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TMI Blog2011 (7) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24/12/1994 was issued after considering the return filed by the appellant on 22/12/1992, therefore, reasons recorded on 23.11.1994 in our view are sufficient to establish nexus with the material on record which have rational connection to the material coming to the notice of the AO and the formation of his opinion that there has been escapement of income. Assessing Officer concluded the assessment order on 27.3.1997 which is within the period of two years from the end of the AY having regard to the fact that the assessee had filed the revised return on 20.10.1995. Therefore, the assessment order dated 27.3.1997 is made within the prescribed period of limitation - Decided in favor of Revenue - ITA No. 408/2003 - - - Dated:- 1-7-2011 - Manjula Chellur, B.V. Nagarathna, JJ. A. Shankar, Adv. and M. lava, Adv., for the Appellant M.V. Seshachala, Adv., for the Respondent JUDGEMENT This appeal filed under Section 260A of the Income Tax Act, 1961 (hereinafter, referred to as the "Act"), is against the order dated 12/5/2003, passed in 11A No.357/Bang/98 by the Income Tax Appellate Tribunal, Bangalore Bench, {hereinafter, referred to as the "Tribunal"). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 was issued on 14/12/1992 and in response to the said notice, the appellant by his letter dated 29/i2/1992 informed the Assessing Officer that he had filed his return of income on 22/12/1992. According to the appellant, the Assessing Officer did not pass any order though he was bound to do so on or before 31/3/1995 under Section 153 of the Act. The Assessing Officer issued one more notice under Section 148 of the Act on 24/11/1994 recording the reasons for issuance of the said notice. On the question as to whether the Assessing Officer has the jurisdiction to issue a second notice under Section 148 of the Act and also on the question as to whether the said notice was valid in the eye of law as well as with regard to reasons recorded for the issuance of notice under Section 148 of the Act on 24/11/1994 and on the question of the assessment order dated 27/3/1997 being barred by limitation, the Appellate Commissioner did not agree with the appellant. Hence, the appellant preferred an appeal before the Tribunal. 5. The Tribunal by its order dated 12/5/2003 held that the assessment made on 27/3/1997 is valid in law and therefore, did not agree with the appellant that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is not so in the instant case. Placing reliance on certain decisions, he has submitted that in the instant case, the second notice was invalid in law in as much as such a notice could not: have been issued and further, the assessment made is beyond the period prescribed under the Act and therefore, the authorities below ought to have appreciated this aspect of the matter. He, therefore, submitted that: the substantial questions of law have to be answered in favour of the appellant. 8. Per contra, learned counsel appearing for the revenue submitted that since there was escapement of income to an extent of Rs.3 lakhs, the return filed by the appellant was an invalid return which implies as if there has been failure on the part of the assessee to file a valid return; that if there is non-compliance with notice issued under Section 148 of the Act, a second notice can be issued as per first proviso to Section 147, then the second notice must be complied with; that the reasons recorded are on the basis of the subjective satisfaction of the authority, which cannot be interfered with by a Court of Law and therefore, it is submitted that the authorities below were right in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs.3 lakhs. In the usual course, within a period of two years i.e., by 31/3/1995, the assessment had to be completed. However, assessment order in the instant case was passed on 27/3/1997 and another notice under Section 148 was issued on 24/11/1994 and a revised return was filed on 31/3/1995. The contention of the counsel for the appellant is that the second notice dated 24/11 /94 is barred by limitation since the time limit for the conclusion of the assessment was 31/3/1995 and after that date, since by then, no assessment order had been passed, it must be deemed to have been concluded and hence, the assessment order dated 27/3/1997 is invalid. Before answering the points for consideration, it would be necessary to refer to the documents annexed to the memorandum of appeal. 13. it is seen from the documents annexed, that as per Annexure-B dated 24.10.1992 statement of return of income as disclosed on 31.3.1992 at the time of search under Section 132(4) of the Act is given. In the said statement it. is noted that agricultural income is not included since the same was being worked out and was to be furnished at the time of filing a revised return. Though the said documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since there was no return filed by the appellant notice under Section 148 of the Act was issued on 14.2.1992 as per Annexure-C which was served on the assessee on 24.12.1992. Therefore, when the notice under Section 148 of the Act was issued, the assessee had not filed his return of income only on 22 12.1992, the assessee filed his return declaring income of Rs.3.00 lakh. if the appellant-assessee had filed his return in the usual course that is on or before 30.10.1991, then the assessment would have to be completed by 31.3.1994. But in the present case a return was filed only on 22.12.1992 after issuance of notice under Section 148 of the Act. The said return was therefore, filed subsequent to the issuance of notice dated 14.12.1992. Thereafter, on consideration of the return filed by the assessee on 22.12.1992, notice under Section 148 was issued on 24.11.1994. In response to which, a revised return was filed on 20.10.1995. On the facts of the present case, it becomes clear that as on the date the first notice was issued, there was no return which had been filed by the appellant. If a return is not filed within time prescribed under Section 139(1) or within the time allowed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.1 is accordingly answered against the appellant. 18. Counsel for the appellant has relied upon the following decisions: (a) In the case of M/s.Renuka Industries v. The Income Tax Officer [ITA No.187/2003], disposed of on 28/11/2007 by this court, it has been stated that when once a notice under Section 148 has been issued and the same is served and proceedings are initiated by the Assessing Officer, such proceedings should be completed within the end of two years of issuance of notice. However, in the said case, since the question of law had not been considered by the Tribunal, the matter was remanded back to the Commissioner of Income Tax (Appeals), after holding that there is no provision under the Act to issue notice one more after notice under Section 148 of the Act has been issued. The said decision squarely applies to the present case. 19. In the case of Commissioner of Income-tax, Faridabad v. M.P.Singh, reported in [(2008) 174 Taxman 423] (Punj. and Har.), the Assessing Officer had issued notice to the assessee under Section 142(1) of the Act. calling upon him to furnish the return of income. The assessee filed return belatedly and the same was treated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e truly and fully ail primary facts and that if the Income-tax Officer failed to Inform himself about the true position in law, that could not be made a ground for reopening the assessment under Section 147(a). Since the assessee made a full and true disclosure of ail primary and material facts it was, therefore, held that the initiation of reassessment proceedings under Section 147(a) was not valid. The facts in this decision are distinct from the facts in the present case and therefore the same is not applicable to the present case. 22. In Commercial Art Press v. Commissioner of Income-Tax, Lucknow, [115 - ITR- 876], it has been held that an Income Tax Officer has no jurisdiction to issue notices under S. 143 of the I.T.Act, 1961, repeatedly. When assessment proceedings commence following the issue of a notice under s.148 and the same are validly pending, no fresh notice can be issued under the section. Subsequent notices can only be in pursuance of the provisions of s.143(2) requiring the assessee to come forward and explain the return filed by him. However, as there is no specific bar on the assessee filing a revised return at any time before the assessment is completed, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under Section 148 shall be issued after the period prescribed has lapsed. But once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Service under the Act, is not a condition precedent to conferment of jurisdiction on the Income-tax Officer; it is a condition precedent only to the making of the order of assessment. 27. Counsel for the revenue has referred to the following decisions in support of his case with regard to the implication of lodging of a return. In the case of Esthuri Aswathiah V/s. Income Tax Officer, (1961)41 ITR 539 (SC), it has been held that under Section 22(3), an assessee may submit a return after he has furnished the return under Sub-section (2) he discovers any omission or wrong statement therein. 3ut such a revised return can only be filed at any time before the assessment is made and not thereafter. In the said case, the return was submitted after the assessment was made pursuant to the earlier return and thus it could not be entertained. It was also held that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be rectified under Section 155 after the firm had filed its return belatedly and the same was lodged. It was held that it was not permissible. 32. As far as the second point is concerned, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or re-assess such income. Once an assessment is reopened, any other income which has escaped assessment and which comes to the notice of the Assessing Officer subsequently in the course of proceedings under Section 147, can also be included in the assessment. However, there are two conditions which are to be satisfied. Firstly, the Assessing Officer muse have reason to believe that the income or profit or gains chargeable to income-tax had escaped assessment. Secondly, the Assessing Officer must also have reason-to believe that such escapement had occurred by reason of either omission or failure on the part, of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. 33. The proceeding can be commenced if the Assessing Officer has material for the belief that income has escaped assessment. Circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening the assessment. At the same time courts have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far fetched. which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. b. In the case of Commissioner of income tax, Delhi-XI V/s. Batra Bhatta Company, (2008) 174 ITR 444), it has been held that the belief of the Assessing Officer is material for invoking Section 147, but such a belief must be based on certain reasons, merely because the Assessing Officer feels that issue requires much deeper scrutiny is not enough ground for invoking Section 147. c. In the case of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.3.00 lakh without the profit and loss account and balance sheet. The same was filed on estimation basis. The assessee requested to treat the said return as a response to the notice dated 14.12.1992 which was issued on account of the fact that there was no return tiled till then. Subsequent to issuance of notice under Section 148 dated 24.11.1994, the assessee filed revised return on 20.10.1995 declaring income of Rs.4,57,934/-enclosing profit and loss account and balance sheet. Prior to the issuance of notice dated 24.11.1994 the Assessing Officer has recorded reasons as follows: "23.11.1994 - The assessee filed his Return of Income declaring an income of Rs.3 lakhs. However, since the Return of Income was defective as per the provisions of Section 139(9) and the defective were not rectified, by the assessee. The return was lodged. This however, means that the income of Rs.3 lakhs has escaped assessment In addition, the excess agricultural income being shown by the assessee which is again brought to tax as income from other sources in. his hands has also escaped. Assessment hence, notice u/s. 148 is to be issued." 36. Therefore, the reasons recorded prior to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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