Income Tax Appellate Tribunal - Hyderabad
Income-Tax Officer vs N. Janardhana Reddy on 15 March, 1994
Equivalent citations: [1994]50ITD227(HYD)
ORDER
R.P. Garg, Accountant Member
1. This is an appeal by the Revenue against the order of the Deputy Commissioner (Appeals) for assessment year 1983-84. The only dispute raised in this appeal is that the DC (Appeals) erred in cancelling the assessment and in holding that the proceedings initiated under Section 147(a) were not proper as the assessee had no obligation to file return of income under Section 139(1 A) of the IT Act.
2. In the previous year relevant to assessment year 1983-84, the assessee was a Minister of Andhra Pradesh. He returned an income of Rs. 13,500 being the gross amount of salary from the Government of A.P. amounting to Rs. 28,500 as reduced by conveyance allowance and motor car allowance amounting to Rs. 15,000 which were exempt under Section 10(14). It came to the notice of the Income-tax Officer that the assessee enjoyed certain perquisites which were not included in the return filed by him. He, therefore, issued a notice under Section 148 to the assessee requiring him to furnish his return of income. No return was filed in pursuance of the aforesaid notice. The ITO, therefore, completed the assessment ex parte determining the total income of the assessee at Rs. 81,962.
3. The proceedings under Section 147 were challenged by the assessee before the DC (Appeals) and the DC (Appeals), following the decision of his predecessor in the case of Sri P. Ranga Reddy, also an ex-Minister of Andhra Pradesh, wherein it was held that the ex-Minister, whose salary excluding perquisites was only Rs. 13,500, was under no obligation to file return of income in view of the provisions of Section 139(1A) of the Act, held that the proceedings under Section 147(a) were not proper and cancelled the assessment made against the assessee. The Revenue is in appeal.
4. There was no challenge of the assessment at Rs. 81,962 on merits of the case. In these circumstances, it is not understandable as to how it could be a case where the assessee could be said to be under no obligation to file the return of income under Section 139(1 A) of the Act. It is not the income in the opinion of the assessee which is taxable but the income which is assessable under the I.T. Act which is decisive of the fact whether the assessee is under an obligation to file the return under Section 139(1A). The income determined by the ITO stands at Rs. 81,962 and it is not disputed. In my opinion, therefore, the order of the DC (Appeals) cancelling the assessment on the ground that the assessee was under no obligation to file return of income under Section 139(1A), is not in accordance with law. His order, therefore, requires to be reversed.
5. The learned Counsel of the assessee, however, submitted that he can support the order of the DC (Appeals) on other grounds that the proceedings initiated by issuing notice under Section 148 were invalid and bad in law and, therefore, the assessment made in pursuance of such notice would also not stand. He filed a photo-copy of the notice under Section 148 dated 8-1 -1986 issued by the ITO. Taking me through the said notice, he demonstrated that the notice nowhere points out for which assessment year it was issued. The notice, he submitted, was vague and, therefore, invalid in law. It was further submitted that this contention was raised by the assessee before the DC (Appeals) and this fact finds a mention in his order in the following words:
The notice under Section 148 issued to the appellant is stated to be not very clear as the assessment year was not. mentioned therein.
When the notice is vague, he submitted, in view of the decisions of the Supreme Court in CIT v. Kurban Hussain Ibrahimji Mithihorwala [1971] 82 1TR 821, the Gujarat High Court in Nyalchand Maluk chand Dagli v. CIT [1966] 62 ITR 102 the Kerala High Court in P.N. Sasi kumar v. CIT [1988) 170 ITR 80, the Allahabad High Court in Modem Lai Agarwal v. CIT [1983] 144 ITR 745, and the Calcutta High Court in Rama Devi Agarwalla v. CIT [1979] 117 ITR 256, the proceedings are vitiated in law and the assessment made in consequence thereof would be a nullity.
6. The learned departmental representative, on the other hand, submitted that the assessee, having understood that the notice had been issued for assessment year 1983 -84 and having proceeded on that basis, cannot now claim that the notice was vague. He further submitted that this is also evident from the notice issued by the ITO under Section 142(1) wherein the assessment year is clearly mentioned. It was further submitted that this fact has not. been brought by the assessee to the notice of the ITO in time and allowed the proceedings to be barred by limitation, and, therefore, the assessee cannot take advantage of the same and he should be estopped from taking such stand in view of the decision of the Andhra Pradesh High Court in Amali English Medium High School v. Government of Andhra Pradesh AIR 1993 AP 338 (FB). He also brought to our notice the provisions of Section 292B wherein it is stated that no return of income, assessment, notice, summons or other proceedings 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 the 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 the Act.
