Income Tax Appellate Tribunal - Cochin
Assistant Commissioner Of Income-Tax vs M. Mani on 18 July, 1996
Equivalent citations: [1997]63ITD393(COCH)
ORDER
T.A. Bukte, Judicial Member
1. The revenue has filed all these appeals against the consolidated order of the CIT (Appeals), Trivandrum, dated 9-11-1993 on common grounds pertaining to the only one issue of quashing the assessment orders holding that the notices issued under section 148 were invalid and the consequent action on the basis of those notices was null and void.
2. We have heard the learned departmental representative Sri P.I. John and the learned counsel for the assessee, Sri A.A. Kulkarni. Their arguments are taken into consideration.
3. The learned departmental representative argued that in accordance with the provisions of section 292B of the Income-tax Act, 1961, no notice issued under the provisions of the I.T. Act shell be invalid merely by reason of any omission or defect or mistake in such notice. Therefore, according to him, the learned CIT (Appeals) should have considered the merits of the case and should not have decided the matter only on the legality of section 148 of the I.T. Act.
4. The only issue involved in this case is regarding the validity of the notices issued by the Assessing Officer under section 148 for reopening the assessments for the assessment years 1982-83 to 1985-86. The notices required the assessee to file returns of income within 30 days from the date of service of the notices. In fact, a notice under section 147 of the Act should have been issued to the assessee requiring him to furnish full particulars for making the reassessment or recomputation of the income within 30 days of the service of the notice. There is no doubt that the provision regarding the issue of a notice under section 148 is a procedural provision. From 1-4-1989 onwards, any action for making any assessment, reassessment or recomputation of the income for the assessment year 1988-89 and earlier years will have to be taken in accordance with the amended provisions. The Assessing Officer called upon the assessee to furnish the particulars of his income by filing a return of income within 30 days from the date of service of the notice. Because of the mentioning of particulars of income within 30 days in the notices issued by the Assessing Officer under section 148, the learned CIT (Appeals) held that such notices were invalid and any action taken on such notices is null and void.
5. The learned departmental representative argued that the mention to furnish the particulars of income in the notice issued under section 148 of the I.T. Act, within 30 days of the service of such notice, is a mistake or defect which can be rectified under section 292B of the Act. At any rate, mentioning to furnish the particulars of income within a period of 30 days does not invalid the notice issued under section 148. He further submitted that the view held by the learned CIT (Appeals) on this point is not correct and, therefore, his order should be set aside and the matter be remanded to him to pass a fresh order according to law. The issue of validity of the notices in this case under section 148 was raised before the CIT (Appeals) by an additional ground. The CIT (Appeals) admitted the additional ground and decided the validity of the notices as a preliminary ground. In this case, the original assessments were completed under section 143(3). Subsequently, there was a search in the premises of the assessee on 22-11-1988, during the course of which certain documents and materials were seized. As a consequence the Assessing Officer found that income chargeable to tax had escaped in the assessments for the assessment years under appeal. Therefore, he reopened the assessment by issue of a notice under section 148 on 9-8-1989 for the assessment years 1982-83 to 1984-85 and on 7-7-1989 for the assessment year 1985-86. In accordance with the said notices, the assessee was required to file the returns for the above years within 30 days from the date of service of such notices. However, the Assessing Officer mentioned in the notices issued under section 148, about the requirement to file the returns of income within the time specified. The assessee contended that calling upon him to file the returns of income within 30 days from the date of service of the notices was against the statutory provisions of section 148 and, hence, the notices and the subsequent action based on such notices was invalid and illegal. It was submitted that the issue of a proper notice under section 148 is the very foundation of the jurisdiction of the assessing authority to make the reassessments.
