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TMI Blog2008 (3) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... gly held that the gains would be assessable in the asst. yr. 1980-81. 2. On the basis of the order of the Tribunal, a notice under s. 148 was issued by the AO on28th March, 2003for the asst. yr. 1980-81 and the same was served on the assessee on17th April, 2003. A return of income was filed on 20th June, 2003 in response to the aforesaid notice but only after the assessee was reminded by a notice under s. l42(1). An order of reassessment was passed on1st Aug., 2003in which net capital gains of Rs. 3,81,223 were brought to assessment. There was an appeal to the CIT(A) before whom it was contended that the reopening of the assessment was barred by time. This contention was rejected by the CIT(A) who held that the provisions regarding the time within which notice under s. 148 can be issued, contained in s. 149, had no application in view of the clear direction of the Tribunal to assess the capital gains in the asst. yr. 1980-81. However, as regards merits, he held that the assessee was awarded enhanced compensation at Rs. 14 per sq. yard by the District Judge vide order dt. 25th Feb., 1985 and the same was received by the assessee in November, 1985 and according to s. 45(5) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ultimate decision of the CIT(A), since the point does not involve any investigation into facts not already on record. It is also purely legal contention and goes to the root of the matter, namely, the validity of the notice issued under s. 148. We, therefore, permit the assessee to invoke r. 27. Accordingly, we have heard the rival submissions. 5. Sec. 148 makes it mandatory for the AO to issue and serve a notice on the assessee calling upon him to furnish a return of income within a specified period. Service upon the assessee of a valid notice under s. 148 constitutes the foundation of the jurisdiction of the AO to make reassessment and this position was recognised and laid down by the Supreme Court for the first time in Y. Narayana Chetty Anr. vs. ITO (1959) 35 ITR 388 (SC). In this case, it was observed as follows: "....The notice prescribed by s. 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required that the ITO would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of the proceedings taken by the ITO without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the position clear. Supposing for the asst. yr. 1999-2000 the AO includes an item of income which on appeal is held to relate to the asst. yr. 1998-99 (the earlier year). This finding on appeal can be utilised to reopen the assessment for the asst. yr. 1998-99 without any time-limit by virtue of the provisions of s. 150(1), the reason being that had the AO been aware even when he completed the assessment for the asst. yr. 1999-2000 that the income was assessable in the asst. yr. 1998-99, he would and could have included the income in that assessment year itself. This in turn postulates that an assessment or reassessment for the asst. yr. 1998-99 would have been permissible at the point of time when the assessment order for the asst. yr. 1999-2000 was passed. That is the reason why sub-s. (2) of s. 150 provides that the enlargement of time provided in sub-s. (1) will not be available where, even on the date when the assessment was completed, an assessment or reassessment of the income for the asst. yr. 1998-99 (in our example) would have been barred by time. 6. Keeping in view the above statutory provisions, let us examine the facts of the present case. The assessment order for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey stood as on 22nd March, 1990 as is clear from the words "assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken". In the very nature of things, such other provision limiting the time for issue of notice under s. 149 has to be reckoned with only on the date on which the assessment order for the asst. yr. 1978-79 was passed, which was on 22nd March, 1990. On this date, the AO could have issued notice under s. 148 within the time-limit provided by s. 149(1)(b)(iii) of the Act as it stood on that date. The contention of the learned counsel for the assessee to the contrary is rejected. 7. We shall now deal with the contention of the learned counsel for the assessee based on the judgment of the Punjab Haryana High Court in Parveen Kumari vs. CIT (1999) 155 CTR (P H) 610 : (1999) 237 ITR 339 (P H). In this case, the starting point for reckoning the period of limitation was taken to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was the subject-matter of the appeal" referred to the original order of the assessment and not the appellate order, as is clear from the observations of the Court towards the end of p. 410 and the top of p. 411 of the report. The High Court observed, vis-a-vis the judgment of the Calcutta High Court that the said judgment "...in fact, supports our proposition rather than militate against it." It was ultimately held that both with reference to the date of the assessment order as also with reference to the date of the appellate order, the notice of reassessment was invalid. These judgments have been considered by the Karnataka High Court in Spences Hotels (P) Ltd. vs. Dy. CIT (2003) 183 CTR (Kar) 508 : (2003) 263 ITR 263 (Kar). 8. The Punjab Haryana High Court decision cited supra supports the contention of the learned counsel for the assessee, whereas the judgments of the Calcutta and Andhra Pradesh High Courts are against the contention of the learned counsel for the assessee and thus the weight of authorities being against the assessee, we are inclined to hold following the judgments of the Andhra Pradesh and Calcutta High Courts that the notice of reassessment issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq. yard as directed by the District Judge by order dt.25th Feb., 1985. In the appeal before the Tribunal, it was contended by the assessee that the right to receive compensation was an inchoate right till the LAO gave the award and, therefore, the transfer can be said to have taken place only on 25th March, 1980, that the award given by the District Judge on 25th Feb., 1985 enhancing the compensation to Rs. ] 4 per sq. yard was in dispute before the Hon'ble High Court as a result of the appeal filed by the State Government, that if the appeal was allowed in its entirety the payment of the enhanced compensation would have fallen altogether and that in such circumstances, it cannot be said that the right to receive compensation had accrued to the assessee. The Tribunal adverted to these contentions in paras 6 and 7 of its order. The assessee had also contended that the capital gains were not taxable in the asst. yr. 1978-79 and this contention was accepted by the Tribunal in para 12 of its order on the ground that the income accrued or arose only in the year in which the award was given by the LAO and accordingly, it was held that it would be assessable in the asst. yr. 1980-81. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessability of the receipt having regard to the law as it stood in relation to the assessment year under appeal i.e., the asst. yr. 1980-81. The CIT(A) has observed in the impugned order that the Tribunal did not refer to the assessability of the enhanced compensation directed, by the order of the District Judge dt.25th Feb., 1985, which was received by the assessee in November, 1985 and, therefore, the AO cannot bring the enhanced compensation to tax while making the reassessment for the asst. yr. 1980-81. In para 4.2 of his order, he has further referred to s. 45(5) of the Act to support the above conclusion. This part of the decision of the CIT(A) has been challenged as incorrect in ground No. 4 before us on the footing that s. 45(5) came into effect only from 1st Apri1, 1988 and having regard to the provisions of s. 45(1) r/w s. 155(7A), even the enhanced compensation was assessable only in the asst. yr. 1980-81. Sec. 45(5) was inserted by the Finance Act, 1987, only w.e.f.1st April, 1988and, therefore, became applicable only from the asst. yr. 1988-89 onwards. The enhanced compensation ordered by the District Judge was received by the assessee in November, 1985 and accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee only if it was received by the assessee as income, the assessee having had an unreserved right to receive the same. The facts show that it had been pleaded before the Tribunal that even the order of the District Judge was subject matter of an appeal filed by the State Government and, therefore, there is no absolute right to receive the enhanced compensation. There is no information as to what happen to the appeal. It is also necessary to ascertain the nature of the amounts received by the assessee in November, 1985 - whether they were received under orders of the Court and under bank guarantee/indemnity bond etc. It is only after ascertaining these crucial facts can the question whether the entire compensation of Rs. 14 per sq. yard can form the basis of the computation of the capital gains can be properly decided, there is no information on record regarding these aspects. We, therefore, restore this matter to the file of the AO for the purpose of ascertaining these facts and for taking a decision thereafter in accordance with law. The assessee shall be given adequate opportunity of being heard. We direct accordingly. 10. In the result, the appeal of the Department is partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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