987) 166 ITR 163 held that requirement under Section 148 of the Act was only of issuing notice and requirement of service of notice within limitation was not required.

Since the judgment of this Court in Tikka Khushwant Singh’s case (supra) is inter partes and covers the year in question, the same will be res judicata on the question of the validity of the notice. It was held that notice for reassessment will be valid only if service of notice has been effected on the assessee prior to 1970 and authorities below have found that service had not been effected on the assessee within that period.

In view of above, the question referred is answered against the revenue and in favour of the assessee. ( ADARSH KUMAR GOEL ) JUDGE November 14, 2006 ( RAJESH BINDAL ) ashwani JUDGE Pag e

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