URMISH M. UDANI,MUMBAI V. ACI 10(3), MUMBAI

ITA 6144/MUM/2017

AI Insights

The case involves Shri Urmish M. Udani, the managing director of U.S. Roofs Limited, who appealed against the order of the CIT(A) pertaining to the assessment year 2009-10. The primary contention was the legality of the notice issued under section 148 of the Income Tax Act, which the assessee argued was invalid as a valid return had been filed and the time for issuing a notice under section 143(2) was still available. The Tribunal examined the circumstances under which the notice was issued and referenced several judicial precedents to conclude that the reassessment notice was improperly issued.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780018 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 06-10-2017
• Other Referred Cases: Commissioner of Income Tax Vs K.M. Pachayappan, Trustees of HEH The Nizam's Supplemental Family Trust Vs. CIT, Smt. Suman [2017] 84 taxmann.com 267 (Bombay), Rajesh Jhaveri Stock Brokers (P.) Ltd., CIT v. Qatalys Software Technologies Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA; DR
• Assessee Lawyers: MADHUR AGRAWALFENIL BHATT; ARS
• Keywords: Set aside; Business income; Additional evidence; Reassessment proceedings; Question of law; Reopening of assessment; Loose papers; Reason to believe
• Section: 147; 148; 143(3)

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 6144/Mum/2017 Assessment Year: 2009-10 Shri Urmish M. Udani RH-12, J-12, Prabhukrupa Sector-6, Vashi Navi Mumbai - 400705 [PAN: AAGPU5477P] Vs Asst. Commissioner of Income Tax – 10(3), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Madhur Agrawal/Shri Fenil Bhatt, A/Rs Revenue by : Shri Vivek Perampurna, CIT D/R सुनवाई की तारीख/Date of Hearing : 7/10/2025 घोषणा की तारीख /Date of Pronouncement: 09/10/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assesse is preferred against the order of the ld. CIT(A) – 24, Mumbai [hereinafter “the ld. CIT(A)”] dated 09/06/2017, pertaining to AY 2009-10. 2. The grievance of the assessee can be summarized as under:- “1. Rejection of additional evidence application. 2. Reassessment proceedings without jurisdiction. 3. Addition on basis of wrong balance sheet. 4. Denial of Telescoping. 5. Taxation of Directors remuneration. 6. Capital gain on sale of agricultural land treated as business income. 7. Addition based on loose papers. 8. Addition under section 68. 9. Addition on account of non-compete receipt. 10. Addition on account of capital account. Printed from counselvise.com I.T.A. No. 6144/Mum/2017 2 3. The assessee has challenged the legality of notice u/s 148 of the Act on the ground that it is bad in law. 4. Representatives were heard at length. Case records carefully perused. 5. Briefly stated the facts of the case are that the assessee is an individual and is managing director of U.S. Roofs Limited, who filed is return of income belatedly on 14/06/2010 declaring total income of Rs. 62,96,500/- which was subsequently revised on 16/06/2010 revising the total income at Rs. 80,96,500/-. 6. The belated return so filed was a valid return and as per the proviso to Section 143(2) of the Act, the time limit available to the AO for issuance of notice u/s 143(2) of the Act was till 30/09/2011 i.e., six months from the end of the financial year in which the return of income was filed. 6.1. Instead of selecting the return for scrutiny assessment, the AO issued a notice u/s 148 of the Act dated 24/11/2010 alleging that income chargeable to tax has escaped assessment. The validity of this notice dated 24/11/2010 issued u/s 148 of the Act is under challenge on the ground that the AO failed to appreciate that a valid return of income was filed and the time limit to issue a notice u/s 143(2) of the Act was available, therefore, the AO grossly erred in issuing notice u/s 148 of the Act. 7. In our considered opinion, when a valid return is available with the AO, the said return of income can be selected for scrutiny assessment under regular assessment and, therefore, the question of any escapement of income does not arise. In our humble opinion, unless the return of income is scrutinized by the AO or the time limit to Printed from counselvise.com I.T.A. No. 6144/Mum/2017 3 scrutinize the return of income is over, he cannot come to a conclusion of any escapement of income. 8. On identical facts, the Hon’ble High Court of Madras in the case of Commissioner of Income Tax Vs K.M. Pachayappan (2008) 304 ITR 264, quashed the reassessment proceedings. In the facts before the Hon'ble High Court, the Assessee filed a return of income under section 139(4) of the Act on March 15, 2000 and the time limit for issuance of notice under section 143(2) of the Act was expiring on March 31, 2000. The assessing officer instead of issuing a notice under section 143(2) of the Act directly issued a notice under section 148 of the Act dated March 15, 2000. The Hon'ble Madras High Court held that when a return of income has been filed and the same is pending, the proceedings are still pending. In such a situation, revenue could not have issued a notice for reopening under section 147 of the Act. The Hon'ble Court relied upon the decision of the Hon'ble Supreme Court in the case of Trustees of HEH The Nizam's Supplemental Family Trust Vs. CIT (242 ITR 381), wherein the Hon'ble Supreme Court held that unless the return of income already filed is disposed of, a notice for reassessment under section 148 cannot be issued. No reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated. 9. Similar is the view taken by the Hon’ble Jurisdictional High Court in the case of Smt. Suman [2017] 84 taxmann.com 267 (Bombay), wherein the Hon’ble High Court was seized with the following substantial question of law:- “2. This appeal was admitted on 04.04.2007 on the following substantial question of law : Printed from counselvise.com I.T.A. No. 6144/Mum/2017 4 'Whether AO can proceeds with extraordinary power U/s. 147, particularly when normal procedure of assessment of Income U/s. 143(3) are available which are otherwise within time?’” 9.1. And answered as under:- “8. Before dealing with the rival contentions, it may be useful to reproduce Section 143 of the Act as existing, when notice dated 25.01.2000 was issued under Section 147/148 of the Act and it read as under : \"143[(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,— (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) ……………… Provided that except as otherwise provided in this sub-section, the acknowledgment of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him : Provided further that no intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.] (2) Where a return has been made under section 139, or in response to a notice under sub-section(1) of section 142, the Assessing Office shall, if he] considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return : Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.] 3 ………………. 4 ……………….. \" (emphasis supplied). 9. It is an undisputed position before us that on 25.01.2000 when the Assessing Officer issued a notice under Section 148 of the Act to reopen the assessment for Assessment Year 1999-2000, even before the time to issue notice under Section 143(2) of the Act to assess under section 143(3) of the Act had expired. It is clear from Section 143(1)(i) of the Act as in force at the relevant time that the intimation thereunder is without prejudice to the right of the Revenue to proceed under Section 143(2) of the Act. Thus, issue of intimation by itself does not bring to an end an assessment proceeding. It comes to an end only when the time to issue a notice under Section 143(2) of the Act expires/come to an end. 10. On the other hand, Section 147/148 of the Act empowers an Assessing Officer to reopen an assessment wherever he has reason to believe that income chargeable to tax has escaped assessment. This power under Section 147/148 of the Act is subject to various limitation provided therein. The power of reopening of assessment can be exercised where assessment has not been completed under Section 143(3) of the Act or even where intimation under Section 143(1)(i) of the Act has been issued provided the time to take further proceeding by issuing notice under Section 143(2) of the Act to complete assessment under Section 143(3) have already expired. So long the time is available to complete an assessment under Section 143(3) of the Act after having issued intimation under Section 143(1) of the Act, there can be no occasion for the Assessing Officer to have reason to believe the income chargeable had escaped assessment, for the reason that the Assessing Officer can issue notice under Section 143(2) of the Act, to complete assessment under Section 143(3) of the Act. Thus, it is a power vested in the Assessing Officer to disturb a concluded issue within a specified period by reopening an assessment. Therefore, it cannot be exercised till the period for completion of assessment has expired. Section 147/148 of the Act is not a power to be exercised to abort the regular assessment Printed from counselvise.com I.T.A. No. 6144/Mum/2017 5 proceeding by issuing notice for reopening an assessment. The proceedings under Section 147/148 are not parallel to regular assessment proceedings under Section 143(2) & (3) of the Act. 11. The impugned order relies upon Explanation 2(b) to Section 147 of the Act to sustain the reopening notice. Explanation 2(b) to Section 147 reads as under :— \"Section 147 ………….. 2: Explanation: For the purpose of this section, the following shall also be deemed to be cases where income chargeable to tax has been escaped assessment, namely :— (a) …………. (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;\" The aforesaid explanation deals with case where income chargeable to tax escapes assessment including a case where a return of income has been filed, but no assessment has been made. The aforesaid explanation seeks to clarify that merely because no assessment has been made even after filing a return, it will not be open to suggest that no income chargeable to tax has escaped assessment. This covers issue where there is no possibility of making an assessment on the date when the notice under Section 147/148 of the Act is issued. So long as the time to issue notice under Section 143(2) of the Act is available, it cannot be said that no assessment has been made as the possibility of making an assessment is always available. The Assessing Officer is obliged to complete assessment under Section 143(3) of the Act by issuing a notice under Section 143(2) of the Act, if he is of the view that the assessee has understated his income or computed excessive loss or understated his tax to the prejudice of the Revenue. Therefore, we are clear that in view of the provisions of Section 143(1)(i) of the Act is in force at the relevant time, no notice under Section 148 of the Act can be issued, till the period to issue notice under Section 143(2) of the Act has expired. 12. Reliance is placed upon the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) by the Revenue and in particular upon paragraph 18 thereof which reads as under :— \"18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.\" The aforesaid observation by the Apex Court is made in the context of the contention of the assessee that an Assessing officer cannot initiate reassessment proceedings, where intimation under Section 143(1) has been issued and the Revenue failed to take steps to issue notice under Section 143(2) and complete assessment under Section 143(3) of the Act. The aforesaid contention was negatived in the above referred para on the ground that in the context of the facts before it, the time to issue notice under Section 143(3) of the Act had expired. It is only thereafter that the Assessing Officer could have reason to believe that the income chargeable to tax has escaped assessment. It is in such cases that the Assessing Officer would not be prohibited under Section 147/148 of the Act from seeking to recover tax on income which has escaped assessment. It is clear that no reassessment proceedings can be initiated so long assessment proceedings on the basis of return of income filed by the assessee is pending. The assessment proceedings would cease to be pending either by passing of an order under Section 143(3) of the Act or by expiry of time to issue a notice under Section 143(2) of the Act, to complete an assessment under Section 143(3) of the Act. So long as the above event has not passed, the Assessing Officer cannot render the provision of Section 143(2) of the Act redundant/otiose by issuing a notice for reopening an assessment under Section 147/148 of the Act. Therefore, the above decision of the Apex Court in Rajesh Jhaveri's Stock Brokers (P.) Ltd. case have no application to the present facts, when admittedly the time to issue notice under Section 143(2) of the Act to complete the regular assessment under Section 143(3) of the Act has not expired. 13. Further, we note that the Hon'ble Madras High Court in CIT v. Qatalys Software Technologies Ltd., [2009] 308 ITR 249 in identical fact situation dismissed the Revenue's appeal by holding that where the period of issuing notice under Section 143(2) of the Act has not expired, then reassessment notice under Section 147/148 of the Act was invalid. Nothing has been shown to us as to why the view taken by the Hon'ble Madras High Court is required to be differed from. Printed from counselvise.com I.T.A. No. 6144/Mum/2017 6 14. In the above view, the substantial question of law framed for our consideration is answered in the negative i.e. in favour of the appellant/assessee and against the respondent/Revenue.” 10. Considering the facts in totality in light of the judicial decisions discussed hereinabove, we set aside the impugned notice u/s 148 of the Act and quash the resultant assessment order. Since we have quashed the assessment order, we do not find it necessary to delve into the merits of the case. 11. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 9th October, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 09/10/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0014ितिलिप अ\u0019ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014 थ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "