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TMI Blog2003 (6) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of assessment order 1976-77 26-3-1985 28-2-1986 1977-78 26-3-1985 28-2-1986 1978-79 26-3-1985 6-5-1986 1979-80 26-3-1985 14-3-1986 1980-81 (for 2 periods) 9-1-1986 31-3-1986 1981-82 24-12-1985 14-3-1986 1982-83 24-12-1985 31-3-1986 3.2 The appeal for the assessment year 1976-77 was decided by the CIT(A), Agra vide order dated 25-5-1987 and for other assessment years vide another consolidated order dated 25-5-1987 whereby all the assessments were annulled for want of service of notices under section 148 of the Act on the assessee. 3.3 Against the order of CIT(A) the department preferred appeals for all the years for the ITAT on 27th Sept., 1987. The Hon'ble Tribunal vide order dated 28-8-1990 dismissed all the departmental appeals. 3.4 Against the order of ITAT, the department preferred reference applications before the ITAT under section 256(1) of the IT Act, 1961. These applications were also rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Art Press v. CIT [1978] 115 ITR 876 (All.) CIT v. P. Krishnakutty Menon [1990] 181 ITR 237 (Ker.). 4.2 Learned counsel further submitted that the observations of the CIT(A), while annulling the original assessments, were not directions for issuing fresh notices under section 148 of the Act because after having annulled the assessments, the CIT(A) had no reason to give any direction. Driving home this plea, the learned counsel, after referring to the provisions of section 251(1) of the Act, submitted that if the assessment is annulled, there is no question of remitting the matter back to the Assessing Officer because the powers of the CIT(A) are either to confirm or to reduce or to enhance or to annul or to set aside the assessment. According to him, the powers of annulment and to set aside are different powers and if the assessment is annulled the assessment cannot be taken as having been set aside the different powers and if the assessment is annulled the assessment cannot be taken as having been set aside, meaning thereby, that there is no question of issuing any direction. He, therefore, submitted that the notices under section 148 of the Act issued on 29-3-1988 and 12-5-198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (P.) Ltd. [1992] 198 ITR 297 (SC) CIT v. Major Tikka Khushwant Singh [1995] 212 ITR 650 (SC) Lakshman Prakash v. CIT [1963] 48 ITR 705 (All.) (FB) CIT v. Fundial Rikhabchand [1994] 208 ITR 348 (Raj.) and 154 CTR (Calcutta) 83. 5.3 The learned DR further submitted that since the provisions of section 150 overrides the provisions of section 149 and section 151, the Assessing Officer was not to seek approval of any higher authority and, therefore, the notice in question were valid in law. In support of these submissions, he relied on the following directions: B.A.R. Abdul Rahman Saheb v. ITO [1975] 100 ITR 541 (AP), 140 ITR 246 (MP) ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), 49 ITR 355 R.A. Boga v. Appellate Assistant Commissioner [1977] 110 ITR 1 (Punj. Har.) (FB), CIT v. G. Viswanathan [1988] 172 ITR 401 (SC) circular No. 549 dated 31-10-1989. 6.1 I have considered the rival submissions, facts and circumstances of the case, provisions of law relevant for the disposal of these appeals and various decisions relied upon by the parties with utmost care and capability and after having done so, I am of the opinion that the short questions to be decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time limit for the Assessing Officer to reinitiate the proceedings under section 148 for all the seven years. In view of the facts and the legal position discussed above the Assessing Officer may re-issue the notice under section 148 and serve the same on the assessee in the manner prescribed under section 282. He should, however, strictly adhere to the procedure prescribed for this purpose. The requirements of sections 149 and 151 should also be fulfilled. The ITO(A), should also keep in mind the provisions of section 140(cc) before accepting any return, or a letter in lieu thereof, in response to the notice under section 148, as well as for entering into any agreement, which may amount to a revised return, for the purpose of assessment. He should also adhere to the provisions of section 288 for allowing any person to appear on behalf of the appellant as an "Authorised Representative"." (ii) Is there any time limit for the service of the notices issued under section 148 of the Act? (iii) Can fresh notices under section 148 of the Act be issued during the pendency of revenue's reference before the High Court? (iv) Can fresh notices under section 148 of the Act be issued witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y used the expression "annulment of assessment" in section 251 of the Act, The question that arises for consideration is in which case the order should be set aside and in which case "annulled" and what is the difference between "setting aside the assessment" and "annulment of the assessment", In our opinion, there is a material distinction between setting aside an assessment and annulment of an assessment. In a case where the order of assessment is set aside, it is open to the Assessing Officer to make a fresh assessment in accordance with law. In the case of annulment, the order becomes non est." 7.1 From the aforesaid observations of the Hon'ble High Court what I am able to understand is that annulment of an assessment and setting aside of an assessment are two different and distinct orders and leads to different results. In case the order of assessment is set aside, it is open for the Assessing Officer to make a fresh assessment in accordance with law, whereas in case the assessment is annulled the order become non est. At the same time where the assessment is set aside, the Assessing Officer gets extended time limit, as prescribed in section 153(2A) for making fresh assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome has escaped assessment. (ii) Having entertained the "reasons to believe" as above on the consideration of the information or material, the Assessing Officer records the reasons in writing for having reasons to believe that certain income had escaped assessment. (iii) Having recorded the reasons the Assessing Officer is to issue notices under section 148 of the Act keeping in view the provisions of sections 147, 149, 150 and 151 of the Act in view i.e., the notices under section 148 have to be issued within the prescribed limited period and wherever approval of higher authority is required then after the approval of such higher authority: (iv) The notices under section 148 so issued, must be valid notices ie., the notices must confirm to the following: (a) must be addressed to the proper person keeping in view the provisions of section 282(2) of the Act. (b) The assessment year must be specifically and clearly be mentioned. (c) Date of issue of the notice must be clearly mentioned. (d) In case the escaped income is of any other person and is liable to be clubbed with the income of the period in whose case the notice is being issued then the name of such person ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f it is taken that there is no time limit for service a notice under section 148 i.e., if it is taken that once a notice under section 148 is issued it can be served at any time then, in my opinion, such a proposition will render the provisions of sub-section 149 as well as provisions of section 153(2) of the Act redundant. For example, if a notice under section 148 is issued within the period of 4 years from the end of the relevant assessment year then to say that it can be served after expiry of 4 years is to render the requirements of prior sanction of CIT under section 149 redundant. Similarly, if it can be said that a notice under section 148 issued after expiry of 4 years but before expiry of 8 years from the end of the relevant assessment year, but with the prior approval of the CIT can be served even after the expiry of period of 8 years from the end of assessment year then the requirement of approval of CBDT for issuing notice after expiry of a period of 8 years but before the end of 16 years from the end of the relevant assessment year will be redundant. (iii) In view of the above, the one way out to find out the limitation is to look into the provisions of section 149 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in contravention of the said requirements, though, they are to be seen with respect to the time when notice was to be issued, is not valid notice and if it is so then how the service of a notice having been issued by complying with the provisions of section 149/151 can be effected after the expiry of limitation for issuance of the notice? 10.3 After having considered the aforesaid provisions and keeping in view that all these provisions are part of process for making of assessment or reassessment under section 147 of the Act, it is the cumulative effect of these provisions which has to be taken into account and therefore when the assessment/reassessment is to be framed within a period of 4 years from the end of assessment year in which the notice under section 148 has been served, it can be taken that the notice under section 148 if not to be served within the limitation prescribed under section 149 of the Act then it has to be served within the period prescribed under section 153(2) of the Act, meaning thereby that a notice issued under section 148 of the Act issued within any of the 3 limitation periods prescribed under section 149 of the Act, if not served within that very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment under section 147 of the Act to be valid, it is quite clear that if an assessment or reassessment framed under section 147 is annulled then the assessment will be rendered as non est and the Assessing Officer can proceed from the stage of illegality which has led the assessment to annulment. 12.2 Coming to the facts of the case under appeal, admittedly, the assessments were annulled for want of service of notices under section 148 on the assessee and, therefore, the effect of annulment in the present case was that the Assessing Officer could serve the notices under section 148 issued on 26-3-1985 before 31st March, 1989 issued on 9-1-1986 (for assessment year 1980-81) and issued on 24-12-1985 (for assessment years 1981-82 and 1982-83) (for assessment years 1976-77 to 1979-80) because had the notices issued on 26-3-1985 for these years been properly served the assessment could be framed latest by 31st March, 1989 and upto 31st March, 1990 (for assessment years 1980-81 and 1982-83) because assessment for these years could be completed by 31st March, 1990. In other words, on 25-5-1987 when the first set of assessment were annulled by the CIT(A), the Assessing Officer had s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. 14.2 The revenue's case is that the notices having been issued in consequence upon the directions of the CIT(A) they were served by the provisions of section 150(1) of the Act and no approval of any higher authority was required. 15. After having considered the facts and circumstances of the case and the provisions of law specially the section 149 and section 150 of the Act and findings in para No.7 of this order, I am of the opinion that revenue's case has no legs to stand, because, I have already observed that the observations of CIT(A) in his orders dated 25-5-1987 while annulling the first set of reassessments were not directions, the provisions of section 150(1) do not come into picture and revenue's case is not saved. 16.1 Coming to the facts of the present case, I am of the opinion that the original assessment having been annulled for want of service of notices under section 148 of the Act, the Assessing Officer could proceed to serve the notices issued on 26-3-1985 (for assessment years 1976-77 to 1979-80), on 9-1-1986 (for assessment year 1980-81) and on 24-12-1985 (for assessment year 1981-82 and assessment year 1982-83). The requirement of service is in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 1981-82 and 1982-83 on 12-5-1988, with the prior sanction of the CIT and therefore validly of these notices is to be seen in the light of these facts. 16.5 If the totality of the facts and circumstances of the case are analysed, it is quite clear that: (i) Notices for assessment years 1976-77, 1977-78 and 1978-79 issued on 29-3-1988 were issued after the expiry of a period of 8 years but before the expiry of a period of 16 years from the relevant assessment year which were not valid notice because as per section 151 the notice for these years could be issued only with the prior sanction of the CBDT. Notices for these 3 years were therefore invalid and bad in law. (ii) So far as assessment year 1979-80 is concerned, the old notice being valid notice could be served on or before 31-3-1988 and if Assessing Officer was to issue fresh notice, then proceedings on the basis of old notice should have been dropped for want of service. (a) Admittedly, the Assessing Officer having not dropped the proceedings, the issuance of 2nd notice for assessment year 1979-80 on 29-3-1988 was not in accordance with law i.e. notice under section 148 for assessment year 1979-80 issued on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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