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TMI Blog2022 (8) TMI 1523X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 143(2) is expired and assessment is not made, is not acceptable as this will put another condition in Explanation 2(b) which is otherwise not inserted by the Legislature. As pointed out earlier, statute provides commencement of assessment proceedings in at least three ways. They can merge into each other but they do not cancel each other. Ultimate object is to make assessment of correct income and, therefore, Legislature has thought it fit to consider commencement of assessment or reassessment proceedings in at least three streams which can subsequently merge into one, if they are pending at the same time. They will ultimately result in an order under section 143(3). A case where assessment proceeding is completed would fall in clause (c). In the present case, we are only concerned with the operation of clause (b) to Explanation 2 and this clearly provides that where assessment is not completed, still then there could be a case of deemed escapement of income and notice under section 148(1) can be issued irrespective of the fact whether assessment proceedings initiated by virtue of filing the return or assessment proceedings by way of issuance of notice u/s 143(2) are conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,933/- being house property income, Rs. 3,12,000/- being income from business and Rs. 5,35,21/- being income from other sources. Apart from these the assessee also offered agricultural income of Rs. 9,00,000/- for the rate purposes. Notice under Section 148 of the Income Tax Act, 1961 (the Act) was issued on 11.02.2014 as per the findings in the order sheet as below: - The assessee Sri C. Gangadhar Murthy filed a letter dated 5-11- 2013 in the office of the undersigned enclosing a copy of a manual return along with particulars as below: A.Y. Income from House Property Income from Business Income from Other Sources Gross total income declared Total income declared Agricultural income declared 2012-13 3,48,933 3,12,000 5,35,221 11,96,154 10,96,150 9,00,000 2. The manual copy of the return of income filed is incorrect as the assessee was required to file e-return. The manual copy of the return filed is filed. As per the AIR and CIB information base, it is also seen that the assessee has deposited a total cash of Rs. 1,12,02,680 in the Savings Bank Accounts maintained by him. As per the AIR information, the assessee has also received interest of Rs. 1,03,462/., rental income of Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed the gross total income at Rs. 3,73,98,834/- as under: - Income from House property Rs. 3,48,933 Income from Business Rs. 3,12,000 Add: Income from Other sources Rs. 5,35,221 Add: Unexplained cash credits in bank accounts Rs. 1,12,02,680 Add: Unexplained capital accretion. Rs 2,50,00,000 Rs.3,67,37,901 Gross total income Rs.3,73,98,834 4. Aggrieved by the order of the AO the assessee filed appeal before the CIT(A) raising many grounds in regard to the legal issue as well as on the merits of the case the assessee also filed detailed written submission and case law before the CIT(A), which has been incorporated by the CIT(A) in his order. After considering the submissions of the assessee the CIT(A) allowed the appeal of the assessee by holding as under: - 6. The grounds of appeal, appellant's statement of facts. AO's observations/ explanations, Remand Report dated 10/01/2017, and legal position have been duly considered. 7. The appellant in its Written submission has raised the issue that initiation of Proceeding u/s 147 and issue of notice u/s 148 is bad in law in as much as the time limit to issue a notice u/s 142(1) 143(2) had not expired and AO could have done so c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 held that in view of the decision in the case of CIT v KM Panchayappan (2008) 304 ITR 264 (Mad) , it was held that the Assessing Officer was barred in initiating proceedings under section 148 where time limit for issuance of notice under section 143(2) had not expired. In the case of K.M Panchayappan (2008) 304 ITR 264 (Madras) in its decision in Appeal No 870 of 2007 dated July 4, 2007 held that where, for AY 1997-98 return of income was filed under section 139(4) on March 15 , 2000, and notice under section 143(2) for framing assessment under section 143(3) could have been issued upto March 31, 2000 and AO issued notice under section 148 when a valid return under section 139(4) was pending, such notice was invalid as no action could have been initiated under section 147 in view of pendency of return before AO. In the case of Trustees of H. E.H. the Nizam's Supplemental Family Trust (2000) 109 Taxman 193 (SC)/(2000) 242 ITR 381 (SC)/(2000) 159 CTR 114 (SC), the Hon'ble Supreme Court of India in Civil Appeal No 5395 of 1993 dated February 16, 2000 held that where a return filed along with refund application being a valid return, and no assessment order had been communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 148 of the Act is to be counted from the relevant assessment year and not from the period of expiry of notice to be issued under Section 143(2) r.w.s. 143(3) of the Act for regular assessment. He also submitted that the intimation under Section 143(1)(a) of the Act is not an assessment order, it is merely intimation issued by the ministerial staff of the Department. Once the AO has reason to believe for escapement of income he can issue notice under Section 148 of the Act as per the judgement of the Hon ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Broker(P) Ltd. (2007) 291 ITR 500 (SC) and he also strongly relied on para 18 of the said judgment which reads as under:- 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) has been issued. 7. Further he also strongly relied on the judgement of the Hon'ble Allahabad High Court in the case of CIT vs. Jora Singh (2013) 32 taxmann.com 263 (Allahabad) and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148(1) during the period when he could have issued notice under section 143(2) and as notice under section 143(2) was not issued till then i.e., (before the expiry of twelve months from the date of filing of the return) the notice under section 148(1) so issued was invalid and, therefore, entire assessment proceedings are required to be quashed. The facts relating to this ground are as under : 5. The assessee had filed return of income on 27-10-2004 for the assessment year 2004-05 declaring a loss of Rs. 20,22,200 and book profit under section 115JB at Rs. 12,27,900. The return was processed on 26-2-2005 under section 143(1). Subsequently, the Assessing Officer issued notice under section 148(1) on 18-5-2005 which was served on the assessee on 24-5-2005. Thereafter, reassessment proceedings were carried out by issuing notice under section 143(2). 6. This issue was also raised before the ld. CIT(A), who vide paras 5 and 6 of his order dismissed the relevant ground of the assessee as under : 5. As per ground No. 1 of appeal, the appellant has challenged the action taken by Assessing Officer under section 147 of the Income- tax Act, stating that the notice was issued wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi High Court in the case of Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173, to hold that proceedings initiated by the Assessing Officer under section 148(1) during availability of time for issue of notice under section 143(2) are valid. 8. The ld. AR submitted that the Assessing Officer had issued notice under section 148(1) at a time when a valid return was pending for assessment and there was time available to issue notice under section 143(2) and the complete assessment under section 143(3). The Assessing Officer could have issued notice under section 143(2) up to 30-10-2005 and till then return filed by the assessee on 27-10-2004 was legally pending. Once return is pending, the Assessing Officer could not have issued notice under section 148(1) as there could not be any escapement of income. Once assessment is not complete as return was pending, question of holding an income escaping assessment does not arise. According to ld. AR, the word 'assessment' in section 147/148 means computing assessable income and computing tax payable thereon. The ld. AR referred to section 147 and submitted that deeming provisions of Explanation to section 147 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 143(2) had expired when notice under section 148(1) was issued. Relying on the above decisions referred to by him, the ld. AR submitted that when time period for issuance of notice under section 143(2) had expired then it could be said that assessment is not made and, therefore, Explanation 2(b) would be applicable. Thus, he sought to emphasize that a case of 'no assessment' will arise only when time period for issuance of notice under section 143(2) has expired. During the time when period for issuance of notice under section 143(2) has not expired, it could not be said that it is a case of 'no assessment'. Thus, where time period for framing the assessment by issuance of notice under section 143(2) is available, it cannot be said that 'no assessment' has been made and, therefore, during this period Explanation 2(b) could not be invoked. 12. The ld. AR then referred to the decision of ITAT Delhi Special Bench in the case of Motorola Inc. v. Dy. CIT [2005] 95 ITD 269. 13. Against this, the ld. DR submitted that decisions of the ITAT Lucknow Bench (cited supra) relied upon by the ld. AR cannot be followed because these decisions were ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment considers to verify the return it issues notice under section 143(2). Therefore, when processing is completed, it cannot be said that return is pending. 14. The ld. DR then submitted that Explanation 2(b) to section 147 is clearly applicable. It is invoked where no assessment is made. After 1-4-1989, there has been a change in the law relating to issuance of notice under section 148(1)/Section 147. Processing is not treated as assessment and, therefore, Explanation 2(b) would be clearly applicable. The ld. DR then opened up a new line of argument by saying that the return filed by the assessee is a self- assessment and the proceedings relating to computation of tax and levy of interest is based on such self-assessment. According to him, it is incorrect to presume that the word 'assessment' as used in section 147 would only mean assessment under section 143(3). It also means reassessment under section 147/148(1) and when any escapement of income is found even in an assessment made under section 147/148(1) still then notice under section 148(1) can be issued by assuming jurisdiction under that section. Finally, the ld. DR relied on the decisions in the case of Rajesh J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 24(5) and (7) of the Judicature Act, 1873, and action is pending after final judgment so long as the judgment remains unsatisfied. (Salt v. Cooper, (1880) 16 Ch. D. 544). [A legal proceeding is pending as soon as commenced (on which see 5 Rep. 47, 48; 7 Rep. 30), and until it is concluded, i.e., so long as the Court having original cognizance of it can make an order on the matters in issue, or to be dealt with, therein. Pending judicial proceeding. A judicial proceeding is said to be pending. (A) in the case of a civil proceeding, when it is instituted by the filing of a plaint or otherwise; (B) in the case of a criminal proceeding under the Code of Criminal Procedure, 1898, or any other law (i) Where it relates to the commission of an offence, when the charge-sheet or challan is filed, or when the Court issues summons or warrant, as the case may be against the accused, and (ii) in any other case, when the Court takes cognizance of the matter to which the proceeding relates, and in the case of a civil or criminal proceeding. [Contempt of Courts Act. (70 of 1971), S. 3 Expln. (a)]. 17. From the above definitions/concepts of the term 'pending', an authority is required s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will commence with the filing of the return and will come to an end when processing is done or acknowledgement is issued deeming it to be intimation. It cannot be deemed to be pending after processing or issuance of acknowledgement. Thus, proceedings for assessment has two methods of initiation, one is when return of income is filed and the other is when notice under section 143(2) is issued. When return of income is filed and subsequently notice under section 143(2) is issued without processing or issuing acknowledgement, then the two proceedings merged into each other and conclude when assessment order under section 143(3) is passed. In other case, when return is filed and is processed/acknowledgement is issued treating it as intimation, the first assessment proceedings get concluded. So, the second assessment proceedings are initiated when notice under section 143(2) is issued within twelve months of filing of return. The law provides for these two proceedings. The third proceedings for assessment are initiated by way of issuance of notice under section 148(1). The statute provides jurisdiction in respect of second [by issuing notice under section 143(2)] and third proceedings [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 18. Explanation 2 to above section clearly provides three situations where it is deemed that income has escaped assessment and, therefore, initiation of assessment/reassessment proceedings by issue of notice under section 148(1) would be valid. These situations are : (i) when return of income is not filed and there is a case of under assessment as mentioned in clause (a). (ii) when return of income is filed and assessment is not made and there is a case of under assessment as mentioned in clause (b). (iii) when return of income is filed and assessment is made and there is a case of under assessment of income as mentioned in clause (c). 19. These three clauses cover practi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not done/acknowledgement is not issued but notice under section 143(2) is issued. If Assessing Officer still finds escapement of income then he has two options. He can cover such escaped income in the proceedings initiated under section 143(2) or he can initiate proceedings under section 147 read with Explanation 2(b) as assessment is not complete and there is a case of deemed escapement of income. (iv) Return of income is filed, processing is done/ acknowledgement is issued and thereafter notice under section 143(2) is issued within twelve months. Such cases would also be cases of deemed escapement of income if conditions laid down in Explanation 2(b) are satisfied. (v) Return of income is filed, processing is done or not done, acknowledgement is issued or not issued as intimation, the time period for issuance of notice under section 143(2) is expired. This would be again a case which will fall in Explanation 2(b) as assessment is not done. (vi) Where assessment is done under section 143(3) after filing the return of income and Assessing Officer finds escapement of income then such case would fall in Explanation 2(c). (vii) Were no return of income is filed at all then such case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We entirely agree with these submissions of the ld. DR. A precedence becomes binding only when it is similar on all four corners of facts and law. A slight difference in fact or in law will not make a valid binding precedence. In this regard, we may refer to the Hon'ble Supreme Court decision in the case of Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147, wherein it was held that circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. 23. In view of the altered position of law with effect from 1-4-1989 with the introduction of concept of deemed escaped income which seems to have not attracted the attention of the Hon'ble Madras High Court in the case of K.M. Pachayappan (supra ), we are of the view that the case is effectively differentiated by the revenue. 24. Thereafter, the ld. AR relied on certain authorities of ITAT, particularly of Lucknow Bench. In our considered view, after carefully going through these authorities we find that they also did not have the benefit of the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) and also did not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 29. The Hon'ble Allahabad High Court in the case of Pradeep Kumar Har Saran Lal (supra), has observed as under : The scheme of section 143(1)(a) of the Income-tax Act, 1961, and the clarificatory circular dated 31-10-1989, issued by the Central Board of Direct Taxes, makes it amply clear that unlike the past practice, assessments are not required to be made in each and every case and assessment orders will be passed only in a very limited number of cases, selected for scrutiny. Under section 143(1)(a), the Assessing Officer has to accept the return on its face value and make minor adjustments consistent with the information given in the return without touching upon debatable and controversial issues. There is a lot of difference between an assessment and an intimation, as contemplated by section 143(1)(a) and if it were not so, then Parliament would not have used the word intimation as a substitute for assessment. The intimation under section 143(1)(a)(i) is only fictionally taken as a notice of demand under section 156. From all this it follows that the intimation is nothing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Bill. Explanation 2(b), therefore, was applicable to scrutiny cases. Moreover even the explanatory note did not say that Explanation 2(b) to section 147 would apply only to the non-scrutiny cases or that cases picked up for scrutiny would not be covered by it. 31. In the case of Pramod Kumar Rakesh Kumar Co. v. ITO [1990] 186 ITR 637, the Hon'ble Allahabad High Court has held as under : In the absence of any specific provision in the circulars issued by the Central Board of Direct Taxes we are not inclined to hold that just because an assessment was made under section 143(1)(a) on the basis of the returns said to have been filed under the Amnesty Scheme, the power of the Income-tax Officer under sections 147 and 148 is taken away. It is, therefore, not possible for us to quash the impugned notices on the said ground. 32 . In the case of Jorawar Singh Baid (supra), it was held under : In our view, the power that can be exercised under section 143(2) to correct the assessment made under section 143(1) does not exclude the power of the Assessing Officer to reopen the assessment under section 147 if the ingredients of section 147 are satisfied. It is open to the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) itself that intimation is not an assessment. Following the above proposition of law, as sending of intimation or issuing acknowledgement is not an assessment, proceedings initiated by filing the return of income are concluded when return is processed and/or acknowledgement is issued as token of acceptance of the return. No proceeding is pending thereafter and also no assessment is made in view of interpretation of the term 'intimation' by Apex Court. This situation is directly covered in Explanation 2(b) to section 147 and, therefore, issuance of notice under section 148(1) after processing is completed/ acknowledgement issued would be covered by the deeming provision in Explanation 2(b). The argument of ld. AR that reassessment presupposes that assessment should have been framed and intimation is not an assessment, therefore, assessment is not framed and, therefore, reassessment could not be initiated is not acceptable because deeming provision of Explanation 2(b) to section 147 does not contemplate that an assessment of the nature as done under section 143(3) should be completed for invoking that clause of the explanation. It only says that the assessee has understated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictly. It can neither be extended nor reduced by reading other provisions into the provisions of section 147, unless it is so specifically provided either in other sections or in section 147. As a result, we hold that issuance of notice under section 148(1) was valid. The appeals will be posted for hearing on merits. 11. On going through the entire judgement of the Coordinate Bench of the Tribunal (supra) the present case is squarely covered in favour of Revenue. In the judgment the details for issuing notice have been discussed elaborately after discussing many judgments regarding the issue of notice under Section 148 of the Act after satisfying the conditions of Section 147 of the Act. The case cited by the ld. D.R. is also applicable to the facts of the present case. While deciding the issue the ITAT Lucknow Bench, has concluded that the notice under Section 148 of the Act can be issued by the AO even if there is time limit for issuance of notice under Section 143(2) of the Act has not been expired in pursuance of return filed under Section 139 of the Act for completing regular assessment under Section 143(3) of the Act. The Assessing Officer has only to show that there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. If Assessing Officer still finds escapement of income then he has two options. He can cover such escaped income in the proceedings initiated under section 143(2) or he can initiate proceedings under section 147 read with Explanation 2(b) as assessment is not complete and there is a case of deemed escapement of income. (iv) Return of income is filed, processing is done/ acknowledgement is issued and thereafter notice under section 143(2) is issued within the specified time. Such cases would also be cases of deemed escapement of income if conditions laid down in Explanation 2(b) are satisfied. (v) Return of income is filed, processing is done or not done, acknowledgement is issued or not issued as intimation, the time period for issuance of notice under section 143(2) is expired. This would be again a case which will fall in Explanation 2(b) as assessment is not done. (vi) Where assessment is done under section 143(3) after filing the return of income and Assessing Officer finds escapement of income then such case would fall in Explanation 2(c). (vii) Were no return of income is filed at all then such case would fall in Explanation 2(a). 12. We also found substance in the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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