INCOME TAX OFFICER, WARD-1(1)(3), DEHRADUN, AAYKAR BHAWAN, SUBHASH ROAD, DEHRADUN vs. UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITED, STATION SUB AREA

The A.O. completed the assessment under section 143(3)/147 of the Act on 30.03.2017, wherein the claimed exemption of Rs. 5,82,53,120/- by the appellant was disallowed and added back to its total income.”

5. The ld. DR submitted that the ld. CIT(A) has committed error in holding the re-assessment proceedings u/s 148 of the Act as pre-mature as there is a time limit available for filing belated returns u/s 139 of the Income Tax Act, 1961 ('Act' for short) whereas as per the provision of section 149 of the Act, there is no time limit prescribed for issuance of notice u/s 148 of the Act in cases where there is time limit for belated return u/s 139 of the Act. The ld. DR relying on the assessment order, submitted that the order of the ld. CIT(A) being erroneous which deserves to be set aside. Thus, sought for allowing the appeal.

“We have heard rival submissions and perused the materials on record. We find that the assessee has filed its return of income for the assessment year 2014-15 belatedly under section 139(4) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) on 06.10.2015 declaring total income of Rs. Nil, after claiming exemption for the profit of Rs.5,11,44,966/- under section 10(26BBB) of the Act. This return was not selected for scrutiny by learned Assessing Officer. But we find very strangely, the learned Assessing Officer issued a notice under section 148 of the Act on 22.01.2015 itself, which is prior to the date of filing of return of income by the assessee. We find that the assessee has got time to file the return belatedly in terms of section 139(4) of the Act till 31.03.2016. While this is so, there is absolutely no need for learned AO to issue reopening notice under section 148 of the Act. The learned Assessing Officer could have as well selected the belated return filed by the assessee for scrutiny and proceeded to determine the total income of the assessee in the manner known to law. Without doing so, when the due date for filing the belated return of income under section 139(4) of the Act was available to the assessee, the learned AO prematurely reopened the assessment by issuing notice under section 148 of the Act on 22.01.2015 much before the end of the assessment year itself. Against the belated return of income filed by the assessee under section 139(4) of the Act on 06.10.2015, learned AO had time to issue notice under section 143(2) of the Act till 30.09.2016.

6. We find that the assessee has raised this issue of reopening notice, being issued before the end of the assessment year itself before the learned CIT(A), which is evident from the writtensubmission filed before the learned CIT(A). The relevant portion thereof is enclosed in pages 14 and 33 of the order of learned CIT(A). Strangely, the learned CIT(A) remains completely silent on this legal issue and simply relying on the order of his predecessor for assessment year 2009-10, passed in assessee’s own case, he proceeded to uphold the addition made by learned AO on merits. In this regard, it is pertinent to note that against the order of learned CIT(A) for assessment year 2009-10, the assessee preferred an appeal before this Tribunal and this Tribunal vide its order passed in dated 31.05.2021 had quashed the reassessment proceedings. Since, for assessment year 2014-15, i.e., the year under consideration, the learned CIT(A) had merely relied on the order of the predecessor for assessment year 2009- 10, which stood subsequently quashed by this Tribunal, the assessee deserves to get relief on merits also for the year under consideration.

7. As stated earlier, the return filed by the assessee on 06.10.2015 is a return filed belatedly u/s 139(4) of the Act. Nothing prevented the learned Assessing Officer to select this return for scrutiny and frame the assessment in accordance with law. When this provision is available with the learned Assessing Officer, where is the need for him to issue reopening notice that too before the end of the assessment year itself. Hence the reopening notice issued u/s 148 of the Act in the instant case is to be declared premature. In any case, the revenue cannot resort to reopening proceedings merely because a particular return is not selected for scrutiny. Reopening of an assessment cannot be resorted to as an alternative for not selecting a case for scrutiny. There should be conscious formation of belief based on tangible information that income of an assessee had escaped assessment. This is conspicuously absent in the instant case before us. With regard to the legal issue raised by the assessee vide ground no. 4, we find that the issue in dispute has already been adjudicated by the Coordinate Bench of Delhi Tribunal in the case of ITO Vs. Momentum Technologies Pvt. Ltd. in dated 31.03.2021 for assessment year 2011-12, wherein, the Tribunal held as under:

“17 The above provisions does not make any distinction between return of income filed u/s 139(1) or U/s 139 (5) of the act. If the return filed u/s 139[5] is a valid return, then the notice u/s 143(2) of the act can be issued to the assessee within expiry of six months from the end of the Financial Year in which revised return of income 7 AY: 2014-15 is filed.

