Income Tax Appellate Tribunal - Madras
Mrs. C. Malathy vs Income-Tax Officer on 30 April, 2003
Equivalent citations: [2004]88ITD37(CHENNAI)
ORDER
A. Kalyanasundharam, Sr. Vice President
1. This is an appeal by the assessee, individual, aggrieved by the order of the CIT(A) dated 8-3-2002. The plea of the assessee in the grounds of appeal raised is with regard to the fresh assessment and its validity.
2. The learned counsel for the assessee Mr. S. Kannan submitted that the assessee filed her return of income on 16th July, 1998 consequent to the notice issued under Section 148 of the Income-tax Act. The challenge of the assessee was that the assessee was served with a notice under Section 143(2) of the Act on 16-11-2000. The learned Departmental Representative Mr. R. Venkataraman, who had the records with him, examined the records and submitted that the notice under Section 139(2) was issued to the assessee some time 16th October, 1999. The plea of the learned counsel Mr. Kannan was that Section 148 clearly states that a return filed in pursuance to notice under Section 148 for all purposes of the Act shall apply as if such a return were a return required to be furnished under Section 139. He submitted that the return would therefore be treated as one filed under Section 139. He made a reference to the provisions of Section 143(2) of the Act and submitted that it required the Assessing Officer to issue a notice and serve it on the assessee within a period of twelve months from the end of the month in which the return was furnished. He submitted that the return having been filed on 16th July, 1998, twelve months period available for issue and service of the notice expired on 31st July, 1999. The notice, as is stated by the learned Departmental Representative that it was served on 16th October, 1999, though the assessee insisted was not received, is still beyond the twelve months statutory and mandatory period permitted under the Act. Therefore, the notice having been issued beyond the time permitted for issue of notice, the consequent assessment framed may have to be quashed. In this regard he placed reliance on the decision of Ahmedabad Bench of the Tribunal in Rakesh S. Manila v. Dy. CIT [2002] 74 TTJ 836, a copy of which has been placed on our records. In this case it was a case of block assessment. Though it was a block assessment, the Bench recognised that the provisions in regard to framing of assessment was governed by the provisions of Section 143. It was also recognised that for framing of an assessment issue of notice under Section 143(2) was mandatory. It further recognised that the mandatory period of one year having been prescribed if not followed by the Department, the assessment cannot be framed on the assessee. The learned Departmental Representative placed on our records copy of the order of the Agra Bench of the Tribunal in Chandra Bhan Bansal v. Dy. CIT [2001] 79 ITD 639. He insisted that in this case the Tribunal had held clearly that the time limit prescribed in Section 143(2) for issue of notice is not applicable to a return filed in response to notice under Section 148. He heavily insisted that this decision squarely applies to the facts of the instant case. He also relied upon the decision of Rajasthan High Court in Sumerpur Truck Operators Union v. ITO. He also relied upon the decision of the Madras High Court in Smt. Indira Devi v. CIT [1994] 210 ITR 537.
3. Rival contentions in regard to the above have been very carefully considered. The present assessment year is 1996-97. Section 153(2) of the Act prescribes the time limit for framing of an assessment especially reopened assessment. The section as it stood for the assessment year reads: "No order of assessment, reassessment or recomputation shall be made under Section 147 after the expiry of two years from the end of the financial year in which the notice under Section 148 was served", provided that where the notice under Section 148 was served on or after the 31st March, 1987, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 1990.
4. The Income-tax Act has been split into various parts and Sections 139 to 158 fall in Chapter XIV where procedure for assessment has been prescribed. The procedure Starts with the requirement of filing of the return voluntarily by the assessee, i.e., under Section 139(1) of the Act. It then proceeds with issue of notice under Section 139(2) calling upon assessee to file a return of income. Section 139(3) of the Act prescribes the return to be filed by a person who has suffered a loss in his business or profession. Section 139(4) prescribes the time for furnishing of a return by a person who could not file his return voluntarily or consequent to a notice calling him to file the return. Section 139(5) of the Act permits a person to file a revised return in the event of he having filed return voluntarily before the expiry of one year from the end of the assessment year or completion of the assessment, whichever is earlier. It prescribed certain other provisions as well. Section 139A prescribes a person to apply for Permanent Account Number. Section 140 prescribes the person who could sign the return so that the return could be treated as valid return. Section 140A talks of payment of self-assessment tax. Section 142 prescribes enquiry before assessment. Section 143 prescribes the assessment. It has Section 143(1) of the Act which permits the Assessing Officer to frame the assessment on the basis of information available on his records. Section 143(2) of the Act talks a situation where return has been filed under Section 139 or in response to a notice calling for filing of return under Section 142 in which the Assessing Officer feels it necessary or expedient making sure 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 on a dale to be specified therein either to attend his office or to produce or cause to be produced therein evidence where the assessee may rely in support of the return. This section has proviso which says that no notice under this section shall be served on the assessee after the expiry of twelve months after the end of the month in which the return is furnished. The purpose of this section is that in a case where the Assessing Officer feels the presence of the assessee necessary, he would have to necessarily comply with this mandatory requirement of serving on the assessee a notice within the period specified in the Act, namely twelve months from the end of the month in which the return is furnished. It is, therefore, clear that the Assessing Officer if he fails to issue a notice within twelve months from the end of the month in which the return was furnished, he cannot thereafter issue a notice under Section 143(2) of the Act to the assessee. The other provisions talk of various other items like regular assessment, ex parte assessment, best judgment assessment and method of accounting in certain cases. This is followed by income escaping assessment, which requires issue of a notice where income was found to have escaped assessment. This is followed by Section 149 which prescribes the time limit for issue of the notice. This section is followed by other provisions like sanction for issue of notice. Section 153 prescribes the time limit as has been reproduced earlier in regard to framing of assessment under various circumstances, which are all mandatory and binding on the administrators of the Act. This is followed by rectification of mistakes and other features.
5. As has been brought out above, the procedure for framing assessment is preceded by filing of return followed by the Assessing Officer feeling the necessity to call the assessee to make sure that the assessee has not understated the income or has not claimed excessive loss or has not paid the tax and so on, should serve on the assessee a notice, which notice shall have to be necessarily served within twelve months from the end of the month in which the return is furnished. The prescribing of notice calling for the return, calling for the filing of the accounts, calling to file a return of income on the reasoning that income has escaped assessment, are various manner of calling for a return of income which the assessee has to file in addition to the assessee requiring to file his return of income voluntarily. The procedure for framing of assessment is prescribed at only one place in the Act, i.e., under Section 143. Three modes of assessments are prescribed. One completing the assessment on the basis of information filed by the assessee on the record of the Assessing Officer. Second, calling the assessee to be present with such information as may be called upon or found necessary by the Assessing Officer, after verification of which the assessment is framed under Section 143(3) of the Act. The next one is the best judgment assessment, which is made in a case where despite the notice having been' served on the assessee, the assessee not responding to the Assessing Officer.
6. From the above it can be seen there are two situations of framing of assessments after issue of a notice. One is assessment framed under Section 143(2) and the other is assessment framed under Section 144, that is ex parte consequent to non-co-operation by the assessee. In respect of assessment framed consequent to reopening of the assessment, it would always be staled that assessment is framed under Section 143(3) of the Act read with Section 147 or 148. Likewise, an ex parte assessment framed it would be stated that Section 144 read with Section 147 or 148. In the case of assessment framed on the basis of return filed, it could be either under Section 143(3) or 144 or 143(1), i.e., not requiring the presence of the assessee.
7. The above only goes to show that there are various circumstances in which the assessee is required to file return of income, some of which could be based on reassessment notice or notice calling upon the assessee to file a return. However, the framing of the assessment is prescribed under Section 153, i.e., the outer time limit available for framing of the assessment. In order that an assessment could be framed on the assessee within the time permitted under Section 153 of the Act, the Assessing Officer has to necessarily and compulsorily follow the procedure prescribed under Section 143(2) of the Act if he has to frame the assessment by calling upon the assessee, that is to frame an assessment order under Section 143(3) or under Section 144 notice under Section 143(2) is a compulsory and mandatory prerogative to be complied by ensuring that the notice is issued within twelve months from the end of the month in which the return is furnished. In the instant case the return was filed on 16th July, 1998. Twelve months from the end of the month, namely 31st July, 1998, would end on 31st July, 1999. The Assessing Officer, therefore, compulsorily and necessarily must issue a notice under Section 143(2) of the Act before 31st July, 1999 if the assessment is to be framed under Section 143(3) of the Act or under Section 144 of the Act. The Assessing Officer in the instant case has apparently issued the notice as per the records shown by the Departmental Representative on 16th of October, 1999 is therefore clearly beyond the time limit that expired on 31st July, 1999. The assessment framed on 29th March, 2001 is therefore not a valid assessment because it is not preceded by a valid notice. The Ahmedabad Bench of the Tribunal, to which our attention was drawn by the learned counsel, has also recognized this feature of the procedure for framing of an assessment prescribed in Section 143 and that it is a mandatory prescription, failing to foll6w such prescription will lead to invalidation of the assessment framed.
8. Coming to the order of the Agra Bench of the Tribunal, to which our attention was drawn, the learned Members apparently were of the opinion "the provisions of Section 143(2) make it amply clear that proviso to Section 143(2) docs not include a return filed in response to notice under Section 148". The reading of Section 143(2) of the Act goes to show that it does not slate anywhere that the procedure prescribed under Section 143 for framing of assessment is limited to returns that are filed under Section 139 and such other features as may be called upon with reference to proviso to Section 142(1) of the Act. There being no restriction that provisions of Section 143(2) of the Act would not apply to any assessment that is framed in response to initiation under Section 148, in our opinion, in view of our above reasons, we necessarily are not in a position to treat the decision as placing some rule of law. There being no restriction of any kind, and further there being no other section under the Act prescribing the procedure for framing of an assessment, in view of our detailed reasons mentioned above, we have to hold that the notice that was issued on the assessee as claimed by the Department (though it was insisted that it was not served on the assessee) on 16th October, 1999 is clearly beyond the time and thereby the assessment framed is bad in law and is hereby quashed. The other points on merits at this point of time, in our opinion, is not necessarily to be gone into because on the basic point of validity of assessment itself we found that the assessment cannot stand. The appeal is allowed.