ASSISTANT COMMISSIONER OF INCOME-TAX vs. KAKADE INFRASTRUCTURE PVT. LTD., PUNE

आदेश / ORDER

PER VIKAS AWASTHY, JM

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-12, Pune dated 30.03.2015 for the assessment year 2010-11.

2 ITA No.854/PUN/2015 A.Y.2010-11

assessee-company is a promoter, builder and infrastructure developer. The

assessee filed return of income for the impugned assessment year on

15.10.2010 declaring total income of Rs.8,69,03,293/-. The case of the

assessee was selected for scrutiny under CASS. Accordingly, statutory

notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as

‘the Act’) was issued to the assessee on 29.08.2011. Statement of Shri

Sanjay Kakade, Director of assessee-company was recorded u/s.131 of the

Act on 21.01.2011 i.e. prior to the filing of the return of income wherein he

admitted that purchases to the tune of Rs.3,46,00,000/- pertaining to the

year were not genuine. He agreed to pay tax on bogus purchases. However,

while filing return of income u/s.139(1) of the Act, the assessee did not

honour his declaration. During pendency of scrutiny assessment

proceedings, the Assessing Officer issued notice u/s.148 of the Act to the

assessee on 02.03.2012 after recording reasons for reopening. In response

to the notice u/s.148 of the Act, the assessee filed return of income on

10.01.2013 declaring income of Rs.12,32,71,031/-. Thereafter, Assessing

Officer finalized the assessment by making further addition of

Rs.48,89,61,225/-on account of non genuine purchases, unproved

purchases and negative cash. The Assessing Officer passed assessment

order dated 28.03.2013 u/s. 143(3) r.w.s. 148 of the Act.

Commissioner of Income Tax (Appeals) challenging additions on merits and

validity of the notice issued u/s.148 of the Act. The Commissioner of Income

Tax (Appeals) after examining facts of the case and various decisions held

that notice issued u/s.148 of the Act during pendency of scrutiny

assessment proceedings is void ab-initio and illegal. Consequently, the

3 ITA No.854/PUN/2015 A.Y.2010-11

assessment order passed u/s.143(3) r.w.s. 148 of the Act was quashed by

the Commissioner of Income Tax (Appeals).

Revenue is in appeal before the Tribunal. The Revenue in appeal has raised

following grounds assailing the findings of Commissioner of Income Tax

(Appeals) :

“1. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the AO framed reassessment order whereas the order passed by the AO is to be treated as passed u/s.143(3) of the IT Act, as original assessment proceedings subsist, even if the subsequently initiated reassessment proceedings are held to be void. The Ld. CIT(A) did not give any finding regarding the invalidity of the original assessment proceedings .Therefore, he erred in quashing the order framed by the AO. 2. The Ld. CIT(A) failed to appreciate that in none of the judgement cited by the Ld. CIT(A), it has been held that the original assessment proceedings will become invalid or void, even if subsequently initiated proceedings are held to be bad in law. 3. Without prejudice to the above, the Ld. CIT(A) failed to appreciate that it was incumbent on the AO to complete the assessment proceeding by considering all the material available with him including the enhanced income declared by the assessee in the returns filed subsequently. 4. Without prejudice to the above, the Ld. CIT(A) erred in quashing the assessment order by relying upon certain case laws even though the facts of such judgments being relied upon were different from the facts of the instant case and hence their ratio is not applicable to the instant case. 5. The order of Ld. CIT(A) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves leave to add, alter, amend, and modify any of the above grounds of appeal.”

