Income Tax Appellate Tribunal - Amritsar
Ramesh Chander vs Income-Tax Officer on 14 November, 1983
Equivalent citations: [1984]7ITD355(ASR)
ORDER
P.K. Mehta, Accountant Member
1. Both the appeals of the assessee relate to the assessment year 1972-73 and these being inter-connected are conveniently considered together and disposed of by a common order. IT Appeal No. 85 (Asr.) of 1983 is an appeal of the assessee in respect of the order of the Commissioner (Appeals) relating to the assessee's application under Section 146 of the Income-tax Act, 1961 ('the Act') filed before the ITO and IT Appeal No. 86 (Asr.) of 1983 is an appeal against the appellate order of the Commissioner (Appeals) in respect of quantum assessment made by the ITO ex parte under Section 144 of the Act. The Commissioner (Appeals) while dealing with the lTO's order under Section 146 rejecting the assessee's application upheld the assessee's claim that the assessee was prevented by sufficient cause from complying with the terms of the notice under Section 142(1) of the Act dated 17-3-1982 and he, therefore, accepted the assessee's application under Section 146. It was non-compliance with the terms of this notice which had attracted the ex parte completion of the assessment under Section 144. The assessee before both the ITO and the Commissioner (Appeals) referred to another contention that the initiating of the assessment proceedings for the assessment year 1972-73 by issuing notice under Section 148 of the Act was not valid. Both the ITO and the Commissioner (Appeals) considered this objection to be irrelevant while dealing with the provisions of Section 146. The Commissioner (Appeals) agreed with the ITO that while dealing with the assessee's application under Section 146 the validity of proceedings initiated under Section 147(a) of the Act could not be looked into. He like the ITO confined himself to the short issue whether the assessee was prevented by sufficient cause from complying with the last notice issued by the ITO under Section 142(1) on 17-3-1982. It may be stated that Section 148 notice required for the filing of the return of income and the assessee did file a return on 17-3-1982 prior to the completion of ex parte assessment on 22-3-1982 and thus, there was no default in complying with the requirements of notice under Section 148. In regard to the quantum appeal the Commissioner (Appeals) stated in his order that as he had accepted the assessee's appeal against the order under Section 146 and directed the ITO to frame assessment according to law, the quantum appeal had become infructuous and it was accordingly dismissed.
2. The preliminary point put to the assessee's counsel, Shri G.R. Sethi, was as to how the two appeals could be said to be maintainable when the assessee had obtained the relief in entirety provided in Section 146 from the Commissioner (Appeals) and when the Commissioner (Appeals) in accordance with the relief allowed as contemplated in that Section had vacated the assessment with a direction to frame it afresh.
3. The assessee's counsel, Shri Sethi addressed us at great length on this point. He insisted firstly, that initiation of proceedings under Section 147(a) having been challenged as invalid and the issue, thus going to the root of the matter, it was open to the assessee to raise it in an appeal against the order under Section 146. Secondly, he contended that when appeals both against quantum assessment and rejection of applicatio, nunder Section 146 by the ITO are filed before the Commissioner (Appeals) he should have first decided the appeal under Section 144 as it involved a question of validity of the assessment itself. He cited certain authorities, namely, Radhey Lal Balmukand, In re. [1942] 10 ITR 131 (All.), J. & T. v. Jain CIT [1961] 41 ITR 700 (All.), Surajmal Ganeshram v. CIT [1979] 120 ITR 715 (Cal.), Gopal Singh v. CIT [1968] 70 ITR 840 (Punj. & Har.) and Rajab Ali Farishta v. CST [1977] 14 STC 574 (MP). The revenue argued that both the appeals were not maintainable and should not be entertained by the Tribunal.
4. We have given careful thought to the legal provisions and the authorities cited but feel that both the appeals filed by the assessee are not maintainable. The first question that arises is which appeal proceedings have to be considered first when both the appeals, i.e., one against the rejection of application under Section 146 by the ITO and the other against quantum assessment were before the Commissioner (Appeals). In such a situation considering the scheme of the Act and the provisions of Section 146 it becomes clear that the appeal against an order under Section 146 will have precedence, as in Section 146(1) it is clearly provided that 'the ITO shall, if satisfied about the existence of such ground, cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of Section 143 or Section 144'. If an assessee succeeds in the application filed under Section 146 the ex parte assessment framed on him will become a nullity and fresh assessment will be ordered in view of the clear provisions of Section 146. The disposal of the assessee's application under Section 146 should, therefore, precede the issue of deciding the merits of quantum assessment made under Section 144. It may also be pointed out that once the appeal under Section 146 gets disposed of in favour of the assessee he gets the necessary relief in the sense that the assessment framed on him under Section 144 and the defaults attributed therein attracting penalty provisions of the Act get vacated and the whole question of framing the assessment opens out.
