THE COMMISSIONER OF INCOME TAX V. SRI R JAYAVELU

ITA/404/2007

AI Insights

The appeals ITA No. 404/2007 and ITA No. 405/2007 were filed by the Commissioner of Income-Tax and the Assistant Commissioner of Income-Tax against the orders of the Income Tax Appellate Tribunal, Bangalore, which had allowed the appeals filed by the assessee, Sri R. Jayavelu, for the assessment years 1998-99 and 1999-2000. The Tribunal's decision was based on technical grounds related to the validity of notices issued under Section 148 of the Income Tax Act, 1961, and the subsequent returns filed by the assessee. The High Court, after hearing the parties and considering the submissions, decided to set aside the Tribunal's order and restore the matter to the Tribunal for a decision on merits, leaving the substantial questions of law open for future consideration.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729085 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 03-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K S HANUMANTH RAO
• Assessee Lawyers: K V ARAVIND
• Keywords: Assessment Order; Assessment Year; Income Tax; Notice under section 148; Technical Grounds; Valid return
• Section: 147; 148; 144; 143(3); 151; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 3RD DAY OF FEBRUARY 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON'BLE MR.JUSTICE B.MANOHAR ITA No.404/2007 & ITA.No.405/2007 ITA.NO.404/2007 BETWEEN: 1. The Commissioner of Income-Tax, Central Circle, C.R.Building, Queens Road, Bangalore. 2. The Assistant Commissioner of Income-Tax, Cricle-10(1), C.R.Building, Queens Road, Bangalore. …Appellants (By Sri.K.V.Aravind, Advocate) AND: Sri.R.Jayavelu, No.6Y/36, 59th Cross, III Main, Rajajinagar, Bangalore. …Respondent (By Sri.K.S.Hanumanth Rao, Advocate) 2 This ITA is filed under Section 260-A of I.T.Act 1961, arising out of order dated 21/12/2006 passed in ITA No.3572/Bang/2004, for the Assessment year 1998-99, praying that this Hon’ble Court may be pleased to: i. formulate the substantial questions of law stated there in. ii. allow the appeal and set aside the orders passed by the ITAT, Bangalore in ITA.No.3572/Bang/2004 dated 21/12/2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Assistant Commissioner of Income Tax, Circle-10(1), Bangalore, in the interest of justice and equity. ITA.NO.405/2007 BETWEEN: 1. The Commissioner of Income-Tax, Central Circle, C.R.Building, Queens Road, Bangalore. 2. The Assistant Commissioner of Income-Tax, Cricle-10(1), C.R.Building, Queens Road, Bangalore. …Appellants (By Sri.K.V.Aravind, Advocate) AND: Sri.R.Jayavelu, No.6Y/36, 59th Cross, 3 III Main, Rajajinagar, Bangalore. …Respondent (By Sri.K.S.Hanumanth Rao, Advocate) This ITA is filed under Section 260-A of I.T.Act 1961, arising out of order dated 21/12/2006 passed in ITA No.3570/Bang/2004, for the Assessment year 1998-99, praying that this Hon’ble Court may be pleased to: i. formulate the substantial questions of law stated there in. ii. allow the appeal and set aside the orders passed by the ITAT, Bangalore in ITA.No.3570/Bang/2004 dated 21/12/2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Assistant Commissioner of Income Tax, Circle-10(1), Bangalore, in the interest of justice and equity. These appeals are coming on for Hearing this day, DILIP B. BHOSALE J., delivered the following: P.C. These two income tax appeals are directed against the common order dated 21-12-2006 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘A’ (for short ‘the Tribunal’) in ITA Nos.3570 & 3572 of 2004, 4 pertaining to the assessment years 1998-99 and 1999- 2000. By this order the Tribunal allowed the appeals filed by the assesses. The appeals before the Tribunal were directed against the order dated 27-10-2004 rendered by the Commissioner of Income Tax (Appeals)- IV, Bangalore (for short ‘the First Appellate Authority’ or ‘FAA') in ITA Nos.1 and 2/R-10/CIT(A)IV/04-05. By this Order, the FAA dismissed the appeals filed by the respondent-assessee, confirming the assessment order dated 26-02-2004 passed by the Assistant Commissioner of Income Tax, Circle-10(1), Bangalore (for short ‘the Assessing Officer or AO) pertaining to the assessment years 1998-99 and 1999-2000. 2. In these appeals, the following substantial questions of law are raised for our consideration: (i) Whether the Tribunal was correct in holding that the assessment orders dated 26-02-2004 passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (for short ‘the Act’) are ab initio void as there was no valid returns filed by the assessee in 5 response to the notice issued under Section 148 of the Act pertaining to the assessment year 1998-99 dated 7-11-2003 and that the assessment should have been completed under Section 144 of the Act? (ii) The second notice dated 6-5-2003 issued under Section 148 of the Act, which according to the assessee was issued without recording reasons, would constitute a valid notice and if not what is the consequence of the proceedings pursuant to the said notice? (iii) Whether the returns filed by the assessee are nullity in law on the ground that they were filed belatedly and whether the assessment order passed on the basis of the belated returns is legal? 3. Learned counsel for the parties submit that these are the only questions arise for consideration in the present appeals. We have perused the order dated 18-07-2012 passed by this Court and so also the substantial questions of law formulated by the Revenue in the memorandum of appeals. 6 4. These appeals are arising from the proceedings initiated by issuing notice under Section 148 of the Income Tax Act (for short ‘the Act’). There does not appear to be any dispute that initially a notice under Section 148 was issued without specifying the period in the notice within which the assessee was suppose to furnish return of income. Since the notice was inconsistent with the provisions contained in Section 148, it was dropped. Then again a notice under Section 148 was issued and that notice was also dropped/withdrawn since the sanction as contemplated under Section 151 was not obtained. In this backdrop, the third notice under Section 148 was issued from which, these proceedings arise. 5. We have heard this appeal for some time and with the assistance of learned counsel for the Revenue perused the original record placed before us, in particular, the memorandum of appeals filed before the 7 FAA and the Tribunal. He submitted that the assessee not only participated in the proceedings but accepted his return filed in response to the first notice under Section 148 of the Income Tax Act, as return filed in response to the third notice and proceeded on merits before the AO and FAA. In short, he submitted having participated and proceeded on the basis of the return filed in response to the first notice, that was withdrawn, he cannot turn around and contend that there was no return and hence the entire proceedings are illegal and void ab initio. As a matter of fact, the Tribunal decided the appeal on this technical ground raised by the assessee and did not enter into merits of the case. 6. In the course of hearing, when we expressed our prima facie opinion on the questions raised, learned counsel appearing for the respondent-assessee fairly stated that we need not address and answer the questions raised in the present appeals and he 8 submitted that the respondent-assessee will be satisfied if the Tribunal is directed to decide the matter on merits keeping the questions raised in the present appeals open to be raised in appeal filed by the assessee in the event, the Tribunal decides the appeals against the assessee on merits. He so submitted, because the Tribunal did not address on merits and decided the appeal against the revenue on technical/legal ground, as reflected in the submission recorded in paragraph number five in this order. 7. Mr.K.V.Aravind, learned counsel appearing for the revenue also agrees for adopting this course for disposing of these two appeals. In view thereof, we are satisfied that the following order shall meet the ends of justice. In other words, we allow these appeals partly and dispose them of by the following order: (a) The common order of the Tribunal dated 21-12-2006 passed in ITA Nos.3570 & 3572 of 2004, pertaining to the assessment 9 years 1998-99 and 1999-2000, is set aside and the said appeals are restored to file. The Tribunal shall decide the appeals on merits in accordance with law, as expeditiously as possible and preferably within a period of one year from the date of receipt of this order. All contentions of the parties on merits are kept open. (b) It is needless to mention that the Tribunal shall not deal with the questions as formulated by us in the present judgment and shall consider the case on merits, as aforementioned. The Tribunal shall proceed and decide the appeals, as if the returns filed by the assessee in response to the first notice are the returns in response to the third notice issued after dropping of the first two notices. (c) If the order passed by the Tribunal disposing of both the appeals is adverse to the assessee, it would be open to the assessee to challenge the same in an appeal under Section 260A of the Act and that eventuality it would be open to the assessee to raise the 10 substantial questions of law, as framed by us in the present judgment. It is made clear that we have not expressed any opinion on the questions framed and reproduced in this judgment. All contentions of the parties are kept open to be considered in the appeal, if filed, under Section 260A of the Act. In view of the peculiar facts and circumstances of the case, there shall be no order as to costs. Sd/- JUDGE Sd/- JUDGE mpk/-* "