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Facts
The Assessee's appeals were against orders of the CIT(A) which confirmed the reopening of assessment for AY 2012-13. The reopening was based on cash and cheque deposits in the bank account and interest earned, as well as the purchase of immovable property. The Assessee argued that a second reopening notice was issued while the first one was still pending.
Held
The Tribunal held that a second notice for reopening under Section 148 of the Act cannot be issued if assessment proceedings from a prior reopening notice for the same assessment year are still pending and have not been terminated. For ITA No. 282/Chd/2023, the Tribunal noted that the reasons for reopening did not specify escapement of income.
Key Issues
Whether a second reopening notice under Section 148 is valid when the first reopening proceeding for the same assessment year is pending. Whether the reasons recorded for reopening sufficiently indicate escapement of income.
Sections Cited
147, 148, 144, 143(2), 143(3), 139(4), 120, 142(1), 69, 237, 249, 139
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आदेश/Order PER BENCH:
These two appeals by Assessee are against the different orders of Commissioner of Income Tax (Appeals), NFAC, Delhi for the same A.Y. i.e. 2012-13 vide appeal Nos. 10864/2015-16/IT/CIT(A)-5/Ldh/2020- 21 and 10871/2016-17/IT/CIT(A)-5/Ldh/2020-21 orders of even date i.e., 28.03.2023. Assessments were framed for the assessment year i.e. 2012-1312 by DCIT, ITO (OSD) Mohali u/s 144 r.w.s. 147 of the 282 & 334-Chd-2023 – Satnam Singh, Mohali 2 Income Tax Act, 1961 (herein referred to as 'the Act') vide orders of even date 25.11.2019.
2. At the outset, ld. Counsel for the Assessee first of challenge the reopening of the assessment in both the appeals. The ld. Counsel for the Assessee stated the facts that in Appeal No. 282/Chd/2023, the assessment was framed by the Income Tax Officer, Ward 6 (4), Mohali by order dated 25.11.2019 passed u/s 144 r.w.s. 147 of the Income Tax Act, 1961 for the reason that the Assessee has deposited cash and cheque for an amount of Rs. 1,55,05,595/- in his bank account No. 21900110000588 maintained with UCO bank and also earned bank interest of Rs. 1,54,895/- during the relevant F.Y. 2011-12 relevant to this A.Y. 2012-13. The A.O. verified from the ITBA that the Assessee has filed return of income for the A.Y. 2012-13 by declaring an income of Rs. 4,65,646/- under the head income from house property, capital gains and income from other sources. According to the Assessing Officer the sources of deposits i.e. by way of cash and cheque amounting to Rs. 1,55,05,595/- remained unexplained and accordingly proceedings u/s 147 of the Act were initiated by issuing notice u/s 148 of the Act. Consequent to the above reasons, notice u/s 148 was issued on dated 30.3.2019. Assessee’s case was transferred by ITO Ward 6 (4), Mohali to the office of ITO (OSD) Mohali in compliance to the order passed u/s 120 of the Act by PCIT-2, 282 & 334-Chd-2023 – Satnam Singh, Mohali 3 Chandigarh vide letter F. No. PCIT/2/CHD/EB/Rationalisation/ 2019-20/1787 dated 20/22.08.2019. Accordingly, notices u/s 142(1) were issued to the Assessee and assessment proceedings were started. As there was no compliance from the Assessee, Assessing Officer added the amount of Rs. 1,55,05,595/- being unexplained cash deposit and unexplained cheque deposit in his bank account maintained with UCO bank. The Assessing Officer also added the interest earned on this bank account of Rs. 1,54,895/- by treating the same as ‘income from other sources’. Accordingly, assessment was framed. Aggrieved, Assessee preferred appeal before the CIT(A) .
The CIT(A) simplicitor confirmed the action of the Assessing 3. Officer as there was no compliance by the Assessee despite opportunities given by CIT(A). Aggrieved, the Assessee came in appeal before the Tribunal.