5. The second question is what will be the scope of an appeal against an order under Section 146 passed against an assessee by the ITO. Section 246(1) of the Act in Clause (d) provides an appeal to the AAC or to the Commissioner (Appeals) under Section 246(2)(a) against 'an order under Section 146 refusing to reopen an assessment made under Section 144'. The scope of such an appeal is clearly restricted to the grounds on which provisions of Section 146 are attracted and these are indicated in the section itself. In brief the section provides for reopening of the assessment made under Section 144 when it is shown that either the assessee was prevented by sufficient cause from making the return required under Section 139(2) of the Act or did not receive the notice issued under Section 142(1) or Section 143(2) of the Act or had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying with the terms of a notice issued under Section 142(1) or Section 143(2). It is obvious that application under Section 146 will lie to the ITO only in respect of default attributed to the assessee, which, in fact, resulted in the ex parte assessment under Section 144 and not in respect of the defaults, which were not at all attributed. In the case in hand the only default attributed to the assessee was failure to comply with the last notice issued under Section 142(1) dated 17-3-1982. There was no default in the matter of filing of the return of income, which admittedly was filed in response to notice under Section 148 on 17-3-1982 and which the assessee chooses to call a return filed under protest. In any case, the return having come in, there was no question of default in Clause (i) of Section 146(1) arising in the assessee's case, i.e., he was not called upon to show sufficient cause which prevented him from making the return required under Section 139(2). It is obvious, therefore, that question of improper initiation of proceedings under Section 147(a) and the invalidity of the notice under Section 148 cannot be agitated in an appeal against an order under Section 146. In our view, the Commissioner (Appeals) has acted correctly in not deciding this issue and confining himself to the default with the notice under Section 142(1) giving rise to the ex parte assessment.
6. Next we come to the relief, which can be allowed to the assessee under Section 146. It is stated clearly in the section itself that the ITO shall, if satisfied about the existence of such ground as is specified in the section, cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of Section 143 or 144. The relief envisaged herein thus, is not only of cancellation of the assessment but a fresh assessment is also directed to be made. This aspect is emphasised by Clause (d) of Section 246(1) when it is stated therein 'an order under Section 146 refusing to re-open an assessment made under Section 144'. The reopening of the assessment must follow the cancellation of assessment according to the language of the statute.
7. After clarifying the above principles, we may now look to the language used in Section 253(1) of the Act about providing an appeal to the Tribunal. Section 253(1) opens with the words "Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order-". As the assessee has relied on case law, which was under the Indian Income-tax Act, 1922 ('the 1922 Act') we may mention the opening words of corresponding Section 33(1) of that Act, viz., 'Any assessee objecting to an order passed by an Appellate Assistant Commissioner.... 'Under Section 253(1), which applies in the assessee's case what is necessary is that he should be aggrieved by an order passed by the Commissioner (Appeals). The assessee here can have no grievance with the order of the Commissioner (Appeals), who has given him the full relief provided in Section 146 and when this is so no appeal will lie to the Tribunal. Again it is not a case where higher relief was admissible in Section 146 but the Commissioner (Appeals) had allowed the lesser relief. We have already indicated above the relief, which is provided in that section and the same has been granted to the assessee ; no more no less. Hence, we hold that appeal against the order of the Commissioner (Appeals) in respect of an order under Section 146 will lie to the Tribunal. In fact, the assessee's very lengthy grounds merely referred to the Commissioner (Appeals) not going into the validity of notice under Section 148 and the jurisdiction and competence of the ITO to issue that notice. These questions obviously could not be agitated in the appeal in the facts and circumstances of the case. The assessee's appeal under Section 146 is rejected being not maintainable.
8. On account of the statutory requirements of Section 146 the ITO has to cancel the ex parte assessment and once that assessment disappears there is no question of any appeal being filed before the Tribunal against the order of the Commissioner (Appeals) in respect of quantum assessment. In accordance with what is laid down in law, the assessment gets vacated and it no longer survives. Here we may mention that the assessee's counsel relied on an earlier decision of the Amritsar Bench in his own case but we may state that the question of maintainability of an appeal was not gone into by that Bench with which we are concerned here. The assessee's counsel also relied on the Allahabad High Court decision in J. & T. Jain's case (supra). The facts of that case being different and so was the proposition involved, we fail to see how that decision will help the assessee. First of all that was a case of reassessment under the 1922 Act, by issuing of notice under Section 34 of that Act and it was not a case of an ex parte assessment which provides for a special procedure for reopening of the assessment under Section 27 of the 1922 Act and under corresponding Section 146 of the Act. The reassessment under Section 34 of the 1922 Act was challenged before the AAC on the legal ground that notice under Section 34 was invalid and also on merits. The AAC did not consider the legal contention that the notice was invalid and merely considered the appeal on merits and set aside the assessment and remanded the case to the ITO directing him to make a fresh assessment, etc. The assessee appealed against the order of the AAC to the Tribunal who held that in view of the order passed by the AAC there was no subsisting demand against the assessee and the appeal before it had, therefore, become infructuous. This decision of the Tribunal was challenged before the High Court, which held that the Tribunal ought to have decided the legal question raised by the assessee in the appeal before it and was not justified in dismissing the appeal as infructuous. The real issue involved in this case was that in the appeal against reassessment the assessee had sought two reliefs, one was on the legal ground of invalidity of notice under Section 34 and if the assessee had succeeded in establishing the invalidity the assessment would have become a nullity and there was on question of its being framed afresh. The second relief was that on merits the assessment was not justified on the ground of proper opportunity not having been allowed, etc. In that situation, the assessee could be provided the opportunity by setting aside the assessment with a direction to make it afresh. This kind of relief was a lesser relief. The assessee having been denied the higher relief asked for due to the AAC and the Tribunal not dealing with the legal ground about the invalidity of the notice the view taken by the High Court was quite correct, as the Tribunal had not acted in accordance with the law. The position in the assessee's case is altogether different as the Commissioner (Appeals) has strictly acted in conformity with the law as contained in Section 146 and has not given any lesser relief to the assessee and has given the very relief, which is provided in the law. Superficially the Allahabad High Court's decision may have resemblance with the facts of this case so far as the quantum appeal is concerned but on a closer examination the distinction becomes apparent, consequently, we hold that the appeal against the order of the Commissioner (Appeals) relating to the quantum assessment is also not maintainable before the Tribunal.
9. We may also briefly deal with the authorities cited by the assessee's counsel. One was Radhey Lal Balmukand's case (supra) which was cited to show that the question about a notice under Section 22 of the 1922 Act was allowed to be gone into in an appeal relating to an order under Section 27 of that Act. There can be no dispute about the default with notice under Section 22 being raised in an appeal under Section 27 when that default itself exists and was made the basis of ex parte assessment. In the Allahabad High Court's case that default was there and hence it was allowed to be raised. The default of that nature in the assessee's case is not there and hence it cannot be allowed. The Calcutta High Court authority in Surajmal Ganeshran's case (supra) appears to be of no assistance in the facts and the circumstances of the assessee's case. The High Court noted the fact that the right to appeal from an assessment or reassessment under Section 147 is a general right and if such appeal is admissible then it cannot be said that the assessee is confined only to certain grounds and not others. The High Court had in view the restrictive nature of issues on which an appeal can be filed under Section 246(1)(c) against an assessment framed under Section 143(3) or Section 144 without any recourse to Section 147. In respect of an order of assessment or reassessment under Section 147 a separate Clause (e) was provided in Section 246(1). We are not questioning that position being subsisting in the case of an assessment made by recourse to the provisions of Section 147, etc. and it will be open to the assessee to agitate that question when the ITO takes up the fresh assessment. Here we are concerned with the effect of provisions of Section 146 and the fact of appeals filed against the orders under Sections 146 and 144. The assessee's counsel finally voiced an apprehension on the basis of the Punjab and Haryana High Court decision in Gopal Singh's case (supra) in which the headnote stated that in an appeal against an assessment under Section 23(4) of the 1922 Act, the validity of the notice under Section 34(1)(a) in pursuance of which the assessment was made cannot be raised without resorting to proceedings under Section 27. The headnote may give rise to an apprehension in the mind of the assessee's counsel that the issue of validity of notice under Section 148 could not be raised when the fresh assessment is made by the ITO but this apprehension disappears when the judgment in full is read and its facts are kept in mind. The headnote no doubt does not give the complete picture and is erroneous inasmuch as it does not give the nature of the objection regarding invalidity of the notice. It is clear from the reading of the judgment that the issue was raised before the High Court in respect of an appeal against an order under Section 23(4), i.e., the order in quantum assessment and the nature of the issue was invalidity of the service of the notice under Section 34. We quote the relevant observations of he High Court towards the end of judgment :
...He must have first resort to the proceedings under Section 27 to have the assessment cancelled and if he is denied relief there, he may then appeal against such an order. But he cannot directly appeal against the assessment order questioning the validity of the assessment on the ground that really no proper notice was served on him before the assessment under Sub-section (4) of Section 23 in the wake of notice under Section 34(1)(a) of the Act was given to him....(pp. 842-43) So the issue raised before the High Court was issue of service of the notice under Section 34, which issue could certainly be raised in an application under Section 27. The issue sought to be raised by the assessee before us is of a different nature as he is contesting the jurisdiction and competence of the ITO to act under Section 147. The assessee's counsel lastly also referred to a Madhya Pradesh High Court decision in Rajab Ali Farishta's case (supra) to say that the assessee's contention went to the root of the case and should have been decided first. This authority cannot apply in the assessee's case at this stage when we are dealing with the statutory provisions of Section 146 and the appeals provided. The scope of appeal against an order under Section 146 is as stated by us above.
10. In the result, we dismiss both the appeals of the assessee as incompetent.