RAJESH BHATIA,JAIPUR vs. ITO, JAIPUR

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur

tax liability of an assessee. He has also relied upon the decision of the Jodhpur Bench of the Tribunal dated 14.01.2009 in case of Sharwan Beniwal Vs. Income Tax Officer in ITA No. 292/JU/2008 and submitted that the Tribunal has held that it can admit additional ground of appeal at this stage in case the issue raised is legal and goes to the rood of the matter. He has also relied upon the decision of Hon’ble kerala High Court in case of CIT Vs. State Co-operative Marketing Federation 193 ITR 624 as well as the decision of Mumbai Special Bench in case of Mahindra & Mahindra Ltd. Vs. D.CIT 122 TTJ 577 and submitted that there can be no embargo on any party to raised a legal ground for the first time before the Tribunal provided the relevant material for deciding that question already exists on record and no further investigation of facts is required. Hence, the ld. AR has submitted that the additional ground raised by the assessee by the admitted for adjudication on merits. 4. On the other hand, the ld. DR has vehemently objected to the admission of the additional ground and submitted that when the assessee has failed to explain as to why the assessee did not raise this ground before the authority below then it is not open to the assessee raised a new/fresh ground at this stage. 5. We have considered the rival submissions as well as relevant material on record on the point of admission the additional ground. There is no dispute that the issue raised in the additional ground by the assessee is purely legal in nature and it also does not require any verification or investigation of new facts but this legal issue can be adjudicated on the basis of the facts and information available on record. The assessee though challenged the validity of the opening 3

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur

before the ld. CIT(A) however, this particular plea/ contention was not raised by the assessee before the ld. CIT(A). Therefore the issue validity of reopening is not a fresh or new ground by the assessee at this stage but only an additional plea has been raised by the assessee in support of its objection against the valid of notice issued u/s 148. There is no dispute that the AO reopen the assessment by issuing notice u/s 148 on 17.08.2012 whereas the time for issuing notice u/s 143(2) was available with the AO upto 30.09.2012. Once these two facts are not in dispute then the additional ground raised by the assessee questioning the validity of notice u/s 148 can be raised before the Tribunal as it goes to the root of the matter and the validity of jurisdiction of the AO to reopen the assessment. Therefore, in view of the facts and circumstances of the case where the issue raised in the additional ground is purely legal in nature and does not require any investigation of new facts for its adjudication then, there is no impediment on the assessee to raise a legal ground for the first time before the Tribunal. Accordingly, by following the decision of Hon’ble Supreme Court in case of National Thermal Power Corporation Ltd. Vs. CIT (supra) as well as the decision of Mumbai Special Bench of the Tribunal in case of Mahindra & Mahindra Ltd. Vs. DCIT (supra) we admit the additional ground raised by the assessee for adjudication. 6. On the merits of the additional ground, the ld. AR of the assessee has submitted that since the time to issue notice u/s 143(2) was still available to the AO then the notice issued u/s 148 is not valid as held by the Hon’ble Jurisdictional High Court in case of Sh. Loku Ram Malik vs CIT dated 03.05.2017 in ITA No. 142/2006. He has also relied upon the decision of Hon’ble Madras High Court in case of CIT Vs. TCP Ltd. 4

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur

323 ITR 346 and submitted that the Hon’ble High Court has held that unless the return of income already filed is disposed of, notice for reassessment u/s 148 cannot be issued. Therefore no reassessment proceedings can be initiated so long as assessment proceeding pending on the basis of the return already filed are not terminated. He has also relied upon the decision of Hon’ble Supreme Court in case of Trustees of H.E.H. the Nizam’ Supplemental Family Trust vs. CIT 159 CTR 114. The ld AR has also referred to the Third Member decision of Chennai Bench in case of Super Spinning Mills Ltd. Vs. ACIT 38 SOT 14/ 3 ITR (Trib.) 258. Thus the ld. AR has submitted that the reopening is not sustainable in law when the Assessee officer has not terminated the assessment proceedings as time to issue notice u/s 143(2) was available upto 30.09.2011. 7. On the other hand, the ld. DR has submitted that that notice for scrutiny is no bar for notice of reassessment but the notice for reopening can be issued notice u/s 148 during the period when the Assessing Officer could have issued a scrutiny notice u/s 143(2). The DR has relied upon the decision of Hon’ble Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. vs. DCIT 345 ITR 228 and submitted that the Hon’ble High Court observed that for issuing notice u/s 143(2) the AO is not required to record reasons to believe that income assessable to tax has escaped assessment and the power of the Assessing Officer to take up the return for scrutiny is much wider and the jurisdictional pre conditions stipulated u/s 147 are not required to be satisfied. Thus, there is no embargo for issuing notice u/s 148 even when the time was available for notice u/s 143(2). The ld. DR has also relied upon the decision of Hon’ble Allahabad High Court in case of CIT 5

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur

vs. Jora Singh 262 215 Taxman 424 and submitted that the Hon’ble High Court has held that there is nothing in the plain language of section 143 which may suggest that the recourse to section 147 can be had only when the period of limitation to complete assessment proceeding has expired or the Assessing officer should wait for the expiry of the said period. The ambit and scope of reassessment proceeding is limited and restricted and if the Assessing Officer is in its wisdom proceeds to assess the income with the help of limited power, it does not lie in the mouth of the assessee to say that the Assessing Officer should have exercised wider jurisdiction under regular assessment proceeding. Thus the ld. DR has contended that when the AO has chosen to assess the income with limited power u/s 147 as against u/s 143(3) then the notice issued u/s 148 cannot be held as invalid. 8. We have considered the rival submissions as well as relevant material on record. The undisputed facts relevant to issue raised in the additional ground are that the assessee filed return of income on 27.09.2010 which was processed u/s 143(1) on 07.12.2010. Thereafter, the assessee filed revised return of income on 10.09.2011 which was also processed u/s 143(1) on 30.11.2011. The time available for issuing notice u/s 143(2) on the revised return filed by the assessee is upto 30.09.2012 however, AO issued notice u/s 148 on 17.08.2012. Thus, it is cleare that the notice issue u/s 148 on 17.08.2012 was prior to the expiry of the time period available to the AO for issuing notice u/s 143(2) on 30.09.2012. 9 There is no quarrel on the point that the jurisdiction of the AO to assess the income u/s 147 is limited and circumstantial in comparison to 6

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur

the jurisdiction under scrutiny assessment u/s 143(3). Therefore, preferring the proceeding for assessment or reassessment u/s 147 by the AO instead of the scrutiny assessment u/s 143(3) would not be prejudicial to the interest of the assessee. The Assessing Officer has issued notice u/s 148 instead of issuing notice u/s 143(2) when the time was till available for issuing notice u/s 143(2). But this has not caused any prejudice to the interest of the assessee however, as per view taken by some of the High Courts the proceedings u/s 147 cannot be initiated prior to the termination of assessment pending before the AO. We find that there are divergent views of different High Courts on this issue. The Hon’ble Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. vs. DCIT (supra) as well as in case of MTNA Vs. CBDT 246 ITR 172 has taken a view that the AO can initiate reassessment action even when he has not exercised the option to the scrutiny notice u/s 143(2). A similar view taken by the Hon’ble Allahabad High Court in case of CIT vs. Jora Singh (supra). However, the Hon’ble Madras High Court in case of CIT Vs. TCP Ltd. (supra) has taken a different view and held that while assessment proceedings remain in inchoate are main in no fresh evidence or material could possibly unearth. if any such material or evidence available there is no restriction or restrain on its being taken into consideration by the AO for framing the regular assessment. It is not permissible under the law that the AO can also travel the path of section 147 to enlarge the time available for framing assessment. The Hon’ble Jurisdictional High Court has also taken a view that if the time is available for issuing the notice u/s 143(2) then the ingredient for issuing notice u/s 148 are not fulfill. Thus where there are divergent views of different High Courts on the same issue the decision of the 7

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur

jurisdictional High Court is binding on this tribunal. Accordingly, we are bound by the precedent of the jurisdictional High in case of Shri Loku Ram Malik Vs. CIT (supra), wherein the Hon’ble High Court after considering the various decisions on this point has held in paras 10, 10.1 to 10.4 as under:- “10 We have heard counsel for the parties. 10.1 Before proceeding with the matter, it will not be out of place to mention that order u/s 143 was confirmed on 11.08.2000 when the return was filed and the notice which is impugned u/s 148 came to be issued before the assessment could have been done. 10.2 The contention of the assessee that in the notice which has been issued u/s 148, ingredients u/s 148 are not fulfilled, in our considered opinion, when order u/s 143 is passed, the observations which are made in the case of Rajesh Jhaveri (supra) in paras No. 11,12 &13 as reproduced hereinabove would apply. 10.3 The contention raised by the counsel for the appellant is required to be accepted in view of the observations made by the Delhi High Court in KLM Royal Dutch Airlines (supra). 10.4 In that view of the matter, we are of the opinion that the Tribunal has seriously committed an error in upholding the notice u/s 148 when the Officer has regularly framed assessment. The view taken by the CIT(A) is required to be accepted. Therefore, the issue is answered in favour of the assessee and against the department.”

Following the decision of Hon’ble jurisdictional High Court we hold that the notice issued u/s 148 on 17.08.2012 when the time was available to the AO for issuing notice u/s 143(2) then the initiation of reopening u/s 148 is not valid and the same is liable to be quashed. Hence, reopening u/s 148 is quashed being not valid. Since the notice issued u/s 148 is 8

ITA No. 551/JP/2014 Sh. Rajesh Bhatia v. ITO, Jaipur quashed as invalid, therefore, the other ground raised by the assessee become in-fructuous. In the result, the assessee’s appeal is allowed. Order pronounced in the open court on 08/11/2017 Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 08/11/2017. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Sh. Rajesh Bhatia, A-84, Atre Path, Shyam Nagar,Jaipur. 2. izR;FkhZ@ The Respondent- ITO Ward 2(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 551/JP/2014} vkns'kkuqlkj@ By order,

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