Taxes), Would Rely On Assistant Cit v. I.t.a

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN &THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 4TH DAY OF DECEMBER 2017/13TH AGRAHAYANA, 1939 ITA.No. 61 of 2012 () ---------------------- AGAINST THE ORDER IN IT(S&S)A No.28/Coch/2004 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED:11.11.1999 APPELLANT(S)/RESPONDENT: ----------------------- THE COMMISSIONER OF INCOME TAX-II, COCHIN BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: ------------------------ V.V.DEVASSY VALIYAVEETTIL HOUSE, ILLIPARAMBIL LANE, ASOKA ROAD, KOCHI - 682 017. R BY ADV. SRI.T.O.XAVIER THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA.No. 61 of 2012 () ---------------------- ANNEXURES: APPENDIX ANNEXURE A: COPY OF ASSESSMENT ORDER U/S.143(3) R.W.S158BC(C) DATED 28.11.200128.11.2001 ANNEXURE B: COPY OF ORDER OF IT(A)-V DATED 12.01.2004 ANNEXURE C: THE ITAT'S PUNE 'SMC' BENCH'S ORDER REPORTED IN (2008) 86TTJ (PUNE) 1079.TTJ (PUNE) 1079. RESPONDENTS EXHIBITS: NIL // TRUE COPY // P.A TO JUDGE SB K. VINOD CHANDRAN&ASHOK MENON, JJ. ========================= I.T.A No.61 of 2012 ==========================Dated this the 04[th] day of December, 2017 JUDGMENT K.Vinod Chandran,J. The short question raised in the above Income Tax Appeal is the sustainability of the proceedings forreassessment in the context of the notice being served on theassessee, beyond the time, as stipulated in the Proviso toSection 143(2) of the Income Tax Act, 1961 (for brevity 'theAct'). On facts suffice it to state that pursuant to a search inthe premises of the assessee on 11.11.1999, a notice underSection 158BC of the Act was issued by the Assessing Officeron 23.05.2000. In response to the said notice, the assesseefiled return of income in Form No.2B on 24.07.2000. The I.T.A No.61/2012 notice under Section 143(2) of the Act. Dated 27.02.2001 wasserved on the assessee on 03.08.2001; three days after thelimitation period, as prescribed under the Proviso to Section143(2) of the Act. 2. Section 143(2) as was in existence at the relevantpoint of time is as follows:- “Where a return has been made undersection 139, or in response to a notice under sub-section(1) of section 142, the Assessing Officershall, if he considers it necessary or expedite toensure that the assessee has not understated theincome or has not computed excessive loss or hasnot under-paid the tax in any manner, serve on theassessee a notice requiring him, on a date to bespecified therein, either to attend his office or toproduce, or cause to be produced there, anyevidence on which the assessee may rely in supportof the return: Providedthat no notice under this sub-section shall be served on the assessee after theexpiry of twelve months from the end of the monthin which the return is furnished.” I.T.A No.61/2012 Going by the facts, the notice is served on the assessee beyondthe time of limitation as spoken of in the proviso. 3. The learned Senior Counsel, Government of India (Taxes), would rely on Assistant CIT v. Hotel Blue Moon[2010] 321 ITR 362 (SC) and an unreported judgment of aDivision Bench of this Court in I.T.A No.65 of 2015 dated 11[th]July of 2017 [Padinjarekara Agencies Pvt. Ltd. v. TheCommissioner of Income Tax]. The submission is that thoughthe proviso speaks of service of notice, the Hon'ble SupremeCourt has understood it as “issuance of notice” in Hotel BlueMoon. On similar set of facts, the Division Bench in I.T.A No.65of 2015 also found that absence of Section 143(2), notice is notrelevant when the assessee has participated in theproceedings. The Division Bench had also relied on yet anotherdecision of a Division Bench of this Court in K.J Thomas v.Commissioner of Income Tax [2008] 301 ITR 301 [Ker]. The I.T.A No.61/2012 (Taxes), would rely on Assistant CIT v. Hotel Blue Moon[2010] 321 ITR 362 (SC) and an unreported judgment of aDivision Bench of this Court in I.T.A No.65 of 2015 dated 11[th]July of 2017 [Padinjarekara Agencies Pvt. Ltd. v. TheCommissioner of Income Tax]. The submission is that thoughthe proviso speaks of service of notice, the Hon'ble SupremeCourt has understood it as “issuance of notice” in Hotel BlueMoon. On similar set of facts, the Division Bench in I.T.A No.65of 2015 also found that absence of Section 143(2), notice is notrelevant when the assessee has participated in theproceedings. The Division Bench had also relied on yet anotherdecision of a Division Bench of this Court in K.J Thomas v.Commissioner of Income Tax [2008] 301 ITR 301 [Ker]. The I.T.A No.61/2012 learned Counsel appearing for the assessee however wouldcontend that Hotel Blue Moon is in his favour. 4. A reading of Hotel Blue Moon would indicatethat the issue decided was as to “whether service of notice onthe assessee under Section 143 (2) within the prescribedperiod is a prerequisite for framing the block assessmentunder Chapter XIV-B of the Income Tax act, 1961” (sic-para 4).The Tribunal, considering the appeal from the blockassessment found that it is only a procedural irregularity andthe same was curable. The High Court of Guwahati reversedthe order of the Tribunal finding the provisions under Section142 and sub-section (2) and (3) of Section 143 of the Act tohave mandatory application. It was argued by the departmentthat Chapter XIV-B being a complete code in itself, enablingblock assessment, pursuant to a search; the other provisions ofthe Act are applicable only so far as it is possible of being I.T.A No.61/2012 extended. The Supreme Court found that after the return isfiled, on the notice issued under Section 158BC(a), if theassessing officer intends to repudiate the return filed and toinitiate an inquiry, then the notice under Section 143(2) ismandatory. 5. It is argued that the Hon'ble Supreme Court in Hotel Blue Moon had at many places in the decision spokenof the issuance of notice U/S 143(2)/142 of the Act and hencethe proviso has to be understood as mandating only issuanceof notice and not serving of notice. We are unable to acceptthe argument raised by the Department. Firstly there was noquestion raised before the Hon'ble Supreme Court as towhether the notice under Section 143(2) of the Act has to beserved or issued; within the time as spoken of in the proviso.The Hon'ble Supreme Court was considering the issue as towhether notice under Section 143(2) of the Act is mandatory or I.T.A No.61/2012 not. There was no contention raised by the Department thatthe notice was issued well within the time, but however servedout of time; as is the case herein. The ordinary recitals made inthe decision as to the notice under Section 143(2), required tobe issued, need not be given the status of a bindingdeclaration. The ratio of a decision is to be called out from thequestion that specifically arose, discussed and answered andnot what can be logically deducted there from. Moreimportantly the proviso speaks of 'service' and it cannot, byany interpretative process, be understood as 'issued'. It cannotat all be said that the Hon'ble Supreme Court had laid downthat what is contemplated under Section 143(2) is onlyissuance of notice and not service within the expiry of 12months from the end of the month, in which return isfurnished; failing which it would be hit by limitation. I.T.A No.61/2012 I.T.A No.61/2012 6. In I.T.A No.65 of 2015 the Division Bench wasconcerned with a reopening of assessment, under Section 147on the ground of escapement of income. On notice ofreopening issued, with reasons recorded under section 148,the assessee filed its reply with detailed objections and alsorequested the return filed to be treated as one filed underSection 148. Notices were again issued posting the case andthe assessee was also informed of the inadmissibility of thededuction made from the total income. Before reassessmentwas completed the assessee filed written submissions and wasafforded an opportunity of hearing. Incidentally the assesseehad also approached the Additional Commissioner underSection 144A, to issue directions for the guidance of theAssessing Officer which was also done. The assessee hencehad ample notice of the reopening proposed, which theassessee availed of by answering the case against it. It was in I.T.A No.61/2012 such a situation that the Division Bench held that the absenceof notice under Section 143(2) of the Act raised subsequent tothe assessment, was not sustainable. In K.J.Thomas (supra)though assessee denied receipt of notice, the assessee hadfiled a detailed reply and was heard before the re-assessmentwas completed. 7. In the present case, we do not see any suchproceedings in which the assessee was informed of theinadmissibility of the returns or the grounds on which thereturns were sought to be rejected. A notice was issued underSection 158BC on 23.05.2000 and the assessee filed its returnin Form 2B on 24.07.2000. It was after the returns were filed,the necessity of a notice under Section 143(2) of the Act arises;if the return is not accepted. The Assessing Officer wasobliged to issue such a notice within the 12 month period asprovided under Section 143(2) of the Act. Herein, though a I.T.A No.61/2012 contention is raised that the notice was dated prior to thelimitation period, it was served only after the period oflimitation, as admitted by the department before the Tribunal.Whether it is three days, three months or three years, if thenotice is served after the limitation period, there could be nofurther proceedings taken. We are inclined to agree with theorder of the Income Tax Appellate Tribunal and answer thequestion in favour of the assessee and against the Department. 8. The learned Senior Counsel would then submitthat the assessee never raised this ground before the assessing officer or the first appellate authority and cannot be allowed toraise it before the Tribunal. The question raised being one oflimitation; it is permissible of being raised at any time.; a mixedquestion of fact and law. In fact the law makers had remediedthe objection as pointed out by the Senior Counsel byenactment of S 292BB, which was introduced in the year 2008 , I.T.A No.61/2012 by way of amendment. Section 292BB reads as under: Where an assessee has appeared in any proceedingor cooperated in any inquiry relating to an assessment orreassessment, it shall be deemed that any notice underany provision of this Act, which is required to be servedupon him, has been duly served upon him in time inaccordance with the provisions of this Act and suchassessee shall be precluded from taking any objection inany proceeding or inquiry under this Act that the noticewas - (a)not served upon him; or (b) not served upon him in time; or (c)served upon him in an improper manner. Provided that nothing contained in this sectionshall apply where the assessee has raised such objectionbefore the completion of such assessment orreassessment. Before the said provision the department could not have taken such a plea. After the provision came into force, the assesseewould not have urged the plea, if not urged before theassessment or reassessment was completed. The blockassessment herein is of assessment years 1990-1991 to 1999- I.T.A No.61/2012 (a)not served upon him; or (b) not served upon him in time; or (c)served upon him in an improper manner. Provided that nothing contained in this sectionshall apply where the assessee has raised such objectionbefore the completion of such assessment orreassessment. Before the said provision the department could not have taken such a plea. After the provision came into force, the assesseewould not have urged the plea, if not urged before theassessment or reassessment was completed. The blockassessment herein is of assessment years 1990-1991 to 1999- I.T.A No.61/2012 2000. The assessment was also completed as per Ext.P1 on28.11.2001. Both prior to the amendment. The Income Tax Appeal would stand rejectedupholding the order of the Tribunal. No order on costs. Sd/-K. VINOD CHANDRAN, JUDGE SB/04/12/2017 Sd/-ASHOK MENON,JUDGE