T.Srinivasa Rao, Rajahmundry V. The Income Tax Officer, Ward-2, Rajahmundry

ITA 561/VIZ/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5811 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reassessment proceedings
• Section: 148; 143(3); 54F; 142(1); 292BB; 143(2)

Judgement Text

आयकरअपीलीयअधधकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री लधलत कु मार, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI LALIET KUMAR, HON’BLEJUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.561/Viz/2018 (ननधधारण वर्ा/ Assessment Year : 2009-10) Sri T.Srinivasa Rao D.No.6-3-2 T.Nagar, Rajahmundry [PAN : ACEPT6962C] Vs. Income Tax Officer Ward-2 Rajahmundry (अपीलाथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri C.Subrahmanyam, AR प्रत्यधथी की ओ रसे/ Respondent by : Shri SPG Mudaliar, DR सुनवधई की तधरीख/ Date of Hearing : 29.03.2022 घोर्णध की तधरीख/Date of Pronouncement : 29.03.2022 O R D E R Per Shri Laliet Kumar, Judicial Member This appeal is filed by assessee against the order of the Commissioner of Income Tax (Appeals) [in short, ‘CIT(A)’], Rajamahendravaram in ITA No.10088/2014-15 dated 23.08.2018 passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘Act’) for the Assessment Year (A.Y.)2009-10. 2 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry 2. The assessee has raised the following grounds of appeal : 1. That under the facts and circumstances of the case the orders passed u/s.143(3) r.w.s. 147 of the LT.Act are against the facts of the case and provisions of law. 2. The learned Commissioner of Income Tax (A)(In short "CIT(A)") is not correct in disallowing the benefit sought by the assessee u/s.54F of the 1.TAct without any substantive and cogent reason. 3. The learned CIT(A) erred in not considering and applying the provisions of section 54F of the I.T.Act and disallowed the exemption claimed by assessee to the tune of Rs.7,86,698/-, 4. The learned CIT(A) failed to recognize that provisions of section 54F of the I.T.Act are beneficial provisions which ought to be applied liberally has so held by judiciary in several cases 5. Even assuming for a moment but without conceding that there is liability for capital gains tax but such liability if at all if arises the same should suffer to tax in the A.Y. 2011-12 because this is the year in which the period of 24 months as provided in sec.54 of the IT Act gets lapsed. 6. The learned CIT(A) failed to consider the fact that the delay in purchase of house property within the stipulated period is due to circumstances which are beyond his control and hence there is no default on the part of the assessee. 7. The learned CIT(A) ought to have held that the assessee fulfilled all the conditions stipulated in section 54F of the I.T.Act and invested the capital gain in purchase of house property, therefore, the disallowance of claim is not tenable. 8. For these and other reasons that are to be urged at the time of hearing of the case, it is the prayer of the assessee that the orders passed u/s143(3)r.w.s. 147 of the I.T.Act are against the provisions of law, facts of the case, therefore, the same are to be quashed in the interest of justice. 3 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry The assessee filed petition for admission of additional grounds since they are legal in nature. The grounds raised by the assessee are as under : 2. The AO having issued notice u/s 148 of the Act dt.18.03.2013 could not have issued another notice dt.23.12.2013 without concluding the proceedings initiated under the earlier notice 3. The Assessment order is liable to be quashed for failure to supply reasons recorded for issuing notice u/s 148 even at the specific request of the assessee. 3. The Ld.AR for the assessee has submitted that the AO had issued notice u/s 148 of the Act on 18.03.2013 and supplied the reasons thereto. Subsequent to receipt of the notice, the assessee had filed a reply to the show-cause notice at page No.17 of the paper book, which was duly acknowledged by the department. Nothing was heard from the department from 18.03.2013 till 23.12.2013, when another notice u/s 148 was issued by the department, calling upon the assessee to file the return of income. The assessee filed the reply to the said second notice u/s 148 vide his response dated 22.01.2014. It was submitted by the assessee that earlier to this notice, another notice dated 18.03.2013 was filed and the assessee also has placed copy of the said notice along with reply. Once again, the assessee has submitted that the return of income filed may be treated as a return of income filled inpursuant to the notice u/s 148. The AO was not convinced 4 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry with the reply and ultimately passed the assessment order making additions in the hands of the assessee. 