Ita/677/2007 Of The Commissioner Of Income Tax v. M/S Sri Durga Enterprises

IN THB HIGH COURT OF KARNATAKA AT BANGALOREDATEKD THIS THE 1[th]DAY OF FEBRUARY 2014 PRESEHBN THER HON’BLE MR. JUSTICE DILIP B.BHOSALEAN ] THE HON’BLE MR. JUSTICE B.MANOHAR| I.T.A. No.677/2007 BETWEEN : 1.|The Commissioner |of Income-Tax,of Income-Tax, Central Circle, C.R.Building, Queens Road,Bangalore.Bangalore. D2 The Income Tax Officer,Ward — 8(1),|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 QO0OA oft thIncome Tax Act, 1961 praying to (i) formulate thesubstantial questions of law stated therein, (11) allow the -9O-. appeal and set-aside the order passed by the IncomeTax|AppellateTribunal, Bangalore|1nTTA.No./792/Bang/2005 dated 15.05.2007 and confirm theorders of the Appellate Commissioner and confirm theorder 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, theCourt, delivered the following: ORAL JUDGMENT (DILIP B.BHOSALE J.) In this Income-tax Appeal, preferred by theRevenue, the following substantial questions of law areraised for our consideration: (1)Whether the Tribunal was correct in'holding that the notice issued under|section 148 of the Act, having notmentionedtherequirementof|filingReturn and the date within which the|Return should be filed, was declared asinvalid?holding that the notice issued under|section 148 of the Act, having notmentionedtherequirementof|filingReturn and the date within which the|Return should be filed, was declared asinvalid? (it)Whether the Tribunal was correct in nottaking into consideration Section 292B of|the Act, which allow to cure any such|defects pointed out by the Assessee?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 inthe 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 AssessingOfficer after obtaining approval from the AdditionalCommissioner of Income-tax as contemplated undersection 151 of the Act. Admittedly, notice undersection 148 of the Act for re-opening of the assessmentwas issued after expiry of the period of four years fromthe end of relevant assessment year. In response to thenotice under Section 148 of the Act, the assessee hadplaced a letter on record dated 11.12.2002 stating thatthe return of income filed by him on 19.02.2002 for theassessment year 2001-02 be treated as the return ofincome filed in response to the notice under Section 148of the Act. In other words, the assessee chose not to fileseparate /independentreturn oT incomefortheassessment year 1997-98 and requested the AssessingOfficer to treat the return of income filed by him on19.02.2002 for the assessment year 2001-02 as returnof income filed for the assessment year 1997-98 inresponse to notice under Section 148 of the Act. -4 _| -4 _| 3. Admittedly, in the notice under Section 148 ofthe Act, period was not specified for furnishing return ofincome. Before the Assessing Officer, the notice undersection 148 of the Act was admittedly not challenged bythe assessee on this ground. As a matter of fact, heissued the letter, as aforementioned and participated inthe proceedings till the assessment order was passed bythe Assessing Officer dated 04.03.2004. Feeling|agerieved and dissatisfied with the order of theAssessing Officer, the assessee preferred First Appealbefore the Commissioner of Income-Tax (Appeals),Bangalore (for short“the FAA?). In the memorandum ofappeal filed before the FAA, the assessee did not raisethe ground of limitation based on the provisionscontained in Section 148 of the Act. Even during thecourse of arguments/ hearing of the appeal, sucheround was not urged by the assesse. The FAAdismissed the appeal on merits filed by the assesseevide its order dated 24[th]March, 2005. -5 -) 4. Feeling aggrieved by the order of the FAA, theassessee preferred second appeal before the Tribunaland in the memorandum of appeal, raised the groundthat “the condition precedent being absent, thereopening of assessment under Section 147 of the Act isbad in law”. Such ground was raised for the first timebefore the Tribunal and the Tribunal ventured to'examine the same and ultimately held that the noticeunder Section 148 of the Act was bad in law since, it didnot specify the time within which the assessee was.called upon to file return of income. It is in thisbackground, we are called upon to consider thequestions as formulated in the memorandum of appeal,and reproduced by us in the first paragraph of thejudgment. — oO. Indubitably, Section 148 of the Act providesthat before making the assessment, reassessment or re-computation under Section 147, the Assessing Officershall serve on the assessee, a notice requiring him tofurnish within such period, as may be specified in thenotice, 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 thepurpose of deciding this appeal. The period as|contemplated by Section 148 of the Act was admittedlynot specified in the notice. In view thereof our attentionwas invited to Section 2O2B oft the Act. This Section|provides for return of income, etc., not to be invalid oncertain grounds. It would be relevant to reproduce thesaid Section which reads thus: (2QGQ. No return of income, assessment,notice,SUM NONSOTotherproceedings,furnished or made or issued or taken orpurported to have been furnished or made orissued or taken in pursuance of any of the|provisions of this Act shall be invalid or shallbe deemed to be invalid merely by reason ofany mistake, defect or omission in such|returnof|income,assessment,notice, Summons or other proceeding tf such return ofincome, assessment, notice, summons orother proceeding is in substance and effect in|conformity with or according to the intent and|purpose of this Act. - f -) 6. For our purpose, under this provision, a noticeissued or purported to have been issued in pursuance ofany provisions of this Act, shall be invalid and shall bedeemed to be invalid mainly by reason of any mistake,defect or omission in such notice, if such notice is insubstance and effect 1n confirmity with or according tothe intent and purpose of this Act.| /. Mr. Parthasarathi, learned counsel appearingfor the respondent invited our attention to the judgmentot this Court in.Commisstoner 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 292Bread with Section 158BC of the Act held that extension|of time for submitting return of income would make thenotice under Section 158BC of the Act, void-ab-initio|and the consequent Block Assessment invalid andthereby notice was also declared invalid. This Courtwhile dealing with Section 292 B observed as follows: /. Mr. Parthasarathi, learned counsel appearingfor the respondent invited our attention to the judgmentot this Court in.Commisstoner 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 292Bread with Section 158BC of the Act held that extension|of time for submitting return of income would make thenotice under Section 158BC of the Act, void-ab-initio|and the consequent Block Assessment invalid andthereby notice was also declared invalid. This Courtwhile 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| -8S-. the notice or other proceedings, tf the same1S |in conformity with or according to the intentand 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 aminimum of 15 and maximum of 45 days. |The same has to be specified in the notice. |Hence, grant of extra time ts without authority of law. It cannot validate an invalid notice.Moreover, it ts relevant to note that the noticeissued 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|tume granted to the assessee ts less than 15|days. Therefore, it is apparent that there hasbeen a violation of law. Therefore, when the|sum and substance of the notice issued to theassessee 1s not in conformity with thepurpose of the Act, section 292B has no -9O-. application. Hence,questionINo.?1S answered in favour of the assessee and|against the Revenue. “ 8. From bare perusal of the provisions containedin Section 158BC of the Act, it is clear that notice under.this provision needs to be served on the assessee byproviding time of not less than 15 days and not morethan 45 days and that no extra time can be grantedsubsequently. In the case before this Court, a noticeunder Section l158BC of the Act was issued onDecember 15, 1997, calling upon the assessee to filereturn of income within a period of 15 days from theBlock period 1988-89 to 1998-99. By the letter datedJanuary 2, 1998, the assessee sought time to file itsreturn of income. On June 16, 1999, the assessee wasonce again requested to file its return of income for theBlock 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 ofthe case, this Court observed as quoted above. -10-. 9. In the present case, as observed earlier, theassessee not only responded to the notice under Section148 of the Act within one month, but on the basis of thereturn filed earlier, participated in the proceedings tillthe matter reached the FAA and was disposed of. Aglance at Section 292B of the Act, shows that under thisprovision, certain Acts are not to be treated as invalid,may be by reason of any mistake, defect or omissions,either1n return oT income,assessment,notice,summons or other proceedings. In other words, anotice 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 defectis not allowed to be cured, or treated as invalid so as todeclare the notice invalid, despite the fact that assesseehad taken that notice as valid and responded to it inletter and spirit and participated in the proceedings, thevery purpose/objective of the provisions contained inSectionAQOBoT|theActwolullstandfrustrated/defeated. The intent of the Legislature is - |] -. - |] -. clear from the language employed in this provisionwhich states that a defective notice, such as the one in)the present case, cannot be declared invalid by reasonof any mistake, defect or omission, if the notice in‘substance’ and in effect’ is in conformity with oraccording to the intent of purpose of this Act. Theintent or purpose of issuing the notice is to call uponthe assessee to file return, if the Assessing Officer findsthat income has escaped the assessment. This beingthe intent and purpose of the provisions contained insection 148 of the Act, in our opinion, it standssatisfied if the notice is responded within reasonabletime, which in the present case was 30 days,irrespective of the fact whether the period was specifiedor not in the notice for filing return of income. In thepresent case, if the assessee had not responded to thisnotice at all and had raised such ground of challenge,perhaps, he would not succeed. But having respondedand participated in the proceedings, he cannot beallowed to turn around and raise objection for the firsttime before the Tribunal seeking invalidation of the -10-. proceedings initiated by issuing notice under Section148 of the Act. In the circumstance, we allow this|appeal answering both the substantial questions of lawin favour of the Revenue and against the assessee. Inview of the peculiar facts and circumstances of the case, there shall be no order as to costs. Sd/-. JUDGE Sd/- JUDGE SPS|