though in the title of assessment order dated 28.03.2013, it is mentioned

that the order has been passed u/s.143(3) r.w.s. 148 of the Act, the order is

, in fact, passed u/s. 143(3) of the Act. The ld. DR admitted that notice

u/s.148 of the Act was issued to the assessee during pendency of scrutiny

4 ITA No.854/PUN/2015 A.Y.2010-11

assessment proceedings, however, the ld. DR vehemently asserted that

assessment order dated 28.03.2013 is arising out of scrutiny assessment

and not re-assessment proceedings. Merely, for the reason that in the title of

assessment order reference of section 148 would not invalidate the

assessment order. Mentioning of the wrong section in the title of the

assessment order is not fatal error. The mistake is rectifiable. The ld. DR

pointed that Shri Sanjay Kakade, Director of assessee-company in his

statement recorded u/s. 131 of the Act on 21.01.2011 admitted bogus

purchases to the tune of Rs.3,46,00,000/-. However, while filing return of

income, assessee did not mention bogus purchases. During assessment

proceedings, assessee filed fresh computation declaring bogus purchases in

returned income. Therefore, the Assessing Officer while computing total

income has mentioned the amount of returned income as Rs.12,32,71,031/-

which includes the amount declared in the return of income filed u/s.139(1)

of the Act plus the amount declared in the statement recorded u/s. 131 of

the Act on 21.01.2011. The ld. DR contended that the Assessing Officer

rightly included the additional income offered by the assessee in his

statement as part of returned income. To support his submissions, the ld.

DR placed reliance on following decisions:

i) Smt. Daxaben Kiritbhai Vs. Income Tax Officer, in ITA No.462/Ahd/2006 for assessment year 2002-03 decided on 31.03.2011. ii) Dr. Pratap Singh Vs. Director of Enforcement, reported in 155 ITR 166 (SC) iii) Pooran Mal Vs. Director of Inspection, reported in 93 ITR 505 (SC)

vehemently defended the order of Commissioner of Income Tax (Appeals).

The ld. AR submitted that it is an undisputed fact that notice u/s. 148 of

the Act was issued to the assessee during pendency of scrutiny assessment

5 ITA No.854/PUN/2015 A.Y.2010-11

proceedings. It is well a settled law that when assessment proceedings are

pending the notice issued u/s. 148 of the Act, for initiation of re-assessment

proceedings is invalid. In support of his submissions, the ld. AR placed

reliance on the following decisions.

i) Trustees of H.E.H the Nizam’s Supplement Family Trust Vs. CIT, reported as 242 ITR 381 (SC) ii) Ador Technopack Ltd. Vs. Dr.Zakir Hussein, Deputy Commissioner of Income Tax & Ors., reported as 271 ITR 50 ( Bombay).

6.1 The ld. AR pointed that assessment order dated 28.03.2013 was

passed in consequence of notice u/s. 148 of the Act. This fact is evident

from the computation of total income wherein the Assessing Officer

specifically mentioned “Income as per return of income filed on 10.01.2013:

Rs.12,32,71,031/-”. The assessee had declared the same amount in return

of income filed on 10.01.2013 in response to notice issued u/s.148 of the

Act. Hence, stand of the Department that in the title of the assessment

order section 148 has been wrongly mentioned holds no water. The

Assessing Officer while passing assessment order dated 28.03.2013 was

fully aware and conscious to the fact that the order is being framed in

consequence to notice u/s.148 of the Act. Therefore, in the title of the order,

he categorically mentioned that the order is passed u/s.143(3) r.w.s. 148 of

the Income Tax Act, 1961 and while computing total income, he starts with

“Income as per return of income filed on 10.01.2013.”

6.2. The ld. AR submitted that in view of the ratio laid down by the Hon'ble

Supreme Court of India, the Commissioner of Income Tax (Appeals) has

rightly quashed the assessment order and has held notice u/s. 148 to be

invalid and void ab-initio. The ld. AR further pointed that after having

realized the mistake, the Assessing Officer passed another assessment order

6 ITA No.854/PUN/2015 A.Y.2010-11

u/s.143(3) r.w.s. 147 on 22.12.2017 on the basis of same notice dated

02.03.2012 issued u/s.148 of the Act and return of income filed by assessee

in response to the said notice on 10.01.2013.

and have perused the orders of Authorities below. We have also considered

various decisions on which the ld. AR had placed reliance. It is an

undisputed fact that reassessment proceedings were initiated by the

Assessing Officer against the assessee during pendency of scrutiny

assessment proceedings. For the sake of clarity, dates and events are

reproduced herein below:

Dates Events

15.10.2010 Return of income filed by assessee u/s. 139(1) of the Act of Rs.8,69,03,293/- 29.08.2011 Notice u/s. 143(2) issued by the Assessing Officer. 02.03.2012 Notice u/s. 148 of the Act issued by the Assessing Officer. 10.01.2013 The assessee filed return of income in response to the notice u/s. 148 of the Act declaring total income of Rs.12,32,71,031/- 28.03.2013 Assessment order u/s. 143(3) r.w.s. 148 of the Act passed by the Assessing Officer.

A perusal of the list of dates and events clearly shows that the

Assessing Officer initiated re-assessment proceedings when scrutiny

assessment proceedings were still pending. If the Assessing Officer was of

the view that the assessee has failed to disclose any income in the return of

income, he could have made addition of the same in scrutiny assessment

proceedings itself rather than issuing notice u/s.148 of the Act. The

submissions of the ld. DR that assessment order is passed under section

143 (3) of the Act and section 148 has been wrongly mentioned in the title of

7 ITA No.854/PUN/2015 A.Y.2010-11

the order is without merit. The computation of income by Assessing Officer

in assessment order clearly indicates that the assessment has been framed

on the return of income filed by the assessee in response to the notice

issued u/s.148 of the Act. The plea of the Revenue in ground No. 1 of appeal

to treat the assessment order as passed u/s.143(3) is an attempt to cover

up the folly of Assessing Officer in initiating reassessment proceedings

during the subsistence of assessment proceedings. The ground No. 1 of

appeal lacks merit.

the Nizam’s Supplement Family Trust Vs. CIT (supra.) has held:

“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.”

Vs. Dr.Zakir Hussein, Deputy Commissioner of Income Tax & Ors (supra.)

has held as under:

“Turning to the facts of the present case on hand, when the order of assessment, though in part was set aside and the finding that the underassessment was required to be enquired into and reassessment is required to be done has become final and conclusive, the question of entertaining reasonable belief that the income chargeable to tax has escaped assessment, in our considered opinion, does not arise much less when the assessment proceedings are still pending. Thus, it is not open for the Assessing Officer to invoke powers under sections 147 and 148 of the Act. In others words, so long as the assessment proceedings in respect of certain income subsist, the income cannot be said to have escaped assessment. Such proceedings, if initiated, will have to be held as invalid, ab-initio void and illegal. It is thus, clear that the concept of reason to believe comes in the picture if the income chargeable to tax has escaped assessment. So long as the assessment is pending, the assessing authority cannot have any such reason to believe that income chargeable to tax for the assessment year in question has escaped assessment. Income cannot be said to have escaped assessment within the meaning of this section

8 ITA No.854/PUN/2015 A.Y.2010-11

if the assessment proceedings in respect of that income and /or issue are still pending and have not yet culminated in a final order. This question came up for consideration before the Supreme Court in the case of Ghanshyamdas Vs. Regional Assistant CST [1964] 51 ITR 557. Relying on the decision of Calcutta High Court in the case of Lachhiram Basantlal, In re [1931] ILR 58 Cal.909; AIR 1931 Cal 545 and of the Judicial Committee in Sir Rajendranath Mukherjee Vs. CIT [1934] 2 ITR 71 (PC), it was laid down that if assessment proceedings have been initiated, income cannot be said to have escaped assessment until a final order of assessment is passed on the pending proceedings. Income cannot be said to have escaped assessment when the assessment proceedings are still pending.”

[ Emphasized by us]

above, we find no infirmity in the order of Commissioner of Income Tax

(Appeals) in holding notice issued u/s.148 to be invalid. Hence, we uphold

the findings of Commissioner of Income Tax (Appeals) in quashing the

assessment order. Accordingly, grounds raised by the Revenue in appeal are

dismissed being devoid of merit.

reliance, however, we find that all the decisions are distinguishable and has

no relevance to the core issue before us. Hence, the decisions cited by the

ld. DR would not support the case of Revenue in any manner.

Order pronounced on Wednesday, the 20th day of June, 2018

Sd/- Sd/- (अ�नल चतुव�द� /ANIL CHATURVEDI) (�वकास अव�थी /Vikas Awasthy) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 20th June, 2018 SB

9 ITA No.854/PUN/2015 A.Y.2010-11

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-12, Pune. 4. The CIT (Central), Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.