Commissioner Of Income Taxchennai-Ix v. Mrs.c.malathy

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.02.2007 CORAM: THE HONOURABLE MR.JUSTICE P.D.DINAKARAN and THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN T.C. (Appeal) No.55 of 2004 Commissioner of Income TaxChennai-IX. Appellant versus Mrs.C.Malathy Respondent PRAYER: Tax Case Appeal filed under Section 260A of the Income Tax Act,1961, against the order dated 30.4.2003 in ITA No.1127/Mds/2002 on thefile of the Income Tax Appellate Tribunal, Chennai 'A' Bench. Againstthe Order of the Commissioner of Income Tax (Appeals)-X dated 08.03.2002I.T.A.No.136/2001-02 against the assesment Order of 1996-97 dated29/3/01 on the file of the Income Tax officer-IV(6) Chennai-6. For appellant For respondent :Mr.K.Subramaniam Standing Counsel for Income Tax :Mr.V.Sundareswaran JUDGMENT (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) The appeal by the Revenue raises the following question of lawviz: " Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was right inholding that the time-limit prescribed for issue ofa notice under Section 143(2) in respect of a returnfiled under Section 139 of the Income-tax Act or areturn filed in pursuance to a notice under Section142(1) of the Act will apply to a return filed inresponse to a notice under Section 148 of the Act? "case, the Income Tax Appellate Tribunal was right inholding that the time-limit prescribed for issue ofa notice under Section 143(2) in respect of a returnfiled under Section 139 of the Income-tax Act or areturn filed in pursuance to a notice under Section142(1) of the Act will apply to a return filed inresponse to a notice under Section 148 of the Act? " 2. The appeal relates to the Assessment Year 1996-97. It isseen that the assessee filed her return of income on 16[th] July 1998. Itis seen that pursuant to the notice under Section 148, the assesseefiled the return of income on 16[th] July 1998. The original assessmentunder Section 143(3) in respect of the assessee's husband was completedon 31.3.1999. It was noticed during the course of assessmentproceedings that the applicant and her husband had jointly purchased aproperty on 26.10.1995; that they had paid Rs.6,00,000/- originally andthe balance was to be paid at the time of registration. On verificationof the books of accounts of the assessee, the Officer found that thesource of funds for the purchase of the property was stated to be onloans received from the creditors. On enquiry, it was found that whilesome of the creditors could not be verified, the others were found to benot genuine. The Assessing Officer noted that in spite of severalopportunities granted, the claim was not substantiated by the assessee. 3. On appeal by the assessee, in the course of the proceedingsbefore the appellate authority, the Assessing officer was directed tofile a report as regards the claim on loans taken with a direction thatthe assessee should prove the cash credits. On receipt of the remandreport, the appellate authority found that there were no fresh factssubmitted by the assessee to substantiate the claim of the assessee.The appellate authority also found that the assessee did notsubstantiate the genuineness of the entries. In the circumstances, theappeal was dismissed. 3. On appeal by the assessee, in the course of the proceedingsbefore the appellate authority, the Assessing officer was directed tofile a report as regards the claim on loans taken with a direction thatthe assessee should prove the cash credits. On receipt of the remandreport, the appellate authority found that there were no fresh factssubmitted by the assessee to substantiate the claim of the assessee.The appellate authority also found that the assessee did notsubstantiate the genuineness of the entries. In the circumstances, theappeal was dismissed. 4. The assessee preferred a further appeal before the Tribunal.In the course of the proceedings before the Tribunal, new set of groundswere raised on the legality of the assessment proceedings. It was notedthat the assessing officer issued a notice under Section 143(2) of theAct on 16.10.1999. The assessee contended that since the notice underSection 143(2) was issued beyond the period of twelve months from theend of the month in which the return was filed (date of filing of thereturn was on 16.7.1998 pursuant to the notice under Section 148), theassessment itself was bad in law as barred by limitation. The assesseecontended that once the return was filed pursuant to the notice underSection 148, all the consequences or the procedure that has to befollowed would be the one pursuant to the notice under Section 142(1),or a return filed under Section 139. Since the return should be treatedto be one filed under Section 139, the Tribunal considered this plea andfound that considering the scope of Section 143(2) and the fact thatthe Assessing Officer had issued the notice on 16[th] October 1999 beyondthe time limit of twelve months which expired on 31[st] July, 1999, theassessment passed on 29[th] March 2001 was not a valid assessment.Referring to the decision of the Agra Bench of the Income Tax AppellateTribunal relied on by the Revenue that the time limit specified underSection 143(2) proviso would not apply to a return filed in response tothe notice under Section 148, the Tribunal held that the decision wouldnot be applicable, since the provisions of Section 143(2) is clearenough to show that it nowhere stated that the procedure under Section143 was limited to the returns filed under Section 139 only and not thehttps://hcservices.ecourts.gov.in/hcservices/proceedings framed in response to the initiation of the proceedingsunder Section 148. In the circumstances, it held against the Revenue. Aggrieved of this, the appeal is preferred by the Revenue on thequestion of law stated above. 5. A reading of Section 143(2) as it then stood at the relevantpoint of time shows that where a return has been made under Section 139or in response to a notice under Section 142(1), no notice under the subsection shall be served after the expiry of twelve months from the endof the month in which the return is furnished. In the decision reportedin 281 ITR 444 (COMMISSIONER OF INCOME TAX Vs. M.CHELLAPPAN), thisCourt held that where no notice was served within the stipulated periodof twelve months, the proceedings under Section 143 came to an end andthe matter attained finality. The decided case related to a case of anassessment under Section 147 of the Income Tax Act. This Court alsoreferred to the decision of the Punjab & Haryana High Court reported in255 ITR 220 (VIPAN KHANNA Vs. C.I.T.), wherein it was held that wherenotice under Section 143(2) had not been served on the assessee withinthe stipulated time and the return filed pursuant to the notice underSection 148, the matter had attained finality; therefore, the proceedingunder Section 143 had come to an end. 6. A perusal of the provisions of Section 148 shows that beforeproceeding with an assessment or a re-assessment or a re-computationunder Section 147, the Assessing Officer shall serve a notice on theassessee requiring him to furnish within such period as specified in thenotice, a return of income in respect of which he is assessable underthe Act. The provision also contemplated that a return filed pursuantto a notice shall be treated as if such a return were a return requiredto be furnished under Section 139. Learned standing counsel appearingfor the appellant herein pointed out that by Finance Act, 2006, aproviso has been inserted to Section 148, as per which, where a returnhas been furnished during a period commencing on 1[st] of October 1991 andending on 30[th] of September 2005 pursuant to a notice served underSection 148 and a notice under Section 143(2) has been served after theexpiry of twelve months as specified under Section 143(2) as it stoodbefore the amendment under the Finance Act, 2002, but before making theassessment, every such notice shall be deemed to be a valid notice; inthe circumstances, the order of the Tribunal is unsustainable and liableto be set aside. 7. A perusal of the proviso to Section 148 inserted by FinanceAct, 2006 with effect from 1.10.1991 reads as follows:" Section 148: Issue of notice where income hasescaped assessment – (1) ......provided that in a case --(a) where a return has been furnished during theperiod commencing on the 1[st] day of October, 1991and ending on the 30[th] day of September, 2005 inresponse 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 oftwelve months specified in the proviso to sub-section (2) of section 143, as it stoodhttps://hcservices.ecourts.gov.in/hcservices/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 makingthe assessment, re-assessment or re-computationas specified in sub section (2) of section 153,every such notice referred to in this clauseshall be deemed to be a valid notice:Provided further that in a case --(a)where a return has been furnished duringthe period commencing on the 1[st] day of October,1991 and ending on the 30[th] day of September,2005, in response to a notice served under thissection, and (b)subsequently a notice has been servedunder clause (ii) of sub-section (2) of section143 after the expiry of twelve months specifiedin the proviso to clause (ii) of sub-section (2)of section 143, but before the expiry of the timelimit for making the assessment, re-assessment orre-computation as specified in sub-section (2) ofsection 153, every such notice referred to inthis clause shall be deemed to be a valid notice.Explanation. -- For the removal of doubts, it ishereby declared that nothing contained in the firstproviso or the second proviso shall apply to anyreturn which has been furnished on or after the 1[st]day of October 2005 in response to a notice servedunder this section. " 8. A perusal of the retrospective amendment introduced in thisproviso along with the explanation inserted shows that the requirementof notice under Section 143(2) within the time limit specified ismandatory in all cases in respect of returns furnished on or after1.10.2005. However, with reference to returns filed from 1.10.1991 to30.9.2005, the plea of limitation in respect of returns filed pursuantto the notice under Section 148 will not invalidate the assessmentproceedings and that such notice would be deemed to be a valid notice.Considering the retrospective amendment, the order of the Tribunal hasto be set aside. 8. A perusal of the retrospective amendment introduced in thisproviso along with the explanation inserted shows that the requirementof notice under Section 143(2) within the time limit specified ismandatory in all cases in respect of returns furnished on or after1.10.2005. However, with reference to returns filed from 1.10.1991 to30.9.2005, the plea of limitation in respect of returns filed pursuantto the notice under Section 148 will not invalidate the assessmentproceedings and that such notice would be deemed to be a valid notice.Considering the retrospective amendment, the order of the Tribunal hasto be set aside. 9. The Tribunal had cancelled the assessment solely on the legalground of limitation. In the light of the view that we have taken onthe lines of the amendment introduced, we remit the matter back to theTribunal to pass orders on merits of the claim of the assessee. Theappeal is allowed with a remand back to the Income Tax AppellateTribunal as stated above. ksv Sd/- Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ /true copy/ Sub Asst.Registrar To:1. The Assistant Registrar Income Tax Appellate Tribunal IIIrd Floor, Rajaji Bhavan, Besant Nagar, Madras-90 (5 Copies)2. The Secretary Board of Revenue New Delhi (3 Copies)3. The Commissioner of Income Tax (Appeals)-X, 121, Mahatma Gandhi Road, Chennai-34.4. The Income Tax Officer, City Ward VI (6), Kannamal Buildings (7th Floor) No.611, Anna Salai, Chennai-600 006.+1 cc to Mr.M.Quadirhosexen, Advocate Sr.No.313224+1 cc to Mr.N.Muralikumaran, Advocate Sr.No.12002.AKR(CO)dcp/26.4.07T.C. (Appeal) No.55 of 2004