Income Tax Appellate Tribunal - Mumbai
Ashwin S Mehta, Mumbai vs Dcit Cc 23, Mumbai on 16 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "A", MUMBAI
BEFORE SHRI G.S.PANNU, VICE PRESIDENT AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No.8704/Mum/2011
Assessment Year: 1991-92
Shri Ashwin S. Mehta, ACIT, CC-23,
32, Madhuli, Aayakar Bhavan,
Dr. A.B. Road, Worli M. K. Road,
Vs.
Mumbai - 4000 018. Mumbai-400020.
PAN: ABAPM2121M
(Appellant) (Respondent)
Assessee by Shri Dharmesh Shah &
: Shri Dhaval Shah (AR)
Revenue by : Dr. P. Daniel, Special Counsel
for Department
Date of hearing : 16.11.2018
Date of Pronouncement : 30.11.2018
ORDER
PER PAWAN SINGH, JM:
1. This appeal by Assessee is directed against the order of the CIT(A)-40, Mumbai dated 16.11.2011 for the A.Y 1991-92. The assessee has raised the following grounds of appeal:
"1. The Ld. C IT(A) has erred in law and f acts in conf irming valid ity of the assessment order passed u/s 147 of the IT Act by the A.O.
2. The Ld. C IT(A) has erred in law and in f acts in not appreciating that the A.O has not complied with the pr inciples of natur al jus tice either during the course of the assess ment proceed ings or dur ing the course of the re mand proceedings.
3. The Ld. C IT(A) has erred in law and in facts in not determining the inco me b ased on the f inal books of account thereby confirming the net accretion method adopted by the A.O for deter mination of the total income. The Ld. C IT(A) ought to have accepted book result sho wn by the appellant.2 ITA No. 8704/Mum/2011.
Shri Ashwin S. Mehta, Mumbai
4. The Ld. CIT(A) ought to have held that deter mination of total inco me of appellant by considering net accretion to var ious assets as under is wholly erroneous and unsustainable.
Particulars Amount
Net accretion to the other 9,17,83,546
assets
Net accretion to the client (-)
control a/c 46,67,09
,099
Net accretion to 67,26,37,149
sharehold ing
Tre asury difference 41,48,440
rece iv able
Vyaj B adla Inco me 2,28,343
Declar ation b y L ate Shri 51,00,000
Harshad S. Mehta
Total 30,71,88,049
Add; Personal expenses 5,07,857
Total Net accretion to the 30,76,95,636
non-revenue accounts
5. The Ld. C IT(A) has erred in law and in f acts in not appreciating that the correct quantity or purchase and sale of shares should be adopted while determining the inco me based on the net accretion method adopted b y the A.O.
6. The Ld. C IT(A) has erred in law and in facts in conf ir ming the determination of the shareholdings of the appellant in Annexure A-1 based on infor mation rece ived fro m clients and other sources.
7. The Ld. C IT(A) has erred in law and in facts in conf ir ming the share hold ings of the appellant in Annexure A-1 on the b asis of the seized data by including the purchase and s ales made b y the appellant as a broker.
8. The Ld. C IT(A) has erred in law and in facts in conf ir ming the determination of unaccounted investments as per Annexure A-3 of the assessment order at Rs. 67,26,37,149/- on the bas is of the infor mation collected from v arious co mpanies allegedly sho wing the shareholding of the appellant without providing the copies of the said letters/infor mation relied upon by him.
9. The Ld. C IT(A) has erred in law and in facts in conf ir ming the value of the unaccounted investment as per Annexure A - 3 b ased on the aver age of the market r ates as on 01.04.1990 and 31.03.1991 without appreciating that the value of investment ought to have been determined at the cost of acquis ition b ased on the dates of purchase.
10. The Ld. C IT(A) has erred in law and in facts in conf irming the addition of Rs. 41,48,440/- on account of tre asury different rece iv able based on the seized records of Late Shri Harshad S. Mehta.
