MANIPAL FINANCIAL SERVICES,CHENNAI vs. ITO, BUSINESS WARD XV(4), CHENNAI

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in Order No.ITBA/NFAC/S/250/2023-24/ 1061661390(1) dated 28.02.2024. The assessment was framed by the Income Tax Officer, Business Ward XV(4), Chennai for the assessment year 2005-06 u/s.147 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 25.03.2013.

The brief facts are that the assessee filed its return of income for the relevant assessment year 2005-06 on 18.10.2005 and original assessment was completed u/s.143(3) of the Act vide order dated 03.12.2007. Subsequently, the assessment was reopened by issuance of notice u/s.148 of the Act dated 20.03.2012. The assessee filed letter dated 07.05.2012 requesting the AO to treat the return filed u/s.143(1) as return filed in response to notice u/s.148 of the Act. The AO completed the assessment and added the receipts from ICICI Bank and HSBC Bank not included in P&L account amounting to Rs.11,61,752/- & Rs.1,96,831/- respectively. Aggrieved, assessee preferred appeal before CIT(A). Before CIT(A), the assessee has not challenged the reopening issue but now, before the Tribunal, the assessee has raised this issue for the first time. The assessee has raised this issue vide grounds Nos.2 & 3 as under:- “2. The NFAC, Delhi erred in confirming the assumption of jurisdiction under Section 47 of the Act and consequently erred in confirming the re-assessment order passed under Section 147 of the Act without assigning proper reasons and jurisdiction.

At the outset, the ld.counsel for the assessee stated that the only reason mentioned by the AO is as under:- 1. TDS certificates filed by you for the year show receipt of a sum of Rs.42,35,778 whereas the credit to the P&L account is Rs.25,70,560 only.

On the other hand, the ld.Senior DR could not controvert.

We have heard rival contentions and gone through facts and circumstances of the case. Admittedly, the reopening is beyond four years and assessee’s case falls under the proviso to section 147 of the Act. Even the original assessment was completed u/s.143(3) of the Act after processing of return u/s.143(1) of the Act. The assessee has filed complete details in regard to TDS certificates and receipts mentioned therein and the AO framed assessment having these information. Now, this issue is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT vs. Foramer France, reported in (2003) 264 ITR 566, wherein the Hon’ble Supreme Court has affirmed the decision of Hon’ble Allahabad High Court in the case of Foramer France vs. CIT, (2001) 247 ITR 436, wherein it is held as under:- 14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed.

It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The relevant part of the new Section 147 is as follows : "147. If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this Section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year."

This new Section has made a radical departure from the original Section 147 inasmuch as clauses (a) and (b) of the original Section 147 have been deleted and a new proviso added to Section 147. 17. In Rakesh Aggarwal v. Asst. CIT (1997] 225 ITR 496, the Delhi High Court held that in view of the proviso to Section 147 notice for reassessment under Section 147/148 should only be issued in accordance with the new Section 147, and where the original assessment had been made under Section 143(3) then in view of the proviso to Section 147, the notice under section 148 would be illegal if issued more than four years after the end of the relevant assessment year. The same view was taken by the Gujarat High Court in Shree Tharad Jain Yuvak Mandal v. ITO [2000] 242 ITR 612. 18. In our opinion, we have to see the law prevailing on the date of issue of the notice under Section 148, i.e., November 20, 1998. Admittedly, by that date, the new Section 147 has come into force and, hence, in our opinion, it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso.”

Coming to the merits of the case, since we have quashed the reassessment on reopening, we need not to adjudicate the issues on merits. In term of the above, the appeal of the assessee is allowed.