Similarly, the ITO, Ward 6(4), Mohali issued another notice u/s 148 of the Act dated 30.8.2019 for the reason that as per information available the Assessee is a non-filer and the Assessee during F.Y. 2011-12 relevant to assessment year 2012-13 purchased one immovable property for a sum of Rs. 90.80 lacs. Since Assessee has not filed any return of income for the year under consideration, the A.O. initiated proceedings u/s 147 of the Act and after recording these 282 & 334-Chd-2023 – Satnam Singh, Mohali 4 reasons, he reopened the assessment by issuing notice u/s 148 of the Act dated 30.08.2019. Assessment was accordingly completed and addition of purchase consideration of immovable property at Rs. 90.80 lacs was added to the total income of the Assessee. Aggrieved, with this assessment order also, the Assessee filed appeal before CIT(A). The CIT(A) also confirmed the action of the A.O. as there was no compliance of various notices issued by the ld. CIT(A) and confirmed the action of the A.O. in assessing this total income at Rs. 90.80 lacs u/s 69 as unexplained investment. Aggrieved, the Assessee is in Tribunal before us.
Now before us, ld. Counsel for the Assessee made first submission in regard to the second notice issued u/s 148 i.e. dated 30.8.2019 that already assessment proceedings were continued in consequent to notice u/s 148 of the Act dated 30.3.2019 and this assessment was completed vide assessment order passed u/s 144 read with section 147 of the Act dated 25.11.2019. The ld. Counsel for the Assessee stated once one live proceeding is pending for any relevant assessment year in consequent to reopening notice u/s 148 of the Act, a second reopening notice till that valid assessment is pending cannot be issued. This is invalid and illegal. For this, the ld. Counsel for the Assessee relied on the decision of the Hon'ble Madras 282 & 334-Chd-2023 – Satnam Singh, Mohali 5 High Court in the case of ‘CIT vs. KM Pachayappan’ [2008] 304 ITR 264 (Mad.) wherein, the Hon'ble High Court held as under:- “Heard the counsel. In this case, Return of income was filed under Section 139(4) of the Act on 15.03.2000 and notice under Section 143(2) for framing assessment under Section 143(3) could have been issued upto 31.03.2000. Therefore, a valid Return of income was pending as on 15.03.2000. The Assessing Officer issued notice under Section 148 on 15.03.2000 when a valid Return under Section 139(4) was pending. In this case the Return was filed and the same is pending, which means that the proceeding is still pending. In such a situation, the Revenue could not have issued notice for the purpose of reopening under Section 147 of the Act. In the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust Vs. Commissioner of Income-tax [2000] 242 ITR 381 (SC), the Supreme Court considered the scope of reopening the assessment and held as follows:
It is settled law that unless the return of income already filed is disposed of, notice for reassessment under section 148 cannot be issued, i.e., no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated. According to the Revenue it is immaterial whether the order is communicated or not and the only bar to the reassessment proceedings is that proceedings on the return already filed should have been terminated.
282 & 334-Chd-2023 – Satnam Singh, Mohali 6 “A mere glance at this note would show that it could not be said that the Income-tax Officer gave finality to the refund since no refund is granted either in the hands of the trust or in the hands of the beneficiaries. It is an inconclusive note where the Income-tax Officer left the matter at the stage of consideration even with regard to refund in the hands of the beneficiaries. This note was also not communicated to the trustees. When we examine the note dated November 10, 1965, on the file of 1963-64 nothing flows from that as well. In any case if it is an order, it would be appealable under section 249 of the Act. Since the period of limitation starts from the date of intimation of such an order, it is imperative that such an order be communicated to the assessee. Had the Income-tax Officer passed any final order, it would have been communicated to the assessee within a reasonable period. In any case, what we find is that the note dated November 10, 1965, is merely an internal endorsement on the file without there being an indication if the refund application has been finally rejected. By merely recording that in his opinion, no credit for tax deducted at source is to be allowed, the Income-tax Officer cannot be said to have closed the proceedings finally. The decisions referred to by the Revenue are of no help in the present case. We are, thus, of the opinion that during the pendency of the return filed under section 139 of the Act along with the refund application under section 237 of the Act, action could not have been taken under section 147/148 of the Act. Our answer to the question, therefore, is in the negative, i.e., against the Revenue."
In the case of KLM Royal Dutch Airlines Vs. Assistant Director of Income-tax’ [2007] 292 ITR 49 (Delhi), the Delhi High Court, following the above Supreme Court judgment, considered the scope of provision of Sections 139 and 147 of the Act and held as follows:
282 & 334-Chd-2023 – Satnam Singh, Mohali 7 "Applying this line of decisions to the facts of the present case, the inescapable conclusion that would have to be reached is that while assessment proceedings remain inchoate, no "fresh evidence or material" could possibly be unearthed. If any such material or evidence is available, there would be no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not been opened under section 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147, provided fresh material had been received by the Assessing Officer after the expiry of limitation fixed for framing the original assessment. So far as the present case is concerned, we are of the view that it is evident that, faced with severe paucity of time, the Assessing Officer had attempted to travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law."
Applying the principles enunciated in the judgments of the Supreme Court as well as the Delhi High Court, cited supra, the Tribunal is right in coming to a conclusion that no action could be initiated under Section 147 of the Act, when there is a pendency of the Return before the Assessing Officer. The reasons given by the Tribunal are based on valid materials and evidence and we do not find any error or illegality in the order of the Tribunal so as to warrant interference.”
The ld. Counsel for the Assessee also relied on another decision of the Hon’ble Madras High Court in the case of ‘CIT vs Qatalys 282 & 334-Chd-2023 – Satnam Singh, Mohali 8 Software Technologies Ltd.’, [2009] 308 ITR 249 (Mad.), wherein the Hon'ble High Court held as under:- “…The revenue, aggrieved over that portion of the order, filed the present appeal by formulating the following questions of law:-
"1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that reassessment proceedings are not valid since the assessing officer is barred in initiating the proceedings under section 148 when the time for issuance of notice under section 143(2) had not expired?
Whether in the facts and circumstances of the case, the Tribunal was right in holding that the appeal by the revenue is infructuous?".
We have heard the argument of the learned counsel for the revenue, who submitted that the issue has already been decided against the revenue by the above cited Judgement of the Division Bench of this Court.
We have also perused the above referred Judgment of the Division Bench of this Court dated 4.7.2007, wherein it is held as follows:-
Applying the principles enunciated in the judgments of the Supreme Court as well as the Delhi High Court, cited supra, the Tribunal is right in coming to a conclusion that no action could be initiated under section 147 of the Act, when there is a pendency of the Return before the Assessing Officer. The reasons given by the Tribunal are based on valid materials and evidence and we do not find any error or illegality in the order of the Tribunal so as to warrant interference 282 & 334-Chd-2023 – Satnam Singh, Mohali 9 Following the said decision, these appeals are dismissed. Consequently, connected miscellaneous petition is also dismissed.”
In view of the above, the second notice issued dated 30.8.2009 u/s 148 of the Act will not survive and hence quashed. Hence, of the Assessee’s appeal is allowed on jurisdictional issue as we have quashed reopening notice u/s 148 of the Act. the ld. Counsel for the 8. Assessee before us submitted that the reasoning recorded are only that there is a cash deposit and cheque credit for an amount of Rs. 1,55,05,595/- in his bank account maintained with UCO bank and therefrom bank interest of Rs. 1,54,895/-. The Department was having this information. There is no whisper in the reasons recorded that there is any escapement of income. There is no basis given how this cash deposit and cheque credited to Assessee’s bank account for Rs. 1,55,05,595/- is income of the Assessee. Hence, once the reasons does not specify or does not hold that cash deposit and cheque credited are in the nature of income, reopening cannot be sustained. Hence, we quash the reopening and allow this issue of the Assessee’s appeal accordingly.
This appeal of the Assessee is allowed on jurisdictional issue.
282 & 334-Chd-2023 – Satnam Singh, Mohali 10 10. In the result, both the appeals of the Assessee are allowed. Order pronounced on 15. 01.2025