Income Tax Appellate Tribunal - Agra
A.C.I.T. vs Shri Baikunth Nath Singhal, Smt. Kiran ... on 31 March, 2003
Equivalent citations: [2004]89ITD109(AGRA)
ORDER
M.L. Gusia, Accountant Member
1. This appeal of the revenue is directed against the order passed by DCIT(A), Agra on 8th March 95 for the assessment year 84-85. The first and second grounds of appeal are as under:
"1. That the D.C.I.T.(A) has erred in law and on facts in annulling the assessment passed under Section 147 on 28/3/94 on the ground that the notice under Section 143(2) was issued after the expiry of one year from the date of filing of the return irrespective of the fact that the return was filed under Section 148 by the assessee and thus the issue of notice under Section 143(2) was not necessary for making the assessment under Section 147 and Assessing Officer issued the notice under Section 142(1) well within time.
2. That the DCIT(A) while annulling the assessment has totally ignored the arguments of the Assessing Officer and decided the matter in favour of the assessee by giving credence to its version without proper consideration and appreciation of the material facts placed on record and also discussed in the assessment order."
2. Facts of the issue are that the Assessing Officer issued notice Under Section 148 of the IT Act on 27/3/92. In compliance to that notice the return of income was filed on 27th May 92. Thereafter notice Under Section 142(1) and 143(2) were simultaneously issued on 11th March 94. From the above it is clear that the notice Under Section 143(2)was issued after the completion of 12 months from the end the month in which the return was furnished which is in contravention to the proviso to Sub-section (2) of Section 143 of the IT Act. 1961. Aggrieved with the belated notice Under Section 143(2), the assessee filed appeal before DCIT(A), Agra who has decide that the notice Under Section 143(2) was not issued within the statutory time limit given in the proviso to Sub-section (2) of Section 143(3), therefore held that the proceedings completed on the basis of such notice, the assessment order was against the provisions of the IT Act 1961. Hence, he annulled the impugned assessment order. Aggrieved with the above decision of the DCIT(A), Agra, the department has filed this appeal before us.
3. The Ld. DR argued that the order Under Section 147 is distinct and separate order from order Under Section 143(2) as per language of Section 147,152 and 247. According to her, the language of Section 147 is that:-
"If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section......" provided that where an assessment under Sub-section (3) of Section 143 or this section has made for the relevant assessment year........."
4. Similarly Section 152 of the IT Act says that - "In an assessment or re-assessment or re-computation made Under Section 147, the tax shall be chargeable at the rate or rates at which it would have been charged had the income not escaped assessment." The Ld. DR further argued that time limit for completion of assessment and re-assessment has been separately given in sub-section (1) of Section 153 which is for the assessment, made Under Section 143 or section 144 however, in Sub-section (2) of Section 153 the time limit for assessment, re-ssessment and re-computation made Under Section 147 has been given Separately. She further argued that Under Section 246 the appellate orders in regard to assessment, reassessment and re-computation Under Section 147 have been given in specific Clause (b) of Section 1 of Section 246. Therefore, the Ld. DR argued that the following conclusion can be arrived on plain reading of the aforesaid provisions: -
"1. The order Under Section 147 is distinct and separate order from order Under Section 143(3) as per language of Section 147, 153 and 246.
2. It is an assessment order distinct from the assessment orders Under Section 143(3) going by the language of Section 147, 152 and 246.
3. It is an appealable order Under Section 246(1)(b) as distinct and separate from the provisions of Section 246(1)(a).
4. Separate time limit has been prescribed for time limit for completion of assessment and reassessment Under Section 153(1) and 153(2) respectively.
5. The provisions of Section 147 are subject to Section 148 to 153 and not to Section 143.
6. As per the phrase used in Section 148 - "so far as may be, apply" (so far as may be, apply accordingly as if such return were a return required to be furnished Under Section 139). The recourse to other provisions may be taken only if they are applicable and only if such recourse is necessary.
5. The Ld. DR argued that as per the provisions of Section 143(2), the Assessing Officer is empowered to serve the notice Under Section 143(2) only if he considered necessary or expedient to ensure that the assessee has not under stated the income etc. However such satisfaction is not only a precondition for issuance of notice Under Section. 148 but also as per mere specific provision, such reasons have to be recorded by the Assessing Officer. Therefore, section 142 encompasses the requirement of Section 143(2) i.e. when the Assessing Officer is not only satisfied about the income escaping assessment Under Section 147 but also records the reasons of such satisfaction, it is not necessary for the Assessing Officer to express the same satisfaction again by issuing notice Under Section 143(2) and therefore, to this extent the requirement of issuance of notice Under Section 143(2) is redundant. In regard the power to determine the sum payable by the assessee as per Section 143(3), the similar power is specifically provided Under Section 152(1) in respect of assessment finalized Under Section 147. Therefore, according to the Ld. DR, on the plain reading of the aforesaid provision, it is clear that the question of necessity of issuance of notice Under Section 143(2) in a case covered by Section 147, does not arise.
6. On the other hand the Ld. counsel for the assessee argued that chapter XIV of the IT Act starts with head note "procedure for assessment". This chapter covers Section 139 to 158. The Ld. counsel for the assessee emphasized that except chapter XIV in no other chapter of the It Act assessment can be framed. He further argued that assessment can only be made under Section 143 or Under Section 144 of the It Act. The Ld. counsel further argued that Section 147 deals with the income escaping from assessment but the assessment of the escaped income shall be made as per the provisions of section 143 and 144 of the IT Act and not in accordance with Section 147 of the IT Act 1961. The Ld. counsel further argued that Sub-section (1) of Section 148, states as under: "Before making the; assessment, reassessment or re-computation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, 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."
7. From the above provisions of Section 148, the Ld. Counsel for the assessee emphasized that the section itself says that any return of income filed in compliance to notice Under Section 148, such return shall be a return furnished Under Section 139. In other words the return of income filed in compliance Under Section 148 shall be considered as if the return has been filed Under Section 139 and once the return considered Under Section 139, the provisions of chapter XIV of the IT Act is applicable i.e. assessment can only be framed either Under Section 143(3) or Under Section 144(4) of the IT Act. The Ld. Counsel further argued that Sub-section (2) of Section 143 starts with the phrase - "where a return has been made Under Section 139 or in response to notice under 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................" Therefore, the Ld. Counsel argued that Section 148 makes the position clear that any return of income filed in compliance to notice Under Section 148 shall be considered as if the return of income filed Under Section 139. Therefore, once the return of income filed in compliance to notice Under Section 148, the same shall be considered as the return filed Under Section 139. In such a situation all the provisions of chapter XIV of the I.T. Act shall be followed and as such the assessment shall be made either Under Section 143 or Under Section 144 of the IT Act. While making assessment Under Section 143(3), the Assessing Officer required to issue notice Under Section 149(2) within the time limit of 12 months from the end of the month in which the return is furnished as provided in the proviso to Section 143(2) of the IT Act. In the instant case the notice Under Section 143(2) was not issued within the prescribed time limit Under Section 143(2), therefore, the Assessing Officer is not empowered to complete the assessment Under Section 143(3) and if he has made the assessment on the basis of belated notice Under Section 143(2), the assessment is illegal and therefore the DCIT(A) has rightly annulled the impugned assessment order. The Ld. DR in support of her contention relied upon the decision of ITAT Jaipur Bench in the case of P. C. Mundra v. ACIT in ITA No. 239/JP/1999 for assessment year 91-92. But it is noted that the said decision was given following the decision of Agra Bench of ITAT in the case of Chandra Bhan Bansal v. DCIT 79 ITD 639. On going through the above decision it is noted that while delivering that decision the mandatory provision of Section 148 was not brought to the notice of the ITAT Agra Bench that the provisions of Section 148 includes that return filed in compliance to notice Under Section 148 shall be considered as return filed Under Section 139 of the IT Act 1961.
8. The Ld. DR further argued that Ld. counsel for the assessee relied upon the judgment of Hon'ble Supreme Court in the case of R. Dalmia and Another v. CIT 236 ITR 480 wherein the judgment was given by Hon'ble Supreme Court in the context of extended time limit available Under Section 144B and in dealing with this specific issue the Hon'ble Apex court has held that:
"As to me argument based upon sections 144A, 246 and 263, we do not doubt that assessments under Section 143 and assessments and reassessments under Section 147 are different, but in making assessments reassessments under Section 147 the procedure laid down in sections subsequent to Section 139, including that laid down by Section 144B, has to be followed."
9. According to D.R. the Hon'ble Supreme Court's finding is in regard to the application of Section 144B in 147, and it has not deliberated upon the requirement of issuance of notice 143(2) within the period of 12 months from filing of return, and failure to do so having effect of annulment of assessment. In this regard our attention is drawn to the Hon'ble Supreme Court's decision in the case of CIT v. M/s Sun Engineering Pvt. Ltd. 198 ITR 297 (SC) wherein it has been held-
"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete "law" declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasonings."
(pp 319-320)
10. The Ld. DR further argued that the use of word "so far as may be" in Section 148 of the IT Act clearly indicates the intention of the Legislature to that only where required and where possible the provisions of the Act applicable to a return filed Under Section 139 will apply to a return filed Under Section 148. She further argued that if it was mandatory to apply all provisions of the Act as applicable to Section 139, the Legislature would not have used the word "so far as may be". The use of the phrase clearly shows that certain section of the Act to file the return Under Section 139, would not be applicable to return filed Under Section 148. The Ld. DR. also cited another case of the ITAT Pune Bench in the case of ITO v. Master Vishal D. Ladage in ITA No. 633/PN/2001, the Hon'ble Trubunal has held as under:
"It would be clear that Section 143(2) does not refer to a return which has been furnished Under Section 148. The restriction placed by the proviso to Section 143(2) would not apply to a return filed in response to notice Under Section 148. In the present case, notices Under Section 148 were issued and assessments were made within the limitation laid down in sections 149 and 153 of the Income-tax Act, 1961. We find force in the contention of the revenue that so long as ingredients of Section 147 are fulfilled and so long as the assessment is made within the limitation laid down in Section 153, the assessment can not be annulled merely because the notice Under Section 143(2) was issued after expiry of period of one year from the end of the month in which the return was furnished. The limitation laid down in the proviso to Section 143(2) would not apply to a return, which has been filed Under Section 147 read with 148. In our view, therefore, the Ld. CIT(A) erred in annulling the assessment.
The reliance placed by the assessee on the decision of the Hon'ble Apex Court in the case of R. Dalmia v. CIT(Supra) is misplaced as both the facts and the issue involved were different in the said case from those in the present case. In the said case, the question was whether Section 144B had applicability to reassessment being made Under Section 147. Scope of proviso to Section 143(2) was not subject matter of the said decision of the Apex Court."
11. In other case of M/s Action Electronics v. DCIT in ITA No. 5215/Del/96 the ITAT, Delhi Bench, Delhi, has held as under:
"After careful reading of both these sections we find that provision of section 142(1) and Section 143(2) are procedural sections. These provisions are in regard to issuance of notice for the purpose of allowing opportunity for completion of assessments. Under section 142(1) the assessee is required to appear in person alongwith details, whereas under Section 143(2) the assessee may file details through his authorized person. Notice Under Section 142(1) was issued and there is no dispute in this regard. Of course nothing is on record that whether any notice Under Section 143(2) was issued or not, but in our considered view, there will be no difference as assessee was allowed opportunity for explaining and filing the details in regard to search material. We, further noted that even a show cause notice was given by the Assessing Officer to the assessee for filing the details and explaining the reasons that why the additions on the basis of search material be not made and after that the assessments were completed. Therefore we hold that Assessing Officer has allowed opportunity by issuing notice Under Section 142(1) before completing of assessment. If by any reason notice Under Section 143(2) was not issued that did not make any difference as the Assessing Officer has already issued notice Under Section 142(1) and show cause notice before completing the assessments. Therefore, in view of these facts and circumstances, we dismiss the legal grounds"
12. On the other hand, the Ld. Counsel for the assessee relied on the decision of Hon'ble Kerala High Court (FB) in the case of Lally Jacob v. ITO 197 ITR 439 wherein it is held that:
"Section 148 enjoins the Income-tax Officer before making an assessment under Section 147 to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139. The further provision in that section is very significant which provides that the aforesaid notice has to be treated as if it is a notice under Section 139(2) and that all the provisions of the Act shall apply to the subsequent procedure and the final assessment. In other words, the notice issued under Section 148 has to be deemed to be a notice under Section 139(2) and , if the other provisions of the Act have to be applied, an assessment in pursuance of that can be made only under Section 143 or Section 144."
13. The Hon'ble Supreme Court in the case of K. Govindan and Sons v. CIT 247 ITR 192(SC) has held that the Kerala High Court in Lally Jacob case "referred avobe" laid down the correct position of law and they have our -approval. The Hon'ble Guwahati High Court in the case of CIT v. Triple Crown Agencies204 ITR 377 has held:
"Assessment or assessment under Section 147 can be made only after issue of a notice under Section 148. The provision in Section 148 declaring that, as far as may be, the provisions of the Act shall apply as, if the return were a return under Section 139 is a device adopted to indicate the procedure to be followed after issue of the notice under Section 148. The procedure contemplated in Section 143 is required to be followed as far as may be."
14. In another case reported at 123 Taxman 226 ITAT Mumbai Bench in he case of Uma Polymers v. ACIT held that:
"The notice Under Section 143(2) is not merely procedural in nature but is mandatory provision. Once the valid Return under Section 148 is filed by the assessee, the provision on the assessment of return filed under Section 139 shall apply due to the mandatory provision of Section 148 itself........ The provision of Section 143(2) being mandatory in nature, the non-issue of notice under this sub-section shall render the order passed under Section 143(3) as invalid. Therefore, the assessment framed under Section 143(3), read with Section 147, would be held invalid."
15. After careful consideration of the rival submissions and the decisions cited by the Ld. counsel for the assessee as well as the Ld. DR and also considering the material before us, we are of the view that Section 148 clearly says that the return of income filed in compliance to notice Under Section 148 shall be considered as if return were a return required to be furnished Under Section 139. Once the return of income was filed in compliance to notice Under Section 148, the provisions of Section 139 shall apply due to mandatory provision of Section 148. The notice Under Section 143(2) is not merely a procedural in nature but is mandatory provision. Once the valid return Under Section 148 is filed by the assessee, the provisions, of Section 143 (2) being mandatory in nature, the non issue of notice under this sub-section within the time limit prescribed statutorily will render the order passed Under Section 143(3) as invalid. Therefore, the assessment-framed Under Section 143(3) read with Section 147 shall be invalid. In view of the above facts and circumstances, we decline to interfere in the order of the DCIT(A).
16. Hence, the appeal of the revenue is dismissed.