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TMI Blog2020 (11) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... on - HELD THAT:- Unless the return filed by the assessee is scrutinized by the AO by way of issuing notice u/s.143(2) he cannot come to the conclusion of any escapement of income by the assessee for the relevant assessment year. If the AO issues notice u/s.143(2) obviously, he would scrutinize the return and frame the assessment u/s.143(3) and, thereafter, original assessment proceedings would be closed or terminated. Subsequently, if the AO notice escapement of income, on the basis of some new tangible material, which was not before him during original assessment proceedings, then he has reason to believe that there is escapement of assessment and he may assume valid jurisdiction for initiation of reassessment proceedings u/s.147 and issuance of notice u/s.148 of the Act. Assessment proceedings are deemed to be over or terminated when (a) the return is processed u/s.143(1) of the Act or (b) scrutiny assessment order is framed u/s.143(3) of the Act or (c) the time limit for issue of notice u/s.143(2) of the Act is expired and thereby the assessment is no longer possible 143(3) of the Act. Thus, the assessment proceedings u/s.147 of the Act can be initiated only after the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, the assessee could able to contact her counsel for preparation and filing the appeal and immediately on 22.10.2019, the appeal was filed. It is stated that the delay was unintentional and, therefore, delay be condoned. Ld D.R. opposed the condonation petition. 3. After hearing the rival submissions, we have perused the condonation and noted the reasons stated therein causing delay in filing the appeal before the Tribunal. The Hon ble Supreme Court in the case of Collector, Land Acquisition vs Mst. Katiji (1987) 167 ITR 471 has held that there can be no presumption of deliberateness or negligence or mala fides in case of delay, because litigants run a serious risk without any benefit by the delay. The judiciary is respected not for legalizing injustice on technical grounds but for removing injustice. We find that the assessee had reasonable cause for not filing the appeal within the stipulated time. Respectfully following the decision of Hon ble Supreme Court in the case of Mst Katiji (supra), we condone the delay of 132 days in filing the appeal before the Tribunal and admit the appeal for hearing. 4. The assessee has raised the following grounds of appeal: (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment is illegal, arbitrary, erroneous and not sustainable in the eye of law and is liable to be quashed in the interest of justice. 5. Although the assessee has raised various grounds of appeal, but at the time of hearing, he prayed before the Bench that first the ground No.C, which is a legal ground, may be taken up for hearing, to which, ld D.R. had no objection. Hence, we proceed to adjudicate the legal ground. 6. The brief facts of the case are that the assessee is an individual, derives income from house property. She filed her return of income on 16.9.2015 declaring total income at ₹ 3,92,560/-. The return was processed u/s.143(1) of the Income tax Act, on 21.10.2015. On the basis of an information received from Sub-Registrar, Khurda, the Assessing Officer noticed that the assessee had purchased two plots of land from Shri Mayadhar Parida of Pandara Samiti, Palasuni, PO: Rasulgarh, Bhubaneswar for a total consideration of ₹ 1,28,00,000/- during the year under consideration. The Assessing Officer observed that in the return of income, the assessee has shown gross rent of ₹ 5,60,800/-, being the only source of income. From the above facts, the AO dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. On merits also, ld CIT(A) confirmed the addition. 8. Before us, ld A.R. of the assessee submitted that notice u/s.148 of the Act was issued on 25.1.2016 even when time of issue of notice u/s.143(2) of the Act had not expired. He submitted that the time limit for issue of notice u/s.143(2) of the Act was upto 30th September, 2016. He further submitted that before the logical termination of original return filed by the assessee, the reassessment proceeding u/s.147 of the Act was invoked and finally the order was passed on 19.12.2016. 9. Ld A,R submitted that the issue is squarely covered in favour of the assessee by the full bench decision of Hon ble High Court of Orissa in the case of Jayanarayan Kedarnath and another vs Sales Tax Officer, reported in 68 STC 25 (Orissa). Ld A.R. submitted that the facts are in pari materia with the present case. In the said case before the disposal of the return under the OST Act, reassessment proceeding was initiated, which was challenged by the Petitioner before the Hon'ble High Court of Orissa. A three 3 judges bench of the jurisdictional High Court while overruling an earlier order of the Hon'ble High Court of Orissa in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer himself. 10. Ld A.R. submitted that applying the ratio laid down by the Full Bench of the Hon'ble High Court of Orissa, the initiation of the reassessment proceeding as well as completion of the reassessment u/s 144/147 of the I.T Act, 1961 is not sustainable. He also referred to the decision of the Hon'ble Madras High Court in the case of Qatalys Software Technologies Ltd (supra) and K.M. Pachayappan (supra) where similar view has been expressed. The relevant portion of the said decision is quoted below- Therefore, a valid return of income was pending as on March 15, 2000.The Assessing Officer issued notice under section 148 on March 15, 2000 when a valid return under section 139(4) was pending. In this case, the return was filed and the same is pending, which means that the proceeding is still pending. In such a situation, the Revenue could not have issued notice for the purpose of reopening under section 147 of the Act. In the case of Trustees of H.E.H. The Nizam's Supplemental Family Trust v. CIT (2000) 242 ITR 381, the Supreme Court considered the scope of reopening the assessment. 11. Ld A.R. submitted that when the return was pending an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and issuance of notice u/s.148 of the Act has been done in accordance with the valid jurisdiction conferred on him under the said provisions of the Act. Ld DR also submitted that there is no requirement of law that in case the statutory period of issuance of notice u/s.143(2) of the Act has not been expired, then, the AO has no valid jurisdiction to initiate reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act. Ld D.R. submitted that after processing the return of income u/s.143(1) of the Act on 21.10.2015, the AO received an information received from Sub-Registrar, Khurda, that the assessee had purchased two plots of land from Shri Mayadhar Parida of Pandara Samiti, Palasuni, PO: Rasulgarh, Bhubaneswar for a total consideration of ₹ 1,28,00,000/- during the year under consideration. The Assessing Officer from the return of income, observed that the assessee has shown gross rent of ₹ 5,60,800/-, being the only source of income. Therefore, there was clear escapement of income and the AO was right in initiating reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act. Therefore, the legal ground of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Officer should complete the regular assessment within the prescribed period of three years for which he had enough time and could have initiated the proceeding under section 12(8) of Orissa Sales Tax Act, 1947. In the same judgment, Hon ble High in para 5 also made it clear that sub section (8) of Section 12 of OST Act, 1947 is almost pari materia with Section 147 of the Income Tax Act, 1961, which covers the case of escaped assessment or underassessment or unauthorized compounding of tax . 17. Further, Hon ble Madras High Court in the case of Qatalys Software Technologies Ltd. (supra) referring to its earlier decision in the case of CIT vs K.M.Panchayappan, 304 ITR 264 (Mad) held thus: Applying the principles enunciated in the judgments of the Supreme Court as well as the Delhi High Court, cited supra, the Tribunal is right in coming to a conclusion that no action could be initiated under section 147 of the Act, when there is a pendency of the return before the AO. The reasons given by the Tribunal are based on valid materials and evidence and we do not find any error or illegality in the order of the Tribunal so as to warrant interference. 18. Furthermore, Thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR contended that expression in clause (b) of Explanation (2) to Section 147 of the Act that no assessment has been made meaning that it also includes situation where assessment order u/s.143(3) of the Act is still possible but yet not made and the return of income has been processed u/s.143(1) of the Act. If this interpretation is accepted, it will destroy the fundamental principles underlying for assumption of valid jurisdiction for initiation of reassessment proceedings u/s.147 of the Act, which are being consistently followed till date by Hon ble Supreme Court, various Hon ble High Courts and co-ordinate Benches of this Tribunal. These principles are also applicable to the extended meaning given to them by way of using expression no assessment has been made in clause (b) of Explanation (2) to Section 147 of the Act by way of amended provision. 21. In our humble understanding, said clause is intended to cover two situations viz; (i) where a return is filed and no action is taken either u/s.143(1) or u/s.143(3) and time for issuing notice u/s.143(2) has expired and (ii) where a return is filed and is processed u/s.143(1) of the Act but the time limit as per provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings are terminated by way of any of the one of the three modes as noted above. Therefore, we are not impressed with the contentions of the ld Sr DR and we dismiss the same in view of aforesaid legal position and prepositions rendered by Hon ble High Courts in the above noted decisions and judgments. 23. The Co-ordinate Bench of ITAT, Hyderabad in the case of Sri Venkata Siva Reddy Nellore vs ITO in ITA No.962/Hyd/2017 for A.Y. 2012-13 dated 22.11.2017, as heavily relied by the ld AR, after referring to the decision of Hon ble Madras High Court in the case of Qatalys Software Technologies Ltd (supra) and K.M.Pachayappan (supra) in para 8.1 held thus: 8.1 The facts indicate that the assessee filed return of income on 26.7.2013 for A.Y. 2012-13, even though belatedly as to the time prescribed u/s.139(1), but within the time provided u/s.139. On receipt of return, AO has time to issue notice u/s.143(2)/142(1) for a period of six months, i.e. upto 31.1.2014. However, AO chose to reopen the assessment on the reason of income escaping assessment on 12.12.2013, when the assessment proceedings have not even been started. On the issue whether the proceedings u/s.147 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r issuing notice u/s.143(2) has expired. It does not envisage a situation where a return is filed and the time limit for issue of notice u/s.143(2) has not expired. Unless the return filed by the assessee is scrutinized by the AO he cannot come to the conclusion of any escapement. If the AO issues notice u/s.143(2), the quite obviously he would scrutinize the return and frame the assessment u/s.143(3). Subsequently, he may notice escapement and issue notice u/s.148. Besides this, in the above two situations also, he will have to look into the return to see whether there is escapement or not. If he notices any escapement, it can eb called an escapement only if it is notice after the proceedings u/s.147. In that event he will have to issue notice u/s.143(2). In nutshell, (a) the proceedings are said to have commenced once the return is filed and (b) the proceedings terminate when (i) the return is processed u/s.143(1) and the time to issue notice u/s.143(2) is over (ii) assessment is made u/s.143(3) or (iii) the assessment is no longer possible u/s.143(3). proceedings u/s.147 can be initiated only after the earlier proceedings have terminated as mentioned above. Order u/s.147 r.w. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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