OLLUKKARA SERVICE CO-OPERATIVE BANK LIMITED vs. THE INCOME TAX OFFICER

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL THURSDAY, THE 13TH DAY OF FEBRUARY 2020 / 24TH MAGHA, 1941 WP(C).No.1020 OF 2020(B) PETITIONER: OLLUKKARA SERVICE CO-OPERATIVE BANK LIMITED NO. 544, REPRESENTED BY ITS SECRETARY, MANNUTHY P.O, THRISSUR DISTRICT, KERALA, PIN 680 561 BY ADVS. SRI.C.A.JOJO SRI.MATHEWS JOSEPH RESPONDENTS: 1 THE INCOME TAX OFFICER WARD 2(3),AYAKAR BHAVAN, SHAKTHAN STAND, THRISSUR 680 001 2 THE PRINCIPAL COMMISSIONER, AYAKAR BHAVAN, SAKTHAN STAND, THRISSUR 680 001 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.02.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.1020 OF 2020(B) 2 JUDGMENT Dated this the 13th day of February 2020 The petitioner in this writ petition has approached this Court challenging Ext.P1 notice dated 29.3.2019 issued under Section 148 of the Income Tax Act, 1961 calling upon the assessee to give the reasons on account of having escaped notice of the assessment for the year 2012-2013. Petitioner stated to have received the notice on 1.4.2019 and he filed Ext.P4 objection calling upon the officer to supply the copy of Ext.P3 which was supplied by Ext.P5. Again the petitioner submitted a request by Ext.P6. The assessing officer dealt with all the objections filed and gave answers particularly on the point of approval of the competent authority. 2. The learned counsel appearing on behalf of the petitioner submits that the entire exercise resulted into WP(C).No.1020 OF 2020(B) 3 passing of Ext.P8 assessment order dated 24.12.2019. The notice exercised beyond the period of limitation as six years for the assessement year 2012-2013 expired on 31.3.2019, whereas the notice received on 1.4.2019. The approval of competent authority, the Income Tax Officer did not have the alleged approval dated 6.11.2019 was from technical office. In such circumstances the writ would definitely lie were the notice lacked reason as to how and in what manner provisions of Section 148 were invoked. 3. Per contra, the learned counsel for the Income Tax Department submits that it is now settled law that where the notice has been issued within the period of limitation even if it is received post expiry, it would not be termed to be beyond limitation. In support of aforementioned contention, reliance has been placed on judgment of Honourable Supreme Court in R.K.Upadhya v. Shanabhat P.Patel [1987 ITR 163]. It is further contended that Ext.P7 has met out all the objections WP(C).No.1020 OF 2020(B) 4 raised by the petitioner including the supply of the approval authorising the officer to initiate proceedings under Section 148 of the Act and request this Court for dismissal of the writ petition. 4. Having heard the learned counsel for the parties and perused the documents, there is no merits on the submission of the learned counsel for the petitioner as in the absence of challenge of assessment order dated 24.12.2019, the notice issued under Section 148 of the Act, become consequential as remedy was to assail the order of assessment in appeal. This Court cannot remain unmindful of the fact that the present writ petition has been filed on 14.1.2020, post passing of the assessment orders. As regards, the contention of non supply of the approval, the same has duly been met as reflected in Ext.P7. The relevant portion of the objection and answer reads thus:- “5. We were not supplied with a copy of the approval WP(C).No.1020 OF 2020(B) 5 of competent authority to issue notice u/s 148 of the Income-tax Act, 1961 The assessee has been provided with the copy of the approval of competent authority both through e- proceedings and through registered post along with the letter dated 06/11/2019. Therefore the objection raised on this ground is also incorrect and therefore overruled.” 5. As regards the question of limitation of law of the purpose of computing the limitation would be the date of the issuance of notice and not from the date of receipt. Relevant paragraph of the judgment in R.K.Upadhya (Supra) reads as follows :- “Section 34, conferred jurisdiction on the Income-tax Officer to reopen an assessment subject to service of notice within the prescribed period. Therefore, service of notice within limitation was the foundation of jurisdiction. The same view has been taken by this court in Jani v.Induprasad Devshankar Bhatt[1969]72ITR 595 as also in CIT v. Robert [1963] WP(C).No.1020 OF 2020(B) 6 48 ITR 177 (SC). The High Court, in our opinion, went wrong in relying upon the ratio of Banarsi Debi v. ITO [1964] 53 ITR 100, in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections, being sections 147, 148 and 149, in the 1961 Act. A clear distinction has been made out between “issue of notice” and “service of notice” under the 1961 Act. Section 149 prescribes the period of limitation. It categorically prescribes that no notice under section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction on the WP(C).No.1020 OF 2020(B) 7 Income-tax Officer to deal with the matter but it is a condition precedent to the making of the order of assessment. The Hight Court, in our opinion, lost sight of the distinction and under a wrong basis felt bound by the judgment in Banarsi Debi v. ITO [1964] 53 ITR 100. As the Income-tax Officer had issued notice within limitation, the appeal is allowed and the order of the High Court is vacated. The Income-tax Officer shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs.” For the reason aforementioned, the writ petition is devoid of merits and accordingly dismissed. SD/- AMIT RAWAL JUDGE ACM/14.2.2020 WP(C).No.1020 OF 2020(B) 8 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE COPY OF THE NOTICE U/S. 148 DATED 29-03-2019 ISSUED BY THE 1ST RESPONDENT EXHIBIT P2 A TRUE COPY OF THE ACKNOWLEDGEMENT COPY OF TAX RETURN FOR AY 2012-13 EXHIBIT P3 A TRUE COPY OF THE LETTER SUBMITTED TO THE 1ST RESPONDENT DATED 02-11-2019 EXHIBIT P4 A TRUE COPY OF THE REPLY NOTICE DATED 06-11-2019 ISSUED BY THE 1ST RESPONDENT EXHIBIT P5 A TRUE COPY OF THE LETTER OF INTIMATION DATED 29-03-2019 ISSUED BY AN INCOME TAX OFFICER. EXHIBIT P6 A TRUE COPY OF THE LETTER DATED 12-11- 2019 SUBMITTED BY PETITIONER TO THE 1ST RESPONDENT EXHIBIT P7 A TRUE COPY OF THE ORDER DATED 24-12- 2019 ISSUED BY THE 1ST RESP[ONDENT EXHIBIT P8