Wp(C)/17509/2016 Of Smt.rajee Rajkumar v. Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 5TH DAY OF APRIL 2017/15TH CHAITHRA, 1939 WP(C).No. 17509 of 2016 (K) ---------------------------- PETITIONER:------------- SMT.RAJEE RAJKUMAR 39/2724,SREEKAILAS, PALIAM ROAD, ERNAKULAM BY ADVS.SRI.ANIL D. NAIR SRI.R.SREEJITH KUM.SOUMYA PRAKASH KUM.MEKHALA M.BENNY RESPONDENTS: --------------- ASSISTANT COMMISSIONER OF INCOME TAX NON-CORPORATE CIRCLE(1), ERNAKULAM 682018 R1 BY ADV. SRI.CHRISTOPHER ABRAHAM, R1 BY ADV. SRI.K.M.V.PANDALAI, THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON05-12-2016, ALONG WITH WPC. 17571/2016, THE COURT ON 5/4/2017DELIVERED THE FOLLOWING: ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ----------------------- P1 TRUE COPY OF THE STATEMENT OF INCOME FILED ALONG WITHTHE RETURNSTHE RETURNS P2 TRUE COPY OF LETTER DTD 15/6/2015 SUBMITTED BY THEPETITIONER TO THE RESPONDENT P3 TRUE COPY OF THE LETTER DTD 22/2/2016 SUBMITTED BY THEPETITIONER TO THE RESPONDENTPETITIONER TO THE RESPONDENT P4 TRUE COPY OF THE LETTER DTD 29/2/2016 SUBMITTED BY THEPETITIONER TO THE RESPONDENTPETITIONER TO THE RESPONDENT P5 TRUE COPY OF THE LETTER DTD 18/3/2016 SUBMITTED BY THEPETITIONER TO THE RESPONDENTPETITIONER TO THE RESPONDENT P6 TRUE COPY OF THE ASSESSMENT ORDER DTD 21/3/2016 OF THERESPONDENTRESPONDENT RESPONDENT(S)' EXHIBITS NIL ----------------------- Rp //TRUE COPY// PS TO JUDGE A.M. SHAFFIQUE, J.===============W.P. (C) Nos. 17509 & 17571 of 2016====================== Dated this, the 5[th] day of April, 2017 J U D G M E N T Since these two writ petitions concern common questions, thesame are heard and decided together. The short facts involved inWP(C) No. 17509/2016 are as under:- 2.Petitioner is an assessee under the Income Tax Act, 1961(hereinafter referred to as IT Act). She had filed returns for theassessment year 2008-09 admitting a total income of `17,74,520/-.She was served with a notice under Section 148 on 13/4/2015proposing to reopen the assessment for the year 2008-09. She wasalso served with a notice under Section 142(1) on 1/6/2015. Shefiled replies as Exts.P3 to P5. However, an order of assessment cameto be passed on 22/3/2016 bringing to tax sale of agricultural landwhich was exempted under the earlier assessment completed underSection 143(1). Petitioner inter alia challenges the aforesaidassessment order mainly on the ground that notice under Section148 had been issued beyond the period of limitation as providedunder the statute. -:2:- 3.In WP(C) No. 17571/16, the assessee is the husband of the petitioner in WP(C) No. 17509/16. The assessee had filed thereturns declaring a total income of `25,29,970/- and agriculturalincome of `30,000/- during the assessment year 2008-09. He wasalso served with notice under Section 148 on 13/4/2015 proposingto reopen the assessment for the year 2008-09. He was alsoserved with a notice under Section 142(1). He filed replies asExts.P3 to P5. However an order of assessment came to bepassed on 22/3/2016 bringing to tax the sale of agricultural landwhich was exempted earlier under the assessment completedunder Section 143(3). Petitioner raises same contentions as thatof the petitioner in WP(C) No. 17509/16. 4.Statement has been filed by the standing counsel onbehalf of the respondent in both the cases. Contentions arecommon and therefore reference is made to the statement filed inWP(C) No. 17509/2016. The first contention is that since thepetitioner has an alternate remedy to prefer an appeal against theassessment order, the writ petition is not maintainable. Further, itis contended that the return filed by the petitioners wereaccepted under Section 143(1) without any modification. -:3:- 4.Statement has been filed by the standing counsel onbehalf of the respondent in both the cases. Contentions arecommon and therefore reference is made to the statement filed inWP(C) No. 17509/2016. The first contention is that since thepetitioner has an alternate remedy to prefer an appeal against theassessment order, the writ petition is not maintainable. Further, itis contended that the return filed by the petitioners wereaccepted under Section 143(1) without any modification. -:3:- Subsequently, the Assistant Commissioner of Income Tax Circle-1,Tirur passed on an information that the assessee AnappadikalHospitality Private Ltd has purchased certain lands in PonamalleeTaluk from the petitioner for a registered value of `2.21 croreswhile the guideline value to be adopted for stamp duty purposewas `2,57,55,000/-. Certain factors like the situation of theproperty in an industrialized and urbanised area, the presentnature of the property, classification of land as residential for thepurpose of fixation of guideline value, the high price realisationfor small extent of land etc tempted the assessing officer to forman opinion that the petitioner is not an agriculturist but anindustrialist and arrived at a conclusion that the land sold is notagricultural land but a capital asset within the meaning of Section2(14) of the IT Act, the transfer of which gives rise to capitalgains. It is stated that the petitioner had indicated in the returnthat she had sold agricultural property situated in Nemily GramaPanchayat in Tamil Nadu acquired by her in the year 1998 for acertain consideration. According to the officer, it was not a fulland true disclosure within the meaning of first proviso to Section147 of the IT Act. There is also a difference of `21 lakhs between W.P(C) Nos.17509 & 17571/16 the registered value and the guideline value. Therefore, proceeding on the basis that there was escaped assessment, afterobtaining prior sanction of the Commissioner of Income Tax,notice under Section 148 was issued on 30/3/2015. Thoughnotices were sent to the available address, the same had beenreturned and finally it was served on 13/4/2015 at one of theassociated business concerns of the petitioner namely M/s SreeSakthi Paper mills, Kochi-16. 5.In the statement filed in WP(C) No. 17571/16, it isstated that the registered value of the property sold was `4.12crores whereas the guideline value adopted for stamp duty was`4,45,85,000/-. Other contentions are almost similar. 6.It is further contended that there is a distinction madeout between the words 'issue of notice' and 'service of notice'.For the purpose of reopening an assessment, it is enough that anotice is issued and it need not be served as such within theperiod of limitation. In this case, notice had been issued on30/3/2015 after having come to know about the escapement ofassessment which is well within the period of limitation. 7.Learned counsel for the petitioners having referred to -:5:- the statutory provisions placed reliance upon the judgment of this 5.In the statement filed in WP(C) No. 17571/16, it isstated that the registered value of the property sold was `4.12crores whereas the guideline value adopted for stamp duty was`4,45,85,000/-. Other contentions are almost similar. 6.It is further contended that there is a distinction madeout between the words 'issue of notice' and 'service of notice'.For the purpose of reopening an assessment, it is enough that anotice is issued and it need not be served as such within theperiod of limitation. In this case, notice had been issued on30/3/2015 after having come to know about the escapement ofassessment which is well within the period of limitation. 7.Learned counsel for the petitioners having referred to -:5:- the statutory provisions placed reliance upon the judgment of this Court in Travancore Diagnostics Pvt. Ltd v. AssistantCommissioner of Income Tax [(2016) 74 Taxmann.com 239(Kerala)]. On the other hand, learned counsel for the Departmentplaced reliance upon the judgment of the Apex Court inR.K.Upadhyaya v. Shanabhai P. Patel [(1987) 166 ITR 163(SC)] to prove the difference between 'issue of notice' and'service of notice'. In the above judgment, it was held that whenthe Income Tax Officer issued a notice of reassessment underSection 147(b) by registered post on 31/3/1970 and the noticewas received by the assessee on 03/04/1970, the notice was notbarred by limitation and the Income Tax Officer has jurisdiction toproceed to complete the assessment. InAssistantcommissioner of Income Tax v. Rajesh Jhaveri StockBrokers P. Ltd [(2007) 291 ITR 500] the Supreme Courtconsidered as to what would be the reason to believe ascontemplated under section 147 of the IT Act. It was held that theexpression 'reason to believe' would mean cause or justification. Ifthe assessing officer has cause or justification to know or supposethat income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The saidexpression cannot be read to mean that the assessing officershould have finally ascertained the fact by legal evidence orconclusion. What is required is “reason to believe” but not anestablished fact of escapement of income. At the stage of issuingof notice, the only question is whether there was relevant materialon which a person could have formed the requisite belief.Whether the material would conclusively prove escapement ofincome is not the concern at that stage. 8.In regard to maintainability of the writ petition, there isno doubt about the proposition that when an alternate remedy isavailable, the interference of Court is very limited especially intaxing statutes. However, when a question of law is raisedespecially in regard to limitation, which is clearly borne out byrecords, nothing prevents this Court from entertaining the saidwrit petition and deciding the same. Hence, there is no reason toreject the writ petition on the ground of maintainability. 9.The only question to be considered is whether theproceedings now initiated against the petitioners were beyond theperiod of limitation. In terms of Section 147, if the assessing 8.In regard to maintainability of the writ petition, there isno doubt about the proposition that when an alternate remedy isavailable, the interference of Court is very limited especially intaxing statutes. However, when a question of law is raisedespecially in regard to limitation, which is clearly borne out byrecords, nothing prevents this Court from entertaining the saidwrit petition and deciding the same. Hence, there is no reason toreject the writ petition on the ground of maintainability. 9.The only question to be considered is whether theproceedings now initiated against the petitioners were beyond theperiod of limitation. In terms of Section 147, if the assessing officer has reason to believe that any income chargeable to taxhas escaped assessment for any assessment year, he may,subject to the provisions of Sections 148 to 153, assess orreassess such income. As per Section 148, before makingassessment, reassessment or recomputation under Section 147,the assessing officer shall serve on the assessee a noticerequiring him to furnish within such period, as may be specified inthe notice, a return of his income of the income of any otherperson in respect of which he is assessable under the Act.Section 149 indicates that no notice under Section 148 shall beissued for the relevant assessment year if 4 years have elapsedfrom the end of the relevant assessment year, unless the casefalls under Clause b. Clause b further indicates that the timeshould not have elapsed more than six years from the end of therelevant assessment year unless the income chargeable to taxwhich has escaped assessment amounts to or likely to amount `1lakh or more for that year. The contention urged is that theassessment year involved is 2008-09 and the notice ought tohave been served within 4 years from the end of the relevantassessment year or six years from the end of the relevant -:8:- assessment year. According to the petitioners, they havedisclosed the facts relating to sale of immovable property duringthe course of assessment under Section 143(1). Therefore goingby the clauses under Sections 148 and 149, notice under section148 ought to have been served on or before 31/3/2015. Therespondent has generated the notice only on 30/3/2015 andserved on the petitioner on 13/4/2015. 10. In the impugned order, it is stated that a notice under Section 148 dated 30/3/2015 was generated to the address of theassessee at Ernakulam. However, on query it came to light thatthe assessee was not regularly staying at the above address andall his letters were being received by unauthorized persons.Hence without loss of further time, notice under Section 148 wassent to the assessee's another address on 31/3/2015. The saidnotice was returned unserved. Thereafter, gathering one moreaddress of the assessee, the letter was finally served on13/4/2015 on the assessee at one of the associated businessconcern namely Sree Sakthi Paper Mills Ltd, Kochi-16. It istherefore contended that the 13 days delay in service of notice isfully attributable to the assessee. The assessing officer further -:9:- observed that though under Section 148, the notice is to beserved, Section 151 (1) prescribes that notice should be issuedwithin 4/6 years time as the case may be. Further it is contendedthat subsequent to issue of notice under Section 148, theassessee's representative had appeared and participated in thereopened assessment proceedings and the issues involved in theassessments were put to them and their explanations wereobtained and placed on record. Therefore, placing reliance onsection 292B/292BBof the IT Act, it is held that there is a validnotice under Section 140. -:9:- observed that though under Section 148, the notice is to beserved, Section 151 (1) prescribes that notice should be issuedwithin 4/6 years time as the case may be. Further it is contendedthat subsequent to issue of notice under Section 148, theassessee's representative had appeared and participated in thereopened assessment proceedings and the issues involved in theassessments were put to them and their explanations wereobtained and placed on record. Therefore, placing reliance onsection 292B/292BBof the IT Act, it is held that there is a validnotice under Section 140. 11.Learned counsel for the petitioner argued that Section292B or 292BB has no application to the facts of the case and itis wrongly invoked. Apparently, the aforesaid provisions will notapply. The petitioner had raised an objection regardingmaintainability of the reassessment on the ground of limitation bystating that the notice under Section 148 has been issued beyondthe period of limitation. Therefore, the only question to beconsidered is whether any notice had been issued within theperiod of limitation. Apparently it is not so. Even according to thedepartment, notice was served only on 13/4/2015 beyond the -:10:- period of limitation. The question is whether there is requirementto serve the notice or whether it would suffice that the notice isissued by the department. The Apex Court in R.K. Upadhyaya(supra) had found out a distinction made between the words“issue of notice” and “service of notice” under the IT Act. It isheld that once the notice is issued within the period of limitation,jurisdiction becomes vested in the Income Tax officer to proceedto assess. However, section 148(1) provides for service of noticeas a condition precedent to making order of assessment. It isheld that “service under the new Act is not a condition precedentto conferment of jurisdiction on the Income Tax officer to dealwith the matter. But it is a condition precedent to the making ofthe order of assessment. It is further held that as Income TaxOfficer had issued notice within limitation, the officer can proceedto complete the assessment after complying with therequirement. Apparently in these cases, though a notice wasgenerated on 30/3/2015, it is not stated that they have issued thesaid notice. According to them, enquiry revealed that theassessee's address was at Chennai and therefore notice was sentin the said address which was returned without being served. -:11:- Thereafter gathering one more address of the assessee, the letterwas finally served on 13/4/2015. It would therefore be seen thatall attempts had been made by the officer to serve the notice onthe petitioners by generating the notice on 30/3/2015 andsending the same by registered post on 31/3/2015. Of course, nonotice was sent or issued in the address shown in the return. Butthere is an explanation for the same. Whenever notices are sent,it is being received by unauthorized persons and therefore theyhave found out the address of the assessee from the registereddocument and notice was sent by registered post on 31/3/2015.As held by the Apex Court, once the notice is issued, thereafter,assessment can be taken only after service of notice. There isproof to show that notice has been issued and therefore, I am ofthe view that the authorities have complied with the requirementsof the statute in accordance with law. 12.The judgment in Travancore Diagnostics (P) Ltd.,(supra), has no application to the facts of the present case. Theonly question to be considered in the present lis is regarding thelimitation. In so far as I have already found that the notice hadbeen issued within the period of limitation, it would suffice as far -:12:- as the proceedings are concerned. There is no merit in the contention urged on behalf of the petitioners. 12.The judgment in Travancore Diagnostics (P) Ltd.,(supra), has no application to the facts of the present case. Theonly question to be considered in the present lis is regarding thelimitation. In so far as I have already found that the notice hadbeen issued within the period of limitation, it would suffice as far -:12:- as the proceedings are concerned. There is no merit in the contention urged on behalf of the petitioners. Writ petitions are dismissed. However, nothing prevents thepetitioners from preferring appeal before the competent appellateauthority, and if the appeals are filed, the period during which thewrit petitions were pending before this Court shall stand excluded. Rp Sd/- A.M. SHAFFIQUE, JUDGE //TRUE COPY// PS TO JUDGE