Income Tax Appellate Tribunal - Delhi
Smt. Munia Devi Jain vs Income-Tax Officer on 18 February, 1989
Equivalent citations: [1989]29ITD36(DELHI)
ORDER
M.C. Agarwal, Judicial Member
1. All these appeals are by interrelated assessees and raise common points. They were, therefore, heard together and for the sake of convenience are disposed of by this common order,
2. We have heard the learned counsel for the appellants and the learned Departmental Representative and have perused the material placed before us. We will deal with the case of Smt. Munia Devi Jain first as similar facts and issues are involved in the other matters also and after having decided the issues in her case, we will proceed to the other cases mentioning their individual facts briefly, if necessary.
3. The appeals relate to assessment years 1973-74, 1977-78, 1978-79, 1979-80, 1980-81 and 1981-82 in respect of which assessments were originally made on 26-9-1973, 22-11-1977, 22-11-1978, 11-10-1979, 12-6-1980 and 30-11-1981, respectively. The assessee had owned certain lands which were acquired and by an Award dated 25-5-1981, the U.P. Avas Evam Vikas Parishad Tribunal enhanced the compensation awarded earlier by the Collector. On the compensation, interest was also awarded to the assessee and since the interest was in respect of the period relating to various accounting periods relevant to the assessment years in question, the ITO initiated action under Section 147(a)/148 of the Income-tax Act, 1961. Notices under Section 148 for all the years were issued on 2-3-1982 and were served on 15-3-1982. The assessee filed returns on 20-5-1982 and reassessments were made on 1-6-1984. The assessee objected to action under Section 147/148 but the objection was overruled by the Income-tax Officer.
4. The assessee appealed to the AAC, Agra. It was contended before the learned AAC that there was no failure on the part of the assessee to furnish correct particulars of income and hence initiation of action under Section 147(a) was invalid. It was also contended that the Commissioner while granting sanction for the initiation of action under Section 147/148 had not applied his mind and, therefore, the Income-tax Officer's action was bad in law. These contentions were negatived by the learned Appellate Asstt. Commissioner and consequently the appeals were dismissed.
5. The assessee is now in appeal before us. The learned counsel for the assessee contended that in this case, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for her assessment for the years in question when the assessments were initially framed and, therefore, re-assessment proceedings could not be legally taken under Section 147(a). According to him, action could have been taken under Section 147(6) but the ITO did not choose to take recourse to this provision of law and that according to the law as laid down by the Hon'ble Allahabad High Court in whose jurisdiction these cases are, it would not be permissible to this Tribunal to treat the assessments as having been reopened under Section 147(b). He further pointed out that even action under Section 147(5) would not be possible for some of the assessment years as the time prescribed under Section 149 had expired. It was also contended that the assessments for assessment years 1977-78, 1978-79 and 1979-80 have not been completed within the time prescribed under Section 153(2)(b)(ii) of the Act under which an assessment under Section 147 has to be made within one year from the date of service of the notice under Section 148. It was also contended that notice under Section 148 for assessment years 1978-79 and 1979-80 was not signed by the ITO and, therefore, the reassessments for these years are illegal.
6. The learned Departmental Representative on the other hand, contended that in this case, the assessee has earned income by way of interest on compensation awarded under the Land Acquisition Act and the same was taxable under the Provisions of the Act. He conceded that Section 147(a) did not permit the reassessments but contended that the Legislature did not contemplate that income should be allowed to escape assessment and that the reassessments in this case could be made at any time under the provisions of Section 153(3)(ii) to give effect to the findings of the Tribunal that awarded enhanced compensation and interest thereon.
7. As is evident from the facts narrated above, assessments for all the years under appeal had initially been completed under Section 143. Reopening of assessments under Sub-clause (a) of Section 147 is permissible in a case where the assessee did not file a return or the assessee failed to disclose fully and truly all material facts necessary for his assessment. Action for reassessments under Sub- Clause (b) of Sec. 147 is permissible where there has been no omission or failure as mentioned in Clause (a) on the part of the assessee but the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. In the case before us, the material fact that is said to have been suppressed by the assessee is that it had moved the U.P. Avas Evam Vikas Parishad Tribunal for enhancement of compensation. The award by the said Tribunal had been made on 25-5-1981 while the assessment for assessment year 1981-82 was made more than six months after, i.e., on the 30th November, 1981. Therefore, so far as assessment year 1981-82 is concerned, the assessee had become entitled to a certain amount of interest which was taxable as its income for that year and patently till the assessment was completed the assessee did not inform the ITO of the coming into existence of income. Therefore, so far as assessment year 1981-82 is concerned, there is a clear default on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year and action under Section 147(a) for this year was legally permissible and was, in our view, validly taken.
8. As regards the other assessment years, we have to see whether the pendency of the proceedings for enhancement of compensation was a material fact that the assessee should have disclosed during the assessment proceedings. So far as the amount of interest relevant to the assessment years under consideration is concerned, patently the award had not been made till the assessments were originally made and it was impossible for the assessee to disclose the amount of interest. In Rat Singh Deb Singh Bist v. Union of India [1970] 77 ITR 802, the Hon'ble High Court of Delhi held that facts that come into existence subsequent to original assessment cannot possibly be disclosed and, therefore, a fact which comes into existence subsequent to the making of assessment cannot be a material fact within the purview of Section 34(1)(a) of the 1922 Act (equivalent to Section 147(a) of the 1961 Act). In T.M. Kousali v. Sixth ITO [1985] 155 ITR 739 the Hon'ble Karnataka High Court held that proceedings cannot be initiated under Section 147(a) to assess amounts awarded as enhanced compensation after the assessments had already been made. That was a case in which like the case before us the amount of interest arising from the compensation awarded was sought to be taxed in the reassessments. In Mukhtiar Singh Sandhu v. ITO [1986] 160 ITR 521 the Hon'ble Punjab & Haryana High Court also dealt with a similar controversy and held that there was no failure to disclose fully and truly all material facts. In this case also when the assessee filed his returns, his application under Section 18 of the Land Acquisition Act was pending with the Distt. Judge and the assessee during the assessment proceedings had not mentioned anything with regard to the pendency of the application under Section 18 of the Land Acquisition Act. In Ganesh Chandra Khan v. ITO [1978] 111 ITR 934 Hon'ble the Calcutta High Court held that where in respect of house occupied by the government and later requisitioned compensation for house for the previous years was fixed by agreement and the assessee was, till the assessments were made, not aware of compensation becoming payable, the assessments could not be reopened under Section 147/148. Thus, in the case before us, so far as the amount of interest is concerned, the assessee could not have disclosed the same in the proceedings for assessment years 1973-74 and 1977-78 to 1980-81 and consequently she cannot be accused of any failure on her part. So far as the pendency of the proceedings for enhancement of compensation are concerned, in the case of T.M. Kousali (supra), the Hon'ble Karnataka High Court has specifically held that the pendency of the proceedings was not a material fact that was required to be disclosed during the assessment proceedings. The same is the view taken by the Hon'ble Punjab & Haryana High Court in the case of Mukhtiar Singh Sandhu (supra) in which the case of T.M. Kousali (supra) has been referred to. The learned Departmental Representative did not cite any authority to the contrary nor did he point out how the mere- fact of pendency of proceedings could have changed the quantum of income assessed in the original assessments so that it could be said that it was a material fact for the assessment of income for those years. We, therefore, hold that for assessment years 1973-74 and 1977-78 to 1980-81 there was no failure on the part of the assessee to disclose all material facts necessary for her assessment for those years within the meaning of Section 147(a) and consequently we hold that action for reassessments for these years under Section 147(a) was invalid.
9. The learned counsel for the assessee Shri C.S. Agarwal relied upon the law as laid down by the jurisdictional High Court of Allahabad in Raghubar Dayal Ram Kishan v. CIT [1967] 63 ITR 572 in which it has been held that where the ITO takes action under Section 34(1)(a) of the 1922 Act, the Tribunal has no jurisdiction to convert or alter the assessment made by the ITO to one under Section 34(1)(6). Section 147 of the 1961 Act is analogous to Section 34 of the 1922 Act and, therefore, this authority is binding on us and we cannot uphold the action of the ITO by resorting to Section 147(6). The Revenue has not placed before us a copy of the reasons recorded by the ITO while initiating action under Section 147(a) and, therefore, it is not possible for us to consider even whether it was a case of mentioning of a wrong section though the reasons recorded showed that in effect only action under Section 147(6) was intended. As a matter of fact such does not appear to be the case because for some of the years action under Section 147(6) had become barred by time and the ITO appears to have been keen to rope in all the assessment years.
10. We may also here deal with an argument raised by the learned D.R. that under Section 153(3)(ii), the assessments could be made at any time. Section 153 deals with the time limit for completion of assessments and reassessments. Section 153(1) prescribes limitation for assessments under Sections 143 and 144 while Sub-section (2) thereof prescribes the limits for assessments or reassessments under Section 147. Sub-clause (ii) of Sub-section (3) provides that nothing in Sub-sections (1) and (2) shall apply :
(ii) where the assessment, reassessment or recompubation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 250, 254, 260, 262, 263 or 264 (or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act).
As is clear Sub-section (3) enacts an exception to the period of limitation prescribed under Section 153(1) & (2). It on its very face would apply only when the assessment, reassessment or recom-putation is open and cannot cover cases where the assessments have already been completed and have not been validly reopened under the provisions of the Act. As has already been mentioned in the present case, the assessments had already been framed by the ITO and he could take proceedings for reassessment only by having recourse to Section 147. We have already held that the initiation of proceedings for reassessments under Section 147(a) by the ITO was invalid. Section 149 provides a period of limitation within which action under Section 147 can be initiated. The learned D.R. contended that the legislature did not contemplate incomes remaining untaxed. This contention in our view is not wholly correct. The legislature was conscious of the difficulty that an assessee would have to face if no time limit is placed for initiation of action for reassessments under Section 147. Therefore, it had to strike a mean between the difficulty that may arise to the taxpayer as well as the interests of revenue and that is why Section 149 has been enacted which provides different periods of limitation for Clauses (a) and (b) as well as different period where the income escaped is beyond a certain monetary limit.
11. The learned D.R. contended that under the aforesaid Sub- Clause (ii) of Section 153(3), an assessment or reassessment can be made at any time if the assessment is in consequence of or to give effect to any finding in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act. According to him, the award of the Tribunal was a finding or direction of a Court and, therefore, under this clause, the ITO could make assessments at any time. As already stated, in our view, Sub-clause (ii) of Section 153(3) can be pressed into service only when the assessment is already pending and it cannot be invoked when the assessments have already been made and have not been validly reopened. The learned D.R., however, relied upon the ratio of the Hon'ble Karnataka High Court in T.M. Kousali's case (supra) in which in almost similar circumstances, the Hon'ble High Court after holding that the assessments could not be reopened under Section 147(a) held that the notice have to be upheld as validly issued under Section 147(6) and Section 153(3)(ii) of the Act. The Hon'ble High Court held that the words an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act are wide enough to cover the orders of any Court and the nature of the order made by the Court have no relevance. In the opinion of their Lordships, if there is an order of a Court, whatever be its status, the bar of limitation is automatically lifted. This ruling was considered by the Hon'ble Punjab & Haryana High Court in Mukhtiar Singh Sandhu's case (supra), and was dissented from on this point. The Hon'ble Pb. & Hr. High Court observed that the judgment in T.M. Kousali's case (supra) suffers from a patent mistake and that if the interpretation of Section 153(3)(ii) as done in T.M. Kousali's case (supra) is to be accepted as correct then Section 150 of the Act becomes redundant. The Hon'ble Pb. & Hr. High Court went further to state that on this aspect of the matter the Karnataka High Court's judgment is contrary to the judgment of their Lordships of the Supreme Court in Hajinder Nath v. CIT [1979] 120 ITR 14. In that case, the Hon'ble Supreme Court was concerned with the interpretation of Section 153(3)(ii) ibself. In that case in the assessments of a partnership firm, the ITO added a certain amount being the unexplained investment in the construction of a building. On appeal, the AAC had held that the partnership was not the owner of the property which actually belonged to the partners in their individual capacity and consequently any excess over the disclosed cost of constrtiction could not be added in the assessments of the firm. The AAC even observed that the ITO was free to take action to assess the excess in the hands of the co-owners. Thereafter the ITO initiated action under Section 147(a) against the individual partners and the matter ultimately reached the Hon'ble Supreme Court which observed as below :--
The expressions "finding" and "direction" are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression "direction" in s. 153(3)(i£) of the Act, it is now well settled that it must be an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. The expressions "finding" and "direction" in Section 153(3)(ii) of the Act must be accordingly confined. Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. It is a provision which merely raises the bar of limitation for making an assessment order under Section 143 or Section 144 or Section 147 : ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) and N.K.T. Sivalingam Chettiar v. GIT [1967] 66 ITR 586 (SO).
The Hon'ble Supreme Court held that the decision of the AAC in the case of the firm was neither a finding nor a direction within the meaning of Section 153(3)(ii).
12. In the case before us what the learned D.R. relied upon is the award passed by the Tribunal enhancing the amount of compensation and consequently of interest payable thereon. The Tribunal was not concerned with the determination of income of the assessee in question and, therefore, there cannot be a finding by the Tribunal that the assessee earned an income from interest assessable to income-tax for any of the accounting periods in question. We, therefore, hold that Section 153(3)(ii) was not applicable to the facts of the case and did not enlarge the limitation either for the reopening of the assessments or for their completion.
13. The next contention raised by the learned counsel for the assessee was that assessments for assessment years 1977-78, 1978-79 and 1979-80 were barred by time. As noted above, the returns in pursuance of notice under Section 148 were filed on 2-3-1982 and the assessments were made on the 1st of June, 1984. According to the learned counsel under Section 153(2)(b)(ii) the assessments should have been made within one year of the filing of the returns. This contention would have been correct if the assessments had been reopened under Section 147(6) but in this case, assessments were reopened under Section 147(a) and we have already held that the initiation of reassessment proceedings was invalid. Therefore, this question does not survive for decision.
14. Lastly, it was contended that the notices issued by the Income-tax Officer under Section 148 for assessment years 1978-79 and 1979-80 were invalid because they were not signed by the ITO. Such a point was not specifically taken before the learned AAC and he has not dealt with the same. In the appeals before us, although this point has been specifically raised, however, no material has been placed before us to show that the notices in question were not signed by the ITO. In the paper book only a copy of the notice for asst. year 1977-78 has been placed which duly bears the signatures of the ITO. Therefore, it is not established that the notices were not signed by the ITO and this argument will, therefore, fail.
15. In the grounds of appeal, a ground has been raised that the CIT accorded sancttion under Section 151(2) mechanically without applying his mind. No argument was addressed to us on this point and nothing has been placed before us to substantiate the contention. We, therefore, reject it. No other point was addressed or pressed before us in the case of Srnt.,Munia Devi Jain.
16. As a result of the findings recorded above, we allow the asses-see's appeals for asstt. years 1973-74, 1977-78, 1978-79, 1979-80 and 1980-81 and cancel the re-assessments made for these years. The appeal for asstt. year 1981-82 is dismissed.
Rajendra Chand Jain (J.T.A. Nos. 2630 & 2631)
17. These are appeals for asstt. years 1980-81 and 1981-82. Original assessments were made on 26-3-1981 and 19-12-1981. Notices under Section 148/147(a) were issued on 14-6-1984 and were served on 2-7-1984 for both the years. The returns were filed on 11-7-1984 and re-assessments were made on 16-7-1984. The facts are identical to the case of Smt. Munia Devi Jain above and for the reasons already recorded, we allow the appeal for asstt. year 1980-81 and cancel the reassessment for this year. The appeal for assessment year 1981-82 is dismissed.
Kishan Chand Jain (I.T.A. Nos. 2632 and 2633)
18. In the case of this assessee, original assessments for assessment years 1980-81 and 1981-82 were made on 26-3-1981 and 30-11-1981 respectively. Notices under Section 148/147(a) for the two years were issued on 14-6-1984 and were served on 2-7-1984. Returns were filed on 11-7-1984 and re-assessments were made on 16-7-1984. The relevant facts and circumstances are identical to the case of Smt. Munia Devi Jain and for the reasons recorded above, we allow the appeal for assessment year 1980-81 and cancel the re-assessment for this year. The appeal for asstt. year 1981-82 is dismissed.
Narain Das Jain (deceased) through L/R Sh. Index Ghand Jain (I.T.A. Nos. 2634 to 2637) :
19. In these apppeals, the assessee is late Sh. Narain Das Jain who is represented by his legal representative Sh. Inder Chand Jain. The proceedings relate to assessment years 1973-74, 1974-75, 1975-76 and 1976-77. Assessments for the first three years were made on 31-3-1976 and for assessment year 1976-77 on 9-2-1979. The assessments were re-opened under Section 147(a) and notices under Section 148 were issued on 15-3-1982. The assessee was already dead and the notices were served on Sh. Inder Chand Jain on 24-3-1982. He filed returns for all these years on 19-5-1982 and assessments were made on 23-7-1984. The facts are in all material respects identical to the case of Smt. Munia Devi Jain which has been discussed above and for the reasons recorded above, we hold that the initiation of action under Section 147(a) was invalid and the assessments have accordingly, to be cancelled.
20. However, the learned counsel for the assessee raised an additional contention that in this case, notice under Section 147(a) was not served on all the legal representatives of the deceased. It appears that this point was not raised before the ITO. It was raised in the grounds of appeal before the learned AAC but she has not discussed the issue probably because at the hearing such contention was not actually pressed. In the paper book filed before us, during the hearing a chart has been placed at page 18 which, inter alia, notes that S/Sh. Inder Chand Jain, Rajendra Chand Jain, Krishan Chand Jain and Rakesh Kumar Jain are the legal representatives. Apart from this, no material has been placed before us to show whether the deceased died intestate and how the four persons named above were related with the deceased. Reliance was placed on E. Alfred v. First Addl. ITO [1957] 32 ITR 401 (Mad.) in which it was held that the assessments were bad for want of service of notice on all the legal representatives. That was, however, a case in which the person who was served with a notice contended before the ITO that he was not the only legal representative and did not represent the entire estate. In spite of this, the ITO did not try to find out who were the other legal representatives. In the case before us, the present appellant never raised such a contention before the ITO nor did he apprise the ITO as to who were the other legal representatives. In the aforesaid ruling the Hon'ble Madras High Court has held that (a) if the ITO bona fide believed and acted on that belief that A was the only legal representative. (b) if A did not bring to the notice of ITO that there were other legal representatives, who should be brought on the record, and, (c) if A represented the estate of E in the assessment proceedings, and (d) if there was no fraud or collusion then it could well be said that the entire body of legal representatives including A would be bound by the assessment made by the ITO. In the case before us, all the aforesaid conditions are fulfilled and, therefore, even if there are any other legal representatives, the assessment would be valid in view of the law as laid down ; in this ruling itself. This point is, therefore, rejected although the assessments have to be cancelled for the other reasons discussed above.
21. In the result, all these four appeals are allowed and the reassessments made by the ITO are cancelled.
Shri Inder Chand Jain (I.T.A. Nos. 2638 & 2639) :
22. These are two appeals by Shri Inder Chand Jain in his por-sonal capacity. They relate to assessment years 1980-81 and 1981-82. The facts are identical to the case of Smt. Munia Devi Jain and, therefore, following the view taken above, we cancel the reassessment for asst. year 1980-81, while we uphold the assessment for assessment year 1981-82. In the result, I.T.A. No. 2638 stands allowed, while I.T.A. No. 2639 stands dismissed.
Sh. Rakesh Kumar Jain (I.T.A. Nos. 2640 and 2641).
23. In this case, the appeals relate to assessment years 1980-81 and 1981-82. The facts are identical to the case of Smt. Munia Devi Jain and, therefore, following the view taken above, we cancel the reassessment for assessment year 1980-81 and we uphold the assessment for assessment year 1981-82. In the result, I.T.A. No. 2640 stands allowed, while I.T.A. No. 2641 stands dismissed.