Smt. Kamala Saha, Siliguri V. JCIT, Siliguri, Siliguri

ITA 2258/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48131 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 24-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S I BARA
• Assessee Lawyers: S M SURANA
• Keywords: Reopening of assessment; Principle of natural justice; Question of law; Non compliance; Procedural lapse; Block assessment; Reason to believe; Reassessment proceedings
• Section: 143(3); 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , . . !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] # # # # / I.T.A NO. 2258/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2003-04 SMT. KAMALA SAHA VS JOINT COMMISSIONER OF INCO ME-TAX, (PAN-AVLPS 4754 M) SILIGURI ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI S. M. SURANA FOR THE RESPONDENT: SHRI S. I. BARA !- / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A)-, SILIGURI IN APPEAL NO.154/CIT(A)/SLG/07-08 DATED 29.10.2010. THE ASSES SMENT WAS FRAMED BY JCIT, RANGE-1, SILIGURI U/S. 143(3) R.W.S. 147 OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2003-04 VIDE HIS ORDER DA TED 27.12.2007. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE FIRST TAKEN US TO GROUND NO. 3 AND STATED THAT THE FIRST LEGAL ISSUE RAISED IS THAT NO NOTICE U/S. 143(2) OF THE ACT WAS SERVED ON THE ASSESSEE WITHIN TWELVE MONTHS FROM THE DATE OF FILING OF RET URN OF INCOME IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. HENCE, ACCORDING TO HIM, THE REASSESSM ENT FRAMED U/S. 143(3) R.W.S. 147 OF THE ACT IS NOT MAINTAINABLE. WE FIND THAT ASSESSEE HAS RAI SED THE FOLLOWING SEVEN GROUNDS: I. FOR THAT THE ORDER OF THE LD. CIT(A) IS ARBITRA RY, ILLEGAL AND BAD IN LAW. 2. FOR THAT THE LD. C.I.T. (APPEAL) ERRED IN CONFIR MING THE INITIATION OF PROCEEDINGS UNDER SEC. 147 WHEN THERE WAS NO REASON TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT NOR THERE WAS ANY MATERIAL ON RECORD TO JUSTIFY FOR INITIATION OF PROCEEDINGS U/S. 147. 3. FOR THAT THE LD. C.I.T.(A) ERRED IN CONFIRMING C OMPLETE OF THE ASSESSMENT U/S. 143(3)/147 WHEN NOTICE U/S. 143(2) WAS NOT SERVED O N THE ASSESSEE WITHIN ONE YEAR FROM THE DATE OF SUBMISSION OF THE RETURN IN RESPONSE TO NOTICE U/S. 148 WHICH IS MANDATORY BEFORE TAKING UP THE ASSESSMENT FOR SCRUTINY. 4. FOR THAT THE LD. C.I.T(A) ERRED IN CONFIRMING TH E TREATMENT OF CAPITAL GAIN OF RS. 89,22,635/- AS INCOME FROM OTHER SOURCES ON WHIMSIC AL GROUNDS WHEN NO EVIDENCE WAS BROUGHT ON RECORD TO JUSTIFY THE ACTION OF THE AO W HICH WAS BASED ON SURMISES, CONJECTURES AND PRESUMPTIONS. 5. FOR THAT THE LD. C.I.T(A) SHOULD HAVE TAKEN INTO ACCOUNT THE VOLATILITY IN THE SHARE MARKET, THE SHARES BEING QUOTED AND REGULARLY TRADE D DURING THE YEAR AND THE TRANSACTIONS WERE HELD THROUGH THE RECOGNISED STOCK BROKERS. 2 ITA 2258K/201 0 KAMALA SAHA. A.Y. 03-04 6. FOR THAT EVEN OTHERWISE THE LD. AO ERRED IN TREA TING THE TRANSACTION AS ADVENTURE IN THE NATURE OF TRADE/BUSINESS WITHOUT ANY BASIS WHEN THE SAME WAS AGAIN PURELY ON INVESTMENT. 7. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ORDER OF THE AUTHORITIES BELOW BE MODIFIED AND THE ASSESSEE BE GIVEN THE RELIEF PR AYED FOR. 3. FIRST, WE WILL DEAL WITH GROUND NO.3, AS THIS IS A JURISDICTIONAL ISSUE. 4. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT, ASSESSEE FILED ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04 ON 28.11.2003, WHICH WA S DULY PROCESSED U/S. 143(1) ON 23.12.2003. SUBSEQUENTLY, ASSESSING OFFICER ISSUED NOTICE U/S. 148 OF THE ACT DATED 9.6.2006 R.W.S 147 OF THE ACT. THE ASSESSEE REQUESTED VIDE LETTER DATED 28.09.2006 TO THE ASSESSING OFFICER TO TREAT THE ORIGINAL RETURN AS FILED IN RE SPONSE TO NOTICE U/S. 148 OF THE ACT. THE ASSESSEE ALSO REQUESTED FOR COPY OF REASONS RECORDE D. THE ASSESSEES MAIN GRIEVANCE ON LEGAL ISSUE IS THAT AFTER ASSESSEES REQUEST ON 28.09.200 6, NO NOTICE U/S. 143(2) OF THE ACT WAS ISSUED WITHIN THE TWELVE MONTHS OF SUBMISSION OF RETURN U/ S. 148 OF THE ACT. TO THIS FACT, THE ASSESSEE DRAWN OUR ATTENTION THAT CIT(A), HAS CLEARLY RECORD ED THAT NO NOTICE U/S. 143(2) OF THE ACT WAS SERVED WITHIN TWELVE MONTHS OF THE FILING OF RETURN . THE CIT(A) ON THIS ISSUE HAS RECORDED THE FACTS IN HIS ORDER AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. A.R AND ALSO PERUSED THE ASSESSMENT ORDER. IT IS APPARENT THAT NO NOTICE U/ S. 143(3) WAS ISSUED WITHIN ONE YEAR OF FILING OF THE RETURN U/S. 148. BUT AS PER THE L AW, THERE IS NO NEED TO FULFILL THIS CRITERION. WHEN A RETURN IS FILED U/S. 139 OF THE ACT, IT IS PRESCRIBED UNDER THE LAW THAT FOR SELECTION OF THE CASE FOR SCRUTINY, THE NOTICE U/S. 143(2) HAS TO BE SERVED WITHIN ONE YEAR OF FILING THE RETURN. UNLESS THE SAME IS DONE , THE A.O. WILL LOSS HIS AUTHORITY TO MAKE ORDER U/S. 143(3) OF THE ACT. BUT WHEN THE RET URN IS FILED U/S. 147/148 OF THE ACT, IT IS A PRE-CONDITION THAT THE SAID RETURN HAS TO B E INVESTIGATED AS PER LAW. WHAT IS REQUIRED ONLY TO ISSUE A NOTICE U/S. 143(2) TO ALLO W THE ASSESSEE TO SUBSTANTIATE THE CONTENTS OF THE RETURN HE FILED. IT IS ALSO NOT NE CESSARY TO ISSUE A FORMAL NOTICE U/S. 143(2). ISSUING A LETTER FOR THIS PURPOSE WILL SER VE THE SAME REQUIREMENTS. TO OBSERVE THE PRINCIPLE OF NATURAL JUSTICE, ONLY THE OPPORTUN ITY HAS TO BE GIVEN TO THE ASSESSEE BEFORE THE ASSESSMENT IS MADE. IN THIS CASE, THE A .O. HAS ISSUED A DETAILED QUESTIONNAIRE ALONGWITH NOTICE U/S. 143(2) AND 142( 1) WHICH WERE DULY SERVED ON THE ASSESSEE. THEREFORE, THERE IS NO INFIRMITY IN THE ACTION OF THE A.O. ON THE OTHER HAND, THE DECISIONS CITED BY THE LD. A.R ARE NOT RELEVANT TO THE FACT OF THE CASE. THE DECISION IN CIT VS. LUNAR DIAMONDS 281 ITR 1 RELATES TO ABSE NCE OF EVIDENCE ISSUING NOTICE U/S. 143(2) IN CASE OF AN ORDINARY SCRUTINY CASE. VIPAN KHANNA VS. CIT 255 ITR 220 (P&H) RELATES TO INITIATING PROCEEDINGS U/S. 147 WI THOUT SELECTING THE CASE FOR SCRUTINY. R. DALMIA VS CIT 236 ITR 480 CASE HAS NOTHING TO DO WITH ISSUING OF NOTICE U/S. 143(2). IN VIEW OF THE ABOVE FACT, THIS GROUND OF THE ASSES SEE ALSO FAILED. 5. THE LD. COUNSEL FOR THE ASSESSEE, IN VIEW OF THE ABOVE FACTS, STATED THAT SEC. 143(2) OF THE ACT IS MANDATORY AND IN THE PRESENT CASE NO NOT ICE U/S. 143(2) OF THE ACT WAS ISSUED WITHIN THE PRESCRIBED TIME I.E. 12 MONTHS FROM THE DATE OF FILING OF RETURN IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. HE RELIED ON THE CASE LAW OF HONBLE APEX COURT IN THE CASE OF ACIT VS HOTEL BLUE MOON (2010) 321 ITR 362 (SC), C.I.T. VS C. PA LANIAPPAN (2006) 284 ITR 257 (MAD) 3 ITA 2258K/201 0 KAMALA SAHA. A.Y. 03-04 AND RAJ KUMAR CHAWLA VS ITO (2005) 94 ITD 1 (DEL.SB ) AND THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MA KAMAKHYAYA ENT ERPRISES, ITAT NO.15 OF 2011, GA NO. 141 & 142 OF 2011 DATED 23.02.2011. 6. ON THE OTHER HAND, THE LD. DR STATED THAT THE CI T(A) HAS DISTINGUISHED THE CASE LAWS IN HIS ORDER AND HE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT, IT IS ADMITTED POSITION THAT NOTICE U /S. 143(2) OF THE ACT WAS NOT ISSUED WITHIN THE PRESCRIBED TIME OF 12 MONTHS FROM THE DATE OF FILIN G OF RETURN U/S. 148 OF THE ACT. THIS FACT IS EVIDENT FROM THE ORDER OF CIT(A), WHEREIN HE HAS CO NCLUDED THAT IN THE PROCEEDING FOR COMPLETION OF ASSESSMENT U/S. 143(3) OF THE ACT, TH ERE IS NO REQUIREMENT OF ISSUANCE OF ANY NOTICE U/S. 143(2) OF THE ACT. WE FIND THAT THE HO NBLE APEX COURT IN THE CASE OF HOTEL BLUE MOON (SUPRA) HAS HELD THAT PROCEDURE OF SECTION 143 (2) IS MANDATORY AND TO BE FOLLOWED IN AN ASSESSMENT. HONBLE APEX COURT HELD AS UNDER (SUMMA RIZED): (I) WHILE NOTICE U/S 143 (2) IS NOT NECESSARY IF TH E AO ACCEPTS THE RETURN AS FILED, THE NOTICE WITHIN THE PRESCRIBED TIME IS MANDATORY IF THE AO P ROPOSES TO MAKE AN ASSESSMENT U/S 158BC R.W.S143 (3). OMISSION TO ISSUE NOTICE U/S 14 3(2) IS NOT A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THE REQUIREMENT OF NOTICE U/S 143(2) CANNOT BE DISPENSED WITH. IF THE INTENTION OF THE LEGISLATURE WAS TO EX CLUDE THE PROVISIONS OF S. 143 (2), THE LEGISLATURE WOULD HAVE INDICATED THAT. (II) IN CIRCULAR NO.717 DATED 14.8.1995 THE CBDT HA S DIRECTED THAT THE AO SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD AND THE PROVISIONS OF S. 142, SUB-S (2) AND (3) OF S. 143 AND S. 144 SHALL A PPLY ACCORDINGLY. THIS CIRCULAR CLARIFIES THE REQUIREMENT OF LAW IN RESPECT OF SERVICE OF NOT ICE U/S 143 (2). THE CIRCULAR IS BINDING ON THE DEPARTMENT THOUGH NOT ON THE COURT. (III) A SEARCH IS THE SINE QUA NON FOR A BLOCK ASSE SSMENT UNDER CH. XIV-B. A BLOCK ASSESSMENT IS IN ADDITION TO REGULAR ASSESSMENTS PR OCEEDINGS AND NOT IN SUBSTITUTION THEREOF. THE SCOPE AND AMBIT OF A BLOCK ASSESSMENT IS LIMITED TO MATERIALS UNEARTHED DURING SEARCH AND CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION. SIMILARLY, HONBLE MADRAS HIGH COURT IN THE CASE OF C. PALANIAPPAN (SUPRA) EXACTLY ON SIMILAR CIRCUMSTANCES HELD THAT THE REOPEN ASSESSMENT U/S. 147 R.W.S 148 OF THE ACT, NOTICE U/S. 143(2) OF THE ACT WITHIN A PERIOD OF 12 MONTHS IS MANDATOR Y. HONBLE MADRAS HIGH COURT HELD AS UNDER: WE HEARD LEARNED COUNSEL FOR THE PARTIES. LEARNED COUNSEL APPEARING FOR THE REVENUE SUBMITTED THAT THE APPELLATE TRIBUNAL FAILED TO APP RECIATE THE FACT THAT THE ASSESSMENT WAS COMPLETED ONLY UNDER SECTION 143(1) OF THE ACT AND HENCE THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT TO CONSIDER THE CORRECT QUANTUM OF INTEREST ALLOWABLE AS DEDUCTION IN COMPUTING THE INCOME FROM HOUSE PROPERTY WAS CORRECT AS THE ASSESSEE HAD NOT FURNISHED RELEVANT FACTS AND E VIDENCE ALONG WITH THE RETURN. LEARNED COUNSEL FURTHER SUBMITTED THAT THE APPELLAT E TRIBUNAL ERRED IN ITS CONCLUSION 4 ITA 2258K/201 0 KAMALA SAHA. A.Y. 03-04 THAT IN THE CASE OF REOPENED ASSESSMENT, ISSUE OF N OTICE UNDER SECTION 143(2) OF THE ACT WITHIN 12 MONTHS IS STATUTORY AND THE TRIBUNAL WAS ALSO WRONG IN DELETING THE ISSUE ON TECHNICAL GROUNDS WITHOUT GOING INTO THE MERITS OF THE CASE. IN RESPECT OF QUESTION NO. 1, WE FIND THAT ON A SIM ILAR ISSUE WHICH CAME UP FOR CONSIDERATION IN CIT V. M. CHELLAPPAN [2006] 281 IT R 444, A DIVISION BENCH OF THIS COURT, IN WHICH ONE OF US WAS A PARTY (P. D. DINAKA RAN J.) APPLYING THE RATIO LAID DOWN BY THE PUNJAB AND HARYANA HIGH COURT IN VIPAN KHANN A V. CIT [2002] 255 ITR 220 (P & H), HELD AS FOLLOWS (PAGE 445): .ADMITTEDLY, NO NOTICES UNDER SECTION 143(2) OF T HE ACT WERE SERVED ON THE ASSESSEES WITHIN THE STIPULATED PERIOD OF TW ELVE MONTHS AND, THEREFORE, THE PROCEEDINGS UNDER SECTION 143 OF THE ACT COME TO AN END AND THE MATTER BECOMES FINAL. IN VIEW OF THE ABOVE, THE FIRST QUESTION NOW RAISED , THEREFORE, STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE. SIMILARLY, HONBLE CALCUTTA HIGH COURT IN THE CASE OF MA KAMAKHYAYA ENTERPRISES (SUPRA) EXACTLY ON SIMILAR CIRCUMSTANCES HELD THAT NOTICE U /S. 143(2) OF THE ACT WITHIN A PERIOD OF 12 MONTHS IS MANDATORY. HONBLE CALCUTTA HIGH COURT D ISCUSSED THE FACTS AS UNDER: THERE IS NO DISPUTE THAT THE ASSESSEE FILED RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31 ST OCTOBER, 2006 AND THE SAID RETURN WAS TAKEN UP FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED O N 25 TH OCTOBER, 2007, AS IT APPEARS FROM THE POSTAL RECEIPT PLACED ON RECORD BY THE REV ENUE. HOWEVER, THE SAID NOTICE WAS RECEIVED BY THE ASSESSEE ON 3 RD NOVEMBER, 2007 I.E. AFTER THE EXPIRY OF THE PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETUR N WAS FILED BY THE ASSESSEE. AND FINALLY, HONBLE HIGH COURT HAS HELD AS UNDER: ON A PLAIN READING OF THE AFORESAID PROVISION, IT IS ABUNDANTLY CLEAR THAT SERVICE ON THE ASSESSEE WITHIN 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FURNISHED IS THE ESSENTIAL REQUIREMENT OF LAW AND NOT MERE ISSU E OF SUCH NOTICE WITHIN THE SAID DATE. WE, THUS, FIND THAT IN THE CASE BEFORE US, THE TRIB UNAL WAS QUITE JUSTIFIED IN HOLDING THAT BY MERE ISSUE OF NOTICE BEFORE THE EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FURNISHED, IF THE SAME WAS RECEIVED AFTE R THE EXPIRY OF 12 MONTHS BY THE ASSESSEE WILL NOT VALIDATE THE PROCEEDING FOR ASSES SMENT. WE, THEREFORE, FIND THAT NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APP EAL AND, CONSEQUENTLY, WE DISMISS THIS APPEAL SUMMARILY. 8. IN VIEW OF THE ABOVE ADMITTED FACTS THAT NO NOTI CE U/S. 143(2) OF THE ACT WAS ISSUED DURING THE PROCEEDINGS PENDING U/S. 148 OF THE ACT WITHIN THE PRESCRIBED TIME OF TWELVE MONTHS FROM THE DATE OF FILING OF RETURN. THE RATIO LAID DOWN BY HONBLE APEX COURT IN THE CASE OF HOTEL BLUE MOON (SUPRA) AND BY HONBLE MADRAS HIGH IN THE CASE OF C. PALANIAPPAN (SUPRA) AND ALSO BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF MA KAMAKHYAYA ENTERPRISES (SUPRA) EXACTLY ON SIMILAR CIRCUMSTANCES, WE ARE OF THE CON SIDERED VIEW THAT THE REASSESSMENT FRAMED WITHOUT ISSUING NOTICE U/S. 143(2) OF THE ACT WITHI N THE PRESCRIBED TIME LIMIT OF TWELVE MONTHS FROM THE DATE OF FILING OF RETURN IS WITHOUT JURISD ICTION. IN A CASE WHERE A RETURN IS FILED AND 5 ITA 2258K/201 0 KAMALA SAHA. A.Y. 03-04 PROCESSED U/S. 143(1)(A) OF THE ACT AND NO NOTICE U /S. 143(2) THEREAFTER IS SERVED ON THE ASSESSEE WITHIN THE STIPULATED PERIOD OF TWELVE MONTHS AS EN VISAGED IN THE PROVISO, THE ASSESSMENT PROCEEDINGS U/S. 143 COMES TO AN END AND THE MATTER BECOMES FINAL ALTHOUGH TECHNICALLY NO ASSESSMENT IS FRAMED IN SUCH CASE, YET THE PROCEEDI NGS FOR ASSESSMENT STAND TERMINATED. SECTION 143(2) INCORPORATES THE RULE OF AUDI ALTERE M PARTEM I.E., NO MAN SHOULD BE CONDEMNED UNHEARD. THE WORDS SHALL SERVE ON THE ASSESSEE A NOTICE OCCURRING IN SECTION 143(2) IMPLY A DUTY TO BE PERFORMED AND THE WORD SHALL CONNOTES THAT THE PROVISIONS ARE MANDATORY AND NON COMPLIANCE OF THE SAME GOES TO VITIATE THE ORDER OF ASSESSMENT ITSELF. EVEN THE PROVISIONS WILL APPLY TO REASSESSMENT PROCEEDINGS AS HELD BY HONBL E MADRAS HIGH COURT IN THE CASE OF C. PALANIAPPAN (SUPRA). ACCORDINGLY, WE QUASH THE ASS ESSMENT IN THE PRESENT CASE. WE NEED NOT TO GO INTO OTHER GROUNDS RAISED ON JURISDICTION AS WELL AS ON MERITS AS THE ISSUE ON ASSUMPTION OF JURISDICTION IS DECIDED AGAINST REVENUE AND IN FAVO UR OF ASSESSEE. APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 25.05.201 1. . . !' , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ') )) ) DATED 25TH DAY OF MAY, 2011 ./ $01 2 JD.(SR.P.S.) !- 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT SMT. KAMALA SAHA, HAIDER PARA MAIN ROA D, SILIGURI. 2 +,)* / RESPONDENT JCIT, SILIGURI 3 . -$ ( )/ THE CIT(A), SILIGURI 4. 5. -$ / CIT SILIGURI 4<= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, !-$>/ BY ORDER, 1 /ASSTT. REGISTRAR .