Shri Loku Ram Malik v. The Commissioner Of Income Tax

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 142 / 2006 Shri Loku Ram Malik ----Appellant Versus The Commissioner Of Income Tax ----Respondent _____________________________________________________ For Appellant(s) : Mr. Naresh GuptaFor Respondent(s) : Mrs. Parinitoo Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 03/05/2017 1.By way of this appeal, the appellant has assailed thejudgment and order of the Tribunal whereby Tribunal has partlyallowed the appeal of the department. 2.This court while admitting the appeal on 26.3.2007 framedfollowing substantial question of law:- “1. Whether on the facts and circumstances of thecase, the ITAT was justified in upholding theissuance of notice u/s 148 though the assessingofficer could have notice u/s 143(2) to frame theregular assessment u/s 143(3)? 2. Whether the provisions of Section 145 of theIncome Tax Act, 1961, in the facts andcircumstances of the case could have been appliedto reject the statement of affairs when there wasno requirement to maintain the books of accountu/s 44AA and 44AF of the Income Tax Act, 1961?” 3.Counsel for the appellant contended that he does not want topress issue no.2 and he has argued only issue no.1. 4.That facts of the case are that the assessee has filed thereturn on 6.12.1999 where an investment in plot no.31 R.K.Puram Kota was shown at Rs.1,31,000/-. The AO processed thereturn u/s 143(1)(a) of the Act on 11.8.2000. The assesseerevised the balance sheet and profit and loss account showing theinvestment in the said property at Rs.5,22,936/- on 16.8.2000.The AO issued notice u/s 148 on 14.9.2000, on the basis ofrevised balance sheet filed by the assessee and then issued noticeu/s 143(2) on 3.10.2000. 5.Counsel for the appellant stated that original return was filedon 6.12.1999 and was accepted on the same day. He hasproduced on record the income tax return which was accepted bythe department being 7578 dt.11.8.2000. 6.He has pointed out the following provisions of law:- 147. Income escaping assessment.- Ifthe Assessing Officer has reason to believethat any income chargeable to tax hasescaped assessment for any assessmentyear, he may, subject to the provisions ofsections 148 to 153, assess or reassess suchincome and also any other incomechargeable to tax which has escapedassessment and which comes to his noticesubsequently in the course of theproceedings under this section, or recomputethe loss or the depreciation allowance or anyother allowance, as the case may be, for theassessment year concerned (hereafter in thissection and in sections 148 to 153 referred toas the relevant assessment year) : Provided that where an assessment undersub-section (3) of section 143 or this sectionhas been made for the relevant assessmentyear, no action shall be taken under this section after the expiry of four years fromthe end of the relevant assessment year,unless any income chargeable to tax hasescaped assessment for such assessmentyear by reason of the failure on the part ofthe assessee to make a return under section139 or in response to a notice issued undersub-section (1) of section 142 or section 148or to disclose fully and truly all material factsnecessary for his assessment, for thatassessment year: Provided further that the Assessing Officermay assess or reassess such income, otherthan the income involving matters which arethe subject matters of any appeal, referenceor revision, which is chargeable to tax andhas escaped assessment. section after the expiry of four years fromthe end of the relevant assessment year,unless any income chargeable to tax hasescaped assessment for such assessmentyear by reason of the failure on the part ofthe assessee to make a return under section139 or in response to a notice issued undersub-section (1) of section 142 or section 148or to disclose fully and truly all material factsnecessary for his assessment, for thatassessment year: Provided further that the Assessing Officermay assess or reassess such income, otherthan the income involving matters which arethe subject matters of any appeal, referenceor revision, which is chargeable to tax andhas escaped assessment. 148 (1) Before making the assessment,reassessment or recomputation undersection 147, the Assessing Officer shall serveon the assessee a notice requiring him tofurnish within such period as may bespecified in the notice, a return of his incomeor the income of any other person in respectof which he is assessable under this Actduring the previous year corresponding tothe relevant assessment year, in theprescribed[1]form and verified in theprescribed[1]manner and setting forth suchother particulars as may be prescribed[1]; andthe provisions of this Act shall, so far as maybe, apply accordingly as if such return were areturn required to be furnished under section139. [Provided that in a case -- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response toa notice served under this section, and (b) subsequently a notice has been servedunder sub-section (2) of section 143 afterthe expiry of twelve months specified in theproviso to subsection (2) of section 143, asit stood immediately before the amendmentof said sub-section by the Finance Act,2002 (20 of 2002) but before the expiry ofthe time limit for making the assessment, reassessment or re-computation asspecified 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 furnishedduring the period commencing on the 1stday of October, 1991 and ending on the30th day of September, 2005, in responseto a notice served under this section, and (b) subsequently a notice has been servedunder clause (ii) of sub-section (2) ofsection 143 after the expiry of twelvemonths specified in the proviso to clause(ii) of sub-section (2) of section 143, butbefore the expiry of the time limit formaking the assessment, re-assessment orre-computation as specified in sub-section(2) of section 153, every such noticereferred to in this clause shall be deemed tobe a valid notice.] [Explanation : For the removal of doubts, itis hereby declared that nothing contained inthe first proviso or the second proviso shallapply to any return which has beenfurnished on or after the 1st day of October,2005 in response to a notice served underthis section.] (2) The Assessing Officer shall, beforeissuing any notice under this section, recordhis reasons for doing so. 143. Assessment.- (1) Where a return hasbeen made under section 139, or inresponse to a notice under sub-section (1)of section 142, such return shall beprocessed in the following manner, namely— (a) the total income or loss shall becomputed after making the followingadjustments, namely:— (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claimis apparent from any information in thereturn; (b) the tax and interest, if any, shall becomputed on the basis of the total incomecomputed under clause (a); (2) The Assessing Officer shall, beforeissuing any notice under this section, recordhis reasons for doing so. 143. Assessment.- (1) Where a return hasbeen made under section 139, or inresponse to a notice under sub-section (1)of section 142, such return shall beprocessed in the following manner, namely— (a) the total income or loss shall becomputed after making the followingadjustments, namely:— (i) any arithmetical error in the return; or (ii) an incorrect claim, if such incorrect claimis apparent from any information in thereturn; (b) the tax and interest, if any, shall becomputed on the basis of the total incomecomputed under clause (a); (c) the sum payable by, or the amount ofrefund due to, the assessee shall bedetermined after adjustment of the tax andinterest, if any, computed under clause (b)by any tax deducted at source, any taxcollected at source, any advance tax paid,any relief allowable under an agreementunder section 90 or section 90A, or anyrelief allowable under section 91, any rebateallowable under Part A of Chapter VIII, anytax paid on self-assessment and any amountpaid otherwise by way of tax or interest; (d) an intimation shall be prepared orgenerated and sent to the assesseespecifying the sum determined to be payableby, or the amount of refund due to, theassessee under clause (c); and (e) the amount of refund due to theassessee in pursuance of the determinationunder clause (c) shall be granted to theassessee:assessee in pursuance of the determinationunder clause (c) shall be granted to theassessee: Provided that an intimation shall also besent to the assessee in a case where theloss declared in the return by the assesseeis adjusted but no tax or interest is payableby, or no refund is due to, him: Provided further that no intimation underthis sub-section shall be sent after theexpiry of one year from the end of thefinancial year in which the return is made.this sub-section shall be sent after theexpiry of one year from the end of thefinancial year in which the return is made. 7.In support of his arguments, he has relied upon the following decisions:- 7.1 In Trustees of H.E.H. The Nizam'sSupplemental Family Trust Vs. :Commissioner ofIncome Tax (2000)242 ITR 381(SC) wherein SupremeCourt held as under:- "It is settled law that unless the return of incomealready filed is disposed of, notice for reassessmentsunder Section 148cannot be issued i.e., noreassessment proceedings can be initiated so long asassessment proceedings pending on the basis of thereturn already filed are not terminated. According tothe Revenue it is immaterial whether the order iscommunicated or not and that the only bar to thereassessment proceedings is that proceedings on thereturn already filed should have been terminated, insupport of this contention reference was made tocertain decisions of the High Courts and sonic observations made by this Court in a case, which wenote as under: In M.Ct. Muthuraman v. Commissioner of Income-tax,MadrasMANU/TN/0556/1961: [1963]50ITR656(Mad), the assessment proceedings which had commencedwith the returns filed by the assessee were lawfullyterminated when they were closed with the entry"N.A." (not assessed) . The orders terminating theassessment proceedings were riot communicated tothe assessee. The Income-tax Officer issued noticesunder Section 34 of the Income-tax, Act, 1922(corresponding to Section147of the Income-tax Act,1961). The Court held that the assessmentproceedings were lawfully terminated and that "theorders terminating the assessment proceedings werenot apparently communicated to the assessee did notaffect the legality of those orders OJ their finality." 