Kerala High Court
Commissioner Of Income-Tax vs P.N. Krishnakumar on 15 October, 2001
Equivalent citations: [2002]254ITR31(KER)
Author: P.K. Balasubramanyan
Bench: P.K. Balasubramanyan, C.N. Ramachandran Nair
JUDGMENT P.K. Balasubramanyan, J.
1. This appeal at the instance of the Commissioner of Income-tax, Cochin, raises the following substantial questions of law accepted by this court while issuing notice to the respondent;
"1. Whether, on the facts and in the circumstances of the case and also in view of the fact that Section 148 has been amended retrospectively from April 1, 1989, to legalise the notices issued stating 'within 30 days' instead of 'not less than 30 days', the Tribunal is right in law in holding the notice and the reassessment as invalid ?
2. Whether, on the facts and in the circumstances of the case and also in the light of the amendment to Section 148 with retrospective effect from April 1, 1989, omitting the words 'not less than 30 days' should not the Tribunal have held the notice and the consequential assessment accordingly valid ?
3. Whether, on the facts and in the circumstances of the case and also in the light of the retrospective amendment to Section 148 with effect from April 1, 1989, the Tribunal is right in law in disposing of the appeal in the manner it did ?"
2. Subsequent to the notice the respondent has appeared and argued on the above substantial questions of law.
3. For the assessment year 1984-85, the assessing authority completed the assessment under Section 143(1) of the Income-tax Act on February 27, 1987. Subsequently, the assessing authority issued a reassessment notice under Section 148 of the Act invoking the power under Section 147 of the Act. In that notice, the assessing authority called upon the assessee to file a return of income within 30 days. This was against the scheme of Section 148 of the Act, as it then stood, since the provision at the relevant time insisted on a notice requiring him to furnish a return within such period "not being less than 30 days". The reassessment was completed on March 30, 1993. Aggrieved by that order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). By order dated February 7, 1995, the Commissioner of Income-tax accepted the contention of the assessee that the notice under Section 148 of the Income-tax Act was defective in that the assessee was not given a notice not being less than 30 days, for submitting a return of income. The Commissioner of Income-tax (Appeals), therefore, set aside the revised order of the assessing authority dated March 30, 1993. The appellate authority did not go into the merits of the contentions sought to be raised by the assessee in the appeal. The assessing authority challenged the order of the Commissioner of Income-tax (Appeals) in a further appeal before the Income-tax Appellate Tribunal, Cochin Bench, as I. T. A. No. 340/Coch of 1995. Pending that appeal before the Tribunal, Section 148 of the Income-tax Act was amended by the Finance (No. 2) Act, 1996, omitting the words "not being less than 30 days" with retrospective effect from April 1, 1989. Thus, when the appeal was taken up for hearing by the Income-tax Appellate Tribunal, there was no insistence by Section 148 of the Act, that the notice period should not be less than 30 days. Meanwhile, the assessing authority purported to issue a second notice under Section 148 of the Act read with Section 147 of the Act giving the assessee a period of not less than 30 days for submitting his return. The assessee submitted his return and the assessing authority completed the assessment by order dated July 31, 1996. That order of assessment was not interfered with in exercise of powers by the Commissioner of Income-tax under Section 263 of the Income-tax Act. In that sense the order of reassessment dated July 31, 1996, became final.
4. The appeal filed by the assessing authority before the Income-tax Appellate Tribunal challenging the decision of the Commissioner of Income-tax (Appeals) dated February 7, 1995, came up for hearing before the Tribunal. The assessing authority pursued the appeal before the Tribunal presumably on the basis of the amendment brought about to Section 148 of the Income-tax Act by the Finance (No. 2) Act, 1996, with effect from April 1, 1989. On behalf of the assessee it was contended that a fresh proceeding had been initiated under Section 147 of the Act and since a reassessment was finally completed by order dated July 31, 1996, the appeal against the order of the Commissioner of Income-tax (Appeals) dated February 7, 1995, had become infructuous. The Income-tax Appellate Tribunal accepted this contention on the side of the assessee and dismissed the appeal filed by the assessing authority on the ground that it has become infructuous. It is feeling aggrieved by this decision of the Tribunal that the Commissioner of Income-tax has filed this appeal under Section 260A of the Income-tax Act on the substantial questions of law as indicated above.
5. Learned counsel for the Revenue submitted with reference to the decision of the Federal Court in Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT [1947] 15 ITR 311, the decisions of the Supreme Court in State of Uttar Pradesh v. Raja Syed Mohammad Saadat Ali Khan [1961] 41 ITR 737; Commissioner of Sales Tax v. Bijli Cotton Mills [1964] 15 STC 656 ; AIR 1964 SC 1594; CIT v. Straw Products Ltd. [1966] 60 ITR 156 ; Kapuchand Shrimal v. CIT [1981] 131 ITR 451 and CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297, that an Appellate Tribunal was bound to take note of an amendment brought about to the law pending the appeal and was bound to dispose of the appeal in the light of that amendment especially when the amendment is given clear retrospective operation. Counsel, therefore, submitted that the Appellate Tribunal was in error in not giving effect to the amended law as on the date of consideration of the appeal and/consequently, the dismissal of the appeal as infructuous suffers from a substantial error of law warranting interference by this court in exercise of its jurisdiction under Section 260A of the Income-tax Act. Learned counsel for the assessee, on the other hand, contended that the assessing authority having issued a fresh notice under Section 148 of the Act in exercise of power under Section 147 of the Act and having completed a reassessment by order dated July 31, 1996, the Tribunal was justified in dismissing the appeal against the order of the Commissioner of Income-tax (Appeals) dated February 7, 1995, as infructuous and the principle canvassed by counsel for the Revenue, which cannot be disputed, has no relevance to the case on hand. Counsel also submitted that the subsequent order of reassessment dated July 31, 1996, having become final, there was no question of reviving the earlier attempt at reassessment and the order dated March 30, 1993, based on such reassessment by the assessing authority.
6. Before proceeding further, we may notice that both counsel for the Revenue and counsel for the assessee brought to our notice the decision of the Supreme Court in ITO v. K.L Srihari (HUF) [2001] 250 ITR 193, in which though apparent conflict was noticed by the Supreme Court, the question was not decided since according to their Lordships the order of assessment in that case showed that there was a fresh assessment which effaced the first order of assessment. That decision, in our view, does not help us to decide the questions falling for decision in this case, one way or the other.
7. There is no dispute before us that there can only be one reassessment in exercise of power under Section 147 of the Act read with Section 148 of the Act. According to counsel for the assessee, that reassessment order is the order dated July 31, 1996, and so long as that order is not got rid of in any mode known to law, there can be no question of the first attempt at reassessment under Section 147 of the Act being reopened or resurrected. There is some difficulty in accepting this contention. In our procedural jurisprudence, an appeal is a continuation of the original proceeding. There is no exception made in the Income-tax Act in that regard. Therefore, on general principles, it has to be taken that the first order of reassessment made by the assessing authority- on March 30, 1993, is in suspended animation in view of the fact that an appeal against the decision of the Commissioner of Income-tax (Appeals) setting aside that order, was pending before the Tribunal. In other words, the validity or otherwise of the order dated March 30, 1993, would depend upon the final decision to be taken by the Tribunal in the appeal pending before it. Therefore, if the Tribunal were to decide that the order of reassessment dated March 30, 1993, is validly made, the consequence would be that the assessing authority could not have issued yet another notice for reassessment in terms of Section 147 of the Act and could not have made a reassessment as reflected by the order dated July 31, 1996. Since it is not disputed that both orders cannot survive and one of them has to fall, on the principle that an order becomes final only when the appeal filed against it is finally decided, it has to be held that the life of the second order dated July 31, 1996, would depend upon the decision of the Income-tax Appellate Tribunal in the appeal pending before it relating to the reassessment order dated March 30, 1993. If that be so, the so called finality attained by the order dated July 31, 1996, cannot have any efficacy or cannot render the hearing and disposal of the appeal by the Tribunal infructuous or bar the jurisdiction of the Tribunal from deciding the appeal on the merits as it is enjoined to do otherwise. In other words, the validity of the second reassessment order would depend upon the validity or otherwise of the first reassessment order made in this case by the assessing authority. In that view of the matter when the assessing authority pursued the appeal filed by him against the order of the Commissioner of Income-tax (Appeals) dated February 7, 1995, before the Tribunal, the Tribunal was bound to decide that appeal by applying the law as it stood on the date of hearing of that appeal. By holding that the appeal has become infructuous because of the second order of the assessing authority dated July 31, 1996, the Tribunal has committed a substantial error of law warranting correction by this court in exercise of its second appellate jurisdiction.
8. In the light of our conclusion as above, the substantial questions of law formulated for decision have to be answered in favour of the Revenue and against the assessee. It has to be held that the Income-tax Appellate Tribunal was substantially in error in holding that the appeal had become infructuous and was also substantially in error in not deciding the appeal based on the amended Section 148 of the Act as it stood when the appeal was being heard and decided by the Tribunal.
9. Then the question is whether this court, exercising jurisdiction under Section 260A of the Act, can only set aside the decision of the Tribunal and remand the appeal to the Tribunal for a fresh decision. We find that in view of the amendment of Section 148 by the Finance (No. 2) Act, 1996, with effect from April 1, 1989, omitting the words "not less than 30 days" relating to the notice requiring the assessee to furnish a return, the decision of the Commissioner of Income-tax (Appeals) dated February 17, 1995, has obviously become unsustainable since that appellate authority allowed the appeal only on the ground that the notice issued to the assessee under Section 148 of the Act did not give him time, not being less than 30 days, for the submission of a return. The Commissioner of Income-tax (Appeals) did not go into the merits of the contentions raised by the assessee in that appeal. In view of the clear retrospective amendment of Section 148 of the Act relating to the notice period all that the Income-tax Tribunal can do is to set aside the decision of the Commissioner of Income-tax (Appeals) and send down the appeal filed by the assessee before that authority to hear and dispose of it on the merits and on the contentions other than the contention of want of sufficient notice under Section 148 of the Act. In that situation, a remand by us of the appeal to the Income-tax Appellate Tribunal would only mean that the parties will have to appear before that Tribunal and that Tribunal will have to remand the proceeding again to the Commissioner of Income-tax (Appeals) for being heard on the merits. In this situation, the question is whether this court exercising jurisdiction under Section 260A of the Act cannot directly remand the appeal filed by the assessee to the Commissioner of Income-tax (Appeals) for a decision on merits. Though, normally under Section 260A of the Act, an appeal has to be heard on the substantial questions of law formulated for decision under Sub-section (6) of Section 260A of the Act, the High Court can determine any issue which has not been determined by the Appellate Tribunal and the High Court can also decide an issue which has been wrongly determined by the Tribunal by reason of the decision on a question of law as is formulated for decision in the second appeal. Therefore, according to us, this court has jurisdiction to decide the issue whether the Commissioner of Income-tax (Appeals) was justified in interfering with the order of the reassessment dated March 30, 1993, on the sole ground that the notice issued under Section 148 of the Act did not give the assessee a time of not less than 30 days for filing a return. Here, this court has necessarily to take note of the amendment brought about to Section 148 of the Act with effect from April 1, 1989, and in the light of that amendment, this court has necessarily to hold that the Commissioner of Income-tax (Appeals) was in error in interfering with the order of the assessing authority on the ground that there was no sufficient notice under Section 148 of the Act. In this situation, we think that it will be appropriate to set aside the decision of the Commissioner of Income-tax (Appeals) to the effect that the order of reassessment dated March 30, 1993, has to be set aside on the short ground of want of sufficiency of notice under Section 148 of the Act and to remand the appeal before the Commissioner of Income-tax (Appeals) filed by the assessee to be heard and disposed of in accordance with law. Incidentally, we may also notice that the first substantial question of law formulated in the memorandum of appeal, does in fact cover the question decided by us as above on the merits. Even apart from that, we are of the view that this court's powers under Section 260A of the Act are wide enough to justify the adoption, pf the course as adopted by us.
10. In the light of what we have stated above, we set aside the decision of the Income-tax Appellate Tribunal and that of the Commissioner of Income-tax (Appeals) dated February 7, 1995, and remand the appeal I. T. A. No. 9-T/CIT of 1993-94 for decision afresh by the Commissioner of Income-tax (Appeals), Cochin, on the merits in accordance with law.