4. On being aggrieved, the assessee preferred to appeal before the CIT(A) and the Ld.CIT(A) has also decided the issue against the assessee. 5. Feeling aggrieved, the assessee filed an appeal before us for the reasons mentioned in the grounds of appeal and the assessee had also taken legal grounds as mentioned herein and above. The Ld.AR for the assessee has vehemently submitted that the AO cannot issue the second notice u/s 148 of the Act, during the subsistence of the first notice u/s 148. Proceedings u/s 148, pursuant to the first notice, have not culminated into the passing of any assessment order prior to 31.12.2013. Prior to last date of passing of the assessment order, the AO issued another notice u/s 148 of the Act. It was stated that the time limit for passing of the assessment order on the basis of the first notice was 31.12.2013 and revenuecan not be permitted to increase the time limit of passing the order by issuing the second notice u/s 148.. The Ld.AR relied on the decision of the coordinate bench at page 65 of the paper book in the case of MedapatiVenkayamma Vs. Income Tax Officer (2017) 160 DTR 0058 (Visakha) (Trib) and also the 5 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry decision of Hon’ble High Court of Delhi in the case of Mastech Technologies Pvt. Ltd. Vs. Deputy Commissioner of Income Tax. 6. Per contra, the Ld.DR submitted that the report was called from the AO on the above said aspect and he has drawn our attention to point 1 and 2 of the report, where, the AO has submitted as under : Point No.1 The contention of the assessee that the assessment order passed ii/s.143(3) rws 147 of the Act on 05.03.2014 was barred by limitation and hence, the same is to be quashed. Reply: The contention of the assessee has been carefully verified and the same is not correct, as the assessment order passed u/s.143(3) rws 147 of the IT.Act, 1961 was completed well within the time limitation and further, the assessment was made based an the notice issued u/s. 148 of the I.T Act, 1961 on 18.03.2013. It is submitted that initially notice u/s148 of the I.T.Act, 1961 was issued on 18.03.2013 and the assessment u/s.143(3) rws 147 of the I.T.Act, 1961 was completed on 05.032014 which was well within the time frame. Therefore, question of barred by limitation in passing the assessment order does not arise and the contention of the assessee cannot be acceptable. Point No.2 The contention of the assessee that the AO issued notice u/s.148 of the Act dtJB.03.2013 could not have issued another notice dt.23122013 without concluding the proceedings initiated under the earlier notice. Reply: The contention of the assessee cannot be acceptable as because, the assessment was completed u/s.143(3) rws 147 of the I.T.Act, 1961 on 05.03.2014 based on the notice issued u/s.148 of the I.T,Act, 1961 on 18.03.2013 only. The first notice u/s.148 of the I.T.Act, 1961 was issued as per the Act and the time barring for completion of assessment was also taken into count as per the first notice only. If the 2 nd notice u/s.148 of the I.T.Act, 1961 dt.23.122013 was into account, the time barring would be 31 March, 2015. Therefore, the assessment completed u/s.143(3) rws 147 of the I.T.Act, 1961 is in order and within the stipulated time frame. The reasons for reopening of assessment was recorded at the time of first notice issued u/s. 148 of the Act, On 18.03.2013 only. Further, it is submitted that there was no separate reasons recorded for notice issued u/s.148 of the I.T.Act, 1961 on 23.122013. It is further submitted that the reason for notice u/s.148 of the Act was need to be issued as because to generate the notice through AST system. There is a clear misconception of 6 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry the assessee in treating the differently dated notices as two notices instead of treating the said notices as one and the same. Further, it can be treated as curable u/s.292 55 of the I.T.Act, 1961. As per the provisions of section 292BB of the I.T.Act, 1961, the assessee cannot be allowed to raise any ground treating the 2d notice given, as the assessee has complied with such notices during the course of reopened assessment proceedings before the Assessing Officer and submitted the information called for. Further, the assessee for the first time has raised this type of ground before the hon'ble ITAT. It can be viewed and evidenced that there is a clear misconception of the assessee in treating the differently dated notices as two notices; instead or treating the said notices as one and the same. 7. On the basis of the above, it was submitted that the second notice is continuation of the first notice and there were no separate reasons available in file for reopening or issue in the second notice. Further it was affirmed that there is no change in “reasons for reopening”, and it continued to be same as available to the AO at the time of issue of first notice u/s 148. 8. We have heard the rival contentions and perused the material placed on record. Admittedly, first notice was issued on 18.03.2013 ( placed at page 16 of the paper book) and the reply thereto was filed by the assessee on 29.04.2013, the reply was duly acknowledged by the office of the AOon 29.4.2013. After that, a second notice was issued on 23.12.2013 and in reply to it, the assessee had filed a reply on 22.01.2014. In the reply dated 22.01.2014, the assessee has categorically mentioned that the similar notice was received by the assessee earlier also and reply dated 29.04.2013 7 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry was filed in response to the said notice. However, ignoring the assessee's reply, the AO chose to pass the assessment order dated 05.03.2014 on subsequent notice u/s 148 dated 23.12.2013. In our view, the issuance of a second notice during the subsistence of the first notice on the same “reasons to reopen” was not envisaged or permissible in the eyes of thelaw. The law requires issuance of notice, not notices on the same “reason for reopening” of assessment. In our view, if the case of the revenue was that there were separate or different “reasons to reopen” the AO is permitted to issue a second notice or further notice. However no two notice under section 148 can be issued on the same reasons to reopen .In the report of the AO, it is categorically mentioned that the reasons are the same and the second notice was the continuation of the first notice and the AO had tried to justify his action by taking shield under section 292BB of the Act. In our view, the AO cannot take the benefit of 292BB for number of reasons including the reasons that the timeline for passing the assessment order pursuant to first noticewas31.12.2013. Further, if we concur with the reasoning given by the AO that it was a defect, then the order was required to be passed under section 143(3) read with 148 upto 31.12.2013 and not after that. Examining from any angle, we do not find any reason for the issuance of second notice for the purposes of passing assessment order. 8 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry Issuance of notice u/s 148 is a Jurisdictional Fact, and any error or defect in it it is not curable as it goes to the root of the matter. Therefore, any assessment based on subsequent notice is required to be quashed. Accordingly, we quash the same. Our view is also fortified by the decision of Hon’ble High Court of Delhi in the case of Mastech Technologies Pvt Ltd. Vs. Dy.CIT, wherein, the Hon’ble High Court held as under : “22. To begin with, it appears to the Court that for reasons which are not clear, the Revenue did not pursue the notice dated 23rd March, 2015 issued to the Petitioner under Section 148 of the Act. An attempt was made by MrRahuC Chaudhary to suggest that since the AO who issued the said notice was replaced by another AO, the said notice was not pursued. He, however, insisted that under Section 129 of the Act it was possible to continue proceedings which commenced with the notice dated 23rd March, 2015 and that was in fact what was done on 18th January, 2016 when the second notice was issued by the incumbent AO. 23. A careful perusal of the notice dated 18th January, 2016 reveals that it does not state anywhere that it is in continuation of the earlier notice dated 23rd March, 2015. There is no noting even on the file made by the AO that while issuing the said notice he was proposing to continue the proceedings that already commenced with the notice dated 23rd March, 2015, Annexure- A to the notice under section 142(1) of the Act reveals what weighed with the AO when he issued the said notice dated 18th January, 2016, In this document with the sub-heading "proceedings u/s 148/147 of the Act for AY 2008-2009, show cause notice - reg. - the AO states as under: 'Please refer to re-assessment proceedings u/s. 147/148 of Income-tax Act, 1961 pending against you for A.Y. 2008-09. A notice u/s. 148 of the Act was issued initiating the proceedings vide notice dated 18.01.2016 served upon you through speed post after duly recording the reasons for reopening the same u/s. 148: The case has been re- opened u/s. 14 of the Act on account or there being a reason t0 believe that at least an amount of Rs, 1,35,00000 has escaped assessment for A.Y.200809, A copy of the reasons for reopening the case is being supplied to you along with (sic herewith).' (emphasis supplied) 24. It is plain from the above paragraph that according to the AO the notice dated 18th January 2016 under Section 148 of the Act was issued 'initiating' afresh the proceedings. It was not merely in continuation of the earlier proceedings that commenced with the notice dated 23rd March, 2015. 9 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry 25. Athough the facts of the present case are different from those in the case before the Gujarat High Court in Aditya Medisales Ltd, V. Deputy Commissioner of income-tax, Circle (supra), it is evident that the entire proceedings under Section 148 of the Act stood vitiated since even according to the AO, he initiated proceedings on 18th January, 2016 on which date such initiation was clearly time barred. Secondly, the fresh initiation did not have the approval of the Additional C11 as required by law. 26. Consequently, on this ground itself the Assessed is entitled to succeed and all proceedings pursuant to the notice dated 18th January, 2016 cannot be sustained in law.” Hon’ble High Court of Gujarat has also held on similar facts that it is settled law that unless the return of income already filed is disposed of, the notice for reassessment under section 148 of the Act cannot be issue i.e. no reassessment proceedings can be initiated so long as the assessment proceedings pending on the basis of the return already filed are not terminated. Similar view was also expressed by coordinate bench in the case of MedapatiVenkayamma Vs. Income Tax Officer, wherein, on identical facts, the Tribunal in para No.5.4 held as under : “5.4. On furnishing the return of income u/s 148, the assessing officer can choose to drop the proceedings and proceed with the reassessment proceedings by issue of notice u/s 143(2) of I.T.Act and in case the assessee do not respond to notice u/s 148, the assessing officer can proceed to complete the assessment u/s 144, Best judgement . Once the return is filed in response to notice u/s 148, provisions of section 139, 143 and 144 applies in case of 148 also. Therefore, provisions of section 142(1), 148 are para materia for furnishing the return of income except recording the reasons in the case of section 148. Once the assessing officer has initiated assessment proceedings, the assessing officer cannot resort to reassessment unless the assessment proceedings are concluded. In this case, the assessment proceedings were initiated by issue of notice u/s 142(1) and before concluding the assessment proceedings, the assessing officer has issued notice u/s 148 for reassessment. Since the notice u/s 148 is issued without concluding the assessment proceedings, the notice issued u/s 148 is bad in law and cannot be sustained. The assessing officer is not permitted to carry on the assessment proceedings and reassessment 10 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry proceedings simultaneously. Hon’ble ITAT Delhi Bench ‘SMC’ in the case of Sunil Kumar Jain Vs. ACIT 71 Taxman.com 136 held that two parallel proceedings on similar subject matter cannot be sustained. Proceedings u/s 147 cannot stand during continuation of proceedings u/s 154. Similarly, the Hon’ble Delhi High Court in the case of Mastech Technologies Ltd. Vs. DCIT 84 taxman.com 20 (2017), Delhi, held that where the reassessment initiated vide two notices and second notice was beyond prescribed period and first notice proceeding were not continued and nowhere it was stated that second notice was in continuation of first one, reassessment was invalid. In the instant case, the assessing officer has issued notice u/s 142(1) and initiated assessment proceedings. The assessment proceedings u/s 143(3)/144 should be completed within the period of limitation allowed to the assessing officer i.e 31.03.2011 and the assessing officer allowed to get the assessment barred by limitation and passed the assessment order u/s 143 on 29.12.2011 which was barred by limitation. Therefore, the assessment passed u/s 143(3) on 29.12.2011 barred by limitation and the same is annulled. “ In light of the above, respectfully following the decision of the coordinate bench and also of the Hon’ble High Courts, we are of the opinion that the assessee’s appeal is required to be allowed. 9. In the result, appeal of the assessee is allowed. Order Pronounced in open Court on 29 th March,2022. S d/- Sd/- (एस बालाकृ ष्णन) (लधलत कु मार) (S.BALAKRISHNAN) (LALIET KUMAR) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated :29.03.2022 L.Rama, SPS 11 ITA No.561/Viz/2018, A.Y.2009-10 Sri T.Srinivasa Rao, Rajahmundry आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1.ननधधाऩरती/ The Assessee–Sri T.Srinivasa Rao, D.No.6-3-2, T.Nagar, Rajahmundry 2. रधजस्व/The Revenue –Income Tax Officer, Ward-2, Rajahmundry 3.आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals), Rajamahendravaram 4.नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT,Visakhapatnam 5.गधर्ाफ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam