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TMI Blog2011 (3) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case the Income Tax Appellate Tribunal was right in law in holding that the reopening of the assessment under Section 147 and completion of assessment without issue of notice under Section 43(2) within 12 months is not valid? (ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that non-furnishing of the copies of the reasons by the Assessing Officer for reopening the case under Section 147, even though the assessee has not applied for certified copies of the reasons recorded by the Assessing Officer and paying the necessary charges is valid? 2. Even though T.C.Nos.672 to 675 of 2009 were filed along with T.C.Nos.886 to 889 of 2005, they got numbered long after the admission of T.C.Nos.886 to 889 of 2005 and are yet to be admitted. As the issues arise out of the common order of the Tribunal dated 18.08.2004 relating to the assessee and other co-owners and the learned counsel appearing for the assessee in the above said appeals are one and the same, these appeals are formally admitted on the questions of law raised as above. 3. T.C.Nos.672 to 675 of 2009 relate to assessment years 1996-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the relevant assessment years, the assessee admitted his net share income from the said property under the head "income from house property" based on the consolidated profit and loss account maintained by the co-owners in respect of the said building, year after year. One of the major items of expenditure appearing in the building account was "interest on borrowed capital". The original assessment in respect of the assessment years 1989-90 to 1996-97 was completed, accepting the returned income, thereby the claim for deduction under Section 24(vi) of the Income Tax Act (hereinafter referred to as 'the Act') on the proportionate share of interest payable on the capital borrowed from numerous parties aggregating Rs.1,78,09,878.91 towards the cost of construction of the building Kannammai Buildings was granted to the assessee. However, on information coming to his possession that the cost of construction of the building was about Rs.60,00,000/- in 1965, carried on entirely through borrowed funds and that the co-owners had withdrawn huge amounts of the borrowed funds for purposes other than for payment of creditors who lent money for the construction of the building, the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s). Following the decision in the case of M.Chellappan and yet another co-owner, the Commissioner of Income Tax (Appeals) rejected the claim of the assessee as inadmissible. Like all other co-owners, the assessee preferred an appeal before the Income Tax Appellate Tribunal. In the course of the proceedings before the Tribunal as well as before the Commissioner of Income Tax (Appeals), the assessee took a specific objection as regards the limitation on reopening the assessment, apart from the Assessing Authority not furnishing the copies of the reasons recorded for reopening the assessment under Section 148 of the Act. As regards the non-furnishing of the copies of the reasons recorded for reopening of the case, in spite of the request made by the assessee, the Tribunal pointed out that as admitted by the Revenue, the Assessing Authority furnished the gist of the reasons recorded and not the entire reasons recorded by the Assessing Officer. The Revenue's contention that the assessee had to apply for certified copies along with the copying fee, however, was rejected by the Tribunal, since there was no confidentiality attached to the reasons recorded for reopening the case. Consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pees Tax as per Revision Order giving effect to CIT(A) Order in Rupees Difference being the Tax Effect in Rupees (a) (b) ( C) (d) (e) (f) (g) 1 1996-1997 146970 31302 321110 100946 69644 2 1995-1996 106920 17578 264220 79190 61612 3 1994-1995 96770 16533 246290 85140 68607 4 1993-1994 79022 13106 190330 62196 49090 5 1992-1993 146795 55622 233350 103910 48288 6 1991-1992 144569 54373 190820 81771 27398 7 1990-1991 79842 22503 112540 37984 15481 8 1989-1990 62119 14803 100410 30928 16125 Considering the circulars issued by the Board setting the monetary limit for filing the appeal under Section 260-A of the Act, learned counsel appearing for the respondent submitted that the Department's appeals have to be, in limine, rejected. Secondly, this Court had already considered the issue on merits on the claim for deduction under Section 24(1)(vi) of the Act in the appeals preferred by the Revenue in respect of more than one co-owner, in the decision reported in [2006] 284 ITR 257 (Commissioner of Income-tax v. C. Palaniappan) (to be read as G.Palaniappan - (2005) 198 CTR (Mad) 490 (The Commissioner of Income Tax Vs. M. Chel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, as the case may be, to cases prior to the amendment, the retrospective amended limitation, as given under the proviso to Section 148 of the Act, alone has to be looked into; as such, limitation provided for under Section 143(2) of the Act has no relevance at all in the matter of assessments under Section 148 of the Act. In sum and substance, he submitted that the amended provisions under the proviso to Section 148(1) of the Act is exclusive to a case of escaped assessment or reassessment or recomputation under Section 148 of the Act. Considering the above-said aspects, the Tribunal is not correct in holding that the notice issued under Section 148 of the Act has to fail, by reason of the limitation prescribed under Section 143(2) of the Act. 11. He pointed out that that apart from the procedure to be followed on the notice given under Section 148 of the Act, when specific provisions are brought under Section 148 of the Act to deal with the notice issued to make the assessment under Section 147 of the Act, it is no longer open to the assessee to state that the proceedings are hit by limitation. As regards the furnishing of copies, he pointed out that when the gist of the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Joint Commissioner of Income-tax), that the amended provision cannot be made use of at the stage when an appeal under Section 260A of the Act is filed, to accept the claim of the Revenue that by reason of the amended provision, the limitation plea, as given under Section 143(1) of the Act, is not available. In any event, having regard to the finding of the Tribunal that the reasons for reopening of assessment were not given to the assessee and that the proceedings were not in conformity with Section 143(2) of the Act, the question of even saving the proceedings by referring to the proviso under Section 148 of the Act, does not arise. He further emphasized that going by the Board's circular, fixing the monetary limit for filing tax cases applicable herein, when the other co-owners' appeals were dismissed by this Court and some of the co-owners' appeals were not even appealed against by the Revenue, the contention advanced by the Revenue does not deserve any countenance. 13. Heard the learned counsel appearing for both sides and perused the material on record. 14. It is not denied herein that in respect of one of the co-owners G.Palaniappan (cause title given wrongly as C.Palan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice preferred to in this clause shall be deemed to be a valid notice: Provided further that in a case -- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.-- For the removal of doubts, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of which he is assessable under the Act during the previous year corresponding to the relevant assessment year in the prescribed form and verified in the prescribed manner and setting forth particulars as may be prescribed, then the return filed shall be treated as if such a return is one required to be filed under Section 139 of the Act, to follow the other provisions of the Act. Chapter XIV of the Act deals with the procedure for assessment. 18. Leaving aside the other provisions on the filing of the return and self-assessment which are not relevant for the purpose of our case, the next relevant provision herein is Section 143 of the Act, dealing with assessment. Where a return has been furnished under Section 139 of the Act or in response to a notice under Section 142(1) of the Act, in order to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, under Section 143(2) of the Act, the Assessing Authority has to serve a notice on the assessee, requiring him either to attend his office or to produce or caused to be produced therein, on a date to be specified therein, such evidence that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit for making the assessment, reassessment or recomputation as specified in Sub-Section (2) of Section 153 of the Act, every such notice issued is deemed to be a valid notice. The explanation appended therein pointed out to the limited scope of the newly inserted provisos that the same would not be available to a return filed on or after 1st day of October, 2005, in response to a notice served under Section 148 of the Act. Thus the substantive provision on limitation in a case of filing a return on a notice issued under Section 148 of the Act would be the one provided under the proviso to Section 148 and limitation available for making an assessment or reassessment or recomputation, as specified under Section 153(2) of the Act and nothing beyond. Hence, in respect of the returns filed between the period 1.10.1991 and 30.9.2005 pursuant to the proceedings under Section 148 would not be hit by limitation on the issuance of notice under Section 143(2) of the Act. The only limitation that has to be seen to confer validity to the proceedings under Section 148, would be the time limit given under Section 153(2) for making the assessment, reassessment, recomputation and nothing beyond. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the proceedings under Section 148 of the Act. In the circumstances, the Assessing Authority was under an obligation to issue a notice, if he considered that there was under-statement of income in the return, within twelve months from the end of the month in which the return was filed. Since the notice was issued beyond the period of 12 months, the order was null and void. As already pointed out, having regard to the proviso inserted to Section 148 of the Act under the Finance Act 2006, with the notice issued under Section 143(2) beyond 12 months and other requirements as regards the period covered and the limitation available for passing the order under Section 153 of the Act, we do not find any ground to uphold the order of the Tribunal on the aspect of limitation. We agree with the submission of the Revenue that the notices are saved by reason of the proviso to Section 148 of the Act, introduced under the Finance Act, 2006. Consequently, the first question raised, has to be answered in favour of the Revenue. 20. Learned Counsel appearing for the assessee pointed out that the intention of the Legislature in saving limitation as regards the notice issued beyond the time limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the legal fiction, one must ascertain the purpose for which the fiction is created. After ascertaining the purpose, the application of the fiction, if restricted by the provision by which the fiction is created, then the purpose for which it is created alone has to be acted upon and nothing beyond. Thus although full effect must be normally given to a legal fiction, yet, it cannot be extended beyond the purpose for which it is created (refer AIR 1955 SC 661 (The Bengal Immunity Company Ltd. Vs. The State of Bihar and others) and AIR 2007 SC 2129 (UCO Bank and Anr. Vs. Rajinder Lal Capoor). In so providing a specific treatment for cases falling under Section 148 of the Act, the question of considering the amendment as a curative legislation does not arise, or for that matter, the amendment failing to meet the avowed object by reason of not carrying out a corresponding amendment to Section 143(2) of the Act. 22. In this connection, the decisions cited by the learned counsel appearing for the assessee as regards the amendment not meeting up the object with which it was made, needs to be seen. The first of the decisions is the Bombay High Court decision reported in [1977] 109 ITR 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudicial to the interest of the Revenue. The Apex Court pointed out to the phrase "prejudicial to the interests of the revenue" under Section 263 of the Act, holding that the same has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Thus, if on the date of passing the order, the same was with reference to the law then existing, the same, on revision under Section 263 of the Act, shall not be challenged on the score that the law had undergone a change thereafter, after the passing of the assessment order. The Karnataka High Court, in the decision reported in [2010] 325 ITR 219 (KAR) (Shriram Chits (Bangalore) Limited. v. The Joint Commissioner of Income-tax), applied the said decision. The said decision related to an order of rectification passed by the Officer in view of the subsequent retrospective amendment to Section 234 of the Income Tax Act under the Finance Act, allowing the appeal filed by the assessee. By following the decision reported in [2007] 295 ITR 282 (SC) (CIT Vs. Max India Ltd.), the Karnataka High Court held that it was not possible for the Assessing Officer to reopen the case, since, at the time of passing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already pointed out, all these appeals are filed in the year 2004. The Revenue had raised a question of law, which is admitted by this Court, as to whether the non-furnishing of the copies of the reasons by the Assessing Officer for reopening of the case, even though asked for by the assessee, would be fatal to the proceedings under Section 148 of the Act. The ground on which the Revenue rakes up this issue is that the assessee had not applied for certified copies of the reasons recorded by the Assessing Officer by paying the necessary charges. 27. We do not appreciate this line of reasoning of the Revenue herein, particularly when the Revenue is duty bound to furnish the reasons on which the assessment proceedings are initiated. The Revenue contended that the gist of reasons were furnished. It must be pointed out that it is not the same as indicating the grounds on which the proceedings have been initiated under Section 148 of the Act. It is a well settled proposition of law that furnishing of grounds for reopening of assessment is a compliance of the principles of natural justice. Quite apart, while Section 148 of the Act contemplates that the Assessing Officer has to serve a n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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