Punjab-Haryana High Court
Smt. Bhagwant Kaur vs Commissioner Of Income-Tax on 20 September, 1996
Equivalent citations: [1997]223ITR242(P&H)
Author: Ashok Bhan
Bench: Ashok Bhan
ORDER--Assessment order passed under s. 143(1) barred by limitation under s. 153. Ratio: It is sufficient of the assessee denied her liability to be assessed under the set to a acquire a right of appeal therefore, the assessee's appeals were maintainable under clause (c) of section 246(1) [Now section 246(1)(a)] of the Act. Held: The denial of liability by the assessee is apparent and it is not necessary to go into the reasons on which the denial rested. It is sufficient if the assessee denied her liability to be assessed under the Act. This would enable her to acquire a right to appeal under clause (c) of section 246(1) of the Act. How far the assessee would succeed in her plea, that the returns filed by her were invalid and non est in the eye of law and that the orders under section 143(1) were barred by limitation, is a matter which did require examination separately. These two grounds raised by the assessee in her appeal before the Appellate Assistant Commissioner were sufficient to give rise to a plea of denial of liability to be assessed under the Act. The assessee's pleas regarding the invalidity of the returns and about the orders being time-barred may or may not ultimately find favour with the appellate authority but these pleas did constitute a basis for denial of liability to be assessed. Since there is a specific and distinct provision for an appeal in a case of denial of liability in clause (c) of section 246(1), the assessee's appeals were maintainable under clause (c) of section 246(1) of the Act. Case Law Analysis: CIT v. Geeta Ram Kali Ram (1980) 121 ITR 708 (All)(FB), CIT v. Kanpur Coal Syndicate (1963) 53 ITR 225 (SC), CIT v. Ramlal Mansukh Rai (1970) 77 ITR 964 (P&H), Mandal Ginning & Pressing Co. Ltd. v. CIT (1973) 90 ITR 332 (Guj), Mohan Lal Khemka v. CIT (1971) 81 ITR 89 (All), Rani Anand Kunwar v. CIT (1940) 8 ITR 126 (Oudh) relied. Application: Also to current assessment years though by the Finance Act, 1994 order under section 143(1) is specifically made appealable. A. Y.: 1963-64 to 1965-66 Income Tax Act 1961 s.246(1)(a) JUDGMENT N.K. Agrawal, J.
1. The assessee, Smt. Bhagwant Kaur, filed returns of income voluntarily for three assessment years, i.e., 1963-64, 1964-65 and 1965-66, showing income from house property at Rs. 8,842, Rs. 8,842 and Rs. 8,467, respectively. Consequent upon the filing of the aforesaid three returns, orders were passed by the Assessing Officer under Section 143(1) of the Income-tax Act, 1961 (for short, "the Act"), for each of the three assessment years on March 23, 1976. Tax was levied on the income declared by the assessee and interest under sections 139(8) and 217 of the Act was also charged.
2. The assesses challenged the orders passed under Section 143(1) of the Act for the three assessment years in question, raising two pleas : (i) that the returns filed by her were invalid returns within the meaning of Section 139(4)(b) of the Act ; and (ii) that the orders passed under Section 143(1) were barred by limitation under Section 153 of the Act. The Appellate Assistant Commissioner dismissed the appeals in limine on the ground that no appeal lay under Section 246 of the Act against an order passed under Section 143(1). The assessee's plea was that, since she denied her liability to be assessed under the Act, the appeals were maintainable under Section 246(1)(c) of the Act. The Income-tax Appellate Tribunal (for short, "the Tribunal") in second appeals filed by the assessee upheld the view taken by the first appellate authority. Neither the Appellate Assistant Commissioner nor the Tribunal felt inclined to look into the various grounds raised by the assessee challenging the orders passed under Section 143(1) of the Act.
3. At the instance of the assessee, the following question of law has been referred to this court for opinion :
" Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no appeal lay against an order of assessment passed under Section 143(1) even though, according to the assessee, she was denying her liability to be assessed ?"
4. Shri N.K. Sud, advocate, learned counsel for the assessee, has argued that the assessee denied her liability to be assessed under the Act for two specific and distinct reasons and, therefore, she could not be denied the right to appeal simply because orders had been passed by the assessing authority under Section 143(1) of the Act, which were indeed not appealable orders. Shri Sud admits that an order under Section 143(1) did not find its mention in the list of orders given in Sub-section (1) of Section 246 but, nevertheless, the order can be challenged on the particular plea that the assessee denied her liability to be assessed under the Act. The thrust of the argument put forward by Shri Sud is that the mere fact that the orders had been passed by the Assessing Officer under Section 143(1), could not disqualify the assessee from challenging the order if she could do so under any of the clauses of Sub-section (1) of Section 246 of the Act. It is stated that Clause (c) of Sub-section (1) of Section 246, which reads as under, enables the assessee to file an appeal in case of denial of liability :
" 246. (1) Subject to the provisions of Sub-section (2), any assessee aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order-- ....
