Pr. Commissioner Income Tax Surat - 1 v. Govind Gopal Goyal

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 300 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALASd/-andHONOURABLE MR.JUSTICE A.C. RAOSd/-==============================================================================1 Whether Reporters of Local Papers may be allowed YESto see the judgment ?2 To be referred to the Reporter or not ?YES3 Whether their Lordships wish to see the fair copy NOof the judgment ?4 Whether this case involves a substantial question NOof law as to the interpretation of the Constitution of India or any order made thereunder ? ============================================================================== PR. COMMISSIONER INCOME TAX SURAT - 1 VersusGOVIND GOPAL GOYAL ============================================================================== Appearance:MRS KALPANA K RAVAL for the Appellant(s) No. 1 for the Opponent(s) No. 1============================================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA andHONOURABLE MR.JUSTICE A.C. RAO Date : 15/07/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, 'the Act') is at the instance of the Revenue and is directed against the order passed by the income Tax Appellate Tribunal, Surat Bench, Surat, dated 20th December 2018 in the ITA No.1280/AHD/2016 for the Assessment Year 2011-12. 2.The Revenue has proposed the following two questions of law : “(i)Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in treating the assessment as bad in law ? (ii)Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in its interpretation of Section 148 of the Income Tax Act ?” 3.It appears from the materials on record that the Directorate of Revenue Intelligence received information that the respondent – assessee had imported polyester films by resorting to undervaluation of the import price to the tune of Rs.13,11,73,783=00 during the Financial Year 2010-11. At the relevant point of time, it was noticed that the assessee had not filed his return of income for the year under consideration and, therefore, a notice under Section 142(1) of the Act was issued dated 1st December 2011, calling upon the assessee to furnish his return of income for the Assessment Year 2011-12 by 9th December 2011. The assessee, however, did not file his return of income. He submitted a letter dated 3rd January 2012, stating that his books of accounts and other records were seized by the Directorate of Revenue Intelligence and that he had applied to the DRI to provide him with the copy of the books of accounts and other records. The assessee informed the Assessing Officer that he would file his return of income once the DRI would provide him with the books of accounts and other records. that he would file his return of income once the DRI would provide him with the books of accounts and other records. 4.It appears from the materials on record that while the assessment proceedings initiated under Section 142(1) of the Act were pending, the Assessing Officer issued notice under Section 148 of the Act dated 16th January 2013, calling upon the assessee to file his return of income for the Assessment Year 2011-12. The assessment proceedings were completed making an addition of Rs.13,11,73,783=00 on account of the unexplained expenditure under Section 69C of the Act and Rs.1,00,69,710=00 being the estimation of the net profit. The assessee, being dissatisfied with the assessment order, preferred an appeal before the CIT(A). The CIT(A) dismissed the appeal preferred by the assessee. The assessee, being aggrieved by the order passed by the CIT(A) dismissing his appeal, preferred further appeal before the Income Tax Appellate Tribunal. The principal argument of the assessee before the ITAT was that the assessment order under Section 143(3) read with Section 147 of the Act was illegal and erroneous in law as the assessment proceedings initiated under Section 142(1) of the Act were pending on the date of the issue of the notice under Section 148 of the Act. The ITAT, while allowing the appeal preferred by the assessee, held as under : “...We have heard both the sides and perused the material on record carefully. At the outset, we are considering the additional ground filed by the assessee stating that assessment order u/s. 143 r.w.s. 147 of the act was wrong, invalid and bad in law because the assessment proceedings initiated u/s. 142(1) of the act by the assessing officer was already pending on date of issuing notice u/s. 148. In this connection, we observe that it was undisputed fact that assessment proceedings initiated u/s. 142(1) of the act by the assessing officer was already pending on date of issuing of notice u/s. 148 and the Ld DR has failed to controvert the undisputed fact with any relevant material....” “...However, the assessee has not filed the return of income. It is noticed that notice u/s. 142(1) was issued on 01-12-2011 directing the assessee to file the return of income as the assessee has not filed the return of income, therefore, the assessing officer should have completed the assessment u/s. 144 on or before 31-03-2014. It is observed that without completing the assessment proceedings initiated u/s. 142(1), the assessing officer has issued notice u/s. 148 of the act on 16-01-2013 called for filing return of income to assess/re-assess the income for assessment year 2011-12. It is observed that when the assessment proceedings are already initiated by issuing of notice u/s. 142(1) and called for the return of income, no notice u/s. 148 is to be issued and the assessment is required to be completed within the time limit allowed u/s. 143(3) or 144. In this case, the assessment year involved is assessment year 2011-12 and the time limit for completion of assessment already initiated by issuing of notice u/s. 142(1) is 31-03-2014, therefore, issuing of notice u/s. 148 of the act during the pendency of assessment proceedings on 16-01-2013 is bad in law and invalid. The existence of this fact is very clearly demonstrated from the findings of the assessing officer mentioned in his order passed u/s. 143(3) r.w.s 147 of the act on 27th March, that a notice u/s. 142(1) of the act was issued to the assessee on 1st December, 2011 and asked the assessee to file return of income for the assessment year 2011-12 by 9th December, 2011 and in response to the notice u/s. 142(2) of the act the assessee has not filed return of income therefore the assessing officer should have completed the assessment on or before 31st March, 2014 however the case was reopened u/s. 147 of the act by issuing of notice u/s. 148 on 16th January, 2013 which was served upon the assessee on 17.01.2013. In the light of the above facts and legal findings and the decision of the coordinate bench on the identical issue as supra in the case of Medapati Venkayamma vs. ITO vide ITA no. 252/Vizag/2013 as supra we consider that the assessing officer has issued notice u/s 148 for reassessment during the pendency of assessment proceedings initiated by issuing of notice u/s 142(1) of the act therefore, the assessment made u/s. 143(3) r.w.s. 147 was bad in law and cannot be sustained. Accordingly, assessment made u/s. 143(3) r.w.s. 147 by issuing of notice u/s. 148 is quashed. Since the assessment made u/s. 143(3) r.w.s. 147 of the act has been quashed, therefore, there is no need to adjudicate the other grounds of the assessee on merit. ” 5.The Revenue, being dissatisfied with the impugned order passed by the ITAT, has come up with this Appeal proposing the two questions of law referred to above. 6.Ms.Kalpana Raval, the learned counsel appearing for the Revenue, vehemently submitted that the ITAT committed a serious error in passing the impugned order. Ms.Raval submitted that Section 142(1) of the Act does not preclude the Assessing Officer from issuing notice under Section 148 of the Act. It is submitted that the ITAT failed to consider the first proviso to Section 147 of the Act. The argument is that the provisions of Section 147 of the Act in no manner restrict the Assessing Officer to make assessment under Section 147 where notice has been issued under Section 142(1) of the Act. 7.Ms.Raval submitted that the ITAT quashed the notice under Section 148 of the Act and authenticated the issue of notice under Section 142(1) of the Act. She submitted that the assessment completed in response to the notice under Section 148 of the Act came to be treated as the assessment completed in response to the proceedings initiated under Section 142(1) of the Act and annulled the same only on the ground of limitation. Ms.Raval submitted that the ITAT overlooked the fact that in the case on hand the assessment had been completed well within the time limit, i.e. on 27th March 2014. She pointed out that the limitation in accordance with Section 142(1) would have expired on 31st March 2014. It has been vehemently submitted that the Revenue is at loss at both the ends. In such circumstances referred to above, Ms.Raval submitted that the present Tax Appeal gives rise to two substantial questions of law and the Appeal may be admitted. 8.Having heard Ms.Raval, the learned counsel appearing for the Revenue, and having gone through the materials on record, we are of the view that the Tribunal committed no error, much less an error of law, in passing the impugned order. 9.It is settled law that unless the return of income already filed is disposed of, the notice for reassessment under Section 148 of the Act cannot be issued, i.e. no reassessment proceedings can be initiated so long as the assessment proceedings pending on the basis of the return already filed are not terminated. (see Trustees of H.E.H. The Nizam's Supplemental Family Trust v. Commissioner of Income-Tax, (2000)242 ITR 381 (SC)) 8.Having heard Ms.Raval, the learned counsel appearing for the Revenue, and having gone through the materials on record, we are of the view that the Tribunal committed no error, much less an error of law, in passing the impugned order. 9.It is settled law that unless the return of income already filed is disposed of, the notice for reassessment under Section 148 of the Act cannot be issued, i.e. no reassessment proceedings can be initiated so long as the assessment proceedings pending on the basis of the return already filed are not terminated. (see Trustees of H.E.H. The Nizam's Supplemental Family Trust v. Commissioner of Income-Tax, (2000)242 ITR 381 (SC)) 10.If an assessment is pending either by way of original assessment or by way of reassessment proceedings, the Assessing Officer cannot issue a notice under Section 148, but if no proceedings are pending either by way of original assessment or by way of reassessment, he can issue a notice under Section 148 within the time as stipulated. (see Nilofer Hameed and another v. Income Tax Officer, (1999)235 ITR 161) 11.In the aforesaid context, we may also refer to a Division Bench decision of the Patna High Court in the case of Commissioner of Income Tax v. Sayed Rafiqur Rahman, reported in 1991(189) ITR 476, wherein the following has been observed : “From the statement of case, it is clear that the assessment proceedings for the assessment year 1972-73 were pending when notice under Section 148 was issued by the Income-tax Officer. Therefore, the notice for reassessment issued during the pendency of the assessment proceedings cannot be held to be valid. Income cannot be said to have escaped assessment if, at that time, proceedings for the assessment of the assessee's income have not yet culminated in a final assessment thereof.” 12.At this stage, Ms.Raval, the learned counsel appearing for the Revenue, invited our attention to Section 124(3)(b) of the Act. The same reads thus : “124. Jurisdiction of Assessing Officers.-- (1)xxxxxxxxx (2)xxxxxxxxx (3)No person shall be entitled to call in question the jurisdiction of an Assessing Officer-jurisdiction of an Assessing Officer- (a) xxxxxxxxx (b)where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115 WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier.” 13.Relying upon the aforesaid provision, it is submitted that the assessee could not have questioned the jurisdiction of the Assessing Officer having failed to file his return allowed by the notice under sub-section (1) of Section 142 or under Section 148 or under the first proviso to Section 144 of the Act. 14.We are afraid, Section 124(3)(b) of the Act would not save the situation. Section 124 talks about the lack of jurisdiction on the part of the Assessing Officer. In other words, Section 124(3) of the Act stipulates a bar to any contention about lack of jurisdiction of an Assessing Officer. The illegality in the case on hand would not be saved by virtue of Section 124(3) of the Act. 15.So far as the contention of the Revenue that it suffered loss at both the ends is concerned, we may remind the Revenue of the observations made by the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. Income Tax Officer, Circle I, Ward A, Rajkot, reported in (1977)106 ITR 1, which read thus : 14.We are afraid, Section 124(3)(b) of the Act would not save the situation. Section 124 talks about the lack of jurisdiction on the part of the Assessing Officer. In other words, Section 124(3) of the Act stipulates a bar to any contention about lack of jurisdiction of an Assessing Officer. The illegality in the case on hand would not be saved by virtue of Section 124(3) of the Act. 15.So far as the contention of the Revenue that it suffered loss at both the ends is concerned, we may remind the Revenue of the observations made by the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. Income Tax Officer, Circle I, Ward A, Rajkot, reported in (1977)106 ITR 1, which read thus : “It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue.” 16.In the overall view of the matter, we are convinced that the Tribunal applied the correct principle of law and passed the impugned order. We may only say that Section 142(1) and Section 148 of the Act cannot operate simultaneously. There is no discretion vested with the Assessing Officer to utilize any one of them. Such a view would be directly opposed to the decision of the Supreme Court in the case of Commissioner of Income Tax, Bombay City, I, Bombay v. M/s.Narsee Nagsee and Co. Bombay, reported in AIR 1960 SC 1232. The very same contention was raised before the Supreme Court and was specifically rejected. The two provisions govern different fields and can be exercised in different circumstances. If income escapes assessment, then the only way to initiate assessment proceedings is to issue notice under Section 148 of the Act. In fact, if notice has already been issued under Section 142 of the Act and the proceedings are pending, it looks absurd to call for a return under Section 148 of the Act. 17.It is settled law that income cannot be said to have escaped assessment when the assessment proceedings are pending. 18.In the result, this Tax Appeal fails and is hereby dismissed. (J. B. PARDIWALA, J.) /MOINUDDIN (A. C. RAO, J.)