Income Tax Appellate Tribunal - Amritsar
Sharma And Co. vs Assistant Commissioner Of Income Tax on 14 June, 2004
Equivalent citations: (2004)85TTJ(ASR)1
ORDER
U.B.S. Bedi, J.M.
1. This appeal of the assessee is directed against the order passed by the learned CIT(A), Bhatinda, dt. 11th Jan., 2000, relevant to the asst. yr. 1994-95 wherein the assessee has raised the following grounds :
"1. That assessment framed is time-barred, hence void ab-initio.
2. That appeal is within time, jurisdiction and is in order, and required fee is deposited as per attached.
3. That appellant reserves the right to amend, advance any arguments, at the time of hearing."
2. The action of the AO was challenged in appeal before the first appellate authority and it was contended that the AO's action in completing the assessment under Section 143(3) when the same got barred by limitation, hence is void ab initio. It was further contended that assessee filed the IT return in response to notice under Section 148 on 26th March, 1998. The AO issued the notices under Sections 143(2) and 142(1) on 9th Aug., 1999, i.e., after the expiry of 12 months from the end of the month in which the return is furnished. As per Section 148 the provisions of this Act shall apply to the return filed under Section 148 as if such return is a return required to be furnished under Section 139, and as per proviso to Section 143(2) where a return has been made under Section 139, no notice under Section 143(2) shall be served on the assessee after the expiry of 12 months from the end of the month in which the return is furnished. The AO issued the notice under Section 143(2) after the expiry of 12 months from the end of the month in which the return is furnished, so the assessment framed is time-barred and, hence void ab initio and may be quashed.
3. The learned CIT(A) while considering but not accepting the plea of the assessee has concluded to confirm the order of the AO as per para 3 of his order as under :
"I have given careful consideration to the rival submissions made by the learned Authorised Representative of the appellant and found that there is no matter in it. The appellant filed the return of income declaring income of Rs. 82,000 on 31st Oct., 1994. This return was duly processed under Section 143(1)(a) on 23rd Nov., 1994, without making any prima facie adjustment. The case was selected for scrutiny and the assessment was framed on 26th Dec., 1995, on total income of Rs. 94,530. However, it was noticed later that the appellant had received income-tax refunds during the relevant previous year and the interest received by the appellant on the amount refundable has not been included in the total income of the year. The interest on income-tax refunds was of Rs. 35,004 which has escaped the assessment and accordingly notice under Section 148 was issued on 27th Feb., 1998, in response to which the appellant filed the return on 26th March, 1998, declaring income of Rs. 1,45,870. The income declared was duly accepted by the AO by passing an order under Section 143(3) dt. 28th Oct., 1999. The assessment framed under Section 143(3) is framed in a manner as the return is processed under Section 143(1) as the returned income has been accepted. The fact remained that the appellant failed to declare his income by virtue of interest on income-tax refunds suo moto and hence the same was brought to tax by issuing notice under Section 148 of the IT Act, 1961. Issue of notice under Section 143(2) is just a formality to taxing the actual income of the appellant. The assessment framed by the AO under Section 143(3) is in order even when the notice under Section 143(2) is not issued in time by virtue of the provisions of Section 292B of the IT Act, 1961. Keeping in view all the factual positions into consideration I hold that the assessment framed is as per law and hence the same stands confirmed."
4. Still aggrieved, the assessee is in further appeal.
5. In terms of notice issued, the assessee did not choose to be present on the date of hearing but filed following written submissions with the prayer that the appeal may be accepted. The written submissions are reproduced hereunder :
"The assessee has filed the IT return in response to notice under Section 148 for asst. yr. 1994-95 on 26th March, 1998, and notice under Sections 142(1) and 143(2) were issued on 9th Aug., 1999, i.e., after the expiry of twelve months from the end of the month in which the return is furnished. As per Section 148 the provisions of this Act shall apply to the return filed under Section 148 as if such return is a return required to be furnished under Section 139. And as per Section 143(2) where a return has been made under Section 139, no notice under Section 143(2) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. In our case notice under Section 143(2) is issued after the expiry of twelve months from the end of the month in which the return is furnished, so the assessment framed is time-barred, hence void ab initio. Learned CIT(A), Bhatinda, has erred in allowing the assessment framed by AO under Section 143(3) even when the notice under Section 143(2) is not issued in time by virtue of the provisions of Section 292B of the IT Act, 1961, whereas no time-limit is prescribed under Section 292B of the IT Act, 1961, which reads as under :
'No notice of income, assessment, notice, summons or other proceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act.'
6. The learned Departmental Representative, on the other hand, relied upon the orders of the authorities below and pleaded for confirmation of the same. It was further submitted that assessment to be framed in relation to the return filed under Section 139 and reassessment in relation to the return filed in response to notice under Section 148 are on different footing. No doubt, return filed in response to notice under Section 148 for limited purpose is to be treated as a return required to be furnished under Section 139 but so far as time-limit as prescribed for issuance of notice as envisaged in proviso to Section 143(2) is concerned, the same cannot be applied to reassessment proceedings because in reassessment proceedings, only for the purpose of giving opportunity notice under Section 143(2) is to be issued but so far as time-limit is concerned, the same cannot apply to reassessment proceedings. Therefore, the plea of the assessee in this regard is unjustified. Since it is a case where return has been filed in response to notice under Section 148 and as per the provisions contained in Section 148(1), the provision of the Act shall 'so far as may be, apply' accordingly and Hon'ble Supreme Court has already interpreted these words to mean "to the extent necessary and practical". So entire provision of Section 143(2) cannot be held applicable in such situation in this case thus the action of the authorities below is correct and justified which requires further confirmation. It was thus urged for upholding of impugned order.
7. We have considered the arguments of learned Departmental Representative, written submissions of the assessee, relevant provisions of law and material on record. In this case, the point for consideration is whether while completing assessment or reassessment, the time-limit of one year as contained in proviso to Section 143(2) for service of notice from the end of the month in which return in response to notice under Section 148 has been filed is to be applied or not.
8. It would be relevant to look into Sub-section (1) of Section 148 which reads as under :
"Before making the assessment, reassessment or recomputation under Section 147, the AO shall serve on the assessee a notice requiring him to furnish within such period, 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, 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."
9. As is seen from the above, the significant relevant phrase is "so far as may be, apply" and this phrase came for consideration before the Pune Bench of the Tribunal in the case of Vijay Kapoor v. Dy. CIT in ITA No. 340/Pn/2002, Block period, 1st April, 1988 to 9th Sept., 1998, dt. 13th March, 2003, [reported in (2004) 86 TTJ (Pune) 1079] (authored by one of us, JM) in the context of time-limit as prescribed in proviso to Section 143(2) in relation to the assessment under Chapter XIV-B wherein similar provision as envisaged in Clause (b) of Section 158BC was under consideration and the relevant portion of the order is reproduced as under :
"As is seen from the above, the significant relevant phrase is "so far as may be, apply" and it is not a case of lifting of provisions of Section 143/142/144 as it is but has made its application conditional with the said phrase and this phrase came up for consideration before various Courts including Hon'ble Supreme Court on more than one occasion and in the case of Dr. Pratap Singh & Am. v. Director of Enforcement & Ors. (supra) it has opined at pp. 173-174 as under :
'Section 37(2) provides that 'the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(1)'. Reading the two sub-sections together, it merely means that the methodology prescribed for carrying out a search provided in Section 165 has to be generally followed. The expression 'so far as may be' has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that Section 165(1) has been incorporated by pen and ink in Section 37(2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under Section 37(1). If Section 165(1) were to be incorporated by open and ink as Sub-section (2) of Section 37, the legislative draftsmanship will leave no for doubt by providing that the provisions of CrPC. relating to searches shall apply to the searches directed or ordered under Section 37(1) except that the power will be exercised by the Director or Enforcement or other officer exercising his power and he will be substituted in place of the Magistrate. The provisions of Sub-section (2) of Section 37 have not been cast in any such language. It merely provides that the search may be carried out according to the method prescribed in Section 165(1). If the duty to record reasons which furnish grounds for entertaining a reasonable belief were to be recorded in advance, the same could have been incorporated in Section 37(1), otherwise a simple oneline section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in Section 165 of the Code by the officer to be set out in the section. In order to give full meaning of the expression 'so far as may be', Sub-section (2) of Section 37 should be interpreted to mean that broadly, the procedure relating to search as enacted in Section 165, shall be followed. But, if a deviation becomes necessary to carry out the purposes of the Act in which Section 37(1) is incorporated, it would be permissible except that when challenged before a Court of law, justification will have to be offered for the deviation. This view will give full play to the expression "so far as may be'.
9. In another case, the Bench of 5 Judges of the Hon'ble Supreme Court in the case of Ujagar Prints v. Union of India & Ors. (1989) 179 ITR 317 (SC) has ruled to describe referential legislation and meaning of 'so far as may be' and has held as under :
'The next question that arises for consideration is, whether, even assuming that the terms of Section 3(3) are applicable, its terms are wide enough to take in not merely the provisions of the Central Excises and Salt Act, 1944, and, in particular, its definition clauses, as they stood in 1957, on the date when the 1957 Act came into force, but also the amendments effected therein from time to time. The answer to this question depends upon the general principles applicable to what is described as 'referential legislation' of which this is an instance. Legislatures sometimes take a short cut and try to reduce the length of statutes by omitting elaborate provisions where such provisions have already been enacted earlier and can be adopted for the purpose of hand. While, on the one hand, the prolixity of modern statutes and the necessity to have more legislations that one on the same or allied topics render such a course useful and desirable, the attempt to legislate by reference is sometimes overdone and brevity is achieved at the expense of lucidity. However, this legislative device is quite well known and the principles applicable to it are fairly well-settled.
Referential legislation is of two types. One is where an earlier Act or some of its provisions are incorporated, by reference, into a later Act. In this event, the provisions of the earlier Act or those so incorporated, as they stand in the earlier Act at the time of incorporation, will be read into the later Act. Subsequent changes in the earlier Act or, the incorporated provisions will have to be ignored because, for all practical purposes, the existing provisions of the earlier Act have been reenacted by such reference into the later one, rendering irrelevant what happened to the earlier statute thereafter. Examples of this can be seen in Secretary of State v. Hindustan Co-op. Insurance Society AIR 1931 PC 149, Bolani Ores Ltd. v. State of Orissa AIR 1975 SC 17, Mahindra & Mahindra Ltd. v. Union of India (1979) 49 Comp. Cas 419 (SC) : AIR 1979 SC 798. On the other hand, the later statute may not incorporate the earlier provisions. It may only make a reference of a broad nature as to the law on a subject generally, as in Bajya v. Smt. Gopikabai (1978) 3 SCT 561, or contain a general reference to the terms of an earlier statute which are to be made applicable. In this case, any modification, repeal or reenactment of the earlier statute will also be carried into the later, for here, the idea is that certain provisions of an earlier statute which become applicable in certain circumstances are to be made use of for the purpose of the later Act also. Examples of this type of legislation are to be seen in Collector of Customs v. Nathella Sampathu Chetty (1962) 3 SCR 786, New Central Jute Mills Co. Ltd. v. Asstt. Collector (1971) 2 SCR 92 and Special Land Acquisition Officer, City Improvement Trust Board v. P. Govindan (1977) 1 SCR 549. Whether a particular statute falls into the first or second category is always a question of construction. In the present case, in my view, the legislation falls into the second category. Section 3(3) of the 1957 Act does not incorporate into the 1957 Act any specific provisions of the 1944 Act. It only declares generally that the provisions of the 1944 Act shall apply 'so far as may be', that is, to the extent necessary and practical, for the purposes of the 1957 Act as well.'
