THE COMMISSIONER OF INCOME TAX V. M/S ITC HOTELS

ITA/531/2007

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Deputy Commissioner of Income-Tax against ITC Hotels, challenging the Tribunal's decision which set aside the reassessment order due to improper service of notice. The primary legal issue was whether the notice under Section 148 of the Income Tax Act, 1961, was properly served, which is a prerequisite for any reassessment under Section 147. The Tribunal had found that the notice was not duly served as required by law, leading to the setting aside of the reassessment order. The High Court, after considering the arguments and evidence, agreed with the Tribunal's decision and dismissed the appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728981 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-08-2014
• Assessment Year: misc
• Other Referred Cases: S. Narayanappa Vs. Commissioner of Income Tax [1967] 63 ITR 219 (SC), Commissioner of Income Tax Vs. Mani Kakar [2009] 178 Taxman 315 (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RUPESH J AIN
• Assessee Lawyers: K V ARAVIND
• Keywords: Income Tax; Jurisdiction; Notice; Reassessment; Service of notice
• Section: 143(2); 151; 148(1); 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 19TH DAY OF AUGUST, 2014 PRESENT THE HON’BLE MR.JUSTICE N.KUMAR AND THE HON’BLE MRS.JUSTICE RATHNAKALA INCOME TAX APPEAL NO.531 OF 2007 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX, C.R. BUILDING, QUEENS ROAD, BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE – 11(1), C.R. BUILDING, QUEENS ROAD, BANGALORE. …APPELLANTS (BY SRI K.V. ARAVIND, ADV.) AND: M/S. ITC HOTELS A-9, USO ROAD, QUTAB INSTITUTIONAL AREA, NEW DELHI. ...RESPONDENT (BY SRI RUPESH JAIN, ADV. FOR SRI PRASHANTH KUMAR D., ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF - 2 - ORDER DATED 12-02-2007 PASSED IN ITA NO.364/BANG/2005 FOR THE ASSESSMENT YEAR 1995-1996, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: i. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA NO.364/BANG/2005 DATED 12-02-2007 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR FINAL HEARING THIS DAY, N.KUMAR J., DELIVERED THE FOLLOWING: J U D G M E N T This appeal is preferred by the Revenue, challenging the order passed by the Tribunal which has held that reopening of the assessment was bad in law as it was not proceeded by a service of statutory notice contemplated under Section 148 (1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. This appeal was admitted on 14.03.2008 to consider the following substantial question of law: “Whether the Tribunal was correct in holding that service of notice under Section 148 had not taken place despite there being proof for - 3 - having dispatched notice and subsequent notices under Section 143 (2) having been served on the assessee and when the assessee’s representative present on the day of dispatch had refused to accept the notice?” 3. A notice under Section 148 of the Act was issued on 22.01.2001 for reopening the assessment. The assessee filed his objections and contended that there was no prior approval of the Commissioner of Income Tax under Section 151 of the Act. When the same was noticed, the proceedings were dropped. After obtaining prior approval of the Commissioner, one more notice was issued on 28.03.2002. The case of the Revenue is that, the representative of the assessee was present in the office and declined to receive the said notice. Therefore, it was despatched on 28.03.2002, itself. However, there is nothing on record to show that this notice was duly served on the assessee. The material on record shows that the notice was despatched on 28.03.2002, but there is nothing on record to show that it was duly served on the assessee. 4. Section 148 (1) of the Act reads as under: “148 (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the - 4 - assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. [Provided that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub- section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case— - 5 - (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.] [Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] 5. Therefore, it is clear from the aforesaid Section that, before making the assessment or reassessment or recomputation under Section 147 of the Act, the Assessing Officer shall serve notice on the assessee. Therefore, service of notice under Section 148 (1) of the Act is a condition precedent before initiating proceedings under Section 147 of the Act. In fact, the Apex Court in the case of - 6 - S.Narayanappa Vs. Commissioner of Income Tax reported in [1967] 63 ITR 219 (SC) has held that the proceedings for assessment or reassessment under Section 34(1)(a) of the Act which is in pari materia with Section 147 of the Act, which start with the issue of a notice and it is only after the service of notice, that the assessee whose income is sought to be assessed or reassessed becomes a party to the proceedings. Therefore, if such a service of notice is not affected, there cannot be any assessment or reassessment proceedings. The Delhi High Court in the case of Commissioner of Income Tax Vs. Mani Kakar reported in [2009] 178 Taxman 315 (Delhi), has held that proceedings under Section 147 of the Act cannot be initiated without the service of notice as mandated in Section 148 of the Act. Service of notice is a precondition for permitting asessement under Section 147 of the Act. 6. Therefore, in the instant case, admittedly, when notice under Section 148 of the Act is not duly served on the assessee, the proceedings under Section 147 of the Act is one without jurisdiction and the Tribunal has rightly set aside the order. We find no infirmity or irregularity committed by the Tribunal. Hence, the substantial question of law is answered in favour of the assesee and against the - 7 - Revenue. There is no merit in the appeal and the same is accordingly dismissed. Sd/- JUDGE Sd/- JUDGE nvj "