Income Tax Appellate Tribunal - Agra
Chandra Bhan Bansal vs Dy. Cit on 29 July, 2001
Equivalent citations: (2004)90TTJ(AGRA)635
ORDER
Kesha W Prasad, A.M.:
The cross appeals have been directed by the assessee as well as by the revenue against the order of the Commissioner (Appeals) dated 31-7-1992, pertaining to assessment year 1988-89. For the sake of convenience, we will first take up the appeal directed by the assessee.
2. In the ground of appeal Nos. 1 and 2, the assessee has challenged issue of notice under section 148 of the Act.
2.1 Briefly the facts of the case are that search and seizure operation under section 132 of the Act in the case of M/s Chandra Saw Mills and M/s Chandra Traders and its partners as well as other cases of the Group took place on 19-1-1989. Shri Anil Chand, Surendra Chand and Shri Sunil Chand were partners in the said firm. The assessee is father of these partners. During the search and seizure operation, certain incriminating documents were found. It was at that time that it was noted that the assessee was not assessed to tax. The assessing officer was of the belief that the assessee's income was above taxable limit and by not filing the return of income, his income has escaped assessment. So, he issued notice under section 148 of the Act on 8-11-1989 for filing the return of income. In response to such notice, the assessee filed return of income on 30-11-1990 disclosing the taxable income of Rs. 1,65,000. The tax on the returned income was also paid. Fresh assessment proceedings started thereafter. However, the assessee got stay of the proceedings from the Hon'ble Allahabad High Court vide order dated 24-2-1992. However, the Hon'ble Allaliabad High Court held that assessment proceedings or this year may continue. In his assessment order under section 144 of the Act, the assessing officer relied on his order under section 132(5) of the Act and computed the assessee's income at Rs. 22,73,000, which was also computed in the order under section 132(5).
2.2 On appeal, it was inter alia claimed that the assessment order was ab initio .void as the notice under section 148 was not served on the assessee. Reliance was placed in the case of Laxmi Narain Anand Prakash (1980) UPTC 125. It was also claimed that in the case of notice under section 148, no status of the assessee was mentioned as the assessee may have different statutes. The notice without mentioning the status of the addresses was invalid and an order passed consequence to such notice was also invalid. Reliance was placed on the decision of Calcutta High Court in the case of Bhagwan Devi Saraogi v. ITO (1979) 118 ITR 906 (Cal). However, the Commissioner (Appeals) rejected both the preliminary grounds by holding that notice under section 148 was duly served on 10-11-1989 on Shri Sunil Chandra son of the assessee, The assessee himself has treated such notice to be a legally valid notice and filed his return of income in response to such notice. The tax on the returned income was also deposited by the assessee suo moto. As regards the status of the assessee, the Commissioner (Appeals) has held that there was no dispute about the status of the assessee as the assessee was an individual. The notice was issued in his name and the assessment order has also been made in his name.
2.3 It was also claimed that the assessment order passed by the assessing officer was barred by limitation, in so much as the notice under section 143(2) was issued beyond the time prescribed in proviso to section 143(2). The Commissioner (Appeals) dismissed this plea also by observing that section 143(2) provides for return to be filed under section 139 or a return filed in response to a notice under section 142(l). A return filed in response to section 148 does not find place in proviso to section 143(2). The Commissioner (Appeals) also considered various additions on merits. After considering these additions, the Commissioner (Appeals) confirmed the addition to the extent of Rs. 11,38,000 and deleted the addition to the extent of Rs. 11,35,000. The assessee as well as the revenue both are in appeal before us. The assessee has challenged the issue of notice under section 148 of the Act on the ground that the same was not served on the assessee. The assessee admitted that such notice has been served on the son of the assessee. The learned counsel, therefore, stated that the service of notice under section 148 on the son of the assessee and not on the assessee himself, was invalid service and therefore, any order passed in pursuant to such notice was invalid order. Reliance was placed on the decision of Hon'ble Supreme Court reported in CIT v. Thayaballi Mulla Jeevaji Kapasi (Decd.) (1967) 66 ITR 147 (SC). It was also argued that it was mandatory on the part of the assessing officer to serve the notice on the assessee and not merely to issue the notice. Reliance was placed on the decision of Hon'ble Allahabad High Court reported in 46 STC (All)(FB). It was stated that the service of the notice can be affected on the family members only when the assessee was in capacitated from receiving the notice. There is no report by the assessing officer or any authority to the effect that the assessee was incapacitated. Hence, there was no valid service of the notice. It was also stated that merely because the assessee has filed return of income in response to notice under section 148, it will not confer any jurisdiction on the assessing officer to make fresh assessment. Reliance was placed on the decisions reported in Shib Charan v. Emperor AIR 1931 All 49, CIT v. Maharaja Pratap Singh Bahadur (1956) 30 ITR 484 (Pat); P.V. Doshi v. CIT (1978) 113 ITR 22 (GuJ) and (1984) ALJ (NOC) 28 (All). Further reliance was placed on the decisions reported in Sewlal Daga v. CIT (1965) 55 ITR 406 (Cal)-, Madanlal Agarwal v. CIT (1983) 144 ITR 745 (All); Income Tax Officer v. Chandi Prasad Modi (1979) 119 ITR 340 (Cal); and some other cases. It was also argued that the issue relating to jurisdiction can be raised at any time. It was stated that the concession of jurisdiction cannot be granted. While relying on the decisions reported in Y. Narayana Chetty v. Income Tax Officer (1959) 35 ITR 388 (SC) and Thayaballi Mulla Jeevaji Kapasi's case (supra) the learned counsel stated that service of notice is not a mere formality or procedural requirement but a substantial provision of law. It was also argued that the return of income was filed on 30-11-1990 in response to notice under section 148. The first notice under section 143(2) was issued on 12-12-1991. As per amended proviso to section 143(2), notice under section 143(2) could be served on the assessee within 12 months from the end of the month in which the return is furnished. On this basis, notice under section 143(2) should have been served on the assessee on or before 30-11-1991. As the notice has been served on 12-12-1991, such notice was invalid and any assessment in pursuant to such notice was also invalid. Even assuming that as the assessment year 1988-89 is in question and unamended provision to section 143(2) was applicable, the time-limit of issue of notice under section 143(2) was the last date of the financial year in which the return is filed or the expiry of six months from the end of the month in which the return is furnished whichever is later. Both the time-limits mentioned in the unamended proviso as well as amended proviso were not adhered to by the assessing officer and, therefore, fresh assessment proceedings have become invalid. He also stated that after issue of a invalid notice under section 143(2), no order under section 144 of the Act can be made. It was also stated that on the basis of these facts, the assessment order passed by the assessing officer may be annulled. While relying on the decision of Hon'ble Allahabad High Court in the case of Saraya Sugar Mills Ltd. v. ITO (1997) 226 ITR 475 (All), the learned counsel stated that the assessee will not be entitled to refund of any tax which was paid by the assessee. On the other hand, the learned departmental Representative supported the order of the Commissioner (Appeals).
2.4 We have considered the rival submissions. There is.no dispute that notice under section 148 was issued after recording reasons. This notice was received by son of the assessee. The assessee also took cognizance of the notice and filed the return of income in response to such notice. He also paid the taxes on the returned income. The learned counsels arguments have been to the effect that by filing return of income and paying tax, the assessee has waived his right by giving concession of jurisdiction to the.assessing officer for making the fresh assessment. He had relied on certain decisions wherein it was held that no concession regarding conferring jurisdiction to make fresh assessment can be granted by the assessee. We have therefore, perused some of these decisions.
2.5 In the case of Maharaja Pratap Singh Bahadur (supra), the assessing officer issued notice under section 34 of the Income Tax Act, 1922 without complying with the conditions laid down in the proviso to section 48 of the old Act as amended on 8-9-1948. The Hon'ble Patna High Court held that a notice under section 34 without complying with the conditions laid down in the proviso was invalid. When the decision is applied to the assessee's case, we find that there is no lack of jurisdiction with the assessing officer. What the assessee has challenged is the service of notice. Thus, it is admitted position that the conditions for invoking provisions of section 148 were satisfied. Accordingly, reliance of the learned counsel on this case is misplaced. Moreover, in the case before Patna High Court, the assessee has challenged the jurisdiction before the assessing officer itself and filed a return of income "under protest". But in the case of the assessee, return of income was filed voluntarily and taxes were paid accordingly. To quote the findings of the Hon'ble Patna High Court-
"Section 34(l) of the Income Tax Act, 1961 as re-enacted by the Income Tax (Amendment) Act (XLVIII of 1948) contained a proviso that the Income Tax Officer shall not issue a notice under section 34 unless he has recorded his reasons for doing so and the Commissioner is satisfied on the reasons recorded that it is a fit case for the issue of such notice. The amending Act was promulgated on the 8-9-1948, but it gave retrospective effect to the re-enacted section 34 from the 30-3-1948 .......... . . as the amending Act gave retrospective effect to section 34 as re-enacted, from the 30-3-1948, the section as re-enacted should be deemed to have been in existence with effect from the 30-3-1948, and, as the notice issued on the 8-8-1948, did not comply with the conditions laid down in the proviso to section 34(I), the entire proceedings were illegal."
2.6 In the case reported in (1984) ALJ (NOC) 28 (All), the Hon'ble High Court held that mere service of summons of suit for remedy upon the adult son of the defendant at the business premises without any effort to serve the defendants would not be due service. But why such observation was made by the Hon'ble High Court is given in the order itself, which reads as under :
"The object of service of summons on the defendant, is to ensure that he is able to contest the proceedings he likes. The emphasis in this rule upon service of summons on the defendant person, if practicable, is to provide him with an effective opportunity to contesting the claim made against him. Service of summons is not a mere formality."
2.7 In the case of Thayabali Mulla Jeevaji Kapasi (supra), issue was altogether different. In this case-The assessing officer served a notice under section 34(l) of Income Tax Act, 1922 (corresponding to section 148 of Income Tax Act, 1961) on the son of the assessee on 18-3-1954 as the assessee was out of station. The assessing officer himself treated this notice as irregular and cancelled it. He issued another notice on 24-3-1954 and got it served by fixture on 25-3-1954. The question was whether the service of notice by fixture was valid or not. The Hon'ble court held such service of notice to be valid.
2.8 In the case of P.V. Doshi (supra), the facts were that the conditions precedent for initiating reassessment proceedings were (I) reasonable belief reached by assessing officer under clauses (a) or (b) of section 147; (2) Recording of reasons by the assessing officer under section 148(2) and (3) sanction before issuing the notice of reassessment by the higher authorities under section 151 of the Act. The question was that when the assessing officer did not record any reasons for initiating the proceedings under section 148 of the Act, whether it can be said that notice under section 148 was invalid notice giving jurisdiction to assessing officer to make reassessment. Hon'ble Court, therefore, held, as under :
"that as a jurisdictional provision which was mandatory and enacted in public interest could never be waived and the want of jurisdiction was discovered by the Appellate Assistant Commissioner, there was no question of waiver by the assessee. No question of finality of the remand order of the Tribunal could arise because the mandatory conditions for founding jurisdiction for initiating reassessment proceedings had not been fulfilled. The order of reassessment was, therefore, not valid."
2.9 The Hon'ble Supreme Court in the case of Y. Narayana Chetty (supra) had considered similar issue. In this case, the assessee alongwith others, was partner in a firm. The firm had not given notice for discontinuance of business. Subsequently, the assessing officer served a reassessment notice under section 34 of Income Tax Act, 1922 on the assessee, who was a partner. Later, the firm challenged by way of a writ-petition the reopening of assessment under section 34 on the ground that the notice was served on one partner only, After considering the matter at length, the Hon'ble Supreme Court held as under :
"Where a registered firm had not given notice of discontinuance of its business under section 25(2) of the Income Tax Act and the main appellant before the Supreme Court (a partner) had in fact been served personally on behalf of the firm with a notice of reassessment'under section 34, and the other partners who might not have been served had made no grievance in the matter. Held, on the facts that it was not open to the appellants to contend that the proceedings taken by the Income Tax Officer under section 34(I)(a) were invalid on the grounds that notices of those proceedings were not served on the other alleged partners of the firm."
2.10 Keeping in view the ratio laid down by various courts mentioned above, we are of the considered view that the service of notice under section 148 of the Act on the son of the assessee was a valid service. It is not a case of granting concession of jurisdiction to a person where the conditions necessary for invoking the provisions of section 148 were not complied with.
2.11 There is another reason for such view. Section 282 of the Act which provides for procedure for service of notice has its title "service of notice generally". The use of the word "generally" indicates that it was not mandatory that notice has to be served on the assessee itself. It can be served on others in-the special circumstances. The purpose for issue of such notice is that the assessee must be aware of its responsibility and liabilities, so that he can defend himself from the impending action. This view has been expressed earlier also. We also find that section 282 has used the word "may". This word gives certain leverage to the assessing officer regarding service of notice. We also find that section 282 has not indicated the procedure for service of notice in case of an individual. If somebody goes by the logic of the learned counsel, no notice can be served on the employees of the individual. That was never the intention of section 282.
2.12 We also found that the assessee has challenged the validity of notice under section 148 on the ground that in the notice the status of the assessee has not been mentioned. We do not find any merit in the these arguments. The notice has been addressed in the name of the assessee. In response to such notice the return has been filed by the same person to whom the notice has been addressed. The assessment has also been made in the same status. Thus, the status of the assessee as an individual is not in dispute. Hence, we reject the submissions of the learned counsel in this regard.
2.13 Second issue relates to the service of notice under section 143(2) of the Act. Proviso to section 143(2) was amended with effect from 1-10-1991. Assessment year in question is assessment year 1988-89. The unamended proviso provided that where the return has been made under section 139 or in response to a notice under section 142(l), no notice under section 143(2) shall be served on the assessee after expiry of financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished whichever is later. The amended proviso provides for the service of notice under section 143(2) within 12 months in which the return is furnished. Admittedly, the first notice under section 143(2) is said to have been served on the assessee on 12-12-1991. This date admittedly falls beyond the limitation period as per unamended as well as amended proviso to section 143(2). But the question arises as to whether the proviso to section 143(2) was applicable or not in respect of returns filed in response to notice under section 148 of the Act. We, therefore, quote the provisions of section 143(2) in this regard :
"Section 143(2) : Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the assessing officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return :
Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. "
2.14 Above provisions make it amply clear that proviso to section 143(2) did not include a return filed in response to notice, under section 148. It has limited itself to the returns filed under section 139 or in response to notice under section 142(l). This is significant to note that sections 139, 142(l) and section 148, all these sections provide for filing of returns in their response. By including sections 139 and 142(l), within the scope of proviso to section 143(2) the law makers have made it abundantly clear that the limitation period imposed in proviso to section 143(2) was not applicable to the returns filed in response to notice under section 148 of the Act. As this is substantive provision of law, we hold that the learned counsel's submissions in this regard have no force and the same are rejected. Accordingly, we hold that the notice under section 143(2) was validly served within limitation.
2.15 Both the grounds raised by the assessee are, therefore, dismissed.
3. Ground no. 3 raised by the assessee relates to the addition on account of unexplained deposits in the bank. As mentioned earlier while making various additions, the assessing officer has relied on his order under section 132(5) of the Act dated 16-5-1989. At the time of proceedings under section 132(5), the assessing officer noted that various sums have been deposited in the bank a/c No. C-309 maintained in the Allahabad Bank. He aggregated these deposits at Rs. 9,11,000 and as no sources of such deposits were explained, the assessing officer added the same to the income of the assessee as unexplained cash deposits. On appeal, the Commissioner (Appeals) confirmed the same. The assessee is in appeal before us against the findings of the Commissioner (Appeals).
3.1 During the course of his arguments, the learned counsel fairly admitted that no explanation regarding sources of these deposits has been furnished before the assessing officer Commissioner (Appeals). But while making addition and sustaining the addition made by assessing officer, the Commissioner (Appeals) did not consider the peak of deposits during the year. He stated that the copies of the bank statement were filed before the assessing officer the assessing officer has only considered the aggregate of deposits made in the said bank a/c. There have been withdrawals from the said bank a/c which were altogether ignored by the assessing officer. It was also stated that the peak deposit was worked out and submitted before the assessing officer/Commissioner (Appeals) and utmost addition on account of such peak deposits could have been made. On the other hand, the learned departmental Representative supported the order of the Commissioner (Appeals).
3.2 We have considered the rival submissions. Admittedly the sources of deposits made in the bank have not been explained by the assessee. We have perused the copies of bank statement in this regard. We find that there have been deposits and withdrawals from the said bank a/c at the periodical intervals. The peak of cash deposits at Rs. 2,90,806 comes on 12-2-1988, Thus the addition to this extent was justified. While confirming the addition to the extent of Rs. 2,90,806, we delete the addition of balance amount. This ground of appeal is partly allowed.
Ground No. 4 relates to the addition on account of investment in NSCs. At the time of search, certain NSCs whose value was Rs. 12,000 was found. These stand in the name of the wife of the assessee. As in his order under section 132(5), the amount was added being unexplained, in his assessment order also, the assessing officer added the same to the income of the assessee. On appeal, the Commissioner (Appeals) also confirmed the same. The assessee is before us against the findings of the Commissioner (Appeals).
4.1 It is argued by the learned counsel that the NSCs were in the name of wife of the assessee and she has independent sources of income. It was, therefore, argued that the Commissioner (Appeals) was not justified in confirming the addition of the same. On the other hand, the learned Departmental Representative supported the order of the Commissioner (Appeals).
4.2 We have considered the rival submissions. Undoubtedly, the NSCs stood in the name of wife of the assessee, who has independent sources of income. The investment in the purchase of NSCs was only to the extent of Rs. 12,000. We are of the view that as the assessee's wife had independent sources of income, she was in a position to make investment in the NSCs. Accordingly, the addition of Rs. 12,000 sustained by Commissioner (Appeals) is deleted.
4.3 This ground of appeal is allowed.
5. Ground No. 5 which relates to the Eaddition on account of unexplained investment in Indira Vikas Patra has not been pressed. Hence, the same is dismissed.
6. Ground No. 6 raised by the assessee relates to the levy of interest under sections 139(8) and 217 of the Act. As this ground is consequential in nature the assessing officer is directed to charge interest, if any, on the basis of income determined as per our order.
7. In the result, the appeal directed by the assessee is partly allowed
8. Now, we will take up the appeal directed by the revenue.
8.1 The first ground of appeal directed by the revenue is against the deletion of the addition of Rs. 10 lacs made by assessing officer on account of unexplained investment in money lending business. At the time of passing the order under section 132(5), the assessing officer observed that since the assessee has not given proper reply in respect of various entries recorded in the incriminating documents found and seized, he was left with no option but to estimate the income of the assessee on account of unexplained investment in the money lending business done by the assessee. In his order under section 132(5), the assessing officer has estimated such investment in the money lending business at Rs. 10 lakhs each in assessment years 1986-87, 1987-88, 1988-89 and 1989-90. As an addition of Rs. 10 lacs was made on this account in this year, the assessee took up the issue in appeal before the Commissioner (Appeals). The Commissioner (Appeals) deleted the addition by observing that no basis of calculation of the investment in the money-lending business has been made by assessing officer. The revenue is in appeal against the findings of the Commissioner (Appeals).
8.2 While the learned Departmental Representative supported the order of the Commissioner (Appeals), the learned counsel supported the order of the Commissioner (Appeals). He further submitted that it is surprising that the assessing officer has made an addition of Rs. 10 lacs each in four assessment years. The assessing officer has not applied his mind as to whether money lending business was done by the assessee or not. Even if it is so, how the estimation of Rs. 10 lacs as investment in the money lending business has been made.
8.3 We have considered the rival submissions. We find that the assessing officer has not given any reasons as to how the addition on account of unexplained investment in the money lending business has been made in four years. It is also not understood as to how the addition in assessment year 1986-87 or assessment year 1987-88 has been made. He has also not mentioned whether any incriminating documents were found regarding investment in the money lending business. In absence of any such material brought on record by the assessing officer, certainly the addition could not have been justified and the Commissioner (Appeals) has rightly deleted the addition. Moreover search and seizure operation took place on 19-1-1989 and therefore, the assessing officer might have been justified in considering the same in assessment year 1989-90. But it is admitted fact, that nothing has happened in the assessment year in question and therefore, the Commissioner (Appeals) has rightly deleted the addition made by assessing officer. While confirming his findings, we dismiss the ground of appeal raised by the revenue.
9. Ground No. 2 raised by the revenue relates to the deletion of the addition of Rs. 1,35,000 out of addition of Rs. 3 lacs made by the assessing officer on account of interest income and business income. At the time of order under section 132(5) of the Act, the assessing officer estimated the interest income of the assessee for the year under consideration at Rs. 1 lac. Similarly, he estimated the business income at Rs. 2 lacs. In his order under section 143(3), the assessing officer estimated the same. On appeal, the Commissioner (Appeals) restricted the addition to Rs. 1,65,000. The revenue is in appeal against the findings of the Commissioner (Appeals). While the learned Departmental Representative supported the order of the assessing officer, the learned counsel supported the order of the Commissioner (Appeals).
9.1 We have considered the rival submissions. We have also perused the orders under section 132(5) passed by assessing officer which is the basis for estimating the interest income as well as the business income by the assessing officer for year under consideration. Such income is based on estimate only. The Commissioner (Appeals) has reduced the addition, which is also based on the estimates. Nothing has been brought on record by the revenue to suggest that such estimate by the Commissioner (Appeals) was unreasonable. Thus, while confirming the findings of the Commissioner (Appeals), we dismiss the ground of appeal raised by the revenue.
9.2 In the result, the appeal filed by the revenue is dismissed.