Madhya Pradesh High Court
Bhatia Motor Stores vs Cit on 14 December, 2005
Equivalent citations: (2006)200CTR(MP)385, [2006]152TAXMAN89(MP)
JUDGMENT
By The Court This is an appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the "Act').
2. The relevant facts for purpose of disposal of this appeal are that the appellant filed return of income for the assessment year 1990-91 on 8-10-1990 declaring income at Rs. 1,14,294 and claiming status of registered firm. The appellant also filed an application under section 184 of the Act in the prescribed form to treat the appellant as a registered firm. The assessing officer passed an order on 16-7-1991 under section 185 of the Act rejecting the application of the appellant to treat the firm as a registered firm and framed the assessment in the status of association of persons (hereinafter referred to as the 'AOP') and assessed the income at Rs. 1,96,689.
3. Aggrieved, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals) (hereinafter referred to as the Commissioner (Appeals) and by order dated 24-7- 1992, the Commissioner (Appeals) annulled the assessment holding that no assessment could be framed against the appellant in the status of AOP, since no return was filed in the status of AOP nor notice under section 142(1)/148 of the Act was issued to the appellant in the status of AOP. The Commissioner (Appeals) while setting aside the order of the assessing officer, directed the assessing officer to pass a fresh order of assessment after giving due opportunity of hearing to the appellant.
4. The department filed an appeal against the said order of the Commissioner (Appeals) before the Income Tax Appellate Tribunal, Indore Bench (hereinafter referred to as the 'Tribunal'). While the said appeal was pending before the Tribunal, the assessing officer issued a notice under section 142(1) of the Act to the appellant on 23-9-1992 requiring the appellant to file return in the status of AOP. Pursuant to the said notice, the appellant filed a return in the status of AOP and again claimed that it was a registered firm. On 18-1-1993 the assessing officer passed a fresh order of assessment treating the appellant as AOP after rejecting the claim of the appellant to be a registered firm. On 18-1-1993, the assessing officer also made a protective assessment (on) the appellant as a registered firm on an income at Rs. 2,35,592.
5. Against the said order of assessment dated 18-1-1993 in the status of AOP, the appellant again filed an appeal before the Commissioner (Appeals), and the Commissioner (Appeals) vide order dated 9-2-1996 allowed registration of the appellant-firm and set aside the order of the assessing officer assessing the appellant in the status of AOP as also the assessment order on protective basis in the status of registered firm.
6. The department did not file appeal against the order of the Commissioner (Appeals), dated 9-2-1996 allowing the registration to the appellant's firm and the order of the Commissioner (Appeals) annulling the assessment of the appellant in the status of AOP, but filed an appeal against the order of the Commissioner (Appeals) annulling assessment of the appellant in the status of registered firm before the Tribunal. The Tribunal by order dt, 8-3-2002 passed in ITA No. 423/Ind/1996, allowed the said appeal and sustained the assessment against the appellant as a registered firm. Aggrieved, the appellant has filed the instant appeal before this Court.
7. On 10-3-2003 when the appeal was admitted, the court formulated two substantial questions of law as under :
(1) When the original assessment was annulled by the Commissioner (Appeals) and revenue had filed an appeal before the Tribunal thus the matter being sub judice, did the assessing officer has the jurisdiction to issue notice under section 142(1) of the Income Tax Act ?
(2) Whether a protective assessment could be done separately from the original assessment or whether it is required to be done only simultaneously ?
8. Mr. S.C. Bagadia, learned senior counsel appearing for the appellant, submitted that when the original assessment was annulled by the Commissioner (Appeals) and the department filed an appeal before the Tribunal and the matter was sub Judice before the Tribunal, the assessing officer should not have proceeded to issue notice under section 142(1) of the Act on 23-9-1992 and should have waited for the Tribunal to dispose off the appeal. He vehemently submitted that the entire action of the assessing officer in issuing notice under section 142(1) of the Act on 23-9-1992 and the assessment that followed pursuant to the notice are, therefore, without jurisdiction.
9. Mr. R.L. Jain, leaned senior counsel appearing for the department, on the other hand, submitted that although the department's appeal before the fresh (sic) Tribunal was sub judice, no stay order has been issued by the Tribunal staying the fresh assessment proceeding after the assessment order was annulled by the Commissioner (Appeals) and, therefore, the assessing officer had to complete the assessment pursuant to the order passed in appeal by the Commissioner (Appeals) within the time-limit prescribed in section 153(2A) of the Act, hence the notice under section 142(1) issued on 23-9-1992 and the fresh assessment that followed cannot be said to be without jurisdiction.
10. Sub-section (2A) of section 153 of the Act as well as Explanation 1 to section 153 of the Act, which are relevant for the purpose of deciding the issue, are quoted hereinbelow:
"Section 153. nme-limit for completion of assessments and reassessments XXXXX (2A) Notwithstanding anything contained in sub-sections (1) and (2), in relation to the assessment year commencing on the 1-4-1971, and any subsequent assessment year, an order of fresh assessment under section 146 or in pursuance of an order, under section 250, section 254, section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order under section 146 cancelling the assessment is passed by the assessing officer or the order under section 260 or section 254 is received by the Chief CIT or CIT or, as the case may be, the order under section 263 or section 264 is passed by the Chief CIT or CIT.
xxxxx Explanation 1 : In computing the period of limitation for the purposes of this section-
(i) xxxxx
(ii) the period during which the assessment proceeding is stayed by an order or injunction of any court, or."
11. A plain reading of sub-section (2A) of section 153 of the Act would show that where an order under section 250 of the Act is passed in appeal cancelling the assessment, an order of fresh assessment can be passed at any time before expiry of two years from the end of the financial year in which the order under section 250 of the Act is received. Explanation 1(ii) to section 153 of the Act quoted above states that in computing the period of such limitation for the purpose of this section, the period during which the assessment proceeding is stayed by an order or injunction of any court shall be excluded. Thus, where fresh assessment proceeding has not been stayed by an order or injunction of any court, a fresh assessment order pursuant to an appellate order under section 250 of the Act cancelling the assessment has to be passed before expiry of two years from the end of financial year in which order under section 250 of the Act is received. In the instant case, the original assessment of the appellant in the status of AOP for the assessment year 1990-91 had been annulled by the Commissioner (Appeals) under section 185 of the Act on 24-7-1992 and, therefore, the fresh assessment had to be completed before expiry of two years from the end of financial year in which the appellate order of Commissioner (Appeals) was received. The assessing officer could not have waited till the Tribunal decided the appeal on 4-4-1997 unless the Tribunal had passed an order of stay staying the fresh assessment pursuant to the order of the Commissioner (Appeals) annulling the assessment and directing fresh assessment after notice under section 142(1) of the Act. It is, therefore, not possible to hold that the assessing officer had no jurisdiction to issue notice under section 142(1) of the Act, when the department filed an appeal against the order of Commissioner (Appeals) annulling. the original assessment before the Tribunal and the said appeal was pending before the Tribunal. The first substantial question of law quoted above is, therefore, answered in positive and in favour of the department.
12. On the second substantial question of law as to whether the protective assessment could be done separately from the original assessment or whether it was required to be done only simultaneously, there appears to be no provision in the Act providing for the manner in which a protective assessment has to be done. But traditionally wherever the department has been in doubt on account of a pending litigation as to how exactly an assessment has been framed against the assessee, the assessing officer has been making one assessment in a manner in which he thinks the assessment should be done and apprehending that such assessment as made by him may be set aside in the pending litigation, he has been making another assessment as per the stand of the assessee for the purpose of protecting the interest of the revenue, in the event the assessee succeeds in the pending litigation. There is no provision anywhere in the Act stipulating that such protective assessment has also to be made along with the original assessment. In the present case, as we have seen, the assessing officer had made one assessment on 18-1-1993 on the appellant in the status of AOP and has made another protective assessment against the appellant as a registered firm so as to protect the interest of revenue in the event the appellant succeeds finally in its claim to be a registered firm. Instances of such protective assessment have been referred to in the judgment of the Supreme Court in the case of Lalji Haridas v. ITO (1961) 43 ITR 387 (SC) as well as the judgment of Gauhati High Court in Jagannath Bawh & Ors. v. CIT & Ors. (1998) 234 ITR 464 (Gau). Thus, the second substantial question of law is also answered in positive and in favour of the department.
13. Mr. Bagadia, learned senior counsel appearing for the appellant, submitted that yet a third substantial question of law arises in this case though not formulated by the court in its order dated 10-4-2003. He submitted that a Special Bench of the Tribunal, Delhi in Motorola Inc. v. Dy. CIT (2005) 96 TTJ (Del)(SB) 1 has held that notice under section 142(1)(i) of the Act calling for return has to be issued after the end of the period mentioned in section 139(1) of the Act and before the end of relevant assessment year. He submitted that in the present case, the assessment year 1990-91 ended on 31-3-1991 and hence notice under section 142(1) issued by the assessing officer on 23-9-1992 was time-barred as per the said decision of the Tribunal and the consequential assessment pursuant to the said notice was bad in law and was liable to be set aside.
14. Mr. R.L. Jain, learned senior counsel appearing for the department, on the other hand, submitted that this is not a case where section 142(1)(i) of the Act was attracted because the appellant, in the present case, had already filed a return of income and notice under section 142(1)(i) is issued only where no return had been filed by the assessee.
15. We find a lot of force in the submission of Mr. R.L. Jain, learned counsel appearing for the department. Section 142(1) of the Act after its amendment. with effect from 1-3-1988, is extracted hereinbelow :
"Section 142. Inquiry before assessment.--(1) For the purpose of making an assessment under this Act, the assessing officer may serve on any person who has made a return under section 139 or in whose case the time allowed under sub-section (1) of that section for furnishing the return has expired a notice requiring him, on a date to be therein specified,
(i) where such person has not made a return within the time allowed under sub-section (1) of section 139, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or
(ii) to produce, or cause to be produced, such accounts or documents as the assessing officer may require, or
(iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters including a statement of all assets and liabilities of the assessee, whether included in the accounts or not as the assessing officer may require :
Provided that-
(a) the previous approval of the Deputy Commissioner of Income Tax shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts;
(b) the assessing officer shall not require the production of any accounts relating to a period more than three years prior to the previous year."
16. A reading of the provisions of section 142(1) of the Act would show that where a person has not filed a return within the time allowed under sub-section (1) of section 139, the assessing officer may under section 142(1)(i) serve a notice requiring him to furnish a return of his income on the date specified in the notice in the prescribed form and verified in the prescribed manner setting forth such other particulars as may be prescribed. In the present case, admittedly, the appellant had filed a return under section 139(1) of the Act and, therefore, the provision of section 142(1)(i) of the Act was not applicable. The notice served under section 142(1) of the Act on the appellant was in compliance of the direction of the Commissioner of Income Tax (Appeals) in the appellate order dated 24-7-1992 annulling, the original assessment for the assessment year 1990-91 and requiring him to give a notice and opportunity of being heard for assessment of AOP. Hence, the decision of the Special Bench of the Tribunal in the case of Motorola Inc. (supra) cited by the learned senior. Counsel for the appellant does not apply and no substantial question of law. arises in this case as to whether notice under section 142(1)(i) of the Act was not barred by time.
For the aforesaid reasons, we dismiss this appeal.