Case Law Details
Medapati Venkayamma Vs. ITO (ITAT Visakhapatnam)
In this case, the assessing officer has issued notice under section 142(1) within time limit allowed for filing return of income under section 139 of Income Tax Act. Since the assessee failed to respond to the notice under section 142(1), the assessing officer should invoke the provisions of section 144 and complete the assessment as per section 144 on or before 31-3-2011. Since the assessment is already initiated, during pendency of assessment proceedings, there is no case for invoking the provisions of reassessment under section 148 of Income Tax Act and reopening of the assessment.
The assessing officer issued notice under section 148 for reassessment, during the pendency of assessment proceedings by issue of notice under section 148 which is bad in law and cannot be sustained as per the detailed discussion made in the earlier paragraphs of this order. Accordingly, the notice issued under section 148 is quashed.
Full Text of the ITAT Order is as follows:-
This appeal is filed by the assessee against the order of the Commissioner (Appeals), (CIT (A))-11, Mumbai holding concurrent jurisdiction of Commissioner (Appeals), Visakhapatnam vide ITA No.CIT(A)-11/M/IT-649/2011-12 dated 26-2-2013 for the assessment year 2008-09.
2. The assessee filed appeal with five grounds on merits along with appeal memo in Form No. 36. Subsequently the assessee filed additional ground stating that the order passed under section 143(3) on 29-12-2011 is barred by limitation. In this case, the assessee has not filed return of income, hence, the assessing officer issued notice under section 142(1) on 29-1-2010 and the same was served on assessee on 15-2-2010. As per the notice issued under section 142(1) the assessee has to file return of income before the due date mentioned in the notice, but the assessee choose not to file the return of income. The assessing officer issued notice under section 148 on 16-11-2010 which was served on the assessee on 22-11-2010. In response to the notice issued under section 148, the assessee filed return of income on 9-3-2011 declaring total income of Rs. Nil and agricultural income of Rs.40,000. The assessing officer issued notice under section 143(2) and was served on the assessee on 30-5-2011. The assessing officer concluded the assessment on total income of Rs.51,01,400 under section 143(3) of Income Tax Act. The assessee filed appeal against the order of the assessing officer and the learned Commissioner (Appeals) confirmed the assessment order of the assessing officer and dismissed the appeal of the assessee. The learned Commissioner (Appeals) dismissed the technical ground in relation to issue of notice under section 147 in para 4.3 which reads as under :
“4.3. I have carefully considered the facts of the case, the submissions of the appellant and assessment order. In view of the facts on record, it is noticed that the assessee did not file its return of income suo-motu. In spite of several reminders by the assessing officer, the assessee was not filing its return of income. The conduct of the assessee clearly shows that had the assessing officer has not initiated the reassessment proceeding, the assessee would have evaded the tax that it was supposed to pay and therefore, the action of the assessing officer in taking recourse to section 147 is upheld and claim of the appellant is dismissed. Ground Nos. 1&2 is dismissed.”
3. Appearing for the assessee, learned Authorised Representative argued that in this case, notice under section 142(1) was issued by the assessing officer on 29-1-2010 directing the assessee to furnish the return of income. Though the assessee has not filed return of income response to notice under section 142(1), the assessing officer had initiated the assessment proceedings by issue of notice under section 142(1) and has to complete the assessment under section 144 by issue of show cause notice before 31-3-2011. There is procedure laid down in the Act for completion of the Best judgment assessment under section 144 in case of non-cooperative assessee. Therefore, the assessing officer is duty bound to complete the assessment within the time allowed under the Act for completing the assessment. By issue of notice calling for the return of income under section 142(1), the assessing officer has initiated the assessment proceedings and during the continuation of the proceedings under section 142(1), the assessing officer cannot issue notice under section 148 calling for the return of income which is nothing but initiation of parallel income tax proceedings under two different sections for the same source of income for the same assessment year and the same is not permitted by law. As per the law laid down under Income Tax Act, the assessing officer is allowed to call for the return of income and other relevant information for completing the assessment under section 142(1) of the Act. If the assessee files return of income, the scrutiny assessment proceedings would commence by issue of notice under section 143(2) and in case of non furnishing the return of income, the assessing officer should resort to Best judgment assessment under section 144 by issue of a show cause letter for making ex-parte assessment as per the information available with the assessing officer. Learned Authorized Representative further argued that when the assessment proceedings are already initiated by issue of notice under section 142(1) and called for the return of income, no notice under section 148 is required. Once the notice under section 142(1) is issued, the assessment is required to be completed within the time limit allowed under section 143(3) or 144. In this case, the assessment involved was of assessment year 2008-09 and the notice was issued on 29-1-2010. Therefore, the time limit for completion of assessment was expired on 31-3-2011. During the pendency of assessment proceedings, the assessing officer issued notice under section 148 on 16-11-2010 for reopening the assessment which is bad in law and has to be treated as invalid. When the assessment proceedings are already pending, the notice issued under section 148 is invalid and the assessment order passed under section 143(3) is barred by limitation.
4. On the other hand, the learned Departmental Representative argued that the assessing officer has issued notice under section 142(1) calling for the return of income for the assessment year 2008-09 on 29-1-2010 and the assessee failed to furnish the return of income by 25-2-2010 the due date given in the notice. Since the assessee did not choose to file the return of income within one year from the end of the relevant assessment year, or before the due date mentioned in the notice under section 142(1) the proceedings initiated under section 142(1) were deemed to have been concluded and hence, the assessing officer has initiated proceedings under section 147 of the Income Tax Act which is valid. The learned Departmental Representative contended that there is nothing wrong in issue of notice under section 148 and the assessment order passed by the assessing officer is valid.
5. We have heard the rival submissions and perused the material placed on record. The assessing officer has passed the order in this case under section 143(3) of Income Tax Act. In this case, the assessee did not file the return of income hence the assessing officer issued notice under section 142(1). There was no return of income filed by the assessee in response to the notice issued under section 142(1). The assessing officer is empowered to issue notice under section 142(1) for the purpose of making assessment under Income Tax Act and calling for information in the following circumstances.
(a) For the purpose of making the assessment, where the return is furnished under section 139 of Income Tax Act.
(b) Where the assessee has not furnished return of income directing the assessee to furnish the return of income in respect of his income or the income of any other person in respect of whom he is asses sable under this Act.
5.1 From the above, it is clear that the assessing officer is authorized to call for the return of income and also collect information for the purpose of making assessment under section 142(1). In case, if the assessee fails to furnish the return of income, provisions of section 144 of the Act applies and the assessing officer is required to complete the assessment as per the procedure laid down under section 143(2)/144 of Income Tax Act. The time limit for completion of assessment is within two years from the end of the relevant assessment year. In case, the assessee did not respond to the notice issued under section 142(1) and the assessing officer is duty bound to make assessment under section 144 by issue of show cause notice. For ready reference, we extract relevant provisions of section 142(1) and 144 of Income Tax Act.
Section 142(1) reads as under :
Inquiry before assessment.
142. (1) For the purpose of making an assessment under this Act, the assessing officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (1) of section 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified, —
(i) where such person has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, to furnish a return of his income or the income of any other person in respect of which he is asses sable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or :
Notice under section 142(1) is issued in case of non filer calling for the return of income. In the instant case, the assessing officer has issued the notice calling for return of income.
Section 144
Best judgment assessment.
144. (1) If any person–
(a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or
(b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or
(c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the assessing officer, after taking into account all relevant material which the assessing officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment :
Provided that such opportunity shall be given by the assessing officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment :
Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.
(2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1-4-1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.
5.2 In this case, the assessing officer has issued notice under section 142(1) within time limit allowed for filing return of income under section 139 of Income Tax Act. Since the assessee failed to respond to the notice under section 142(1), the assessing officer should invoke the provisions of section 144 and complete the assessment as per section 144 on or before 31-3-2011. Since the assessment is already initiated, during pendency of assessment proceedings, there is no case for invoking the provisions of reassessment under section 148 of Income Tax Act and reopening of the assessment.
5.3 The procedure for reassessment is also enshrined in section 147, 148 and 143 of Income Tax Act. Where the assessee is having taxable income but not filed the return of income, the assessing officer is empowered to issue notice under section 148 after recording the reasons. Similarly, where the assessee has furnished return of income, but the assessing officer has a reason to believe that income chargeable to tax has escaped assessment, after recording the reasons, the assessing officer has to take action under section 148 and issue notice under section 148. In both the instances, notice under section 148 is issued calling for the return of income from the assessee within a specified period. For ready reference, we extract the relevant provisions of Income Tax Act.
(Issue of notice where income has escaped assessment.
148. (1) Before making the assessment, reassessment or re computation under section 147, the assessing officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is asses sable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:)
5.4 On furnishing the return of income under section 148, the assessing officer can choose to drop the proceedings and proceed with the reassessment proceedings by issue of notice under section 143(2) of Income Tax Act and in case the assessee do not respond to notice under section 148, the assessing officer can proceed to complete the assessment under section 144, Best judgment. Once the return is filed in response to notice under section 148, provisions of sections 139, 143 and 144 applies in case of 148 also. Therefore, provisions of section 142(1), 148 are para materia for furnishing the return of income except recording the reasons in the case of section 148. Once the assessing officer has initiated assessment proceedings, the assessing officer cannot resort to reassessment unless the assessment proceedings are concluded. In this case, the assessment proceedings were initiated by issue of notice under section 142(1) and before concluding the assessment proceedings, the assessing officer has issued notice under section 148 for reassessment. Since the notice under section 148 is issued without concluding the assessment proceedings, the notice issued under section 148 is bad in law and cannot be sustained. The assessing officer is not permitted to carry on the assessment proceedings and reassessment proceedings simultaneously. Hon’ble ITAT Delhi Bench-SMC in the case of Sushil Kumar Jain v. Asstt. CIT ITA No. 181 (Delhi) of 2016 [AY 2006-07] 24-6- 2016 (Delhi-Trib.) held that two parallel proceedings on similar subject matter cannot be sustained. Proceedings under section 147 cannot stand during continuation of proceedings under section 154. Similarly, the Hon’ble Delhi High Court in the case of Mastech Technologies Ltd. v. Dy. CIT W.P. (C) No. 2858 of 2016 C.M. APPL. No. 11983 of 2016, dt. 13-7-2017 (Delhi), Delhi, held that where the reassessment initiated vide two notices and second notice was beyond prescribed period and first notice proceeding were not continued and nowhere it was stated that second notice was in continuation of first one, reassessment was invalid. In the instant case, the assessing officer has issued notice under section 142(1) and initiated assessment proceedings. The assessment proceedings under section 143(3)/144 should be completed within the period of limitation allowed to the assessing officer i.e. 31-3-2011 and the assessing officer allowed to get the assessment barred by limitation and passed the assessment order under section 143 on 29-12-2011 which was barred by limitation. Therefore, the assessment passed under section 143(3) on 29-12-2011 barred by limitation and the same is annulled.
5.5. The assessing officer issued notice under section 148 for reassessment, during the pendency of assessment proceedings by issue of notice under section 148 which is bad in law and cannot be sustained as per the detailed discussion made in the earlier paragraphs of this order. Accordingly, the notice issued under section 148 is quashed.
6. In the result, the appeal of the assessee is allowed.
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