6. Sri A.A. Kulkarni, the learned counsel for the assessee, submitted that the notices which are not in consonance with the statutory provisions are undoubtedly invalid and all subsequent actions adopted on the basis of such notices are illegal. As per the amended provisions of section 148 with effect from 1-4-1989 "before making any assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than 30 days, as may be specified in the notice, a return of income....". However, the assessee was called upon to file the returns within 30 days from the date of service of the notices. It may be mentioned that a decision of the Karnataka High Court dated 15-2-1993 in Writ Petition No. 33832 of 1992 in the case of Winter Core Private Ltd., Bangalore-25 was relied on by the assessee before the learned CIT (Appeals) who accepted the contention of the assessee that the notices are invalid and the consequent actions were illegal. According to him, the notices should have been issued in accordance with the amended provisions of section 148, by affording time to the assessee to file the returns of income after the expiry of a period of 30 days. Thus, he allowed the assessee's appeals on the preliminary ground only by holding that the notices issued under section 148 were invalid and the subsequent action as illegal. Accordingly, he quashed the reassessments.
7. The learned departmental representative relied on the provisions of section 292B of the I.T. Act and contended that it would be necessary to consider the provisions of the said section in the right perspective. Therefore, it would be proper to quote the said provisions, which are as follows :
"292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act."
After finding that the income of the assessee has escaped assessment, issuance of notice under section 148 is in substance and effect in conformity with or according to the intent and purpose of this Act. It is true that by an amendment, it was specifically clarified that in a notice issued under section 148, time should be given to the assessee to file his return of income is more than 30 days or after the expiry of 30 days. The reassessments have been made on 31-3-1992 in accordance with the notices issued under section 148.
8. Apart from interpreting the provisions of section 292B to show that the issuance of the notices under section 148 in this case is procedural in nature, the learned departmental representative contended that the defect or mistake in the procedure of issuing notices is curable under the said section. In this connection, he has relied on the judgment of the Supreme Court in the case of CIT v. Jai Prakash Singh [1996] 85 Taxman 407. The Supreme Court on the question whether it could be said that non-service of notice under section 143(2) against nine out of the ten legal representatives of the deceased invalidated the assessment orders, held that the assessment orders cannot be held to be invalid. The Supreme Court further held that "the principle that emerges from the decision in Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505, is that an omission to serve or any defect in the service of notices provided by procedural provisions does not effect or erase the liability to pay tax where such liability is created by distinct substantive provisions. Any such omission or defect may render the order made irregular - depending upon the nature of the provisions not complied with - but certainly not void or illegal". The appeals were, accordingly, allowed and the judgment of the Gauhati High Court was set aside. According to the learned departmental representative once having held that issuance of notice under section 148 is a procedural matter, the defect is removable and, therefore, such notice is valid and the action subsequent to the issue of the notice is not illegal.
9. The learned counsel for the assessee, Sri Kulkarni relied on the decision of the Bangalore Bench of the Income-tax Appellate Tribunal in the case of Prabhat Saw Mills & Timber Merchants v. ITO [1994] 51 ITD 548, and contended that the Bangalore Bench of the Tribunal on identical circumstances held that issuing notice under section 148 calling upon the assessee to file the return of income within 30 days is invalid and bad in law and, hence, the reassessments made in the case of assessee were illegal. However, the Supreme Court decision was not available before the Bangalore Bench at that time. In support of his contention, he has also further relied on the following decisions :-
1. CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 (SC),
2. Jayanthi Talkies Distributors v. CIT [1979] 120 ITR 576 (Mad.),
3. P.N. Sasikumar v. CIT [1988] 170 ITR 80/[1987] 35 Taxman 131 (Ker.), and
4. Nawab Sir Mir Osman Ali Khan Bahadur, H.E.H. The Nizam of Hyderabad v. ITO [1970] 75 ITR 133 (AP).
10. We have examined the facts and considered the arguments as well as the case law cited by both parties. In our opinion, the latest decision of the Supreme Court dated 13-3-1996 in the case of Jai Prakash Singh (supra) has to prevail over all other decisions wherein the procedural defect in the notice is held to be removable and the notice neither becomes invalid nor the subsequent action based on such notice is illegal. It is immaterial for our purpose that the Income-tax Officer has issued fresh notices and, made reassessments for the second time and therefore, we need not give a finding on the validity or the legality of the notices in question. In this view of the matter, we are of the further opinion that the order of the CIT (Appeals) should be set aside with a direction to decide the appeals afresh on merits and in accordance with law. We do so.
11. In the result, the appeals are allowed for statistical purposes.