7. I have heard the parties and considered the rival submissions. I have also seen the original notice produced by the learned departmental representative and I find that it nowhere mentions the assessment year for which it was issued or intended to be issued. It is true that the notice under Section 142(1) mentions the assessment year, but that does not make the notice under Section 148 valid if it was invalid otherwise. The scope and intent of both the notices are distinct and the validity of one notice cannot determine the validity of the other notice. I do not, therefore, see any merit in the contention of the learned departmental representative. The further contention of the learned departmental representative that the assessee has not brought this fact to the notice of the ITO is also devoid of any force. The assessee is under no duty to tell the ITO as to how he should proceed and whether he was proceeding legally or illegally. It was for the ITO to proceed in accordance with law and if he does not proceed in accordance with law, the assessee can challenge his action even after the expiry of the period within which he could have remedied the illegality of his action.
8. In the case of Kurban Hussain Ibrahimyi Mithiborwala (supra), the Supreme Court held invalid a notice issued under Section 34 of the Indian Income-tax Act, 1922 calling upon the assessee to file his return for assessment year 1948-49 which was intended to have been issued for assessment year 1949-50. In that case also, a notice under Section 22(2) was issued wherein the assessment year 1949-50 was mentioned. The court held as under :
It is well-settled that the Income-tax Officer's jurisdiction to reopen an assessment under Section 34 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. In the notice issued under Section 34 the Income-tax Officer sought to reopen the assessment of the assessee for the assessment year 1948-49 but in fact he reopened the assessment of the year 1949-50. Hence, in our opinion, the High Court was right in holding that the notice in question was invalid and as such the Income-tax Officer had no jurisdiction to revise the assessment of the assessee for the year 1949-50.
9. Similar is the position in the case of Nyalchand Malukchand Dagli (supra) dealt with by the Gujarat High Court, wherein it was held that the notice under Section 34(1) of the Indian Income-tax Act, 1922, to be valid, must specify with clearness and particularity the assessment year for which the assessment is sought to be reopened.
10. In the case of Madari Lal Agarwal (supra), the Allahabad High Court, held that where the notice issued to an assessee is vague, it would not be possible to rely upon it to sustain an assessment made under Section 147; that a notice contemplated by Section 148 is a jurisdictional notice for initiating proceedings for making an assessment under Section 147 and any defect in that notice Cannot be cured by anything done by the ITO subsequently; that a vague notice is an invalid notice and in such a case the vagueness cannot be removed by reference to other documents on the record; and that if a notice itself is otherwise bad in law, the invalidity thereof cannot be cured by any act of the assessee to whom the said notice is issued. In that case, the notice was intended to be issued to the assessee in the status of HUF but the notice was not addressed to the assessee which was an HUF, an entity different from the assessee, i.e., individual. The notice was held to be vague and as such invalid.
11. In the case of Rama Devi Agarwalla (supra), the Calcutta High Court held that a notice under Section 148 cannot be regarded as a mere procedural requirement and if the notice issued by the ITO is invalid for any reason, the entire proceedings taken by the ITO would become void for want of jurisdiction. If such a notice is ambiguous or defective or otherwise invalid, the same cannot be cured by taking into account and/or looking into other documents whereby such defects can be rectified and/or omissions filled in.
12. In the case of P.N. Sasi kumar (supra), the Kerala High Court held that where the ITO did not make it plain or clear that the notice was to assess the association of persons consisting of S and others and hence the ITO had no competence to assess the association of persons consisting of S and others and, therefore, the entire proceedings were illegal and without jurisdiction. It was further held that such a fundamental infirmity could not be called a "technical objection" or a mere irregularity and such a vital infirmity could not be cured or obliterated by reliance on Section 292B.
13. In the present case, the notice issued by the ITO did not mention for which year it was issued and, therefore, that was an invalid notice suffering from a fundamental mistake and not a mere irregularity. Such a vital infirmity could not be cured or obliterated by reliance on Section 292B of the IT Act.
14. The reliance on the Full Bench decision of the Andhra Pradesh High Court in the case of Amali English Medium High School (supra) is also of no help. That was a case where the principle of estoppel was exercised under Section 115 of the Evidence Act with regard to the concession made by the council. There is no such case appearing in the present appeal. Therefore, the question of estoppel would not be applicable in the present case.
15. In view of the aforesaid, I am of the opinion that the notice issued by the ITO to the assessee was vague and invalid and, therefore, the assessment order made by the ITO in such a proceeding would be invalid and bad in law. I therefore, uphold the order of the DC (Appeals), though for different reasons.
16. In the result, the appeal is dismissed.