10. As is clear from the abovenoted two authoritative pronouncements of Hon'ble Supreme Court of India out of which later one is of Constitutional Bench, which makes the meaning of the phrase 'so far as may be' amply clear, that is, 'to the extent necessary and practical', therefore, for the purpose of block assessment provisions of Section 143(2) can be applicable to the extent necessary and practicable as the provisions of Section 158BC(b) do not incorporate specific provisions of Section 143(2) and it only declares generally that provisions of Section 143(2) shall apply 'so far as may be' and if the relevant provisions in relation to the manner of assessment of undisclosed income as detected in the search, the issuance of notice, filing of the return in Form 2B and period of completion of assessment, etc. as given in Chapter XIV-B is seen it would transpire that only for giving opportunity, recourse to Section 143(2)/142(1) can be taken, especially when Section 158BC(b) does not incorporate Section 143(2) specifically. So far as assessment under Chapter XIV-B is concerned, the same cannot be equated either with the assessment and reassessment under Section 147 or assessment under Section 143(3) or 144. This view gets further strengthened by the Hon'ble Gujarat High Court decision where clear distinction has been brought out with regard to normal assessment, assessment and reassessment of escaped turnover, and assessment of undisclosed income detected in a search, and it has been held that the exercise under Section 143(2) and (3) for regular assessment stands in contrast to the exercise of the AO under Section 158BB r/w Section 158BC(b) and further that requirement of Section 142 can never be read into the provisions of Section 143(2). While distinguishing normal assessment from block assessment under Chapter XIV-B, the Hon'ble Gujarat High Court in the case of N.R. Paper & Board Ltd. & Ors. v. Dy. CIT (1998) 234 ITR 733 (Guj) has held as under :
'Chapter XIV-B of the IT Act, 1961, lays down a special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of search. Under Section 158BB(1) r/w Section 158BC of the IT Act, 1961, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed in the normal regular assessment under Section 143(3). This exercise under Section 143(2) and (3) for regular assessment stands in contrast to the exercise of the AO under Section 158BB r/w Section 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted under Section 132 of the Act. The regular assessment is to assess the total income or loss of the previous year where a return is filed under Section 139 and the AO, considers it necessary or expedient under Section 143(2) to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid tax in any manner.
There was a search and seizure operation in the case of the assessee and the block assessment under Chapter XIV-B of the said Act was made for the block period from 1st April, 1985, till 6th Jan., 1996, which included asst. yr. 1995-96. In those proceedings, the total income of the said period was worked out in accordance with the provisions of Section 158BB of the Act and after giving credit for the amount disclosed, the assessment order was made. The assessees' appeals in respect of the said assessment orders passed under Chapter XIV-B of the Act were pending before the Tribunal. The issued notices to the assessees under Section 143(2) with a view to completing the assessment for the asst. yr. 1995-96 pursuant to the returns filed by the assessees'. In a writ petition it was contended by the assessees that the total income for the asst. yr. 1995-96 was already computed in the assessment orders for the block period and, therefore, no regular assessment for the asst. yr. 1995-96 could be computed and that the returns of income filed by them in respect of the asst. yr. 1995-96 was required to be filed.
Held, (i) that the notices issued under Section 143(2) were in respect of the regular assessment and the AO was within his jurisdiction to proceed with the same as per Section 143(3) and make a regular assessment of the total income/loss of the previous year for the asst. yr. 1995-96, notwithstanding the fact that the said previous year was included in the block period for the purpose of assessment of the undisclosed income and that such assessment was already done, and was the subject-matter of challenge before the Tribunal. Any question or problem that may arise in implementing the said provision or other provisions of Chapter XIV-B had no bearing whatsoever on the question whether the AO had jurisdiction to proceed with the regular assessment for the asst. yr. 1995-96 in the case of the assessee;
(ii) that there is no need to give any reasons or grounds for proceeding with such regular assessment and the requirement of Section 147 of there being reason to believe that any income chargeable to tax has escaped assessment, can never be read into the provisions of Section 143(2). The only requirement for issuance of the notice under Section 143(2) for calling upon the assessee to attend office and produce evidence in support of the returns is that the AO should consider it necessary or expedient to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid the tax in any manner.'
11. In another case titled R. Dalmia & Anr. v. CIT (1999) 236 ITR 480 (SC), where the question about the procedure prescribed in Section 144B is to be applied even to assessment and reassessment under Section 147 and extended period of limitation prescribed by Expln. l(iv) to Section 153 has to be applied, the Hon'ble Supreme Court has opined as under:
'If, therefore, the procedure that is prescribed by Section 144B is to be applied even to assessments and reassessments under Section 147 and, as we have stated, we think it must, having regard to the terms of the provisions of the Act hereinbefore referred to, as also because the provisions of Section 144B are intended to safeguard the interest of the assessee, the extended period of limitation prescribed by Expln. 1(iv) to Section 155 must apply.
It was submitted on behalf of the assessee that the provisions of Section 144B were not applicable to assessments and reassessments under Section 147 because Section 144B stated that it applied only to 'an assessment to be made under Sub-section (3) of Section 143'. The submission cannot be accepted because the words we have quoted from Section 148 cannot be ignored. A notice having been issued under Section 148, the procedure set out in the sections subsequent to Section 139 has to be followed 'so far as may be'. Section 144B is a procedural provision. It fits into the procedural scheme as hereinbefore noted and, therefore, it cannot be excluded by reason of the use of the words 'so far as may be'. Nor is there any other good reason to exclude it from the procedure to be followed subsequent to notice under Section 148.' While holding so, the Judges of the apex Court did not cast any doubt that assessment under Section 143 and assessment and reassessment under Section 147 are different.
12. Keeping in view the discussion as held above in foregoing paragraphs, considering the language as used in Clause (b) of Section 158BC and other provisions of Chapter XIV-B, the provisions of Section 143(2) are found to be applicable to the extent necessary and practical. Since the assessment under Section 143(3) relates to normal assessment, assessment and reassessment under Section 147 relate to income escaping assessment, and assessment under Chapter XIV-B relates to undisclosed income found during the search and seizure operation, therefore, these are different and distinct in character, as has been held by the Courts and the words 'so far as may be apply' give the meaning 'to the extent necessary and practical'. Therefore, in my considered view, provision of Section 143(2) in its entirety cannot be made applicable to block assessment and same can be to the extent and for the purposes of opportunity only as same are necessary and practicable in terms of provisions and scheme of Chapter XIV-B of the Act. Therefore, the plea of the assessee in this regard is found to be untenable and as such is rejected. Case law relied upon by learned counsel is found to be not applicable in view of Hon'ble Supreme Court's latest decision.
10. Subsequently, the interpretation of the said phrase in the context of block assessment in relation to the period of limitation as envisaged in the proviso to Sub-section (2) of Section 143 came up for consideration before the Special Bench of Tribunal, Pune, when during the hearing decision as referred to above, was also relied upon by the Departmental Representative and Lucknow Bench in the case of Nawal Kishore & Sons Jewellers v. Dy. CIT (2003) 81 TTJ (Lucknow)(SB) 362 : (2003) 87 ITD 407 (Lucknow)(SB) has taken a similar view.
11. Similarly, the Pune Bench of the Tribunal has already taken a view in the context of assessment/reassessment under Section 148 in the case of ITO v. Master Vishal D. Lagade in ITA No. 683/PN/2000 for the asst. yr. 1993-94, dt. 24th March, 2002 (in which one of us is a party), to the effect that time-limit as envisaged in proviso to Section 143(2) will not apply in relation to the assessment completed consequent upon the notice issued under Section 148 of the Act.
12. Since all the provisions of the Act "so far as may be, apply" as envisaged under Section 148(1) which is the phrase used in relation to assessment under Chapter XIV-B in Section 158BC(c) and "so far as may be, apply" has been interpreted not only by various Benches but also the Special Bench of the Tribunal to mean "to the extent necessary and practical", therefore, in our considered opinion, provision of Section 143(2) in its entirety cannot be made applicable to the assessment/reassessment under Section 147 which relates to the income escaped assessments and the same can be to the extent and for the purpose of opportunity only as same is necessary and practical for scheme of provisions relating to escapement of income. Therefore, the plea of the assessee in this regard is found to be not tenable, which is rejected.
13. So far as the case on merits is concerned, nothing more than what is submitted before the lower authorities or contended in the written submissions is produced. In the absence of any material or evidence and considering the fact that the interest on refundable amount is chargeable to tax, therefore, we are not inclined to interfere with the order passed by the learned CIT(A), who is found to have appropriately considered all the pleas as raised before him and arrived at a correct conclusion. Therefore, finding no substance in the appeal of the assessee on merits also, we agree with the findings and conclusion of the learned CIT(A), and dismiss the appeal of the assessee.
14. As a result, the appeal is dismissed.