11. The Ld. C IT(A) has erred in law and in f acts in conf irming the add ition of Rs. 2,28,343/- on account of Vyaj B adla inco me based on the se ized records of L ate Shri Harshad S. Mehta.
12. The Ld. C IT(A) has erred in law and f acts in rejecting the claim of deduction on account of interest expenditure.3 ITA No. 8704/Mum/2011.
Shri Ashwin S. Mehta, Mumbai
13. The Ld. C IT(A) has erred in law and in f acts in rejecting the claim of deduction of other expenses as per the books of account.
14. The Ld. CIT(A) has erred in law and in facts in not holding that the gain on s ale of shares is to be taxed as capital gain. The Ld. C IT(A) has erred in rejecting the claim of deduction u/s 48 of the Act.
15. The Ld. CIT(A) ought to have held that the alternate work ing of the total inco me made by the A.O as given below is wholly erroneous and unsustainable.
Particulars Amount
Dividend inco me 15,63,037
Debenture interest 4,14,813
Tre asury difference 41,48,110
rece iv able
Client dividend / 36,814
interest
Interest on other lo ans 62,411
Mone y market brokerage 48,82,750
A/c. No. 3086
Vyaj B adla income 2,28,343
Additional income 3,80,57,000
offered u/s 132(4) of the
Act by L ate Shr i
Harshad S. Mehta.
Total 4,93,93,278
Less: Expenses 13,11,627
Total inco me as per 4,80,80,651
revenue account
16. The Ld. C IT(A) has erred in law and in facts in conf irming the levy of interest u/s 234A, 234B and 234C of the Act.
17. The appellant craves leave of Your Honour to add to, alter, amend and/ or delete all or any of the foregoing grounds of appeal.
2. Brief facts of the case are that, the assessee is an individual and was a member of Bombay Stock Exchange (BSE). The assessee is a brother of late Shri Harshad S. Mehta who was involved in securities scam of 1992. The assessee was notified under the provisions of Special Court Act. A search and seizure operation under section(u/s) 132 of the Income Tax Act, 1961(Act) was carried on the premises of the assessee on 27.09.1990. During the course of search a large number of documents were seized. The assessee has not filed return of 4 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai income for the year under consideration within time prescribed under section 139 of the Act. A notice u/s 148 of the Act was issued to the assessee on 20.05.1992 requiring the assessee to furnish the return of income. In response to the said notice the assessee filed return of income and also furnished the various details. The assessment was ultimately completed u/s 144/143(3) r.w.s 147 of the IT Act on 24.03.1994 determining the total income at Rs. 30,76,95,636/-. Aggrieved by various additions made in the assessment order the assessee filed an appeal before the CIT(A), wherein all the additions were confirmed and no relief was granted except in respect of addition of Rs. 380 lakhs made on account of declaration by late Shri Harashad S. Mehta which was deleted. The assessee further filed appeals before the ITAT vide ITA No. 3022/Mum/2005 and ITA No. 4994/Mum/2003 and the matter was restored to the file of the CIT(A) to decide the issue afresh. Therefore, the CIT(A) passed impugned order confirming various additions. Aggrieved by the order of the Ld. CIT(A) the assessee has filed present appeal.
3. At the outset of hearing the Ld. Counsel for the assessee submits that the assessee has raised the ground of appeal No. 1, which is legal ground and goes to the root of the case being jurisdictional issue and may be decided first. The Ld. AR further submitted that the date of filing of return of income for impugned assessment year was 31.03.1993. The A.O issued 5 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai notice u/s 148 of the Act on 20.05.1992 i.e much prior to the date of filing of return of income. The assessee was not granted the statutory time available for him for filing of the regular return of income to disclose his return of income during the year. Before allowing such time to file the return of income, it cannot be presumed that some income has escaped assessment so as to assume jurisdiction to reopen the assessment. The Ld. AR of the assessee has drawn our attention to the notice u/s 148 of the IT Act dated 20.05.1992, copy of which is placed on record (page No. 115 of paper book). Perusal of notice reveals that A.O provided time of less than 30 days for filing the return of income. The Ld. AR submitted that the content of the notice was contrary to the provisions of Sec. 148 of the IT Act (at the relevant time). The notice issued by the A.O is being invalid and therefore the subsequent action initiated therein is ab- initio. Thus the assessment order passed based on such notice is invalid in the eyes of law. In support of his submission the Ld. AR relied upon the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Ekbal and Co. [13 ITR 154 (Bom)] and Deepika A. Mehta Vs. ACIT [57 TT] 104 (Mum)]. The Ld. Counsel for the assessee also relied upon the decision of Hon'ble Allahabad High Court in the case of Pr. CIT Vs. Mohd. Rizwan Prop M/s M.R. Garments [ITA No. 100 of 2015] and decision of Lucknow Tribunal in UP Housing & Development Board Vs ACIT (50 taxman.com 214).
6 ITA No. 8704/Mum/2011.
Shri Ashwin S. Mehta, Mumbai
4. The Ld. AR for the assessee further submitted that an amendment has been made in Sec. 148 of the Act by Finance (No. 2) Act, 1996, wherein the minimum time limit of 30 days for filing of return of income has been retrospectively removed w.e.f 01.04.1989. However, the said amendment would not save the assessment order prior to the date of making such amendment. In support of his contention the Ld. AR for the assess relied upon the decision of the ITAT, Mumbai Bench in the case of Ashok Rao & Co. Vs. ACIT [ITA No. 5595 & 5596/Bom/1994] dated 29.05.2002, wherein it was held that amendment made to Sec. 148 of the Act omitting the time limit of 30 days would not apply to assessment order already passed before the date of amendment, meaning thereby that such an amendment order is not saved. The Ld. AR also relied upon the decision in assessee's group case i.e CIT Vs. Sudhir S. Mehta [265 ITR 548].
5. On the other hand the Ld. DR / Special Counsel for Department supported the orders of the authorities below. The Ld. DR submits that assessee has not filed return of income in response to the notice u/s 142(1) of the IT Act. The assessee neither filed the return of income u/s 139(1) of the IT Act within the due date or in response to notice u/s 142(1) of the IT Act. The assessee also did not file the return of income u/s 139(4), the return should have filed on or before 31.03.1993. The assessee has filed his return of income on 11.11.1993 which 7 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai was a defect return; defect is that no return of income was filed. At that time no proceedings were pending and issue of notice u/s 148 is valid. The Ld. DR further submits that reliance on the decision of Hon'ble ITAT, Lucknow bench in the case of UP Housing & Development Board Vs. ACIT, in the said case the return was filed on the last working day i.e 31.03.2006 when the notice u/s 148 of the IT Act was issued on 30.03.2006, thus the finding in that case was different. The case of CIT Vs. Md. Rizwan Prop M/s. MR Garments (supra) is also on under different footing. On contention of the Ld. AR of the assessee that notice u/s 148 of the IT Act shows that the assessee was asked to file return within 30 days when the Section says not less than 30 days, the Ld. DR further submits that Section 148 was amended by the Finance Act, 1996 with retrospective effect from 01.04.1989, therefore in view of the amendment the submissions of the assessee that notice or the assessment is invalid does not have any legs to stand. Therefore, the submissions are also without any merit. The Ld. DR further submitted that the assessee never raised this ground of appeal earlier.
6. We have considered the submissions of both the parties and perused the material available on record. We have also gone through the orders of the authorities below. The assessment was reopened by issuing notice u/s 147 of the Act dated 20.05.1992. The assessee has filed his return of income on 8 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai 11.11.1993 declaring total income of Rs. 93,80,000/-. The return was treated as invalid return. Perusal of the assessment order does not reveal that the reasons recorded were not supply to the assessee. Before the Ld. CIT(A) the assessee objected that the assessee is not provided reasons recorded and that the assessee was asked to file the return of income within 30 days which is invalid and bad in law. The Ld. CIT(A) took his view (para 6.2 of impugned order) that the assessee has not filed return of income neither has made any request for reasons recorded.
7. The provisions of Sec. 148 of the Act have been amended by Finance Act, 1996 with retrospective effect from 01.04.1989, whereby the expression "not being less than thirty days" has been omitted. As per the CIT(A), due to the amendment the contention of the assessee that A.O had given less than the prescribed time to file the return has no legs to stand. Thus the Ld. CIT(A) rejected the contention of assessee about providing less than 30 days time for filing of return in response to the notice under section 148.
8. For appreciation of facts, we may refer the language of Sec. 148 of the Act at the relevant time on the statue book:
"Issue of notice where income has escaped assessment. 148(1). Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, 9 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139] (2) The Assessing Officer shall, before issuing any notice under this Section, record his reasons for doing so.]
9. Our attention has been drawn to notice issued under section 148 of the Act dated 20.05.1992, interalia calling upon the assessee to file return 'within 30 days'. This according to the appellant is not the same thing as "not being less than thirty days". No doubt the expression "not being less than thirty days has been removed w.e.f. 01.04.1989 retrospectively by Finance Act, 1996. The assessment under section 143(3) rws 147 of the Act in this case has been completed on 24/03/1994. The contention of the assessee is that the amendment in section 148 will not save the order already passed prior to such amendment as there is no amendment validating the order passed in pursuance to such invalid notices even if it is taken the amendment saves the notice.
10. On this aspect, there is direct decision of our Coordinate Bench in Ashok Rao & Co. Vs ACIT (supra). The relevant part of the order is extracted below:
8. But, the position has beco me a little different because of the amendment made to section 148(1) by the Finance No.2 Act, 1995 with retrospective effect fro m 1.4.1989. By this amendment the words 'not be ing less than 30 days have been o mitted fro m the sub section with retrospective effect. Apparently, the atte mpt of the legislature is to valid ate the notices is sued u/s. 148(1) where the assessee were given time of less than 30days to f ile the 10 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai returns. The contention of the Ld. Representative for the assessee ho wever is that the amendment may v alid ate the notices which pave less than 30 days time to the assesses to file the returns, but cannot v alidate the reassess ments made In the me antime pursuant to the defective notices. In other words, his contention is that the reassess ments made on 2.11.1993 for both the4sess ment ye ars under appe al are null and vo id because of the defective notices and have not been v alidated by any v alidating amendment and the mere v alidation of the notices cannot have the effect of valid ating the re assess ments also. To further elaborate, what he says is that the assessee has obtained a vested r ight because of the v alid ity of the re assess ments and such vested right cannot be tak en away? merely validating the notices pursuant to which they were made. There has to be, accord ing to the Ld. Representativ e for the assessee an amendment expressly validating the re assessments also.
9.In support of the above contentions, the Ld. Representative for the assesses cited the follo wing three judgments:-
(1) Prithvi Cotton Mills v. Bro ach Burrough Municip ality L & Ors [79 ITR 136 (Sc)].
(2) Jose D acosts V. Bascora Sadashiv SinalNarco min A IR (1975) SC 1843.
(3) Delhi Cloth & Gener al Mills Co. Ltd. v Inco me Tax Co mmissioner, A IR 1927 (P7)242 In Delhi Cloth Mills case (supra), the following observ ations were made by the Privy Council.
"The principle which their Lordship must apply in de aling with this matter has been author itatively enunciated by the Board in the Colonial Sugar Ref ining Co v. Irving (1995) A. C. 369=74 Lj.P.C. 77=21 T.L.R . 513 = 92 L. T 738]. where in effect it is laid do wn that while provis ions of a statute de aling merely with matters of procedure may properly, unless that construction to be textually inadmiss ible, have retrospective effect attr ibuted to the m prov is ions which touch a right in existence at the p ass ing of the statute are not to be applied retrospectively in the, would deprive of the ir ex isting f inality orders, which when the statue came into force, were final are provisions which touch existing rights. Accordingly, if the section now in question is to apply to orders final at the d ate when it came into force, it must be cle arly so 11 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai prov ided. Their Lordships cannot f ind in the section even an indication to the effect (underlining ours) These observations were quoted with approv al by the Supreme Court in the case of Jose Dacosta (supra). In Pr ithv i Cotton Mills case (supra) a Five Judge Bench he aded by Hon'ble Chief Justice M. Hid ayatullah, made certain general observ ations about validating tax statues. The f irst condition laid do wn was that the legislature must possess the Po wer to impo se the tax. The second cond ition was that granted legislative competence, it is not suff icient to declare merely that the decis ion of the court shall not bind, for that is tantamount to reversing the decision in exercis e of judicial po wer which the legislature does not possess or exercise The Supre me Court proceeded to observe that validation of a tax can be done only if the grounds of illeg ality or inv alidity are capable of being re moved and are in f act removed and the tax thus made leg al. The Supreme Court recognized the v arious methods by which this can be done, It observed thus."Some time this is done by prov iding for jurisdiction where jur isdiction had not been properly invested before. So metimes this is done by re- enacting retrospectiv ely a v alid and leg al tax ing prov is ion and then by f iction mak ing the tax alre ad y collected to stand under the re-enacted law. Sometimes the leg islature gives its o wn me aning and interpretation of the law under which the tax was collected and by leg islative flat makes the ne w me aning binding upon courts. The legislature may follo w any one method or all of the m and while it does so it may neutralize the effect of the earlier decis ion of the court which beco mes ineffective af ter the change of the law. Whichever me thod is adopted It must be within the co mpetence of the leg islature and legal and adequate to attain the object of valid ation. If the leg islature has the po wer over the subject- matter and co mpetence to make a valid law, it can at any time make such a v alid law and make it retrospectively so as to bind even past tr ansactions, The v alid ity of a v alidating law, therefore, depends upon whether the legislature possesses the co mpetence which it claims over the subject-matter and whether it making the v alid ation it re moves the defect which the courts had found in the existing law and makes adequate provis ions in the validating law for a valid imposition of the tax".12 ITA No. 8704/Mum/2011.
Shri Ashwin S. Mehta, Mumbai These observations sho w that the defect which made the imposition of tax illegal must be re moved effectively. The question before us Is whether this has been done in the present case by merely v alidating the notices. If the e ar lier law laid do wn by the courts was that the Inv alid notices Invalid ate the re assessme nt proceedings also, it wo uld f irst appe ar that by merely v alidating the notices, the reassess ments would also be v alidated auto matically. Ho wever, we have to re member, as laid do wn by the Privy Council (supr a), that it must be clearly prov ided that the amending law would disturb or take away the finality attained by the orders or the vested rights of the assessee. When the re assessments in the present case made on 2.11.93 became null and vo id for want of proper notices, the assessee acquired a vested right that no tax would be collected pursuant to them. If the leg islature wants to effectuate those reassess ment orders by injecting life to the m, there must be a cle ar prov is ion to that effect in the amending law or necess ar y intendment, It is co mmon ground that there is no c/ear provision in the amending law to the effect that the re assess ments made pursuant to defective notices shall not be considered to be null and void and the assessee 's in whose cases such reassess ments had been made would nevertheless be liable to pay tax pursuant thereto. Thus, there are no express words in the amendment tak ing away the vested right of the assessee that no tax will be collecte d fro m him pursuant to those re assess ments. The question howev er would be whether there is necess ary intend ment - an intendment to the effect that since the notices am being v alid ated, the intention is also to validate the re assess ments. We are unab le to spell out any necess ary intendment, It may be that the legislature did not want to d isturb the re assess ments alre ady made pursuant to the defective notices and wanted to s ave them f ro m Challenge only where the reassess ment proceedings were pending. The Circular No 752 dated 182.1998 (reported at p age 5228 of Volume lit) of the 5 Edition of Chaturved i & Pithis ar ia's inco me-tax law is as under:
"Modifications of provis ions of section 148 - 481. under the existing prov is ions of the Inco me-tax Act, in cases where the Assessing Off icer has re ason to be//eve that income has escaped assess ment, a notice can be issued to an assessee for filing a 13 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai return of his inco me within a specif ied period, not being less than thirty d ays. In the notice u/s. 148, the as sessee was required to furnish a return of his income within thirty days. The above position in law was in effect fro m April 1, 1989.
48.2 Notices issued under section 148 have been held to be invalid b y the inco me Tax Appellate Tribunal on the ground that where as the statute allo ws the tax p ayer a time, "not be ing less than 30 days the notice gives the d irection to f ile a return " within a period 0130 d ays". The Bo mbay High Court in the case of C IT v. Ekbal and Co. [19451 13 ITR 154, decided a simil ar issue by laying do wn that the expressions within thirty days" and "not less than thirty days am two quite different things. In vie w of the afores aid decis ions of the Bo mbay High Court and also of the Income Tax Appellate Tr ibunal, the Finance (No.2) Act 1996, prov ides in section 148 that the Assessing Officer may require the assessee to furnish the return within the per iod specif ied in the notice.
48.3 The amendment will take effect retrospectively fro m April 1, 1989, and will, acco rdingly, apply in relation to notices issued under section 148 on or af ter that date (Section 43).
There is nothing in the C ircular to sho w that the amendment validating the notices issued af ter 01.04.1989 was also Intended to valid ate the reassessments alre ady made pursuant to those defective notices.
10. There is one more re ason why we are unable to spell out any intention on the part of the legislature to v alidate the re assessments the ms elves. Section 153(2) prescribes a time limit of two ye ars fro m the end of the financial year in which the notice u/s. 148 was served as the limitation for a reassess ment u/s.
147. The amendment to section 148(1) was made in1996 with retrospective effect fro m 1.4.1989. Many Assessing Off icers would have issued notices u/s. 148 af ter this date containing the defect (giv ing a period of less than 30 d ays for tiling the return). It wo uld appe ar that the ne w time limit given in section 148(1) as introduced we t 1.4.1989 was overlooked by the Assessing Officers who were ap parently guided by the time limit prescribed by section 139(2), which was incorporated in the original section 14 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai 148(1). Therefore, it wo uld be a reasonable inference that many notices would have been issued on or af ter 14.1989 directing the assessee to f ile returns within 30days. In many such cases, the re assessment would have also been co mpleted long before the retrospective amendment brought by the Finance (no.2) Act, 1996. In many cases, appeals might have been pend ing against such re assessments challenging the m on the ground that the y were made pursuant to defective notices. The legislature must be taken to be aware of this position and that is why the y brought the amendment. Nevertheless the amendment was confined only to the v alid ation of the notices issued without v alid ating the re assessments also. It is quite usual and common for any such validating Act to provide that no re assessment made pursuant to the defective notices shall be called in question by way of appeal to any inco me-tax authority or Tr ibunal or in any wilt proceedings before the High Court. It is also usual to provide that the tax collected pursuant to such re assess ments must be deemed to have been v alidly assessed, imposed or recovered. These are the usual forms b y which the assess ments to tax ar e validated and this is not unkno wn to the legislature. Therefore, it would appe ar to us, that the leg islature did not want to inject life or v alidate those re assessments which have alre ady been made pursuant to the defective notices and wanted to s av e only the pending re assessment proceedings fro m challenge. There was nothing to prevent the leg islatur e from expressly enacting, together with the retrospective amendment to section 148(1), that all the re assessment proceedings, whether pending or co mp leted shall be dee med to have been v alidly initiated and completed. In the absence of such express intendment. the vested right accruing to the assessee because of an inv alid re assess ment cannot be taken away.
11. In this vie w of the matter, we hold that the retrospective amendment to section 148(1) made by the f inance (NO2). Act, 1996 does not s ave the re assess ments 1mm be ing declared null and vo id."
11. Further the Coordinate Bench of this Tribunal in the case of Shri Lalit Sheth Vs. ACIT and Vice Versa [ITA No. 7394/Mum/1996] wherein the similar facts of the case, held 15 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai that in absence of any express indication in the amending Act, the mere validation of notice cannot validate the reassessment order passed before the date of such amendment in absence of any express or implied intention of the legislature. The decision of the Tribunal in the case of Shri Lalit Sheth Vs. ACIT (supra) has also been affirmed by the Hon'ble Bombay High Court in ITA No. 1570 of 2005 dated 29.09.2017.
12. We have also noticed that the jurisdictional High Court in assessee's group case (brother case) in CIT Vs Sudhir S. Mehta [265 ITR 548] held that the notice u/s 148 of the Act giving less than 30 days time is invalid. In this case the Tribunal held that there was no amendment in section 148 at the time of passing of the order dated 26.06.1996 and dismissed the application of the department. Against that order the revenue filed appeal before Hon'ble Bombay High Court raising the following question of low;
"Whether the Taxation Laws (Amendment) Act, 1996, applied only to pending proceedings or whether it applied even to proceedings which stood completed three months prior to the law being enacted?"
The Hon'ble High Court passed the following order;
4. In the present case, the short point which arises for consideration is whether miscellaneous application filed by the Department was maintainable under section 254(2) of the IT Act which states that mistake apparent from the record can be rectified by the Tribunal within four years from the date of its order. In this case, the reassessment proceedings were initiated vide notice dated 7th Nov., 1990. Under the provisions which existed on that date, it was provided under section 148(1) that in cases where the Assessing Officer had reason to 16 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai believe that income had escaped assessment a notice had to be issued to an assessee for filing return of income within a specified period, not being less than thirty days. The (italicised in portion) became subject-matter of dispute in proceedings pending before various High Courts. In certain cases these notices were held to be invalid on the ground that where the Act allows the assessee time to file revised returns within a stipulated period under the Act, it was not open to the Assessing Officer to call upon the assessee to file the returns within thirty days - CIT v. Ekbal & Co. [1945] 13 ITR 154 (Bom.). In view of these conflicting decisions, the Legislature by virtue of Taxation Laws (Amendment) Act, 1996, deleted the above expression "not being less than thirty days". However, the Taxation Law (Amendment) Act of 1996 got the Presidential assent on 28th Sept., 1996. No doubt, the Amending Act operated w.e.f. 1st April, 1989. However, the Amending Act got the Presidential assent only on 28th Sept., 1996, by which time the entire, gamut of reassessment proceedings, in this case, got concluded before the Tribunal when it allowed the appeal of the assessee striking down initiation of reassessment proceedings under the then existing law. That decision of the Tribunal was delivered on 26th June, 1996, i.e., three months prior to the amending law receiving the Presidential assent. In the circumstances, the miscellaneous application filed by the Department was rightly rejected by the Tribunal as there was no mistake apparent from the record in the order of the Tribunal dated 26th June, 1996.
13. Hence, following the aforesaid legal position, it has to be held that the assessment order dated 24.03.1994is invalid as it is based on a notice isuued under section 148 dated 20.05.1992, which was invalid on account of the then existing law. The subsequent amendment in section 148 may validate the notice, but, it would not save the assessment order from being declared null and void, as it was passed prior to the amendment.
14. Considering our decision as we have allowed the legal ground and held the assessment as null and void as notice u/s 148 of 17 ITA No. 8704/Mum/2011. Shri Ashwin S. Mehta, Mumbai the IT Act is invalid, therefore, the discussion on merit of the case has become academic and is not being rendered.
15. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on this 30 th Nov, 2018.
Sd/- Sd/-
(G.S.PANNU) (PAWAN SINGH)
VICE PRESIDENT JUDICIAL MEMBER
मुंबई Mumbai; दनांक Dated 30/11/2018
KRK / PS
आदेशक ितिलिपअ िे षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकरआयु (अपील) / The CIT(A), Mumbai.
4. आयकरआयु / CIT
5. िवभागीय ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai आदेशानुसार/BY ORDER,
6. गाड फाईल / Guard file.
स यािपत ित //True Copy/
उप/सहायकपंजीकार
(Asstt.Registrar)
आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai