THE COMMISSIONER OF INCOME TAX V. M/S SRI DURGA ENTERPRISES

ITA/677/2007

AI Insights

This case involves an appeal by the Commissioner of Income-Tax and the Income Tax Officer against M/s. Sri Durga Enterprises concerning the validity of a notice issued under Section 148 of the Income Tax Act, 1961, for the assessment year 1997-98. The primary legal contention was whether the notice, which did not specify a period for filing the return, was invalid. The Income Tax Appellate Tribunal had declared the notice invalid, leading to the Revenue's appeal in the High Court. The court examined the applicability of Section 292B, which allows for the curing of defects in notices, and considered the participation of the assessee in the proceedings without challenging the notice's validity initially.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729074 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 11-02-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-tax and another V/s. Micro Labs Limited, reported in (2012) 348 ITR 75 (Karn)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI; MALLAHARAO
• Assessee Lawyers: K V ARAVIND
• Keywords: Income Tax; Invalid notice; Notice under section 148; Reassessment; Return of Income
• Section: 148; 260A; 151; 292B

Judgement Text

"IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 11th DAY OF FEBRUARY 2014 PRESENT THE HON’BLE MR. JUSTICE DILIP B.BHOSALE AND THE HON’BLE MR. JUSTICE B.MANOHAR I.T.A. No.677/2007 BETWEEN : 1. The Commissioner of Income-Tax, Central Circle, C.R.Building, Queens Road, Bangalore. 2. The Income Tax Officer, Ward – 8(1), C.R.Building, Queens Road, Bangalore. …APPELLANTS (By Sri.K.V.Aravind, Adv.) AND : M/s.Sri.Durga Enterprises, No.3, Infantry Road, Bangalore. …RESPONDENT (By Sri.S.Parthasarathi, Adv. a/w. Sri.Mallaharao, Adv.) . . . . This I.T.A. is filed under Section 260A of the Income Tax Act, 1961 praying to (i) formulate the substantial questions of law stated therein, (ii) allow the - 2 - appeal and set-aside the order passed by the Income Tax Appellate Tribunal, Bangalore in I.T.A. No.792/Bang/2005 dated 15.05.2007 and confirm the orders of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward-8(1), Bangalore in the interest of justice and equity. This I.T.A. coming on for hearing, this day, the Court, delivered the following: ORAL JUDGMENT (DILIP B.BHOSALE J.) In this Income-tax Appeal, preferred by the Revenue, the following substantial questions of law are raised for our consideration: (i) Whether the Tribunal was correct in holding that the notice issued under Section 148 of the Act, having not mentioned the requirement of filing Return and the date within which the Return should be filed, was declared as invalid? (ii) Whether the Tribunal was correct in not taking into consideration Section 292B of the Act, which allow to cure any such defects pointed out by the Assessee? 2. These questions arise for our consideration in the back-drop of the facts that a notice under Section - 3 - 148 of the Income Tax Act, 1961(for short `the Act’) was issued for the assessment year 1997-98 on 11.11.2002. The notice was issued by the Assessing Officer after obtaining approval from the Additional Commissioner of Income-tax as contemplated under Section 151 of the Act. Admittedly, notice under Section 148 of the Act for re-opening of the assessment was issued after expiry of the period of four years from the end of relevant assessment year. In response to the notice under Section 148 of the Act, the assessee had placed a letter on record dated 11.12.2002 stating that the return of income filed by him on 19.02.2002 for the assessment year 2001-02 be treated as the return of income filed in response to the notice under Section 148 of the Act. In other words, the assessee chose not to file separate/independent return of income for the assessment year 1997-98 and requested the Assessing Officer to treat the return of income filed by him on 19.02.2002 for the assessment year 2001-02 as return of income filed for the assessment year 1997-98 in response to notice under Section 148 of the Act. - 4 - 3. Admittedly, in the notice under Section 148 of the Act, period was not specified for furnishing return of income. Before the Assessing Officer, the notice under Section 148 of the Act was admittedly not challenged by the assessee on this ground. As a matter of fact, he issued the letter, as aforementioned and participated in the proceedings till the assessment order was passed by the Assessing Officer dated 04.03.2004. Feeling aggrieved and dissatisfied with the order of the Assessing Officer, the assessee preferred First Appeal before the Commissioner of Income-Tax (Appeals), Bangalore (for short `the FAA’). In the memorandum of appeal filed before the FAA, the assessee did not raise the ground of limitation based on the provisions contained in Section 148 of the Act. Even during the course of arguments/ hearing of the appeal, such ground was not urged by the assesse. The FAA dismissed the appeal on merits filed by the assessee vide its order dated 24th March, 2005. - 5 - 4. Feeling aggrieved by the order of the FAA, the assessee preferred second appeal before the Tribunal and in the memorandum of appeal, raised the ground that “the condition precedent being absent, the reopening of assessment under Section 147 of the Act is bad in law”. Such ground was raised for the first time before the Tribunal and the Tribunal ventured to examine the same and ultimately held that the notice under Section 148 of the Act was bad in law since, it did not specify the time within which the assessee was called upon to file return of income. It is in this background, we are called upon to consider the questions as formulated in the memorandum of appeal, and reproduced by us in the first paragraph of the judgment. 5. Indubitably, Section 148 of the Act provides that before making the assessment, reassessment or re- computation under Section 147, the Assessing Officer shall serve on the assessee, a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income in respect of which he is - 6 - assessable under the Act. We are not concerned with the remaining part of Section 148 of the Act for the purpose of deciding this appeal. The period as contemplated by Section 148 of the Act was admittedly not specified in the notice. In view thereof our attention was invited to Section 292B of the Act. This Section provides for return of income, etc., not to be invalid on certain grounds. It would be relevant to reproduce the said Section which reads thus: “292B. No return of income, assessment, notice, summons or other proceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. - 7 - 6. For our purpose, under this provision, a notice issued or purported to have been issued in pursuance of any provisions of this Act, shall be invalid and shall be deemed to be invalid mainly by reason of any mistake, defect or omission in such notice, if such notice is in substance and effect in confirmity with or according to the intent and purpose of this Act. 7. Mr. Parthasarathi, learned counsel appearing for the respondent invited our attention to the judgment of this Court in Commissioner of Income-tax and another V/s. Micro Labs Limited, reported in (2012) 348 ITR 75 (Karn) and submitted that in a similar situation, this Court while dealing with Section 292B read with Section 158BC of the Act held that extension of time for submitting return of income would make the notice under Section 158BC of the Act, void-ab-initio and the consequent Block Assessment invalid and thereby notice was also declared invalid. This Court while dealing with Section 292 B observed as follows: “The purport of section 292B is that in the event of any mistake, defect or omission in - 8 - the notice or other proceedings, if the same is in conformity with or according to the intent and purpose of the Act, the notice cannot be termed as invalid. The notice should be in conformity with and in accordance with the intent and purpose of the Act. The intent and purport as provided under Section 158BC is to serve a notice on the assessee by providing a time of not less than 15 days and not more than 45 days. This is the purport and intent of the section. No extra time can be granted subsequently. Time to be granted is a minimum of 15 and maximum of 45 days. The same has to be specified in the notice. Hence, grant of extra time is without authority of law. It cannot validate an invalid notice. Moreover, it is relevant to note that the notice issued is on a printed form wherein the details are required to be filled up. At the bottom of the notice, is a printed matter, which reads that the time to be granted shall not be less than 15 days. In spite of this, the time granted to the assessee is less than 15 days. Therefore, it is apparent that there has been a violation of law. Therefore, when the sum and substance of the notice issued to the assessee is not in conformity with the purpose of the Act, section 292B has no - 9 - application. Hence, question No.2 is answered in favour of the assessee and against the Revenue.” 8. From bare perusal of the provisions contained in Section 158BC of the Act, it is clear that notice under this provision needs to be served on the assessee by providing time of not less than 15 days and not more than 45 days and that no extra time can be granted subsequently. In the case before this Court, a notice under Section 158BC of the Act was issued on December 15, 1997, calling upon the assessee to file return of income within a period of 15 days from the Block period 1988-89 to 1998-99. By the letter dated January 2, 1998, the assessee sought time to file its return of income. On June 16, 1999, the assessee was once again requested to file its return of income for the Block period, which was served on him on June 17, 1999. The assessee filed the return of income on June 29, 1999. On these facts and in the circumstances of the case, this Court observed as quoted above. - 10 - 9. In the present case, as observed earlier, the assessee not only responded to the notice under Section 148 of the Act within one month, but on the basis of the return filed earlier, participated in the proceedings till the matter reached the FAA and was disposed of. A glance at Section 292B of the Act, shows that under this provision, certain Acts are not to be treated as invalid, may be by reason of any mistake, defect or omissions, either in return of income, assessment, notice, summons or other proceedings. In other words, a notice cannot be invalidated by reason of any mistake, such as the one occurred in the present case, namely, the period of filing return of income was not specified as contemplated by Section 148 of the Act. If such a defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid, despite the fact that assessee had taken that notice as valid and responded to it in letter and spirit and participated in the proceedings, the very purpose/objective of the provisions contained in Section 292B of the Act would stand frustrated/defeated. The intent of the Legislature is - 11 - clear from the language employed in this provision which states that a defective notice, such as the one in the present case, cannot be declared invalid by reason of any mistake, defect or omission, if the notice in `substance’ and in `effect’ is in conformity with or according to the intent of purpose of this Act. The intent or purpose of issuing the notice is to call upon the assessee to file return, if the Assessing Officer finds that income has escaped the assessment. This being the intent and purpose of the provisions contained in Section 148 of the Act, in our opinion, it stands satisfied if the notice is responded within reasonable time, which in the present case was 30 days, irrespective of the fact whether the period was specified or not in the notice for filing return of income. In the present case, if the assessee had not responded to this notice at all and had raised such ground of challenge, perhaps, he would not succeed. But having responded and participated in the proceedings, he cannot be allowed to turn around and raise objection for the first time before the Tribunal seeking invalidation of the - 12 - proceedings initiated by issuing notice under Section 148 of the Act. In the circumstance, we allow this appeal answering both the substantial questions of law in favour of the Revenue and against the assessee. In view of the peculiar facts and circumstances of the case, there shall be no order as to costs. Sd/- JUDGE Sd/- JUDGE SPS "