Income Tax Appellate Tribunal - Jaipur
Jai Dev Jain And Co. vs Income-Tax Officer on 30 June, 1993
Equivalent citations: [1994]48ITD124(JP)
ORDER
J.K. Verma, Accountant Member
1. It is the case of a firm in which Svs. Rishabhdas Jain, Jaidev Jain and V.K. Jain were partners with 33 per cent, 33 per cent and 34 per cent shares respectively. On 6-7-1971, partner Shri V.K. Jain had given notice of dissolution of the firm with effect from 10-7-1971. On 11-7-1972 a suit had been filed by Shri V.K. Jain against Shri Rishabhdas Jain and Shri Jaidev Jain for rendition of accounts. On 28-7-1972 Shri Hulasmal Chopra was appointed Receiver and a preliminary decree was passed on 17-1-1973. On 19-5-1986 decree was passed in the said suit on the basis of compromise. In between, a great deal of disputes appear to have arisen between the two partners namely, Shri Rishabhdas Jain and Shri Jaidev Jain who are real brothers The facts which are relevant for us are that on 9-10-1973 notices under Section 148 were issued and served on the Receiver Shri Hulasmal Chopra for both the assessment years under consideration, namely, assessment years 1971-72 and 1972-73. It is stated by the counsel for the assessee that no assessment order was passed on the basis of those two notices under Section 148. Thereafter, for the assessment year 1971-72 another notice under Section 148 was issued on 31-3-1980 and for assessment year 1972-73 also another notice under Section 148 was issued on 17-3-1981. The assessment for the assessment year 1971-72 was made ex parte under Section 144 on 29-3-1984 on an income of Rs. 45,970. For the assessment year 1972-73, assessment was completed under Section 143(3) on an income of Rs. 2,53,400 on 20-2-1985. For both the assessment years, the firms were treated as URF. The assessment order for the assessment year 1972-73 was set aside by the Id. CIT (A) vide his order dated 18-3-1986. For the assessment year 1971-72, the matter was decided by the Id. AAC who followed the order of the Id. CIT (A) and set aside the assessment for that year also vide his order dated 28-11-1986. Both the authorities, while deciding the appeal, inter alia, rejected the plea on behalf of the assessee-firm that the assessments had become time-barred as they could not have been framed on 29-3-1984 and 20-2-1985 the basis of notices issued on 9-10-1973. Both the first appellate authorities took the view that the perusal of record did not reveal that any notice under Section 148 had been issued on 9-10-1973 and that the photocopy of the notices shown to them did not give reasons for initiating the proceedings. They, therefore, held the initiation of proceedings under Section 148 vide subsequent notices as valid. However, they set aside the assessments for further examination of the cases and for fresh assessments.
2. Feeling aggrieved against those orders, Shri Rishabhdas Jain filed the above-mentioned two appeals before us in his capacity as a partner of the firm. Appeal for the assessment year 1972-73 was filed on 22nd May, 1986 and for the assessment year 1971-72 on 9th February, 1987.
3. Thereafter, Shri Jaidev Jain entered the scene as an intervener and on the basis of several arguments and documents claimed that Shri Rishabhdas Jain was not competent to file these appeals, that his stand to the effect the assessments framed were Invalid and illegal was not correct because the original notices dated 9-10-1973 were not validly served, inasmuch as, Shri Hulasmal Chopra had no authority to receive those notices and Shri H.M. Chopra had no authority to authorise Shri Rishabhdas Jain to file the appeals on behalf of the firm.
4. Shri N.M. Ranka who represented the firm and Shri Rishabhdas Jain questioned whether the notices under Section 148 issued on 31-3-1980 and 17-3-1981 were valid and within the jurisdiction of the ITO. He submitted that so long as the first notices dated 9-10-1973 had been issued and had not been either dropped or the assessments on their basis had not been completed, the second set of notices were without jurisdiction. Referring to the order of CIT (A) for the assessment year 1972-73, he claimed that it was not correct to say that the notices dated 9-10-1973 had not been issued. He referred to the photocopy on page 4 of his paper book of a certified true copy of notice under Section 148 dated 9-10-1973 for the assessment year 1972-73. This photocopy shows that the copy has been certified as true copy by ITO, B-Ward, Sriganganagar and shows that the notice has been received by H.M. Chopra on 15-10-1973 as a Receiver for Jaidev Jain & Co. Page No. 9 of the paper book is photocopy of the notice bearing the signatures of ITO, D-Ward who had issued the notice. Shri Ranka showed us original notice which is on his record. He submitted that this showed that the notice had been duly issued and served and hence the CIT (A) was not correct in writing in his order that such a notice was not issued or served. He also referred to page 3 of the paper book which is copy of the order sheet entry dated 9-10-1973 and which shows that notice under Section 148 was issued by the ITO to the assessee-firm.
5. Similarly for the assessment year 1971-72, he filed photocopies of the notice served on the assessee as well as photocopy of a certified true copy from ITO, B-Ward, Sriganganagar. The true copy of the notice also shows a note which reads "For reasons for issue of notice under Section 148 see order sheet entry dated 9-10-1973". He submitted that although he did not have a copy of the order sheet entry for the assessment year 1971-72 and although the AAC had written in his order that there was no mention of issue of notice on the order sheet entry, Shri Ranka submitted that it was not assessee's fault and assessee could not be held responsible for not making entry on the order sheet in respect of a notice which was served on the assessee. He submitted that the legal position was that when an assessee does not file a return under Section 139(1), the Department was entitled to issue a notice under Section 139(2} within that assessment year itself and under Section 148 after the expiry of that assessment year. Since, in this case, the assessee had not filed the returns for the assessment years under consideration, the Revenue was entitled to issue the notices after 31-3-1973 in both the years, which it did on 9-10-1973. He further submitted that the assessment proceedings start when (0 either a return is filed or (it) notice under Section 139(2) or 148 is issued. In the instant case, valid assessment proceedings started for both the years when notices under Section 148 were issued on 9-10-1973. He submitted that if after issue of notice under Section 139(2) or 148 the assessee failed to file its return of income, the Assessing Officer was entitled to frame assessment exparte under Section 144 within the time allowed by law, but he was not entitled to issue a fresh notice under Section 148. In order to give support to his arguments, the Id. counsel referred to the decisions in CIT v. Pirojbai N. Contractor [1937] 5 ITR 338 (Bom.), C.V. Govindarajulu Iyer v. CIT [1948] 16 ITR 391 (Mad.), Ghanshyamdas v. Regional Asstt. CST [1964] 51 ITR 557 (SC) at 562, S.P. Kochhar v. ITO [1984] 145 ITR 255 (All.) at page 264, Hargovindsing Narainsing v. CIT [1973] 90 ITR 435 (Bom.) and the decision of the Jaipur Bench of the Tribunal in the case of R.Y. Durlabhji v. ITO so also decision in the case of CIT v. P. Krishnankutty Menon [1990] 181 ITR 237 (Ker.) and in the case of Commercial Art Press v. CIT [1978] 115 ITR 876 (All.). Regarding the observations of the Id. CIT (A) that no reasons had been recorded, he submitted that reasons may not be in any prescribed form and they may be recorded separately and not in the notice. He submitted that the Id. CIT (A) was not justified in saying that first notice was not valid because reasons were not recorded in the notice. He submitted that any notice was valid unless objected to by the assessee. He pointed out that in the instant case, the assessee had never objected to the validity of the first set of notices.
6. Shri C.L. Jhanwar who represented Shri Vijay Kumar and Shri Hulasmal Chopra, Receiver explained that in this case Shri Hulasmal Chopra had been appointed as a Receiver on 28-7-1972 and his authority expired only on 22-10-1986. He pointed out that even the second set of notices were issued through Official Receiver Shri Hulasmal Chopra and hence it was not correct to say that a notice issued or served on Shri Hulasmal Chopra was not a valid notice or that he had no authority to receive a notice on behalf of the firm. He submitted that the Receiver had duly authorised Shri Rishabhdas to file the return.
7. The Id. D/R submitted that the order-sheet entry dated 9-10-1973 for the assessment year 1972-73 stated that no notice under Section 139(2) had been issued whereas it should have been that no return under Section 139(1) had been filed. Further, since the Assessing Officer wanted to assess the representative assessee, he had to consciously invoke provisions of Section 160/161 and that is why the second set of notices was served on Shri Hulasmal Chopra. He submitted that in view of the decision in the case of M.L. John v. ITO [1983] 139 ITR 972 (All.), a Receiver could not be assessed for income prior to his appointment as Receiver and hence the Assessing Officer had discovered that the original notices were not valid. He further submitted that in, view of several decisions cited by him, there was no restriction on the number of times notices under Section 148 could be issued. He further argued that the Assessing Officer must have discovered that the original notices were slip-shod and could not stand the test of appeal as they did not specify whether they were issued to assess or re-assess the income and the name of the receiver had not been mentioned and hence fresh notices were issued by the Assessing Officer.
8. In his rejoinder, Shri Ranka pointed out that Shri Hulasmal Chopra had been appointed Receiver on 28-7-1972 and receivership came to end with decision of the High Court on 22-10-1986 when Rishabhdas was given the assets of the firm and Rs. 3 lacs were given to Shri Jaidev Jain. He submitted that even the notice in 1981 was issued on Shri Hulasmal Chopra. Further, the assessment order for the assessment year 1971-72 has referred to him as a Receiver who could inspect books of account. Again, as late as in 1984 the notices were served on Hulasmal Chopra as official receiver. In the assessment order for 1972-73 dated 20-2-1985 there is again reference to Hulasmal Chopra as Receiver and hence it could not be said that he had no authority to receive the notices dated 9-10-1973. Regarding the argument of the Id. D/R, he explained that no authority had held that the first set of notices was defective or invalid nor had the assessee challenged their validity. He submitted that even defective notices are voidable at the instance of the assessee but they cannot be said to be void. In the instant case, neither the revenue has declared those notices to be void nor the assessee had claimed them to be void and hence the arguments given by the Id. D/R may be his personal views and deserved to be ignored. He submitted that such an opinion had not been expressed or recorded by the Assessing Officer. He explained that the first appellate authority had not recognised assessee's objections because the notices were not on record but now he has procured their certified copies and has also filed photocopies of the original notices which have also been shown to the Bench. He submitted that the argument of the Id. D/R that any number of times notices under Section 148 could be issued applied only to separate escapements of income and not to issue of notices when assessment proceedings were already pending.
9. Shri C.L. Jhanwar submitted that it was not a case regarding Section 163; it is a simple case of assessment of a firm and any one authorised to receive notices on behalf of the firm could receive it and in the instant case the receiver was authorised to receive the notices. Since the first set of notices had already been served on the Receiver, the second set of notices issued was invalid and assessments completed beyond the time permissible on the basis of notices issued on 9-10-1973 were barred by time.
10. We have carefully considered the submissions from all the sides and have perused the material on record. We fully agree with the arguments advanced by Svs. N.M. Ranka and C.L. Jhanwar that once notices under Section 148 have been issued, the proceedings initiated through them have to be taken to the logical end. In other words, either assessments should be framed on the basis of those proceedings or the Assessing Officer may specifically drop the proceedings, may be on the ground that no sufficient material was available for holding that income liable to tax had escaped assessment. Even if an assessee does not comply with those notices by filing the income-tax returns, the remedy which is open to the revenue is not to issue fresh notices under Section 148 but to issue notices under Section 142(1) or to have completed the assessments under Section 144. In our opinion, if the assessments have got barred by limitation, they cannot be revived by issuing fresh notices. This position appears to be clear to the Assessing Officer and other officers of the Department as can be gathered from a D.O. letter written by ITO, Sriganganagar dated 4th December, 1985 addressed to his IAC at Blkaner (Page 5 of the Paper Book of Shri Rishabhdas Jain) in which he has written that in this case, the assessment for the assessment year 1972-73 was completed on a total income of Rs. 2,53,400 on 20-2-1985 as a result of which a demand of Rs. 8,20,080 was created. He has further written that the assessment was completed in pursuance of action initiated under Section 148 subsequent to an action under Section 148 got time-barred. He has further mentioned that this matter was discussed with the CIT on 30-11-1985 and that according to the CIT the demand was unrealisable and assessment is likely to be annulled. In these circumstances, we find no force in the arguments of the Id. D/R nor do we find any relevance of the intervention of Sh. Jaidev Jain because, if he is not aggrieved with the orders of the first appellate authorities he has got no basis to come before us.
11. Taking all these factors into account, we are of the opinion that since in the Instant case valid notices for the assessment years under consideration had been issued by the Assessing Officer on 9-10-1973 but he failed to complete the assessments within the time allowed under law, the assessments got barred by time for both the years. We further hold that the assessments dated 29-3-1984 for the assessment year 1971-72 and 20-2-1985 for the assessment year 1972-73 are invalid, because they were completed on the basis of fresh notices issued under Section 148 dated 31-3-1980 and 17-3-1981 i.e., at a time when the original proceedings initiated under Section 148 were still pending. Hence both the assessments framed by the Assessing Officer for these two assessment years are annulled.
12. Both the appeals filed by the assessee are, therefore, allowed.