(c) an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under Sub-section (3) of Section 143 or Section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed ;"
5. It would thus appear that Clause (c) permits an assessee to challenge two categories of orders :
(i) an order whereunder liability to tax has arisen 'under the Act but the assessee denies his liability to be assessed ;
(ii) an order of assessment made under Section 143(3) or Section 144, against which the assessee feels aggrieved as to the amount of income assessed or the amount of tax determined or the amount of loss computed or as to the status under which he has been assessed.
6. The question which arises for determination is whether the assessee had denied her liability to be assessed under the Act and, if it was so, whether she had a right to appeal against the orders passed under Section 143(1) of the Act. It is correct that an order under Section 143(1) has not been specifically mentioned in the list of orders mentioned in Sub-section (1) of Section 246 of the Act. It is, at the same time, correct that, in Clause (c), specific orders have been mentioned against which an assessee could file an appeal. One such order, as seen earlier, arises from a situation where the assessee denied his liability to be assessed under the Act. It is correct that the assessee had voluntarily filed returns for the three assessment years and thereupon orders under Section 143(1) were passed, accepting the income declared in each year. So far, there was no denial of liability by the assessee. The stage of denial appeared thereafter. The assessee challenged the orders in appeals filed before the Appellate Assistant Commissioner on two grounds, namely, the invalidity of the returns and the expiry of the period of limitation. The question which arises is whether the assessee, who denied her liability to be assessed under theN Act after she had voluntarily filed returns of income for the three years and the returns so filed had been accepted and income declared therein was charged to tax, could challenge the order subsequently.
7. Before an order under Section 143(1) of the Act is passed, there is no occasion for, nor an opportunity is given by the Assessing Officer to the assessee to deny liability to be assessed. There is nothing in the Act to justify the view that it is incumbent upon the assessee to deny her liability to assessment before the Income-tax Officer to invest her with a right of appeal. It may be noticed that mere filing of return cannot be said to be tantamount to an admission by the person submitting the returns that he is liable to assessment. The Assessing Officer accepted the returns and there was no opportunity for the assessee to appear before him and to put forward her objections on the ground that she was not liable to assessment at all. There is nothing in Clause (c) of Section 246(1) requiring the assessee to deny her liability to be assessed at a particular stage. If the assessee could not deny her liability while filling up the return, that would not debar her from raising a plea based on the denial of liability to be assessed at a subsequent stage as and when such a right accrued in her favour. In the case of the assessee before us, returns, though filed voluntarily, had not been filed, as claimed by her, within the prescribed period as laid down in Section 139(4)(b) and were, therefore, claimed to be non est and invalid returns in the eye of law. Moreover, orders under Section 143(1) are also said to have been passed by the Assessing Officer after the expiry of the period of limitation as prescribed in Section 153 of the Act. These two grounds constituted the basis for the denial of liability to be assessed under the Act.
8. A similar question had arisen before the Oudh Chief Court in Rani Anand Kumar v. CIT [1940] 8 ITR 126. There returns for two assessment years were filed by the assessee in response to the notices issued by the Income-tax Officer. The Income-tax Officer accepted the returns and, without any further notice to the assessee, assessed her at amounts shown in the returns. The assessee appealed to the Assistant Commissioner of Income-tax denying her liability to be assessed. She had raised a question as to whether she was a member of the joint Hindu family or not. The assessee's plea was rejected on the ground that the assessee had not raised the question before the Income-tax Officer and, therefore, no appeal against the order of assessment was maintainable. It was held as under (headnote) :
" The words 'denying his liability to be assessed under this Act' in Section 30(1) are not confined to the denial of liability before the Income-tax Officer but include his denial in the appeal filed by him.
There is nothing in the Indian Income-tax Act to justify the view that it is incumbent upon the assessee to deny his liability to assessment before the Income-tax Officer to invest him with a right of appeal under Section 30 of the Act.
The absence of a dispute by an assessee as to his liability of being assessed under the Act where he had an opportunity of raising it may be a ground for not entertaining it in appeal but would not take away the right of appeal that is granted to him in express terms by statute or for saying that in such a case there can be no proceedings in law under Section 31 of the Indian Income-tax Act."
9. The Allahabad High Court had also an occasion to examine the question regarding denial of liability in Mohan Lal Khemka v. CIT [1971] 81 ITR 89. R.S. Pathak J. (as his Lordship then was), took the view that a provision granting the right of appeal to the subject should be construed liberally. It is a valuable right. In that case, two partners of an unregistered firm had filed appeals separately against the orders of assessment for three assessment years. The first set of appeals was disposed of and, thereafter, when the second set of appeals filed by the second partner came up for consideration before the Appellate Assistant Commissioner, that set of appeals was also dismissed, being not competent. The plea raised by the second partner in the second set of appeals was that he denied his liability to be assessed, disputing that he was a partner of the firm. It was held by his Lordship that an assessee denies his liability to be assessed under the Act not only when he contends that the Act has no application lo him at all but also when he urges that he cannot be assessed in a particular assessment proceeding taken under the Act. It was open to the assessee to appeal against the assessment orders on the ground that he was not a partner of the firm and the appeals were competent under the substantive provisions of Section 30(1). The observations of the Supreme Court in CIT v. Kanpur Coal Syndicate [19641 53 ITR 225, 229, were taken note of, which read as under (at page 93 of 81 ITR) :
" The expression 'denial of liability' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. "
10. Shri R.P. Sawhney, senior advocate and learned counsel for the Department, has argued that the assessee had declared income from property in all the three years and that income was assessed to tax without any variation. Therefore, the assessee had no right to challenge the assessments because she had voluntarily declared income and brought it into the assessment without any objection. Since the assessee had subjected herself to assessment by voluntarily filing returns, there was no question of permitting her to deny her liability. Reliance has been placed on a decision of this court in CIT v. Ramlal Mansukh Rai [1970] 77 ITR 964, wherein it was held that there existed no inherent right of appeal and this right is entirely a creature of the statute granting the same. Mr. Sawhney has argued that an order under Section 143(1) has not heen made appealable under any of the clauses of Section 246(1). There is no right of appeals vested in the assessee, The assessee had no right to deny her liability to be assessed under the Act once she had voluntarily submitted the returns and was assessed accordingly. A question about the denial of liability to be assessed came up for examination before the Gujarat High Court also in Mandal Ginning and Pressing Co. Ltd. v. CIT [1973] 90 ITR 332. That was a case where an order of rectification was passed under Section 35(1) of the Indian Income-tax Act, 1922. Assessment made under Section 23 was rectified. It was held by Bhagwati C. J. (as his Lordship then was) that no appeal lay against an order of rectification, It was observed that when an assessee claims that he is not liable to be proceeded against under Section 35(1), he is not denying his liability to be assessed under the Act. His objection is only against a proceeding for assessment under the particular provision of the Act. A right of appeal is given under Section 30(1) of the Indian Income-tax Act, 1922, against various orders and each of the orders against which a right of appeal is conferred is described by reference to the source of power under which.it is made. An appeal lies from an assessment made under Section 23. The assessee has, therefore, no right of appeal under Section 30(1) against an order of rectification made under Section 35(1) of the Act. Shri Sawhney has, on the strength of the said observations, contended that, in the absence of any specific provision permitting an appeal against an order under Section 143(1), the assessee cannot take shelter under Clause (c) simply by denying her liability to be assessed once she has voluntarily declared her income for being assessed under the Act. The Allahabad High Court (Full Bench) has also considered the right of appeal in a case where the assessee denied his liability to be assessed under the Act, in CIT v. Geeta Ram Kali Ram. [1980] 121 ITR 708. That was a case where an assessee had challenged the levy of interest under sections 139 and 215 of the Act. There was no provision of appeal against an order levying interest under Section 139, 215 or 217 of the Act. It was held that an appeal is a creature of statute and an assessee has a right of appeal only after there is a statutory provision for it. Under Clause (c) of Section 246, any assessee aggrieved by an order against the assessee, "where the assessee denies his liability to be assessed under this Act. . . ." may appeal to the Appellate Assistant Commissioner. The crucial phrases are "denies his liability to be assessed" and "under this Act". No particular section or provision of the Act has been mentioned. In this setting, the use of the phrase "under this Act" should not mean under any individual section or provision of this Act. The following observations are relevant (at page 710) :
" Under Clause (c) of Section 246, there is a right of appeal against the regular assessment under Section 143(3) or Section 144 where the objection is to the amount of income assessed or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed. In this context, the phrase 'where the assessee denies his liability to be assessed under this Act' should not be construed to include the grounds of attack covered by the other part of the clause, because that will render the aforesaid part of Clause (c) otiose or superfluous."
11. In the case before us, the denial of liability by the assessee is apparent and it is not necessary to go into the reasons on which the denial rested. It is sufficient if the assessee denied her liability to be assessed under the Act. This would enable her to acquire a right to appeal under Clause (c) of Section 246(1) of the Act. How far the assessee would succeed in her plea, that the returns filed by her were invalid and non est in the eye of law and that the orders under Section 143(1) were barred by limitation, is a matter which did require examination separately. These two grounds raised by the assessee in her appeal before the Appellate Assistant Commissioner were sufficient to give rise to a plea of denial of liability to be assessed under the Act. The assessee's pleas regarding the invalidity of the returns and about the orders being time-barred may or may not ultimately find favour with the appellate authority but these pleas did constitute a basis for denial of liability to be assessed. Since there is a specific and distinct provision for an appeal in a case of denial of liability in Clause (c) of Section 246(1), the answer to the question of law, referred to this court for opinion, is in the negative. Therefore, the question is answered in favour of the assessee and against the Revenue. The assessee's appeals were maintainable under Clause (c) of Section 246(1) of the Act, and have to be heard on the merits.
12. Ordered accordingly. No order as to costs.