7.2In Commissioner of Income Tax vs. Ram Kishan Leela(2007) 295 ITR 525 (Raj.) wherein Rajasthan High Court held as under:- 7.2In Commissioner of Income Tax vs. Ram Kishan Leela(2007) 295 ITR 525 (Raj.) wherein Rajasthan High Court held as under:- 7. Having given our careful consideration to thefacts and circumstances of the case and thesubmissions made by learned Counsel for theappellant, we are of the opinion that issues raisedin these appeals are of academic importance andfrom the narration of facts it is apparent that firstreassessment proceedings initiated after thesearch was conducted at the premises ofrespondent-assessee on 15th March, 1990 had notattained finality and as a result of orders of theappellate forum the reassessment proceedings forthe asst. yrs. 1985-86 and 1986-87 in pursuanceof notice issued prior to one in question becamepending and final assessment orders were passedon 28th March, 2003. 8. Apparently, two assessment proceedings couldnot have continued together and at parallel length.The original reassessment proceedings havealready been restored to the file of AO,consequently, second reassessment proceedingsbecame infructuous as the orders can be passedon the basis of available material includinginformation received later on while finalising theproceedingsunderSection143(3)r/wSection 147in pursuance of the reassessmentproceedings commenced earlier to one in question.While the first reassessment proceedings werepending, there cannot be second reassessment proceedings. It is also settled that once thereassessment proceedings are pending, the entireassessment is open and is not confined to scope ofreasons recorded by the AO before assumingjurisdiction. The setting aside of the reassessmentproceedings commenced vide notice dt. 28thMarch, 1996 could not have been resurrected andall material must be taken into consideration inmaking final assessment in terms of the directionsof the Tribunal while setting aside the order ofCIT(A) and directing the AO to make freshassessment vide its order dt. 8th Jan., 2002. 9. The Tribunal has categorically reached a finding in these appeals that M/s Jagdamba Griha NirmanSahakari Samiti Ltd., Jodhpur, is a separate entitywith the respondent-assessee. On the basis of thisfinding also, the reassessment order framed infavour of respondent-assessee could not havebeen sustained. The finding that M/s JagdambaGriha Nirman Sahakari Samiti Ltd. andrespondent-assessee are two separate entities andindependent of each other is a finding of fact andthat finding has not been challenged before us. Forthat reason also assessment order dt. 30th March,1998 cannot be sustained. Viewed from any angle,the questions raised in these appeals are ofacademic importance and cannot be considered asquestions of law requiring consideration in theseappeals. 7.3In Jhunjhunwala Vanaspati Ltd. vs. AssistantCommissioner of Income Tax (No.2) (2004) 266 ITR 664 (All)wherein Allahabad High Court holding as under:- “Be that as it may, there is no dispute that oncethe Commissioner of Income Tax (Appeals) passedan order of remand on March 15, 1994, theassessment proceedings became pending beforethe Assessing Officer. It is well settled that the notice underSection 148cannot be issued when assessmentproceedings are pending vide CIT v. RanchhoddasKarsondasMANU/SC/0097/1959:[1959]36ITR569(SC) ; CIT v.S. Raman ChettiarMANU/SC/0146/1964: [1965]55ITR630(SC) ; N.Naganatha Iyer v. CIT MANU/TN/0436/1965:[1966]60ITR647(Mad) ; Ram Bilas Kedar Nath v. ITO MANU/UP/0128/1963: [1963]47ITR586(All);Dr.OnkarDuttSharmav. CITMANU/UP/0247/1966: [1967]65ITR359(All) ; SoolChand Ram Sewak v. CIT MANU/UP/0127/1968:[1969]73ITR466(All) ; S.P. Kochhar v.ITOMANU/UP/0347/1982: [1984]145ITR255(All) ;Trustees of H. E. H. The Nizam's SupplementalFamily Trust v. CITMANU/SC/0106/2000: [2000]-242 ITR 381 and CIT v.M. K.K. R. MuthukamppanChettiarMANU/SC/0195/1969:[1970]78ITR69(SC) , etc. It is well settled that the notice underSection 148cannot be issued when assessmentproceedings are pending vide CIT v. RanchhoddasKarsondasMANU/SC/0097/1959:[1959]36ITR569(SC) ; CIT v.S. Raman ChettiarMANU/SC/0146/1964: [1965]55ITR630(SC) ; N.Naganatha Iyer v. CIT MANU/TN/0436/1965:[1966]60ITR647(Mad) ; Ram Bilas Kedar Nath v. ITO MANU/UP/0128/1963: [1963]47ITR586(All);Dr.OnkarDuttSharmav. CITMANU/UP/0247/1966: [1967]65ITR359(All) ; SoolChand Ram Sewak v. CIT MANU/UP/0127/1968:[1969]73ITR466(All) ; S.P. Kochhar v.ITOMANU/UP/0347/1982: [1984]145ITR255(All) ;Trustees of H. E. H. The Nizam's SupplementalFamily Trust v. CITMANU/SC/0106/2000: [2000]-242 ITR 381 and CIT v.M. K.K. R. MuthukamppanChettiarMANU/SC/0195/1969:[1970]78ITR69(SC) , etc. In the present case, the petitioner filed asupplementary affidavit stating that against theorder of the Commissioner of Income Tax(Appeals) an appeal was filed before the IncomeTax Appellate Tribunal which has been dismissedon January 28, 1997 (vide annexure SA 1). Hence,the order of the Commissioner of Income Tax(Appeals) stands confirmed. In the circumstances it is not necessary for usgoing into the other points urged by the petitioner. In view of the above, we are of the opinion thatthe impugned notice dated March 18, 1994, underSection 148is invalid and it is hereby quashed.The petition is allowed. No order as to costs. 7.4In KLM Royal Dutch Airlines vs. Assistant Director ofIncome Tax (2007) 292 ITR 49 (Del) wherein Delhi High Courtheld as under:- 11. In our opinion Sections147/148cannot beinterpreted in isolation of the other provisions ofChapter-XIV of the IT Act which is the fasciculusdealing with the procedure for Assessment.Section 139makes it mandatory for every personwhose total income exceeds the maximum amountwhich is not chargeable to Income Tax, to furnisha Return of Income by the due date.Section 142deals with the inquiry beforeAssessment. The first sub-section thereofempowers the AO to issue a notice to any personto file a Return or to produce its Accounts or anydocuments or to provide any information as theAO may require. Sub-section (2) empowers the AOto make any inquiry he considers necessary. Sub-section (3) incorporates the audi alteram partemrule of natural justice viz. providing to the affectedparty an opportunity of being heard. Section 143deals with the dispatch of intimationsspecifying the sum payable as tax or interest thathas been found by the AO to be due on the basisof the Return; it deals with refunds payable to theassessed. The neat question which arises beforeus is whether on the commencement ofassessment proceedings must they first bebrought to their logical conclusion by framing anassessment before embarking on the proceedingsas envisaged in Sections147/148of the IT Act; ormore precisely stated, can resort toSection 147be made even whilst the normalassessment proceedings are pending conclusion.To find the answer we must keep in perspectivethat every Return of Income filed underSection 139may not result in its active and in-depth perusal or consideration by the AO as it mayreceive an automatic onward passage underSection 143(1). However, once an inquiry has beeninitiated by the AO, it cannot but result in eitherthe Return being accepted as having beencorrectly computed by the concerned assessed, orfor an Assessment being conducted and concludedthereon by the AO. The provisions ofSection 147would have no role to play at thisstage of the proceedings. Once a Return of Incomeattracts the attention and scrutiny of the AO, it ishis bounden duty to delve into every aspectthereof. The AO is sufficiently empowered to askfor all information necessary for framing theAssessment. The only fetter on the amplitude ofhis discretion is that the Assessment must beframed within the time limit set-down bySection 153which, in substance, is two years fromthe end of the Assessment Year in which theincome was first assessable or one year from theend of the Financial Year. A perusal of its secondsub-section makes it clear that proceedings underSection 147are altogether different to those underSection 143. This distinction appears to haveescaped the attention of the Revenue. Sub-section(2)stipulatesthatnoorderunderSection 147shall be made after the expiry of oneyear from the end of the Financial Year in whichnotice under Section 148was served. 12. Section147of the IT Act deals with thepowers of the AO to 'assess' or reassess theincome chargeable to tax which has escapedassessment. Section 148contemplates making the'assessment', reassessment or recomputationunder Section147. Keeping the factual matrixbefore us in perspective, it becomes critical todefine the word assess since the AO is avowedlynot reassessing or recomputing the income 12. Section147of the IT Act deals with thepowers of the AO to 'assess' or reassess theincome chargeable to tax which has escapedassessment. Section 148contemplates making the'assessment', reassessment or recomputationunder Section147. Keeping the factual matrixbefore us in perspective, it becomes critical todefine the word assess since the AO is avowedlynot reassessing or recomputing the income presented by the assessed for taxation in the formof its Return. It is trite that the words assess,reassess or recompute are not synonymous ofeach other. It seems to us that an assessmentmust entail a conscious and concerted calculationcarried out by the concerned officer with a view todetermine the amount of tax payable by anyperson. The exercise commencing withSection 139and ending at Section145Acannot beinterpreted as identical to or overlappingSections 147/148/149. They are predicated ondifferent circumstances and operate in disparatedimensions. The IT Act makes it incumbent uponevery person whose total income exceeds themaximum amount which is not chargeable toIncome Tax to file a Return of Income in order tokick-start the normal assessment procedure.However, it may happen that a person fails to file aReturn of Income, say for the AY 2000-2001, eventhough he is liable to pay tax. It could also happenthat a person may file a Return of Incomeincorrectly offering for purposes of taxation a sumlower than the correctly calculated income. Boththese situations have been obviously kept in viewin 2nd Explanation to Section 147and in itsClauses (a) and (b). In either event the AO wouldinvoke the powers conferred upon him bySection 147of the IT Act culminating with thecompletion of the assessment. It is alsoconceivable that the incorrectness of the Returnmay not be detected or noticed within the timeperiod set-down in Section 153. In thesecircumstances if the AO has reason to believe,predicated on information received by him, thatincome chargeable to tax has escapedassessment, he would invoke the powers underSection 147. On the other hand, where a Return ofIncome has been filed but has been taken at itsface value, without any proceedings underSection 143(2)and 143(3)havingbeenconducted, no assessment exercise wouldobviously have been undertaken. After the expiryof the time period set-down in Section153, thissituation can be remedied by the AO by invokingSection 147. The word 'assessment' has beendefined in the Act in a most unsatisfactory manner,merely by stating that it includes reassessment. Amore comprehensive definition is readily availablein the Australian decision titled Batagol -vs-Federal Commissioner of Taxation (1963) 109 CLR243 in these words: assessment means the completion of the processby which the provisions of the Act relating to liability to tax are given concrete application in aparticular case with the consequence that aspecified amount of money will become due andpayable as the proper tax in that case. assessment means the completion of the processby which the provisions of the Act relating to liability to tax are given concrete application in aparticular case with the consequence that aspecified amount of money will become due andpayable as the proper tax in that case. 19. Applying this line of decisions to the facts ofthe present case, the inescapable conclusionthat would have to be reached is that whileassessment proceedings remain inchoate, no'fresh evidence or material' could possibly beunearthed. If any such material or evidence isavailable, there would be no restrictions orconstraints on its being taken into considerationby the AO for framing the then currentassessment. If the assessment is not framedbefore the expiry of the period of limitation for aparticular AY, it would have to be assumed thatsince proceedings had not been opened underSection143(2), the Return had been acceptedas correct. It may be argued that thereafterrecourse could be taken to Section 147,provided fresh material had been received bythe AO after the expiry of limitation fixed forframing the original assessment. So far as thepresent case is concerned we are of the viewthat it is evident that, faced with severe paucityof time, the AO had attempted to travel the pathof Section147in the vain attempt to enlarge thetime available for framing the assessment. Thisis not permissible in law. 7.5In CESC Ltd. and another vs. Deputy Commissioner ofIncome Tax and others (No.2) (2003) 263 ITR 402 (Cal) whereinCalcutta High Court held as under:- It is an admitted proposition that the jurisdictionfor assessment of nonresidents have beenconferred only upon the authorities at Mumbai.All nonresidents are assessed at Mumbai, Thejurisdiction relating to such assessment by theDy. CIT, Mumbai, cannot be questioned. The saidproceeding cannot be taken up anywhere else inIndia. In connection with such proceedings, theDy. CIT, Mumbai, had authority to summon orask for information from any person through outIndia in connection with such proceedings. Nowit is to be considered whether issue of a notice inconnection with a proceeding pending before theDy. CIT, Mumbai, would give rise to a cause ofaction to such an extent enabling the High Courthaving territorial jurisdiction where such notices were served to exercise its discretion to assumejurisdiction even if such service of notice is anintegral part of the cause of action or even if itprima facie appears to be without jurisdiction. 7.6In Commissioner of Income Tax vs. K.M. Pachayappan(2008) 304 ITR 264 (Mad) wherein Madras High Court holding asunder:- Heard the counsel. In this case, Return ofincome was filed under Section 139(4)of the Acton15.03.2000andnoticeunderSection143(2)for framing assessment underSection143(3)could have been issued upto31.03.2000. Therefore, a valid Return of incomewas pending as on 15.03.2000. The AssessingOfficer issued notice under Section 148on15.03.2000 when a valid Return underSection139(4)was pending. In this case theReturn was filed and the same is pending, whichmeans that the proceeding is still pending. Insuch a situation, the Revenue could not haveissued notice for the purpose of reopening underSection147of the Act. In the case of TrusteesOf H.E.H. The Nizam's Supplemental FamilyTrustv.CommissionerofIncomeTaxMANU/SC/0106/2000: [2000] 242 ITR 381(SC), the Supreme Court considered the scopeof reopening the assessment and held asfollows: It is settled law that unless the return of incomealready filed is disposed of, notice forreassessment under Section 148cannot be issued,i.e., no reassessment proceedings can be initiatedso long as assessment proceedings pending on thebasis of the return already filed are notterminated. According to the Revenue it isimmaterial whether the order is communicated ornot and the only bar to the reassessmentproceedings is that proceedings on the returnalready filed should have been terminated. It is settled law that unless the return of incomealready filed is disposed of, notice forreassessment under Section 148cannot be issued,i.e., no reassessment proceedings can be initiatedso long as assessment proceedings pending on thebasis of the return already filed are notterminated. According to the Revenue it isimmaterial whether the order is communicated ornot and the only bar to the reassessmentproceedings is that proceedings on the returnalready filed should have been terminated. ... A mere glance at this note would show that itcould not be said that the Income Tax Officer gavefinality to the refund since no refund is grantedeither in the hands of the trust or in the hands ofthe beneficiaries. It is an inconclusive note wherethe Income Tax Officer left the matter at the stageof consideration even with regard to refund in thehands of the beneficiaries. This note was also not communicated to the trustees. When we examinethe note dated November 10, 1965, on the file of1963-64 nothing flows from that as well. In anycase if it is an order, it would be appealable underSection249of the Act. Since the period oflimitation starts from the date of intimation of suchan order, it is imperative that such an order becommunicated to the assessee. Had the IncomeTax Officer passed any final order, it would havebeen communicated to the assessee within areasonable period. In any case, what we find isthat the note dated November 10, 1965, is merelyan internal endorsement on the file without therebeing an indication if the refund application hasbeen finally rejected. By merely recording that inhis opinion, no credit for tax deducted at source isto be allowed, the Income Tax Officer cannot besaid to have closed the proceedings finally. Thedecisions referred to by the Revenue are of no helpin the present case. We are, thus, of the opinionthat during the pendency of the return filed underSection139of the Act along with the refundapplication under Section237of the Act, actioncouldnothavebeentakenunderSection147/148of the Act. Our answer to thequestion, therefore, is in the negative, i.e., againstthe Revenue. In the case of KLM Royal Dutch Airlines v. AssistantDirector of Income Tax MANU/DE/7547/2007 :[2007]292ITR0(Delhi) , the Delhi High Court,following the above Supreme Court judgment,considered the scope of provision ofSections139and 147of the Act and held asfollows: Applying this line of decisions to the facts of thepresent case, the inescapable conclusion thatwould have to be reached is that while assessmentproceedings remain inchoate, no "fresh evidenceor material" could possibly be unearthed. If anysuch material or evidence is available, there wouldbe no restrictions or constraints on its being takeninto consideration by the Assessing Officer forframing the then current assessment. If theassessment is not framed before the expiry of theperiod of limitation for a particular assessmentyear, it would have to be assumed that sinceproceedings had not been opened underSection143(2), the return had been accepted ascorrect. It may be argued that thereafter recoursecould be taken to Section147, provided freshmaterial had been received by the AssessingOfficer after the expiry of limitation fixed for framing the original assessment. So far as thepresent case is concerned, we are of the view thatit is evident that, faced with severe paucity oftime, the Assessing Officer had attempted to travelthe path of Section 147in the vain attempt toenlarge the time available for framing theassessment. This is not permissible in law. framing the original assessment. So far as thepresent case is concerned, we are of the view thatit is evident that, faced with severe paucity oftime, the Assessing Officer had attempted to travelthe path of Section 147in the vain attempt toenlarge the time available for framing theassessment. This is not permissible in law. Applying the principles enunciated in thejudgments of the Supreme Court as well as theDelhi High Court, cited supra, the Tribunal is rightin coming to a conclusion that no action could beinitiated under Section147of the Act, when thereis a pendency of the Return before the AssessingOfficer. The reasons given by the Tribunal arebased on valid materials and evidence and we donot find any error or illegality in the order of theTribunal so as to warrant interference. 5. In view of the foregoing reasons, no substantialquestions of law arise for consideration of thisCourt and accordingly the tax case is dismissed.No costs. 7.7In Commissioner of Income Tax vs. TCP Ltd. (2010) 323 ITR 346 (Mad) wherein Madras High Court held as under:- We heard learned counsel for the Revenue, whofairly submitted that the issue is covered by thedecision in the case of Trustees of H.E.H. TheNizam'sSupplementalFamilyTrustv.CIT MANU/SC/0106/2000: [2000] 242 ITR 381 inwhich case, the Supreme Court considered thescope of reopening of the assessment and held asfollows : It is settled law that unless the return of incomealready filed is disposed of, notice forreassessment under section148cannot be issued,i.e., no reassessment proceedings can be initiatedso long as assessment proceedings pending on thebasis of the return already filed are notterminated. According to the Revenue, it isimmaterial whether the order is communicated ornot and the only bar to the reassessmentproceedings is that proceedings on the returnalready filed should have been terminated... A mere glance at the note of the Income-taxOfficer would show that it could not be said that the Income-tax Officer gave finality to the refundsince no refund was granted either in the hands ofthe trust or in the hands of the beneficiaries. Itwas an inconclusive note where the Income-taxOfficer left the matter at the stage of considerationeven with regard to refund in the hands of thebeneficiaries. This note was also not communicatedto the trustees. Nothing flowed from the notedated November 10, 1965, on the file of 1963-64as well. In any case if it was an order, it would beappealable under section249of the Act. Since theperiod of limitation starts from the date ofintimation of such an order, it was imperative thatsuch an order be communicated to the assessee.Had the Income-tax Officer passed any final order,it would have been communicated to the assesseewithin a reasonable period. In any case, the notedated November 10, 1965, was merely an internalendorsement on the file without there being anindication if the refund application had been finallyrejected. By merely recording that in his opinion,no credit for tax deducted at source was to beallowed, the Income-tax Officer could not be saidto have closed the proceedings finally. During thependency of the return filed under section139ofthe Act along with the refund application undersection237of the Act, action could not have beentaken under section 147/148of the Act(headnote). 3. Following the abovesaid judgment, a DivisionBench of this court in the case of CIT v. K.M.Pachayappan MANU/TN/8644/2007: [2008] 304ITR 264 and the subsequent Division Bench of thiscourt, in which one of us is a party (RavirajaPandian J.) in the case of CIT v. Qatalys SoftwareTechnologies Ltd. MANU/TN/1630/2008: [2009]308 ITR 249, has held the issue against theRevenue, by also relying upon the decision in thecase of KLM Royal Dutch Airlines v. Asst.DITMANU/DE/0589/2007: [2007] 292 ITR 49, inwhich the Delhi High Court, following the SupremeCourt judgments cited supra, considered the scopeof the provision of sections139and 147of the Actand held as follows (page 63): Applying this line of decisions to the facts of thepresent case, the inescapable conclusion that would have to be reached is that while assessmentproceedings remain inchoate, no 'fresh evidence ormaterial' could possibly be unearthed. If any suchmaterial or evidence is available, there would beno restrictions or constraints on its being takeninto consideration by the Assessing Officer forframing the then current assessment. If theassessment is not framed before the expiry of theperiod of limitation for a particular assessmentyear, it would have to be assumed that sinceproceedings had not been opened undersection143(2), the return had been accepted ascorrect. It may be argued that thereafter recoursecould be taken to section147, provided freshmaterial had been received by the AssessingOfficer after the expiry of limitation fixed forframing the original assessment. So far as thepresent case is concerned, we are of the view thatit is evident that, faced with severe paucity oftime, the Assessing Officer had attempted to travelthe path of section 147in the vain attempt toenlarge the time available for framing theassessment. This is not permissible in law. In the light of the decisions cited supra and on thefacts of this case, we are of the view that the orderof Tribunal is not against any statutory provision orthe law declared by the Supreme Court. The taxcase appeal stands dismissed. No costs. 7.8 In Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC) wherein SupremeCourt held as under:- 10. Section143(1)as it stood at the point of timewhen the intimation was given under the saidprovision, so far as relevant, read as follows: 143. (1)(a) Where a return has been made underSection139, or in response to a notice under Sub-section (1) of Section 142, (i) if any tax or interest is found due on the basisof such return, after adjustment of any taxdeducted at source, any advance tax paid andany amount paid otherwise by way of tax orinterest, then, without prejudice to the provisionsof sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, andsuch intimation shall be deemed to be a notice ofdemand issued under Section156and all theprovisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of suchreturn, it shall be granted to the assessee: Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely: (i) any arithmetical errors in thereturn, accounts or documentsaccompanying it shall be rectified;(ii) any loss carried forward,deduction, allowance or relief,which, on the basis of theinformation available in suchreturn, accounts or documents, ifprima facie admissible but whichis not claimed in the return, shallbe allowed; (iii) any loss carried forward,deduction, allowance or reliefclaimed in the return, which, onthe basis of the informationavailable in such return, accountsor documents, is prima facieinadmissible, shall be disallowed : Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely: (i) any arithmetical errors in thereturn, accounts or documentsaccompanying it shall be rectified;(ii) any loss carried forward,deduction, allowance or relief,which, on the basis of theinformation available in suchreturn, accounts or documents, ifprima facie admissible but whichis not claimed in the return, shallbe allowed; (iii) any loss carried forward,deduction, allowance or reliefclaimed in the return, which, onthe basis of the informationavailable in such return, accountsor documents, is prima facieinadmissible, shall be disallowed : Provided further that an intimationshall be sent to the assesseewhether or not any adjustmenthas been made under the firstproviso and notwithstanding thatno tax or interest is due from him: Provided also that an intimation under this clause shall not be sent after the expiry of two years from the end of the assessment year in hthe income was first assessable. 147.Income escaping assessment.--If theAssessing Officer, has reason to believe thatany income chargeable to tax has escaped assessment for any assessment year, he may,subject to the provisions of Sections 148 to153, assess or reassess such income and alsoany other income chargeable to tax which hasescaped assessment and which comes to hisnoticesubsequently in the course of the proceedingsunder this section, or recompute the loss orthe depreciation allowance or any otherallowance, as the case may be, for theassessment year concerned (hereafter in thissection and in Sections 148 to 153referred toas the relevant assessment year): Provided that where an assessmentunderSub-section(3)ofSection 143or this section has beenmade for the relevant assessmentyear, no action shall be taken underthis section after the expiry of fouryears from the end of the relevantassessment year, unless any incomechargeable to tax has escapedassessment for such assessmentyear by reason of the failure on thepart of the assessee to make areturn under Section139or inresponse to a notice issued underSub-section (1) of Section142orSection 148or to disclose fully andtruly all material facts necessary forhis assessment for that assessmentyear. Explanation 1.--Production beforethe Assessing Officer of account booksor other evidence from which materialevidence could, with due diligence,have been discovered by theAssessing Officer will not necessarilyamount to disclosure within themeaning of the foregoing proviso. Explanation 2.--For the purposes of this section,the following shall also be deemed to be caseswhere income chargeable to tax has escapedassessment, namely: (a) where no return of income hasbeen furnished by the assesseealthough his total income or thetotal income of any other person inrespect of which he is assessableunder this Act during the previousyear exceeded the maximumamount which is not chargeable toincome-tax; (b) where a return of income hasbeen furnished by the assessee butno assessment has been made andit is noticed by the AssessingOfficer that the assessee hasunderstated the income or hasclaimed excessive loss, deduction,allowance or relief in the return; (c) where an assessment has beenmade, but- (i) income chargeable to taxhas been under-assessed ;or (ii) such income has beenassessed at too low rate ; or (iii) such income has beenmade the subject ofexcessive relief under thisAct ; or (iv) excessive loss ordepreciation allowance orany other allowance underthis Act has been computed. (b) where a return of income hasbeen furnished by the assessee butno assessment has been made andit is noticed by the AssessingOfficer that the assessee hasunderstated the income or hasclaimed excessive loss, deduction,allowance or relief in the return; (c) where an assessment has beenmade, but- (i) income chargeable to taxhas been under-assessed ;or (ii) such income has beenassessed at too low rate ; or (iii) such income has beenmade the subject ofexcessive relief under thisAct ; or (iv) excessive loss ordepreciation allowance orany other allowance underthis Act has been computed. 148.Issue of notice where income hasescaped assessment.--(1) Before making theassessment, reassessment or recomputation underSection147, the Assessing Officer shall serve onthe assessee a notice containing all or any of therequirements which may be included in a noticeunder Sub-section (2) of Section 139; and theprovisions of this Act shall, so far as may be, applyaccordingly as if the notice were a notice issuedunder that sub section. (2) The Assessing Officer shall, before issuing anynotice under this section, record his reasons fordoing so. 11. It is to be noted that substantial changes havebeen made to Section143(1)with effect from June 1,1999. Up to March 31, 1989, after a return of incomewas filed the Assessing Officer could make anassessment under Section 143(1)without requiringthe presence of the assessee or the production byhim of any evidence in support of the return. Wherethe assessee objected to such an assessment orwhere the officer was of the opinion that theassessment was incorrect or incomplete or the officerdid not complete the assessment underSection 143(1), but wanted to make an inquiry, anotice under Section 143(2)was required to beissued to the assessee requiring him to produceevidence in support of his return. After consideringthe material and evidence produced and after makingnecessary inquiries, the officer had power to makeassessment under Section143(3). With effect fromApril 1, 1989, the provisions underwent substantialand material changes. A new scheme was introducedand the new substituted Section143(1)prior to thesubsequent substitution with effect from June 1,1999, in Clause (a), a provision was made that wherea return was filed under Section139or in responseto a notice under Section 142(1), and any tax orrefund was found due on the basis of such returnafter adjustment of tax deducted at source, anyadvance tax or any amount paid otherwise by way oftax or interest, an intimation was to be sent withoutprejudice to the provisions of Section143(2)to theassessee specifying the sum so payable and suchintimation was deemed to be a notice of demandissued under Section 156. The first proviso toSection 143(1)(a)allowed the Department to makecertain adjustments in the income or loss declared inthe return. They were as follows: (a) an arithmetical