Income Tax Appellate Tribunal - Indore
Assistant Commissioner Of Income-Tax vs Tolaram Hassomal on 31 October, 1996
Equivalent citations: [1997]61ITD38(INDORE)
ORDER
Shri Satish Chandra, A.M.
1. These appeals by the revenue arise out of the consolidated order dated 20-11-1991 of the CIT(A)-I, Indore, pertaining to the assessment years 1981-82, 1982-83, 1983-84 and 1984-85 respectively. These involve common issue and, therefore, for the sake of convenience, these appeals were heard together and are being disposed of by this order.
2. The revenue has taken the following substantive grounds :-
(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in annulling the assessment order holding that the notice issued under section 148 and the reassessment order are not valid in law.
(ii) On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the assessment order was not served on the assessee till the time of issue of notice under section 148 and that, therefore, the assessment cannot be considered to have been completed on the returns filed by the assessee before the issue of notice under section 148.
3. Briefly stated, the facts are that the assessee is an individual. He derived income from house property and also 30% share income from the firm, M/s. Tollaram Hassomal, Indore. For the assessment years 1981-82, 1982-83, 1983-84 and 1984-85, the assessee had filed returns of income declaring income of Rs. 18,517, Rs. 22,180, Rs. 23,860 and Rs. 12,580 respectively. In January 1986, a search under section 132(1) was conducted at the residence and business premises of the assessee and his other relatives and business associates. On the basis of the material found in search, notice under section 148 was issued on 2-11-1988 for the assessment year 1984-85 and for other three assessment years on 21-3-1989. The notice under section 148 was served on the assessee on 18-11-1988 and for the other three years on 23-3-1989. In response thereto, the assessee filed returns for the assessment years 1981-82 and 1982-83 on 14-9-1990. For the subsequent two assessment years, no returns were filed but it was stated in letter filed on 15-3-1991 before the Assessing Officer that the returns submitted earlier under section 139 be treated as returns filed in response to notice(s) under section 148. The Assessing Officer commenced reassessment proceedings.
4. During the course of reassessment proceedings, it was contended in reply dated 18-3-1991 that the returns of income were originally filed by the assessee under section 139 and as no orders of assessments have been received by the assessee, the issue of notice under section 148 is illegal and bad in law. This objection was overruled by the Assessing Officer. He observed that the above objection has been taken by the assessee on 14-9-1990 after furnishing the return of income in response to notice(s) under section 148. He further observed that examination of the records of the assessee showed that assessments for assessment years 1981-82 to 1984-85 had been completed earlier than issuance of notice under section 148 for these years. According to him, the assessments for the assessment years 1981-82, 1982-83, 1983-84 and 1984-85 were completed on 7-1-1983, 23-3-1985, 23-3-1985 and 24-12-1985 respectively and were entered in demand and collection register at No. 192/162, 221/82, 222/82 and 120/23 respectively. He also observed that even assuming that the orders have not been served upon the assessee, as these are made under section 143(1) no prejudice has been caused to the assessee. According to him, the fact, however, remains that the orders must have been served upon the assessee, which is clear from the fact that penalty proceedings under section 10CDS have been taken up for these assessment years and the assessee filed replies on different dates. He further stated that penalty under section 10CDS for assessment year 1982-83 has been imposed upon the assessee on 17-3-1989 and the assessee had appealed against the said order. With these observations he proceeded to compute the total income of the assessee and determined his total income at Rs. 1,98,480, Rs. 3,97,400, Rs. 5,33,600 and Rs. 10,61,480 for the assessment years 1981-82, 1982-83, 1983-84 and 1984-85 respectively, in his order dated 26-3-1991 under section 143(3), read with section 147(a), of the Act. Aggrieved, the assessee carried the matter in appeal.
5. Before the CIT(A), it was contended that the assessee had filed returns under section 139 for the assessment years in question. The Assessing Officer was bound to serve the assessment orders after completion of assessments; whether the same resulted in no demand, refund or other liability. It was argued that as the assessment orders have not been served in pursuance of the returns filed by the assessee, the assessments are to be treated as pending and under these circumstances, no notice under section 148 could be issued. Reliance was placed on Satish Chandra Arya v. ITO [1984] 146 ITR 334/[1983] 15 Taxman 86 (MP) and Smt. Jijeebai Shinde v. CGT [1986] 157 ITR 122 (MP). On consideration of the assessee's submission, the CIT(A) recorded the following findings in para 15 :-
"As per the facts available, it is clear that there is no evidence available to show that the assessment orders passed under section 143(1) for the assessment years 1981-82 to 1984-85 were served on the assessee. In spite of the fact that period of two months has been given to the Assessing Officer to rebut the contention of the assessee in this regard, it is noted that the Assessing Officer has not been able to rebut the same, as neither he attended at the time of hearing nor he has filed any written submissions even when the written submissions filed by the assessee were given to the Assessing Officer at the time of earlier hearing. Thus it has to be accepted that the assessment orders claimed to have been passed for the assessment years under consideration were not served on the assessee at least till the time of issue of notices under section 148. Following the decision of Hon. M.P. High Court in the case of Smt. Jijeebai Shinde (supra), it is clear that as the assessment orders have not been served on the assessee, the assessments cannot be considered to have been completed on the returns of income filed by the assessee. Thus as the assessments cannot be considered to have been completed by the time the notice under section 148 were issued, the notice so issued under section 148 are invalid and so are the reassessment proceedings against which the assessee has filed the present appeals."
6. In arriving at the above findings, he applied the ratio of decision in the case of Smt. Jijeebai Shinde (supra). Accordingly, he annulled the notices under section 148 and reassessment orders passed consequent thereto holding them as not valid in law. Dissatisfied, the revenue is in appeal before the Appellate Tribunal.
7. The ld. D.R. submitted that the assessments for the assessment years in question had been completed on the respective dates mentioned by the Assessing Officer in the reassessment order dated 26-3-1991 at page 3 thereof. She frankly admitted that there is no evidence of service of the above assessment order on the assessee framed under section 143(1). She invited our attention to the Assessing Officer's observation on the stand taken by the assessee as to the illegality of the initiation of the reassessment proceedings. She highlighted the point that the original assessments for all these years had been completed under section 143(1) on the date(s) mentioned by the Assessing Officer on page 3 of the order accepting the income disclosed by the assessee in the return(s). She argued that no prejudice had been caused to the assessee, as the income returned by the assessee had been accepted. There was, therefore, no necessity for the assessee to press into service the provisions of clause (a) of sub-section (2) of section 143 of the Act, whereby the assessee had a right to object the assessment(s) framed under section 143(1) of the Act. She also argued that the Assessing Officer has mentioned the circumstances, which go to establish that the assessments had, in fact, been made on the date(s) noted by him in the order. The Assessing Officer has pointed out the penalty proceedings under section 10 CDS and even imposition of penalty under the said section for assessment year 1982-83 against which appeal was preferred by the assessee. She vehemently argued that merely because the record of the Assessing Officer does not contain proof of service of the original assessment order(s) framed under section 143(1) for these years, the initiation of reassessment proceedings by following the procedure prescribed under law cannot be held to be vitiated. In support of her arguments, reference was made to the decision in the case of CIT v. Miss Swarn Taneja [1990] 186 ITR 348 (MP) (relevant observations at page 351). She, therefore, submitted that the order of the CIT(A) is not sustainable and deserves to be set aside. The ld. A.R., on the other hand, strongly supported the order of the CIT(A). According to him, the service of the assessment order in the manner prescribed under section 282 of the I.T. Act is essential. In this connection, he referred to Circular No. 10D of 1048 dated 15-4-1948 and Circular No. 1 of 1950 dated 24-4-1950 as also decision in CIT v. Sree Narayana Chandrika Trust [1995] 212 ITR 456/81 Taxman 199 (Ker.) (relevant page 474). He filed a copy of Supreme Court decision in Smt. Kilashadevi Berman v. CIT JT 1996 (2) SC 555 in support of the proposition that it is necessary that the assessment order and the computation of tax sheet should be signed by the Assessing Officer. He further argued that an order of assessment is a property and a valuable security as held by the Supreme Court in Ishwarilal Girdharilal Parekh v. State of Maharashtra [1968] 70 ITR 95. The revenue, therefore, cannot be allowed to prove service of assessment order by circuitous route/method. He also submitted that for presentation of an appeal, the assessment order is essential under section 249(1) of the I.T. Act and in this connection referred to the decision of Bombay High Court in Rasiklal Amritlal Doshi v. A. Nundi, Addl. ITO [1961] 42 ITR 35 and argued that the assessment order under section 143(1) for these years had not been served upon the assessee. He argued that so long as the assessment is pending, the Assessing Officer cannot have reason to believe that income has escaped assessment. In this connection, reference was made to the decision of Allahabad High Court in S.P. Kochhar v. ITO [1984] 145 ITR 255/[1983] 13 Taxman 414. He invited our attention to the observations of the CIT(A) that despite opportunity allowed to the Assessing Officer, the Assessing Officer could not prove the service of original assessment order(s) under section 143(1) for these years. He, therefore, submitted that the initiation of reassessment proceedings by issue of notice(s) under section 148 was invalid and the CIT(A) was justified in annulling the issuance of notice(s) under section 148 and consequent reassessment orders for these years.
8. We have considered the rival submissions, perused the documents made available to us as also the decisions cited by the parties. The controversy involved in this case is in a very narrow compass. It is an admitted position that the assessee had filed his returns of income for the assessment years 1981-82 to 1984-85 under section 139 of the Act. The stand of the revenue is that the assessments for all these assessment years had been made under section 143(1) of the Act prior to issue of notice(s) under section 148 of the Act for the above assessment years. According to the revenue, there are over-whelming evidence on the records of the Assessing Officer which go to establish the factum of completion of assessment for all these assessment years under section 143(1) of the Act prior to issue of notice under section 148 of the Act. True, the onus of proving the service of assessment order(s) and the notice(s) of demand is on the revenue. It is, however, admitted by the revenue that there is no proof of service on the records. In the peculiar facts and circumstances of the case in hand, it is for consideration whether merely because proof of service of assessment order(s) under section 143(1) for all these assessment years are not on the records of the Assessing Officer, it necessarily follows that the said assessments had not been completed, notwithstanding the fact that there are over-whelming evidence to establish the factum of completion of assessment for these years prior to issue of notice(s) under section 148 of the Act for all these assessment years.
9. As stated earlier, it is not at all in dispute that the assessee had filed return(s) for the assessment years 1981-82 to 1984-85 under section 139 of the Act. Before us, the revenue has filed a paper book on 3-1-1996 consisting of 27 pages along with a certificate at the end of the index that the documents referred therein are on the records of the Assessing Officer. We find that the paper book filed by the revenue is in conformity with rule 18 of the Income-tax (Appellate Tribunal) Rules, 1963. On page 2 thereof is copy of assessment order dated 7-1-1983 under section 143(1) of the Act accepting the income returned at Rs. 18,570 for the assessment year 1981-82. On page 3 is ITNS-150 Form dated 7-1-1983 for this very assessment year, whereby refund of Rs. 2,823 was worked out as a result of excess payment of advance tax. This form mentioned Sl. No. in Demand & Collection Register as 192/162. In the cage provided at the bottom of the said form, record of refund is maintained. As per the said record, refund of Rs. 2,823 was issued on 5-2-1983. This is duly signed by the concerned authorities including the ITO. On page 4 thereof is the first foil of the refund voucher bearing No. B-633223 dated 5-2-1983 giving the D&C.R. No. 192/162. The assessee encashed the said refund of Rs. 2,823 on 4-5-1983, which finds mention at Sl. No. 82 of the Daily Refund Register 1983-84 (copy at page 5 of the paper book). It is, thus, evident that assessment for the assessment year 1981-82 had been framed under section 143(1) on 7-1-1983, which resulted in refund of Rs. 2,823. The refund voucher which was account payee and in the name of the assessee was issued for the said amount on 5-2-1983, which was duly encashed by the assessee on 4-5-1983. At this juncture, it may be stated that notice under section 148 was issued on 21-3-1989 for assessment year 1981-82, which was served on the assessee on 23-3-1989.
10. On page 11 of the revenue's paper book is assessment order dated 23-3-1985 under section 143(1) accepting the income returned at Rs. 22,180 for the assessment year 1982-83. It was entered at Sl. No. 221/82 in Demand & Collection Register. At page 10 of the paper book is ITNS-150 Form, according to which, the assessment resulted in refund of Rs. 1,791 after adjustment of advance tax paid by the assessee at Rs. 3,690. This form is duly signed by the concerned authorities including the ITO on 23-3-1985. One noticeable feature is that there seems to be change in the incumbency of the ITO, as the assessment order for the assessment year 1982-83 was made by an ITO other than the ITO who framed assessment for the assessment year 1981-82. At this stage, it may be stated that notice under section 148 was issued on 21-3-1989 by yet another incumbent who was ACIT and not ITO who had completed the assessment under section 143(1) on 23-3-1985 for the assessment year 1982-83.
11. The assessment for assessment year 1983-84 was also made under section 143(1) on 23-3-1985 accepting the income returned at Rs. 23,860. It was entered at Sl. No. 222/82 in D&C.R. As per ITNS-150, the assessment had resulted in refund of Rs. 376. The assessment order and ITNS form appear at pp. 15-16 of the paper book. For the assessment year also, the notice under section 148 was issued on 21-3-1989, which was served on the assessee on 23-3-1989.
12. Assessment for the assessment year 1984-85 was made on 24-12-1985 under section 143(1) accepting the income returned at Rs. 12,580 by yet another incumbent ITO. The entry in D&C.R. was made at Sl. No. 120/23. As per ITNS-150 form, the assessment had resulted in refund of Rs. 2,090 for which refund order was issued on 3-1-1986. Copy of assessment order dated 24-12-1985, ITNS form and first foil of refund voucher bearing No. 382856 are available at pp. 22, 20-21 and 23 of the paper book respectively. The said refund voucher was encashed by the assessee on 5-2-1986 as per entry at Sl. No. 2512 in local treasury unit (L.T.U.) register for 1985-86 (copy at page 6 of paper book). At this stage, it may be stated that notice under section 148 was issued on 2-11-1988 for the assessment year 1984-85, which was duly served on the assessee on 18-11-1988.
13. As stated earlier, the assessee derives 30% share income from the firm, M/s. Tollaram Hassomal, Indore. It appears that the assessments under section 143(1) for all the assessment years involved were made by accepting the share income of the assessee from the said firm subject to rectification on completion of firm's assessment. On completion of the firm's assessment, the share income of the assessee had to be adopted as per firm's assessment by resorting to provisions of section 155 of the Act. Accordingly, a notice dated 7-5-1987 under section 155 of the Act was issued to the assessee for the assessment years 1983-84 and 1984-85, a copy of which appears at page 27 of the paper-book. This notice was served on the assessee on 8-5-1987. There is a noting thereon whereby the assessee's counsel had recorded his no objection to the proposed rectification. This is dated 15-5-1987. The rectificatory action had resulted in demand of Rs. 37,460 for the assessment year 1984-85, which is evident from notice of demand served on the assessee on 6-6-1987 (copy at page 26 of the paper book).
14. From the facts narrated above, it is obvious that in the case of the assessee not only that the assessments under section 143(1) had been framed for all these years but these assessments had resulted in refund to the assessee on account of excess payment of advance tax. In the case of C.M. Jaffar Khan v. CIT[1966] 62 ITR 199 the assessee had filed his return including therein share income from the firm in which he was a partner. The ITO did not make any specific order of assessment on that return. Nonetheless, he refunded a sum of Rs. 641-3-0 Ps. to the assessee. On these facts, their Lordships of the Mysore High Court observed that from the admitted facts it is clear that the ITO had accepted the return of the assessee. Otherwise he could not have ordered the said refund to the assessee. Their Lordships further observed that the fact that there was no assessment order as such is wholly immaterial. For the above observations, their Lordships derived support from the decision of the Supreme Court in Esthuri Aswathiah v. ITO [1961] 41 ITR 539. Their Lordships finally held that an order for making a refund on the basis of a return submitted by an assessee amounts to an order of assessment. As stated earlier in the case before us, the Assessing Officer had made an order for making a refund on the basis of return filed by the assessee for all the four assessment years involved. If the ratio of the decisions (supra) are applied to the facts of the case in hand, it has to be held that assessments for all these assessment years had been completed. The case of the revenue is on a better footing inasmuch as the assessments for all these assessment years had duly been completed under section 143(1) of the Act resulting in an order of refund in all these years. The facts narrated above go to establish that the assessments under section 143(1) had been completed for all these assessment years prior to the issue of notice(s) under section 148 of the Act. These facts are available on the records of the Assessing Officer. It is well established that the powers of the CIT(A) are co-terminus with that of the Assessing Officer. He could have very well examined the factual position outlined above from the records which he chose not to do. Had he done so, it would have been well-neigh-impossible for him to arrive at the conclusion which he did that the original assessments were pending at the time when reassessment proceedings were initiated by issue of notice(s) under section 148 of the Act for all these assessment years involved. Since the proof of service of the original assessment orders framed under section 143(1) of the Act was not on the records, production of the same by the Assessing Officer as insisted upon by the CIT(A) was an impossibility. His findings extracted above are based entirely upon the premise that the revenue had no proof of having served the assessments framed under section 143(1) for all these years. On this premise alone, in our considered view, the findings recorded by the CIT(A) are not sustainable. On the facts already narrated and in the face of evidence available on the records of the Assessing Officer, it could not be said that the original assessments for all these assessment years were pending disposal at the time reassessment proceedings commenced by issue of notices under section 148 of the Act.
15. Now we proceed to the next step that if the returns filed by the assessee had been disposed of by assessment orders framed under section 143(1) of the Act for all these years, whether notice under section 148 could validly be issued even if the assessment orders were not communicated to the assessee. In the case of M. CT. Muthuraman v. CIT[1963] 50 ITR 656 (Mad.), the returns for assessment years 1953-54 and 1954-55 were closed by the ITO with the remarks 'not assessed'. Subsequently notices under section 34(1) = 147(a) were issued. The assessee had contended that the assessment proceedings with reference to the returns filed by the assessee must be deemed to be pending and as such recourse to section 34(1) of the Act was invalid during pendency of the assessment proceedings. Their Lordships of the Supreme Court held that the proceedings were lawfully terminated by the remark 'N.A.' on the assessment file and the notice under section 34 were not invalid. The fact that the order was not communicated to the assessee was immaterial. In yet another case of V.S.S. Sivalingam Chettiar v. CIT [1966] 62 ITR 678 (Mad.), the assessee had filed returns for the assessment years 1955-56 and 1956-57. On the returns filed by the assessee, the ITO had noted 'N.A.'. The orders were, however, not communicated to the assessee. The ITO sought to re-open the assessment of those years which was objected to by the assessee on the ground that the returns filed by the assessee had not been disposed of. When the matter came before their Lordships of the Madras High Court, they held that the failure of the officer to serve the orders of assessment had not the effect of rendering them invalid because they were neither prejudicial to the assessee nor did they fasten any liability on them nor did they contain any finding which can be said to be prejudicial to him as an individual and a strict reading of the Act does not contemplate service of notice in such cases but only in cases where the orders passed are prejudicial to the assessee. As stated earlier, in the case in hand, the assessment orders framed under section 143(1) of the Act did nut cause any prejudice to the assessee, as the income shown by the assessee in the returns of the respective assessment years had been accepted. The tax payable by the assessee was determined and after adjustment of the advance tax paid by the assessee in the respective assessment years, the order(s) of the refunds were issued. On these facts we have no hesitation in holding that even the lack of communication of the assessment orders in the face of the facts narrated above would not lead to the conclusion that the assessment proceedings were pending when notices under section 148 of the Act were issued for the assessment years involved. In taking this view, we derive support from the decision of Kerala High Court in CIT v. K.H. Parameswara Bhat [1974] 97 ITR 90.
15A. We have perused the decision in the case of Smt. Jijeebai Shinde (supra). This decision was rendered under the Gift-tax Act in the context of revisionary powers of the CGT under section 24(2) of the Gift-tax Act, 1958. It may be stated that the ratio of this decision is inapplicable to the facts of the assessee's case so also the decisions relied upon by the ld. counsel for the assessee before us. We may state that the decision of the Mysore High Court in C.M. Jaffar Khan's case (supra) wherein it has been held that an order allowing a refund on the basis of the return filed by the assessee amounts to an order of assessment has been affirmed by the Hon'ble Supreme Court in CIT v. C.M. Jaffar Khan [1972] 83 ITR 339. The case of the assessee before us is that of a search, wherein on the basis of the incriminating material and documents, the Assessing Officer had reason to believe that substantial income had escaped assessment for all the assessment years involved. Following the ratio of decision (supra) of the Apex Court, we hold that on the facts and in the circumstances of the assessee's case, the proceedings under section 147(a) had been validly initiated. We, therefore, set aside the orders of the CIT(A) for all these years and direct him to decide the appeal on merit after allowing opportunity of being heard to the parties.
16. In the result, all the appeals of the revenue are hereby allowed.