In this case, Revised return is filed on 12/2/2013, so 143 (2) notice could have been issued to the assessee on or before 30/9/2013. Therefore, the assessment proceedings were pending before Id AO. However, Id AO issued notice u/s 148 of the act on 15/04/2013, i.e. when the original assessment proceedings were pending as time limit for issue of notice u/s 143 (2) did not expire. Section 142(1) and Section 148 of the Act cannot operate simultaneously. There is no discretion vested with the Assessing Officer to utilize any one of them. The two provisions govern different fields and can be exercised in different circumstances. If income escapes assessment, then the only way to initiate assessment proceedings is to issue notice under Section 148 of the Act. In fact, the proceedings are pending u/s 143 of the act, it looks in appropriate to call for a return under Section 148 of the Act because income cannot be said to have escaped assessment when the assessment proceedings are pending. Such is also held by Honourable Madras High court in COMMISSIONER OF INCOME-TAX V QATALYS SOFTWARE TECHNOLOGIES LTD. [2009] 308 ITR 249 (Madras) where in following the decision of the- Honourable High court in COMMISSIONER OF INCOME-TAX v. K. M. PACHAYAPPAN in 304 ITR 264 ( Madras) held that:

"7. 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."

9. Question now remains what is the effect of the notice under section 148. Does the return filed after

issue of notice under section 148 cease to be a return under section 139 or any loss determine in pursuance of such a return could be denied to be carried forward and set off ? The department’s contention is that recourse to section 148 is a remedy available to the department to assess or reassess the income which had escaped assessment and in such a recourse the assessee cannot be granted a benefit to the prejudice of the revenue. It may be true that the assessee cannot be benefited in a proceeding under section 148 as this provision is meant to safeguard the interests of the revenue. It is an enabling provision to assess or reassess the income which escaped assessment. But at the same time we cannot overrule the right of the assessee to file the return within two years from the end of the assessment year under section 139(4). This right of the assessee, in our opinion, cannot be taken away or whittle down by the revenue by issuing a notice under section 148. We would have agreed with the contention of the department if the return in this case was filed beyond the prescribed limit under section 139(4). The notice under section 148 as aforesaid is issued to assess or reassess the escaped income and the notice should be deemed invalid if ultimately the alleged income is found to have not escaped. If in the case of income having escaped it is found ultimately that there was a loss, the whole basis of issue of notice under section 148 falls down and the notice, therefore, becomes for all practical purposes invalid. It should be deemed as if it were never issued. As a natural consequence, therefore, it is to be assumed that there was no notice under section, 148 in this case and the return filed on 15-12-1982 was not a return in pursuance of the notice under section 148. We, therefore, hold that it was a return under section 139(4) and in view of the Bombay High Court decision (supra), the assessee would be entitled to carry forward the loss.

9. In view of the above, respectfully following the judicial precedents relied upon hereinabove, we have no hesitation to quash the reassessment proceedings framed by learned AO as void abinitio. Accordingly, ground no. 4 raised by the assessee on legal issue is allowed.

8. The Ld. CIT(A) has relied on the order of the Tribunal in Assessee’s own case for A.Y. 2014-15 (supra) while deciding the First Appeal and deleted the addition made by the A.O. In the absence of any contrary material or judicial precedents brought on record by the Revenue, we find no reason to interfere with the findings and conclusion of the ld. CIT(A).

Accordingly, the grounds of appeal of the Revenue are dismissed as devoid of merit.

Order Pronounced in the Open Court on 23/12/2025.