Sri Nama Ibaraju, Penukonda, C/o. Balaji Oil Industries, Hyderabad V. ITO, Ward-1, Hindupur

ITA 841/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74755 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reopening of assessment; Value adopted by valuation officer; Difference of opinion; Valuation report; Reassessment proceedings
• Section: 143(3); 234B; 147; 145; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1 841/H/11 2005-06 NAMA IBHARAJU, C/O BALAJI OIL INDUSTRIES, PENUKONDA. PAN ACRPN5968C INCOME-TAX OFFICER, WARD 1, HINDUPUR. 2 842/H/11 2005-06 NAMA SATYANARAYANA, C/O BALAJI OIL INDUSTRIES, PENUKONDA. PAN ACRPN5969O INCOME-TAX OFFICER, WARD 1, HINDUPUR. 3 843/H/11 2005-06 NAMA VENKATA RAMANA, C/O BALAJI OIL INDUSTRIES, PENUKONDA. PAN ACRPN5973C INCOME-TAX OFFICER, WARD 1, HINDUPUR. ASSESSEE BY: SRI A.V. RAGHU RAM REVENUE BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 05/03/2014 DATE OF PRONOUNCEMENT: 21/03/2014 O R D E R PER CHANDRA POOJARI, AM: THESE APPEALS PREFERRED BY DIFFERENT ASSESSEES ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT(A), GUNTUR DATED 08/12/2010 FOR THE ASSESSMENT YEAR 2005-06. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENC E. 2. THE GROUNDS RAISED IN THESE APPEALS ARE COMMON, THEREFORE, THE GROUNDS FROM 841/HYD/2011 ARE EXTRACTED BELOW: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOT H ON FACTS AND IN LAW, IN SO FAR AS, IT IS PREJUDICIAL TO THE ASSESSEE. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ISS UANCE OF NOTICE U/S 148 IS VALID, WHEN THERE IS TIME FOR ISS UE OF NOTICE U/S 2 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS 143(2), BY REFERRING TO THE DECISION OF HONBLE SUR PEME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS ( P) LTD. REPORTED IN [2007] 291 ITR 500 (SC) WHICH IS NOT ON THE ISSUE AT ALL. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED BY THE ASSESSING OFFICER IN THE CASE OF APPELLANT AND ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER OF REFERRING THE MATTER TO VALUAT ION CELL WITHOUT REJECTION OF BOOKS OF ACCOUNT. 4. THE LEARNED CIT(A) ERRED IN REFUSING TO ACCEPT T HE PLEA TO ALLOW 15% FOR HALL TYPE CONSTRUCTIONS, 15% FOR RATE DIFFERENCE IN PLINTH AREA RATES BETWEEN THE DELHI AND PENUKONDA A ND INCREASE THE SELF SUPERVISION CHARGES TO 15% AND NO T EVEN DIRECTING TO ALLOW 7.5% AS ALLOWED BY THE DVO SINCE THE ASSESSING OFFICER HAS ALLOWED ONLY 2.5% THOUGH HE H OLDS THAT THE DVO REPORT IS BINDING ON THE AUTHORITIES OF THE DEPARTMENT. 5. THE LEARNED CIT(A) ERRED IN HOLDING THAT HE CAN NOT DISTURB THE REPORT OF THE DVO IGNORING THE FACT THAT HE IS SITTING ON JUDGMENT OF SUCH REPORT AND SUCH REPORT IS NOT BIND ING ON APPELLATE AUTHORITY. 6. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE GROUND ABOUT NOT GIVING DEDUCTION FOR NOT PROVIDING LIME CONCRET E TERRACING FINISHED WITH BRICK TILES FOR ONLY ONE FLOOR WHEN I T IS INCLUDED IN THE PLINTH AREA RATES ADOPTED FOR VALUING EACH OF T HE FLOORS. 7. THE LEARNED CIT(A)S DECISION THAT ADDITION OF N OTIONAL INTEREST OF RS. 12,834/- MADE BY THE ASSESSING OFFI CER AS MADE ON SOUND FOOTING IS ON SOUND GROUNDS IS PERVERSE SI NCE THE ASSESSING OFFICER HAS NOT MADE ANY DISCUSSION FOR M AKING SUCH ADDITION AND THEREBY THE CIT(A) ERRED IN CONFIRMING THE SAME. 8. THE LEARNED CIT(A) ERRED IN HOLDING THAT LEVY OF IN TEREST U/S 234B IS MANDATORY, WITHOUT APPRECIATING THE FACT TH AT THERE IS NO SUCH INTEREST IN DEEMED INTIMATION U/S 143(1) OF TH E ACT. 3. THE FIRST COMMON GROUND IS GROUND NO. 2, WHICH I S A LEGAL ISSUE, AS FOLLOWS: 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ISS UANCE OF NOTICE U/S 148 IS VALID, WHEN THERE IS TIME FOR ISS UE OF NOTICE U/S 143(2), BY REFERRING TO THE DECISION OF HONBLE SUR PEME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS ( P) LTD. REPORTED IN [2007] 291 ITR 500 (SC) WHICH IS NOT ON THE ISSUE AT ALL. 3 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS 4. TO DECIDE THIS GROUND, WE REFER TO THE FACTS FRO M ITA NO. 841/HYD/2011 IN CASE OF NAMA IBHARAJU. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND MEMBER OF AOP BY NAME HOTE NAMA RESIDENCY, ANANTPUR. THE ASSESSEE ALONG WITH HIS TW O BROTHERS SRI NAMA VENKATA RAMANA AND SRI NAMA SATYANARAYANA COMP LETED THE CONSTRUCTION OF HOTEL NAMA RESIDENCY DURING THE PER IOD SEPTEMBER 2002 TO OCTOBER, 2004 AND COST OF CONSTRUCTION WAS OFFERED AT RS. 82,41,654/-. THE AOP FILED ITS FIRST RETURN SHOWING THE COMPLETION OF BUILDING. THE ASSESSMENTS WERE MADE SUBSTANTIVE BAS IS IN THE HANDS OF MEMBERS AND PROTECTIVE ASSESSMENT IS MADE IN THE HANDS OF HOTEL NAMA RESIDENCY. THE MATTER WAS REFERRED TO THE VALU ATION CELL AND IT HAD VALUED THE COST OF CONSTRUCTION AT RS. 1,26,25, 000/-. WHILE COMPLETING THE ASSESSMENT, THE AO HAD RELIED ON THE VALUATION REPORT OF THE DVO OBTAINED IN THE CASE OF M/S HOTEL NAMA R ESIDENCY, AN AOP, IN WHICH THE ASSESSEE IS A MEMBER AND MADE THE FOLLOWING ADDITIONS: 1 ASSESSEES SHARE IN DIFFERENCE IN COST OF CONSTRUCTION 14,61,116 2 ASSESSEES SHARE OF DISALLOWANCE TOWARDS SELF-SUPERVISION CHARGES 2,25,227 3 ASSESSEES SHARE OF DIFFERENCE IN COST OF LIST 41,000 4 ASSESSEES SHARE OF COST OF LAND 2,10,000 5 ASSESSEES SHARE OF FEE TO ARCHITECT AND STRUCTURAL ENGINEER 50,000 6 ASSESSEES SHARE OF NON-CONSTRUCTION EXPENSES 2,02,647 7 ASSESSEES SHARE OF COST OF MISC. ITEMS 3,92,519 8 ADDITION IN RESPECT OF INTEREST ON DEBTORS 12,834 4.1 THE VALUATION CELL HAD DETERMINED THE COST OF C ONSTRUCTION AT RS. 1,26,25,000/- AS AGAINST THE COST OF CONSTRUCTI ON ADMITTED BY THE ASSESSEE AT RS. 82,41,654/- AND HENCE, THE DIFFEREN CE IN VALUATION COMES TO RS. 43,83,346/-, OUT OF WHICH THE ASSESSEE S SHARE AMOUNTING TO RS. 14,61,116/- WAS ADDED AS UNEXPLAIN ED INVESTMENT U/S 69B OF THE IT ACT IN THE ASSESSEES HAND ON SUB STANTIVE BASIS. 4 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), TIRUPATHI AND THE CIT(A), TIRUPATHI, VIDE HIS ORDER DATED 30/05/2008, UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN COST OF CONSTRU CTION IN THE ASSESSEES HAND SUBSTANTIVELY AND IT WAS HELD THAT IT WAS NOT WARRANTED THE SAME IN THE HANDS OF AOP I.E., M/S NA MA RESIDENCY AND DISMISSED THE APPEAL. WHEN THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL, THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 1280/HYD/08, DATED 03/11/2009, SET ASIDE THE ORDER OF THE CIT(A), TIRUPATHI, ON TECHNICAL GROUND AND NOT INCLINED TO GO INTO OTHER ORDER GROUNDS RAISED BY THE ASSESSEE AND RESTORED THE MAT TER TO THE FILE OF THE CIT(A) FOR A FRESH DECISION IN ACCORDANCE WITH LAW. 5. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT T HE NOTICE U/S 148 WAS ISSUED ON 12/07/2006 ON THE RETURN OF INCOM E THAT WAS FILED ON 24/04/2006 AND AS PER THE PROVISIONS OF SECTION 143(2), THERE IS TIME OF 12 MONTHS FROM THE END OF THE MONTH IN WHIC H THE RETURN OF INCOME IS FILED FOR ISSUE OF NOTICE. EVEN BEFORE TH AT THE ASSESSING OFFICER ISSUED NOTICE BASED ON VALUATION REPORT OBT AINED IN THE CASE OF NAME RESIDENCY. AS PER THE INSTRUCTIONS OF BOARD TO CONVERT CASES TO SCRUTINY, IF THE SAME IS NOT FALLING WITH THE GU IDELINES, THE ASSESSING OFFICER HAS TO OBTAIN APPROVAL FROM THE C CIT. TO AVOID THIS APPROVAL, THE ASSESSING OFFICER HAS RESTORED TO INI TIATING PROCEEDINGS U/S 148 TO MAKE IT A COMPULSORY SCRUTINY AND SUBMIT TED THAT THE ACTION OF THE ASSESSING OFFICER IS INCORRECT AND THE ORDER IS INVALID. THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY TH E DECISIONS OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. K.M. PACHA YAPPAN, 304 ITR 264 (MAD.) WHEREIN FOLLOWING A DECISION OF SUPREME COURT, IT WAS HELD THAT WHEN THERE IS TIME FOR ISSUE OF NOTICE U/ S 143(2) NO ACTION COULD BE INITIATED U/S 148. 5.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED THAT THE APEX COURT IN THE CASE OF ACIT VS . RAJESH JHAVERI 5 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS STOCK BROKERS PVT. LTD. 291 ITR 500 (SC) HELD THAT SO FAR AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED, THE ASSES SING OFFICER IS FREE TO INITIATE PROCEEDINGS U/S 147 AND FAILURE TO TAKE ST EPS U/S 143(3) WILL NOT RENDER AO POWERLESS TO INITIATE REASSESSMENT PR OCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUE D. THUS, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS RIGH TLY INITIATED REASSESSMENT PROCEEDINGS EVEN THOUGH HE WAS HAVING TIME FOR ISSUE OF NOTICE U/S 143(2) OF THE IT ACT, 1961. ACCORDING LY, DISMISSED THE ASSESSEES GROUND ON THE ISSUE OF NOTICE U/S 148 OF THE ACT. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. BEFORE US, THE LEARNED AR CONTENDED THAT THE TIM E LIMIT FOR ISSUE OF NOTICE U/S 143(2) IS 12 MONTHS FROM THE EN D OF THE MONTH IN WHICH THE RETURN OF INCOME IS FILED FOR ISSUE OF NO TICE. BEING SO, THE ASSESSING OFFICER MUST HAVE COMPLETED THE ORIGINAL ASSESSMENT U/S 143(3) IN STEAD OF ISSUING NOTICE FOR REOPENING OF ASSESSMENT U/S 148 OF THE ACT. IN THIS CONNECTION, THE LEARNED AR RELI ED ON THE ORDER OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN CASE OF MR. NITIN KUMAR SHAH VS. ACIT IN ITA NO. 1489/HYD/2012 VIDE ORDER D ATED 11/10/2013, A COPY OF WHICH IS AVAILABLE ON RECORD. 8. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE JUDGEMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JORA SINGH VIDE IT APPEAL NO. 418 OF 2010, JUDGMENT DATED 08/0 3/2013 WHEREIN IT WAS HELD THAT NOTICE ISSUED U/S 148 WITHIN THE TIME LIMIT TO ISSUE NOTICE U/S 143(2) FOR REGULAR ASSESSMENT, THOUGH, T HE RETURN WAS DULY PROCESSED U/S 143(1) OF THE ACT, IS VALID. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE LEARNED AR BEFORE US. BEFORE EXAMINING THE LEGAL ISSUE RAISED, IT IS NECESSARY TO DEAL WIT H THE FACTS, FIRST. FOR 6 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED HI S RETURN OF INCOME ON 24/04/2006 DISCLOSING A NET LOSS OF RS. 8 5,800/-. AS CAN BE SEEN, THE RETURN WAS FILED WITHIN THE TIME LIMIT U/ S 139 OF THE ACT. SECTION 143(2) OF THE ACT PRESCRIBES THAT IN A CASE WHERE RETURN IS FILED U/S 139 OF THE ACT OR IN RESPONSE TO NOTICE U NDER SUB-SECTION (1) OF SECTION 142, THE AO IF HE CONSIDERS IT NECESSARY OR EXPEDIENT TO ENQUIRE THAT THE ASSESSEE HAS NOT UNDERSTATED THE I NCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDER-PAID THE T AXES IN ANY MANNER, THEN, HE SHALL SERVE UPON THE ASSESSEE A NO TICE REQUIRING HIM ON A DATE TO BE SPECIFIED THEREIN EITHER TO ATT END OR TO PRODUCE OR CAUSED TO BE PRODUCED ANY EVIDENCE, ON WHICH THE AS SESSEE MAY RELY IN SUPPORT OF HIS RETURN. THE PROVISO TO SECTION 14 3(2)(II), WHICH IS AMENDED VIDE FINANCE ACT, 2008 WITH EFFECT FROM 01/ 04/2008 PROVIDES THAT NO NOTICE UNDER CLAUSE (2) SHALL BE SERVED ON THE ASSESSEE AFTER EXPIRY OF SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED. IN THE PRESENT CASE, ADMITTEDL Y RETURN WAS FILED BY THE ASSESSEE ON 24/04/2006 AND AS IT APPEARS FROM T HE ASSESSMENT ORDER, THE AO INITIATED ACTION U/S 148 OF THE ACT O N 12/07/2006 ITSELF IMMEDIATELY AFTER THE RETURN WAS FILED BY THE ASSES SEE. THEREFORE, IT APPEARS FROM THE RECORD THAT ACTION U/S 147 OF THE ACT WAS INITIATED BY ISSUING NOTICE U/S 148 OF THE ACT BEFORE THE EXPIRY OF TIME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. EVEN ON A SPECIFIC QUERY MADE BY THE BENCH IN COURSE OF HEARING, THE LEARNED DR COULD NOT CONTROVERT THIS FACTUAL POSITION. THEREFORE, IN THE AFORESAID FACTUAL BACKDROP, WE HAVE TO EXAMINE THE ISSUE WHETHER THE ISSUANCE OF NOTICE U/S 148 OF THE ACT BEFORE THE EXPIRY OF TIME LIMIT PRESCRIBED U/S 143(2) OF THE ACT, IS LEGALLY VALID OR NOT. 10. THE HONBLE MADRAS HIGH COURT IN THE CASE OF C IT VS. K.M. PACHAYAPPAN (SUPRA) UPHELD THE ORDER OF THE TRIBUNA L WHEREIN IT WAS HELD THAT NOTICE U/S 148 OF THE ACT CANNOT BE ISSUE D WHEN THE TIME FOR ISSUANCE OF NOTICE U/S 143(2) HAD NOT BEEN EXPIRED. THE AFORESAID VIEW WAS AGAIN REITERATED BY HONBLE MADRAS HIGH CO URT IN THE CASE 7 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS OF CIT VS. QATALYS SOFTWARE TECHNOLOGIES CITED SUPR A. WHEN IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE A DIVISION B ENCH OF INCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH IN CASE OF SUPER SPINNING MILLS LTD. VS. ACIT, 3 ITR(TRIBUNAL) 258 THERE WAS DIVER GENT VIEW ON THE ISSUE. WHILE HONBLE AM WAS OF THE VIEW THAT THE A SSESSING OFFICER CANNOT INITIATE REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT WHILE TIME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) HAD BE EN EXPIRED. THE HONBLE JUDICIAL MEMBER TOOK A DIFFERENT VIEW BY HO LDING THAT AVAILABILITY OF TIME LIMIT FOR ISSUANCE OF NOTICE U /S 143(2) OF THE ACT WOULD NOT STAND AS A BAR FOR INITIATING PROCEEDINGS U/S 147 OF THE ACT. WHEN THE AFORESAID DIFFERENCE OF OPINION WAS REFERR ED TO HONBLE 3 RD MEMBER, THE HONBLE 3 RD MEMBER HELD AS UNDER:- THE DEPARTMENT WANTS TO INTERPRET THE EXPRESSION ' NO ASSESSMENT HAS BEEN MADE' IN THE ABOVE CLAUSE TO ME AN THAT IT ALSO INCLUDES SITUATION WHERE ASSESSMENT UNDER S ECTION 143(3) IS STILL POSSIBLE BUT NOT YET MADE. IF THIS S INTERPRETATION IS TO BE ACCEPTED, IT WILL SET AT NAUGHT THE FUNDAM ENTAL PRINCIPLES UNDERLYING SECTION 147 OF THE ACT AND WH ICH PRINCIPLES HAVE BEEN FOLLOWED TILL DATE. THESE PRIN CIPLES ARE APPLICABLE EVEN TO THE EXTENDED MEANING GIVEN TO TH E TERM 'ESCAPED ASSESSENT' IN THE AMENDED PROVISION. THE ABOVE CLAUSE IS INTENDED TO COVER THE FOLLOWING TWO SITUA TIONS: I) WHERE A RETURN IS FILED AND NO ACTION IS TAKEN EITHER UNDER SECTION 143(1) OR UNDER SECTION 143(3) AND THE TIME LIMIT FOR ISSUING NOTICE UNDER SECTION 143(2) HAS EXPIRED; (II) WHERE A RETURN IS FILED AND IS PROCESSED UNDE R SECTION 143(1) AND THE TIME LIMIT FOR ISSUING NOTIC E UNDER SECTION 143(2) HAS EXPIRED. IT DOES NOT ENVISAGE A SITUATION WHERE A RETURN IS FILED AND THE TIME LIMIT 56 FOR ISSUE OF A NOTICE UNDER SECTION 143(2) HAS NOT EXPIRED. UNLESS THE RETURN FILED BY THE ASSESSEE IS SCRUTINISED BY THE ASSESSING OFFICER, HE CANNOT COME TO THE CON CLUSION OF ANY ESCAPEMENT. IF THE ASSESSING OFFICER ISSUES NO TICE UNDER SECTION 143(2), THEN QUITE OBVIOUSLY, HE WOULD SCRU TINISE THE RETURN AND FRAME THE ASSESSMENT UNDER SECTION 143(3 ) OF THE ACT. SUBSEQUENTLY, HE MAY NOTICE ESCAPEMENT AND ISS UE NOTICE UNDER SECTION 148 OF THE ACT. BESIDES THIS, IN THE ABOVE TWO SITUATIONS ALSO HE WILL HAVE TO LOOK INTO THE R ETURN TO SEE WHETHER THERE IS ESCAPEMENT OR NOT. IF HE NOTICES A NY 8 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS ESCAPEMENT, IT CAN BE CALLED AN ESCAPEMENT ONLY IF IT IS NOTICED AFTER THE PROCEEDINGS HAVE BEEN TERMINATED EITHER BY WAY OF SOME ASSESSMENT, EITHER UNDER SECTION 143(1) OR 143(3) OR WHEN THE TIME-LIMIT FOR ISSUE OF A NOTICE UNDER SECTION 143(2) HAS EXPIRED. BUT IF SUCH TIME-LIMIT HAS NOT EXPIRED, IT CANNOT BE TERMED AS ESCAPEMENT AND HE C ANNOT RESORT TO PROCEEDINGS UNDER SECTION 147. IN THAT EV ENT HE WILL HAVE TO ISSUE NOTICE UNDER SECTION 143(2) OF THE AC T. IN A NUTSHELL, AS PER THE PRINCIPLES LAID DOWN BY THE SU PREME COURT IN SEVERAL CASES, (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 UNDER SECTION 143(2) IS OVER, (II) ASSESSMENT IS MADE UNDER SECTION 143(3) OR, (III) THE ASSESSMENT IS NO LONGER POSSIBLE UNDER SE CTION 143(3), PROCEEDINGS UNDER SECTION 147 CAN BE INITIA TED ONLY AFTER THE EARLIER PROCEEDINGS HAVE TERMINATED AS MENTIONED IN (B) ABOVE. 11. THE HONBLE THIRD MEMBER FOLLOWING THE DECISION OF CIT VS. RAJESH JAVERI STOCK BROKERS (P) LTD. (291 ITR 500) FURTHER HELD AS UNDER:- NOW WE DEAL WITH CERTAIN OBSERVATIONS OF THE LEARN ED JUDICIAL MEMBER DE IN HIS ORDER. IN PARAGRAPH 6 OF THE ORDER, IT HA S BEEN OBSERVED THAT RE IS NO BAR FOR ISSUING NOTICE UNDER SECTION 148 BEFORE EXPIRY OF THE TIME . ABLE FOR IS SUING NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1, IF T HE OTHER CONDITIONS FOR REOPENING OF THE ASSESSMENT AND INIT IATION PROCEEDINGS UNDER SECTION 147 ARE SATISFIED. IN THI S CONNECTION, THE ERNE OF THE ACT HAS TO BE APPRECIAT ED. CHAPTER XIV OF THE ACT DEALS WITH PROCEDURE FOR ASSESSMENT. SECTIONS 139 TO 140A DEALS WITH THE FILING OF RETURN AND MAT TERS CONNECTED WITH THE RETURN. SECTIONS 142 TO 145A DEA LS WITH ASSESSMENT PROCEDURES. IT IS ONLY AFTER SECTION 145 A THE SUBJECT OF REOPENING OF ASSESSMENT FOLLOWS. THIS IS ONE INDICATION THAT AN ASSESSMENT BE REOPENED ONLY ON T HE TERMINATION OF THE PROCEDURE PRESCRIBED IN THE PEND ING PROVISIONS, VIZ., FROM SECTIONS 142 TO 14:3A. FURTH ER, SECTION 147 THE EXPRESSION 'ASSESS OR REASSESS'. THE WORD ' REASSESS' IS USED TO INDICATE THE TERMINATION OF PROCEEDINGS AS A RESULT OF AN ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT. THE 9 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS WORD 'ASSESS' IS USED TO COVER THOSE SECTIONS WHERE THE RETURN HAS OR HAS NOT BEEN PROCESSED UNDER SECTION (1) BUT THE TIME LIMIT TO ISSUE NOTICE UNDER SECTION 143(2) HAS EXPI RED. EN THE LEGISLATURE HAS LOGICALLY ARRANGED THE RELEVANT PRO VISIONS, THERE NO NEED TO PUT A SPECIFIC BAR IN SECTION 1471 148 TO THE EFFECT THAT THE ASSESSING OFFICER CANNOT INITIATE P ROCEEDINGS UNDER SECTION 147 WHEN THE TINE AVAILABLE FOR ISSUI NG NOTICE UNDER SECTION 143(2) HAS NOT EXPIRED. IN THIS VIEW, IT WOULD BE QUITE ABSURD TO PUT SUCH A PROVISION AND IT IS WELL KNOWN THAT THE LEGISLATURE DOES NOT WASTE WORDS. THE NEXT OBSE RVATION OF LEARNED JUDICIAL MEMBER IS ALSO IN PARAGRAPH 6 WHIC H SAYS THAT FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT EVEN WHEN THE RETURN WAS PRO CESSED UNDER SECTION 143(1) ONLY. THIS OBSERVATION IS BORR OWED FROM THE JUDGMENT IN THE CASE OF ASST. CIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN [2007] 291 ITR 500 WITH WHICH WE HAVE ALREADY DEALT IN PARAGRAPH 10 ABOVE. THE THIRD OBSERVATION IS IN PARAGRAPH 10 OF THE ORDER. IT READS AS FOLLOWS: 'THE HON'BLE SUPREME COURT HAS EMPHATICALLY MADE IT CLEAR THAT THE POWER OF THE ASSESSING OFFICER IS NO T FETTERED FOR INITIATING THE PROCEEDINGS UNDER SECTI ON 147 BY ISSUING NOTICE UNDER SECTION 148, EVEN PRIOR TO THE EXPIRY OF THE PERIOD FOR ISSUING NOTICE, UNDER SECT ION 143(2).' . THE JUDGMENT OF THE SUPREME COURT REFERRED TO IN TH E ABOVE OBSERVATION IS THAT IN THE CASE OF ASST. CLT V. RAJESH JHAVERI STOCK BROKERS PVT. LTD. ., REPORTED IN [2007] 291 ITR 500. I HAVE READ THE SAID JUDGMENT MORE ONCE. UNFORTUNATELY, I HAVE NOT FOUND ANYWHERE IN THE JUDGMENT THE ABOVE OBSERVATION MADE BY THE COURT EITHER DIRECTLY OR INDIRECTLY. NOWHERE IN THE JUDGMENT IS THERE ANY REFERENCE ABOUT THE TIME LIMIT OF NOTICE TO BE UNDER SECTION 143(2) OF THE ACT. COMING TO THE THREE DECISIONS OF THE JURISDICTIONA L HIGH COURT, THERE IS INDEED A DIVERGENCE OF OPINION IN THE TWO JUDGMENTS, VIZ..ONE IN THE OF ITO V. K. M. PACHIAPPAN [2009] 311 ITR 31 (MAD)AND QATALYS SOFTWARE TECHNOLOGIES LTD. [2009] 308 ITR 249 IN WHICH THE DECISION IN THE CASE K. M. PACHAYAPPAN [2008] 304 ITR 264 (MAD) HAS BEEN FOLLOWED. I AM VIEW THAT IN SUCH A SITUATION, THE DECISION WHICH APPEALS TO ONE'S SCIENCE MORE SH OULD BE FOLLOWED. THE DECISION IN THE CASE OF QATALYS SOFTWARE TECHNOLOGIES LTD. [2009] 308 ITR 249 IS IN CONSONANCE WITH SUPREME CO URT JUDGMENTS ON THE ISSUE INCLUDING THE ONE IN THE CAS E OF ASST. CLT V. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN [200 ITR 500. THEREFORE, I AM INCLINED TO FOLLOW THE SAID DECISIO N. 10 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS 12. IT WOULD BE WORTH MENTIONING HERE THAT THE 3 RD MEMBER DECISION OF INCOME-TAX APPELLATE TRIBUNAL HAS THE SAME BINDI NG FORCE AS THE SPECIAL BENCH DECISION OF INCOME-TAX APPELLATE TRIB UNAL. THE CO- ORDINATE BENCH OF THE TRIBUNAL IN CASE OF SAHITYA HOUSING PVT. LTD. (ITA NO,.569/HYD/2010 PERTAINING TO ASSESSMENT YEAR 2006-07 DATED 31-10-2010 WHILE CONSIDERING IDENTICAL ISSUE HAS HE LD AS UNDER THEREFORE, FROM THE JUDGMENT OF THE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA) AND THE DECISION OF SPECIAL BENCH IN THE CASE OF MOTOROLA INC. (SUPR A), IT IS OBVIOUS THAT EXPLANATION-2 (B) TO SECTION 147 REFER S TO A SITUATION WHERE NO ASSESSMENT ORDER HAS BEEN PASSED AND THE TIME LIMIT FOR PASSING SUCH ORDER HAS BEEN EXPIRED OR TIME LIMIT FOR ISSUING A NOTICE UNDER SECTION 143(2) WAS EXPIR ED. THIS IS OBVIOUS FROM THE DECISION OF THE SPECIAL BENCH IN T HE CASE OF MOTOROLA INC. (SUPRA) AND THE JUDGMENT OF APEX COUR T IN THE CASE OF NARSEE NAGSEE & COMPANY (SUPRA). THE QUESTION OF ESCAPEMENT OF INCOME FROM ASSESSMENT WOULD COME WHE N THE ASSESSMENT PROCEEDINGS HAVE BEEN TERMINATED/ CONCLU DED EITHER BY AN ORDER UNDER SECTION 143(3) OR BY OPERA TION OF LAW ON THE EXPIRY OF TIME LIMIT FOR ISSUING A NOTICE UN DER SECTION 143(2) OF THE ACT. IT IS OBSERVED BY THE APEX COURT THAT SECTION 147 REFERS TO A SITUATION WHERE THE INCOME HAD ESCA PED ASSESSMENT. SECTION 143(2) REFERS TO A SITUATION WH ERE THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSES SEE HAS UNDERSTATED THE INCOME. WHEN THE ASSESSING OFFICER HAS TIME LIMIT FOR MAKING AN ENQUIRY UNDER SECTION 143(2) OF THE ACT AS HELD BY THE APEX COURT, WE MAY NOT BE ABLE TO SAY T HAT ANY INCOME HAS ESCAPED ASSESSMENT. THE LUCKNOW BENCH OF HIS TRIBUNAL HAS NOT TAKEN NOTE OF THIS FACTUAL SITUATI ON IN WHICH THE APEX COURT DECIDED THE CASE IN RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA). IN OTHER WORDS, THE LUCKNOW BENC H OF THE TRIBUNAL IN KAILASH AUTO FINANCE LIMITED (SUPRA) HA S NOT TAKEN NOTE OF THE FACT THAT THE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD., (SUPRA) DECIDED TH E ISSUE ON THE FACTS ON WHICH THE TIME LIMIT FOR ISSUING A NOT ICE UNDER SECTION 143(2) HAS ALREADY EXPIRED. EVEN THOUGH INT IMATION UNDER SECTION 143(1) WAS ISSUED, THE FAILURE OF THE ASSESSING OFFICER TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. IN VIEW OF THIS FACTUAL SIT UATION, IN OUR OPINION, THE DECISION OF THE LUCKNOW BENCH OF THE T RIBUNAL IN THE CASE OF KAILASH AUTO FINANCE LIMITED (SUPRA) MA Y NOT BE ANY ASSISTANCE TO THE REVENUE. A SIMILAR VIEW WAS T AKEN BY THE AGRA BENCH OF THE TRIBUNAL IN SUBHASH CHANDRA GOYAL (2005) 4 SOT 405 (AGRA) AND MUMBAI BENCH OF THE TRIBUNAL IN FATEH INTERNATIONAL (2007) 104 ITD 305 (MUM.). IN VIEW OF THE ABOVE DISCUSSION, BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF APEX 11 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P VT. LTD., AND IN THE CASE OF TRUSTEES OF HEH THE NIZARN'S SUPPLEM ENTAL FAMILY TRUST (SUPRA), AND THE DECISION OF SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF MOTOROLA INC. (SUPRA), WE H OLD THAT ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT DURING THE P ENDENCY OF PROCEEDINGS UNDER SECTION 143(2) OF THE ACT IS INVA LID AND CONSEQUENTLY ALL THE ORDERS PASSED BY THE ASSESSING OFFICER IN PURSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT CA NNOT STAND AND ACCORDINGLY THE SAME ARE QUASHED. IN VIEW OF TH E ABOVE DECISION IT MAY NOT BE NECESSARY FOR THIS TRIBUNAL TO GO INTO THE MERITS OF THE CASE. 13. SIMILAR VIEW HAS ALSO BEEN EXPRESSED BY THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. VED & CO., 302 ITR 328 (DE L.) AND THE HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. TCP LT D., 323 ITR 346. THE ITAT, HYDERABAD BENCH IN CASE OF M/S EENADU REL IEF FUND VS. DDIT, IN ITA NO. 434/HYD/2010, VIDE ORDER DATED 13 TH JANUARY, 2011 ALSO EXPRESSED SIMILAR VIEW BY HOLDING THAT NO ACTI ON U/S 147 OF THE ACT CAN BE INITIATED BEFORE EXPIRY OF THE TIME LIMI T FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. FOLLOWING THE CONSIST ENT VIEW LAID DOWN IN JUDICIAL PRECEDENTS, DISCUSSED HEREINABOVE, WE H OLD THAT REOPENING OF ASSESSMENT MADE BY ISSUANCE OF NOTICE U/S 148 OF THE ACT BEFORE THE EXPIRY OF TIME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) OF THE ACT IS LEGALLY INVALID AND THE ASSESSMENT ORDER PASSED IN CONSEQUENCE THEREOF IS ALSO UNSUSTAINABLE. 13.1 THE SAME VIEW HAS BEEN TAKEN BY THE COORDINA TE BENCH OF ITAT, HYDERABAD IN CASE OF MR. NITIN KUMAR SHAH CIT ED SUPRA, ON WHICH THE ASSESSEE HAS PLACED RELIANCE, AND IN THE CASE OF SAHITYA HOUSING PVT. LTD., IN ITA NO. 569/HYD/2010 FOR AY 2 006-07, ORDER DATED 31/08/2010 WHEREIN IT WAS HELD THAT ISSUE OF NOTICE U/S 148 OF THE ACT DURING THE PENDENCY OF PROCEEDINGS U/S 143( 2) OF THE ACT IS INVALID AND THE ORDERS PASSED BY THE ASSESSING OFFI CER IN PURSUANCE OF NOTICE U/S 148 OF THE ACT CANNOT STAND AND ACCOR DINGLY THE SAME ARE QUASHED. 12 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS 13.2 IN THE AFORESAID VIEW OF THE MATTER, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND QUASH THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. AS A RESULT GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 14. SINCE THE ASSESSEE HAS NOT URGED ANY ARGUMENT IN RESPECT OF OTHER ADDITIONAL GROUNDS AS WELL AS THE GROUNDS RAI SED ON THE MERITS OF THE ISSUE AND CONSIDERING THE FACT THAT WE HAVE ALREADY QUASHED THE ASSESSMENT ORDER ON LEGAL ISSUE RAISED BY THE A SSESSEE IN GROUND NO. 2 HAS BECOME REDUNDANT AND, THEREFORE, NOT REQU IRED TO ADJUDICATE THE SAME. 15. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER U/ S 148 IS BAD IN LAW. 15.1 AS WE HAVE QUASHED THE REOPENING OF ASSESSMENT IS BAD IN LAW, IT IS NOT NECESSARY TO GO INTO THE MERITS OF THE CA SE. 16. AS THE GROUNDS AND FACTS RAISED IN ITA NOS. 842 & 843/HYD/2011 IN CASE OF NAMA SATYANARAYANA AND NAM A VENKATA RAMANA ARE MATERIALLY IDENTICAL TO THAT OF ITA NO. 841/HYD/2011, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE ALLOW T HESE APPEALS ALSO. 17. IN THE RESULT, THE THREE APPEALS IN ITA NOS. 84 1,842, & 843/HYD/2011 ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21/03/2014 SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 21/03/2014. KV 13 ITA NOS. 841, 842 & 843/H/2011 NAMA IBHARAJU AND OTHERS COPY FORWARDED TO: 1. NAMA IBHARAJU, NAMA SATYANARAYANA NAMA VENKATA RAMANA, C/O SHRI AV RAGHU RAM, ADVOCATE, FLAT NO. 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEER BAGH, HYD. 500 001. 2. ITO, WARD 1, HINDUPUR. 3. CIT(A), GUNTUR 4. CIT, TIRUPATHI 5. THE DR, ITAT, HYDERABAD S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER