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TMI Blog2016 (11) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... o because even in the absence of such an electronic return for the year 2010-11, the Assessing Officer had infact issued the mandatory notice for that year on 11.01.2012. It is beyond comprehension that even though the Assessing Officer had time till 30.09.2011 to issue notice under Section 143(2) and even though he had recorded the reasons for assuming jurisdiction under Section 147 for re-assessment on 21.09.2011, he had still not chosen to issue the notice which would have then given him the jurisdiction to continue with the proceedings. We are unable to obtain any reasons to these omissions and it is rather distressing, as we have recorded in the opening lines of the judgment, that on account of this omission and non compliance of mandatory and imperative provisions, the assessee would now be entitled to reliefs which they otherwise would not have able to obtain. We have, therefore, no other option but to hold in the absence of a Section 143(2) notice, proceedings of assessment initiated, conducted and completed for the year 2009-10 will have to fail but for the year 2010-11, since the proceedings have been continued on the basis of a validly issued Section 143(2) notice, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e V.I.R.C. (1921) 1 KB 64 would be the fundamental guiding line: In a taxing statute one has to look merely at what is clearly said. There is no reason for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look faily at the language used. That the statutes imposing taxes or monetary burdens are to be strictly construed is settled by the Hon'ble Supreme Court of India in a multitude of decisions and the above words of Rowlatt J. has found approval in them. It is the statutes of taxation that the maxim A verbis legis non est recedendum is the most apt and apodictic. This maxim directs the construction to be put on statutes, against the express letter of which the courts will not sanction any interpretation. 6. We have started this judgment with the above exordium, since we find certain issues that have been raised in this matter, essentially relating to noncompliance, on account of oversight or heedlessness, by the Tax Officers of imperative provisions, which unfortunately obtain to the assessees the benefit of technical defences against orders, which otherwise they would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountant, appeared before the authorities and submitted certain details. A questionnaire under Section 142(1) of the Act was issued to Sri.Alex Kuriakose on 25.02.2013, and his answers shown to be sworn under oath, were furnished by him on 05.03.2013. Thereafter, the Revenue issued a proposal to the assessee on 25.03.2013, in response to which the assessee filed a reply on 26.03.2013 and again Sri.Alex Kuriakose appeared personally representing the assessee on 19.12.2012, 11.03.2013 and 27.03.2013. 8. The Assistant Commissioner of Income Tax, Circle-1, Kollam, who was the relevant Assessing Officer, assessed the assessee under Section 143(3) read with Section 147 of the Act to a total income of ₹ 1,09,38,057/- as per the assessment order dated 30.03.2013. This was for the assessment year 2009-10. This order is annexed as Annexure-A4 along with ITA 221/2015. 9. As far as the next assessment year, namely A/Y 2010-11 was concerned, on the same set of allegations the Assessing Officer issued an assessment order under Section 143(3) of the Act dated 30.03.2013 assessing a total income of ₹ 1,43,52,665/-. This order is annexed as Annexure-A2 in ITA 228/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mon order dated 12.02.2015. 13. Additional jurisdictional grounds were raised by the assessee before the ITAT. Primary among them being that since the assessment was completed by the assessing authority under Section 143(3) read with Section 147 of the Act, a notice under Section 143(2) of the Act had to be issued within the period of limitation. The assessee maintains that no such notice under Section 143(2) had ever been issued to him and that in such circumstances, the entire assessment fails. The assessee also raised an issue regarding the assumption of jurisdiction for assessment by the Assessing Officer under Section 147(1) which he claimed was without jurisdiction. It is the specific case of the assessee that the Assessing Officer had initiated action under Section 147 without sufficient material and without sufficient cause or reason and that thus it eroded the substratum of the entire process initiated under Section 147 of the Act. The assessee has also asserted that the quantification of unaccounted income and that the assessment/reassessment has been done without any discernible rationale or comprehensible reason and that it, therefore, suffers from gross illegality. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference made in ITA 221/2015. 16. We have heard Sri.D.S.Sreekumaran, the learned counsel appearing for the appellant and Sri.Christopher Abraham, the learned Standing Counsel for the Assistant Commissioner of Income Tax, Circle-1, Kollam, the sole respondent in both the appeals. We have also read the notes of arguments filed by Mr.Sreekumaran on 26.08.2016 and 07.09.2016. 17. An ex facie examination of the questions of law that have been raised as above, would clearly show that some of the questions that have been raised are essentially questions of fact sought to be presented with the facade of questions of law, especially in the case of ITA 288/2015. 18. The questions that have been raised in ITA 228/2015 would also, according to our view, deal with the questions that have been raised in ITA 221/2015. The questions raised in ITA 221/2015 can be clubbed broadly into three classes. Question Nos.1 to 4 relate to the authority of the Assessing Officer to assume jurisdiction for re-assessment under Section 147 of the Act. Question No.6 relates to the service of notice under Section 143(2) and question Nos.5 to 10 relate to the method adopted by the authorities in arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to income so returned or assessed. In other words, whether return is filed or intimation sent or regular assessment is completed or not, the AO can initiate and complete an assessment under s.147 for any year, if he has reason to believe that any income chargeable to tax has escaped assessment within the meaning of the said expression contained in the Act. As already stated, s.147 is a self-contained provision and the limitations and conditions are only those specifically stated therein. This position is fortified by the first proviso to s.147 which provides for extended period of limitation for reassessment under s.147 beyond four years after completion of assessment under s.143(3) only if assessee failed to disclose fully and truly all material facts necessary for assessment. 20. We are in absolute agreement with the above stated position of law and it is indubitable that, an income escaping assessment as provided under Section 147, may not be based on the return filed or on the basis of the materials thereunder, but may be the materials independently collected leading to a subjective opinion in the minds of the Assessing Officer that he has reasons to believe that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct by legal evidence or conclusion. The function of the Assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Province Manganese Ore Co. Ltd. v. ITO (1991) (191 ITR 662), for initiation of action u/s.147 (a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding, is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing officer is within the realm of subjective satisfaction. 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are such as to justify income escaping assessment under s.147, he is free to record the reasons for the belief and proceed to make income escaping assessment under s.147 without proceeding to make a regular assessment under s.143 (3) of the Act. The only caveat in the nature of a proscription noticed by this Court in Abad Fisheries (supra) while proceeding with re-assessment under Section 147 when the assessment proceedings under Section 143(3) is pending, is that an income escaping assessment under Section 147 cannot be completed within the time available for issuing notice under Section 143(2) of the Act and for the completion of assessment under Section 143(3) . 23. On a conspectus of the ratio of the judgments noticed above and the reasons stated by us supra, we are of the view that the Assessing Officer was forensically empowered and justified for assuming the jurisdiction vested in him under Section 147 of the Act and that the notice issued to him under Section 148 of the Act suffers from no legal error or infirmity. 24. Quoad hoc the contention of the appellant that the assessments for the years 2009-10 and 2010-11 have been made by the Assessing Officer withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n oath. Thus, in contradistinction to the power under s.133A, s.132(4) of the IT Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded under s.133A of the IT Act, is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn in statement which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument of the learned counsel for the appellant that the statement, elicited during the survey operation has no evidentiary value and the ITO was well aware of this. 25. Before we examine this contention, we have to bear in mind that another Bench of this Court in the judgment in Commissioner of Income-Tax v. Hotel Samrat ((2010) 323 ITR 353 (Ker)) has virtually gone to the extent of thinking that the judgment in Paul Mathew and Sons (supra) may not lay down the correct law. However, in the said judgment, since the learned counsel for the assessee did not press further contentions based on the vires of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though separare bills are issued to the patients for MRI Scan and other diagnostic services, cash collection is done at one single point. On the end of the day, total income is separated and the income from MRI Scan and X-ray is given to Travancore Health Care Private Limited, which is accounted for by them and the income from other diagnostic services is account for by the appellant . In view of these specific pleadings, the uncontroverted and admitted statement given on behalf of the assessee under Section 133A and the documents impounded during the survey, which were also virtually admitted by the assessee, we do not find any error in the order of the ITAT in accepting the materials on record in order to arrive at an assessment. 27. The learned counsel for the appellant finally asserts that even if the documents impounded and the statement made are acceptable in evidence, the method adopted by the Assessing Officer and approved by the orders of ITAT in adopting the figures, found in the documents impounded, for the whole year on a prorata basis and the extrapolation of such figures for the subsequent year in order to make a best judgment or assessment is completely err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under s.143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under s.143(2) cannot be a procedural irregularity and the same is not curable and, therefor, the requirement of notice under s.143(2) cannot be dispensed with. 29. At the time when the matter was heard, the learned counsel for the Revenue virtually admitted that no notice under Section 143(2) of the Act has been issued but held out that even in the absence of Section 143(2) notice, the assessment made could be maintained on two grounds. He contends that the Assessing Officer had, during the proceedings, issued a notice as is discernible from the order sheet produced as Annexure-A2 in the papers of ITA 221/2015, on 10.12.2012. Even though the said notice has not been produced before us, we see from the order of the ITAT that same has been extracted. For ease of reference and since the Revenue contends that this notice can be treated as one issued under Section 143(2), we deem it appropriate to extract the same here: Government of India Income Tax Department Office of the Additional Commissioner of Income-tax Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expiry of six months from the end of the financial year in which the return is furnished. It is indubitable from the section that the Assessing Officer shall serve on the assessee a notice specifying the particulars of such claim of loss, exemption, deduction, allowance or relief made in the return, if he has reason to believe that all such are inadmissible. The notice is also to direct the assessee to produce or cause to be produced any evidence or particulars specified therein or on which the assessee may rely. A notice under Section 143(2) is the hypostasis on which any proceedings under Section 143(3) or a re-assessment under Section 147 (if the time for regular assessment is not over) will have to be rested on. In the absence of a notice under Section 143(2), it is obvious that no further proceedings can be continued for assessment under Section 143 and the Hon'ble Supreme Court has already settled the law that without such a notice the Assessing Officer could not assume jurisdiction and that this defect cannot be cured subsequently, since it is not a procedural defect, but it is the defect that goes to the root of the jurisdiction. 31. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fcer under the bona fide impression that the proceedings that were going on was the re-assessment under Section 147 and not for assessment under Section 143 for the year 2009-10. We are not impressed with this stand of the assessee because as regards 2010-11, the assessee admits that the Revenue had issued a Section 143(2) notice and that the assessee had received the same. He was, therefore, obviously aware of the fact that the proceedings being continued were under Sections 143 and 147. However, the assessee is entitled to take all technical defences available to them and we cast no aspirations on their conduct in making a defence that they were not aware that they was participating in a proceedings under Section 143 for the year 2009-10. 32. It is virtually admitted by the Revenue that no notice under Section 143(2) had been issued. In Blue Moon (supra), the Hon'ble Supreme Court has already settled the position of law the omission on the part of the Assessing Officer under Section 143(2) cannot be a procedural irregularity and that the same is not curable and that therefore, the requirement of notice under Section 143(2) cannot be dispensed with. This emphatic statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The only benefit that Section 292BB obtains to the assessing officer is that after the issuance of such notice the assessee appears and participates in the proceedings, then he shall not he heard, subject to the proviso to the said section, that he had not been properly served with notice. We have no hesitation in holding that the Assessing Officer can claim and avail the benefit under Section 292BB and the assssee will be burdened by the rigour of estoppel contained therein only after a notice under Section 143(2) had been validly issued. When it is virtually admitted that no such notice had been issued, the Assessing Officer loses even the authority to enter into the jurisdiction under Section 143 and the participation or otherwise of the assessee would be of no avail. It is here that the words of Rowlat, J. vide supra in paragraph 5 of this judgment assumes climataric importance because in taxation nothing is to be intended and nothing can be presumed. If a notice under Section 143(2) has not been issued, the Assessing Officer cannot claim the benefit under Section 292BB and the claim that the earlier notice extracted in paragraph 29 of the judgment was intended to be the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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