Commissioner Of Income Tax v. Adarsh Kumar Goel, J

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.41 of 2010 Date of decision: 4.10.2010 Commissioner of Income Tax. Vs. Smt. Indra Devi Jindal. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Vivek Sethi, Standing Counselfor the appellant. for the appellant. Mr. S.K. Mukhi, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against the order dated 30.4.2009 of the Income Tax AppellateTribunal, Amritsar in I.T.A. No.617(ASR)/2008 for the assessmentyear 2004-05 proposing to raise following substantial question oflaw:- “Whether on the facts and in the circumstances of thecase, the ITAT was right in law in annulling theassessment ignoring that in view of amendedprovisions of section 143(1) and 148 to 153 of theIncome Tax Act, 1961 brought in by the Direct Tax Law (Amendment) Act, 1987 w.e.f. 1987 according towhich failure to take steps u/s 143(3) of the Act doesnot take away the jurisdiction of the AO to tax theincome escaping assessment by initiatingproceedings u/s 147 of the I.T. Act, 1961.” 2. Return of the assessee for the assessment year2004-05 was processed under Section 143(1) of the Act butthereafter, finding that some income had escaped assessment,notice under Section 148 of the Act was issued to the assesseeand assessment was completed under Section 143(3) of the Act,making addition on account of capital gains. Appeal of theassessee against the order of assessment was dismissed but onfurther appeal, the Tribunal held that notice under Section 148 ofthe Act itself was not maintainable as the Assessing Officer hadnot resorted to Section 143(2) of the Act and if that remedy wasnot taken, recourse to Section 147 of the Act was not permissible.Reliance was placed on judgment of the Hon’ble Supreme Courtin Trustees of H.E.H., the Nizam’s Supplement family Trustv. CIT242 ITR 381 (SC), holding that where assessment had notbeen finalised and notice under Section 143(2) of the Act waspending, reassessment could not be resorted. The observationsof the Tribunal, after noticing the judgment in Nizam’sSupplement family Trust, are as under:- “Applying the above decision to the facts of thepresent case, the inescapable conclusion that wouldhave to be reached is that while assessment proceedings remains inchoate, no ‘fresh evidence ormaterial’ could possibly be unearthed. If any suchmaterial or evidence is available, there would be norestrictions or constraints on its being taken intoconsideration by the AO for framing the then regularassessment. If the assessment is not framed beforethe expiry of the period of limitation for a particularassessment year, it would have to be assumed thatsince proceedings had not been opened undersection 143(2), the return had been accepted ascorrect. Thereafter, recourse could be taken tosection 147, provided fresh material had beenreceived by the AO after the expiry of limitation fixedfor framing the original assessment. In the presentcase, the AO had attempted to travel the path ofsection 147 in the vain attempt to enlarge the timeavailable for framing the assessment. This notpermissible in law. But what cannot be done directlythat cannot be done indirectly.” 3. We have heard learned counsel for the parties andperused the record. 4.Learned counsel for the revenue submitted that theTribunal erred in taking the view that without resorting to Section143(2) of the Act, power under Section 147 of the Act cannot beinvoked. Judgment in Nizam’s Supplement family Trust wasclearly distinguishable. Power under Section 147 of the Act iswide and independent power and there is no requirement thatbefore exercise of such power, recourse to Section 143(2) of theAct must be taken. It is a different matter if Section 143(2) of the 3. We have heard learned counsel for the parties andperused the record. 4.Learned counsel for the revenue submitted that theTribunal erred in taking the view that without resorting to Section143(2) of the Act, power under Section 147 of the Act cannot beinvoked. Judgment in Nizam’s Supplement family Trust wasclearly distinguishable. Power under Section 147 of the Act iswide and independent power and there is no requirement thatbefore exercise of such power, recourse to Section 143(2) of theAct must be taken. It is a different matter if Section 143(2) of the Act has been resorted to and assessment is pending. Parallelproceedings for reassessment cannot be initiated, as held inNizam’s Supplement family Trust. Where no proceedings areinitiated under Section 143(2) of the Act and conditions of Section147 of the Act are fulfilled, there is no legal bar to proceed underthe said provision of Section 147 of the Act. Reliance has beenplaced on judgment of the Hon’ble Supreme Court in ACITv.Rajesh Jhaveri Stock Brokers Pvt. Ltd.[2007] 291 ITR 500,wherein it was held:- “17.The scope and effect of section 147 assubstituted with effect from April 1, 1989, as alsosections 148 to 152 are substantially different from theprovisions as they stood prior to such substitution.Under the old provisions of section 147, separateclauses (a) and (b) laid down the circumstances underwhich income escaping assessment for the pastassessment years could be assessed or reassessed.To confer jurisdiction under section 147(a) twoconditions were required to be satisfied firstly theAssessing Officer must have reason to believe thatincome profits or gains chargeable to income tax haveescaped assessment, and secondly he must alsohave reason to believe that such escapement hasoccurred by reason of either (i) omission or failure onthe part of the assessee to disclose fully or truly allmaterial facts necessary for his assessment of thatyear. Both these conditions were conditions precedentto be satisfied before the Assessing Officer couldhave jurisdiction to issue notice under section 148read with section 147(a) But under the substitutedsubstituted with effect from April 1, 1989, as alsosections 148 to 152 are substantially different from theprovisions as they stood prior to such substitution.Under the old provisions of section 147, separateclauses (a) and (b) laid down the circumstances underwhich income escaping assessment for the pastassessment years could be assessed or reassessed.To confer jurisdiction under section 147(a) twoconditions were required to be satisfied firstly theAssessing Officer must have reason to believe thatincome profits or gains chargeable to income tax haveescaped assessment, and secondly he must alsohave reason to believe that such escapement hasoccurred by reason of either (i) omission or failure onthe part of the assessee to disclose fully or truly allmaterial facts necessary for his assessment of thatyear. Both these conditions were conditions precedentto be satisfied before the Assessing Officer couldhave jurisdiction to issue notice under section 148read with section 147(a) But under the substituted section 147 existence of only the first conditionsuffices. In other words if the Assessing Officer forwhatever reason has reason to believe that incomehas escaped assessment it confers jurisdiction toreopen the assessment. It is however to be noted thatboth the conditions must be fulfilled if the case fallswithin the ambit of the proviso to section 147. Thecase at hand is covered by the main provision and notthe proviso. 18.So long as the ingredients of section 147 arefulfilled, the Assessing Officer is free to initiateproceeding under section 147 and failure to takesteps under section 143(3) will not render theAssessing Officer powerless to initiate reassessmentproceedings even when intimation under section 143(1) had been issued.” section 147 existence of only the first conditionsuffices. In other words if the Assessing Officer forwhatever reason has reason to believe that incomehas escaped assessment it confers jurisdiction toreopen the assessment. It is however to be noted thatboth the conditions must be fulfilled if the case fallswithin the ambit of the proviso to section 147. Thecase at hand is covered by the main provision and notthe proviso. 18.So long as the ingredients of section 147 arefulfilled, the Assessing Officer is free to initiateproceeding under section 147 and failure to takesteps under section 143(3) will not render theAssessing Officer powerless to initiate reassessmentproceedings even when intimation under section 143(1) had been issued.” 5. Learned counsel for the assessee on the other handrelied upon judgment of Madras High Court inCITv. TCP Ltd.44DTR 31, wherein the view taken by the Madras High Court wasidentical to the view taken by the Tribunal. Reliance has alsobeen placed on judgments of Delhi High Court inCITv. Ved &Co.302 ITR 328 andK.L.M. Royal Dutch Airlinesv. ADIT292ITR 49 and judgment of the Hon’ble Supreme Court in CITv.Kelvinator India Ltd.322 ITR 561. 6. We are of the view that the substantial question of lawproposed by the revenue has to be answered in its favour. Thematter is covered in favour of the revenue not only by the plain provisions of Section 147 of the Act but also by judgment of theHon’ble Supreme Court in Rajesh Jhaveri Stock Brokers Pvt.Ltd. In view of said judgment of the Hon’ble Supreme Court, theview taken by the Madras High Court in TCP Ltd. cannot be heldto be a correct view. The judgments of Delhi High Court in Ved &Co. and K.L.M. Royal Dutch Airlines are distinguishable, astherein proceedings for assessment were pending. As regardsjudgment of the Hon’ble Supreme Court in Kelvinator India Ltd.,the issue therein was only whether for a mere change of opinion,power of reassessment could be exercised, which is not thequestion herein. The said judgment is, thus, distinguishable. 7. Accordingly, we allow this appeal, set aside theimpugned order of the Tribunal and remit the matter to theTribunal for fresh decision on merits in accordance with law. 8. Parties may appear before the Tribunal on 20.12.2010for further proceedings. (ADARSH KUMAR GOEL) JUDGE October 04, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE