Case Law Details
Piramal Swasthya Management and Research Institute Vs ACIT (Telangana High Court)
The Telangana High Court allowed the writ petition challenging the order dated 31.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice issued under Section 148.
The petitioner is a society registered under the AP Societies Registration Act, 2001 and under Section 12A of the Income Tax Act, established to undertake studies and research relating to health services and manage health-related programmes. For Assessment Year 2017-18, it filed its return declaring nil income, claimed a refund of Rs.7,29,68,048, and claimed exemption under Section 11(2) in respect of an accumulated amount of Rs.3,43,34,021.
The petitioner stated that, with effect from 01.04.2016, Rule 17 of the Income Tax Rules, 1962 required electronic filing of Form 10 within the time prescribed under Section 139(1). Owing to oversight during the first year of the new requirement, Form 10 was not filed electronically with the return, although it had been prepared manually before filing the return. During scrutiny proceedings initiated under Sections 143(2) and 142(1), the petitioner furnished the required documents, uploaded Form 10 subsequently, explained the accumulation and investments under Sections 11(2) and 11(5), and provided a copy of Form 10. After examining these materials, granting a personal hearing, and considering the manually filed Form 10, the Assessing Officer completed the assessment under Section 143(3) on 26.07.2019 by accepting the return of income.
More than four years after the end of the relevant assessment year, the Assessing Officer issued a notice dated 27.02.2023 under Section 148A(b), stating that Form 10 had not been electronically submitted as required under Rule 17 and, therefore, the petitioner was not entitled to the benefit under Sections 11(2) and 11(5). It was proposed to add Rs.3,43,34,021 to the total income. The petitioner replied that the issue relating to filing and electronic transmission of Form 10 had already been examined during the original assessment proceedings and that reopening the assessment amounted to an impermissible review of the earlier assessment order. The petitioner also relied on the Supreme Court judgment in CIT v. Nagpur Hotels Owners Association. Despite this, the impugned order under Section 148A(d) and the consequential notice under Section 148 were issued on 31.03.2023.
The respondents contended that a revenue audit objection had pointed out that Form 10 had been filed offline instead of electronically before filing the return. Based on this objection, proceedings under Section 148A were initiated. They also contended that the petitioner had claimed the benefit of accumulation beyond permissible investments, that Form 10 had not been electronically filed before the return, and that the alleged escaped income exceeded Rs.50 lakh, attracting the extended limitation under Section 149(1)(b). The respondents further argued that the reopening was supported by Explanation I(ii) to Section 148, inserted by the Finance Act, 2022, treating an audit objection as valid information, and that the proceedings were within limitation.
The High Court framed two issues: whether the impugned proceedings amounted to a review of the earlier assessment order passed by the same authority and whether the absence of electronic filing of Form 10 under Rule 17(2) and (3) justified reopening when the form had already been examined and accepted during the original assessment.
The Court observed that it was undisputed that electronic filing of Form 10 became mandatory from the relevant assessment year. It noted that the petitioner had disclosed that Form 10 had initially been filed manually, subsequently uploaded it in response to the notice dated 18.01.2019, and that the Assessing Officer acknowledged the upload, examined the return and Form 10, and completed the assessment on 26.07.2019.
The Court held that once the manually submitted Form 10 had been examined and accepted during the original assessment, the Assessing Officer could not reopen the completed assessment on the ground that Form 10 had not originally been electronically submitted. It held that reopening in such circumstances amounted to a review of the completed assessment, which was impermissible. The Court rejected the respondents’ contention that non-electronic filing of Form 10 justified reopening. It further stated that it is a settled principle that an Assessing Officer cannot review an order already passed by the same authority and referred to the Supreme Court’s decision in Nagpur Hotels Owners Association.
Accordingly, the Court concluded that the impugned proceedings dated 31.03.2023 amounted to a review of the assessment order dated 26.07.2019 passed by the same authority. It held that the impugned proceedings suffered from gross illegality, were vitiated by law, and were liable to be set aside. The writ petition was allowed, and the impugned order under Section 148A(d) and the consequential notice under Section 148, both dated 31.03.2023, were set aside and quashed. No order as to costs was made, and pending miscellaneous petitions, if any, stood closed.
Cases Discussed:
1. Assistant Commissioner (CT), LTU, Kakinada & Ors. vs. M/s. Glaxo Smith Kline Consumer Health Care Limited 2020 (19) SCC 681.
2. CIT v. Nagpur Hotels Owners Association (2001) 247 ITR 201.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
The present writ petition has been filed for the following reliefs:
“to issue writ, order or direction, (i) quashing the order, dt.31.03.2023, bearing No. ITBA/ AST/F/148A/2022-23/105180606401(1) passed under Section 148A(d) of the Act(Annexure P9); (ii) quashing the notice, dt.31.03.2023, bearing No .ITBA/AST/S/148_1/2022-23/1051806617(1) issued under Section 148 of the Act (Annexure 10) and (iii) pass such other or further orders as this Court may deem fit in the facts and circumstances of the case, in the interest of justice and equity”.
2. The brief facts of the case are that the petitioner is a society registered under the AP Societies Registration Act, 2001 and is also registered under Section 12A of the Income Tax Act, 1961 (for short, “the Act”), established with the main object of carrying out extensive studies and research into various aspects relating to health services, besides managing health-related programmes for Government departments and other organizations with a view to improving access to quality healthcare. Further, during the financial year 2016-17, the petitioner launched several community outreach programmes in the States of Andhra Pradesh, Assam, Rajasthan and Telangana, in collaboration with the respective State Governments.
3. For the assessment year 2017-18, the petitioner filed its return of income declaring nil income and claimed a refund of Rs.7,29,68,048/-, and the petitioner had accumulated an amount of Rs.3,43,34,021/- and claimed exemption under Section 11(2) of the Act.
4. It is further contended that so as to claim benefit under Section 11(2) of the Act, with effect from 01.04.2016, for the financial year 2016-17, under Rule 17 of the Income Tax Rules 1962 (hereinafter referred to as “the Rules”) filing of Form 10 electronically was mandatory within the stipulated time allowed for filing the return of income under Section 139(1) of the Act, but due to oversight, as the said requirement was introduced in the very same financial year, the petitioner did not file Form 10 electronically along with the return of income, nonetheless the same had been prepared manually well before the filing of the return.
5. It is further stated that the 1st respondent taken up the case of the petitioner for scrutiny for the Assessment Year 2017-18, and issued a notice, dt.13.08.2018, under Section 143(2) of the Act calling upon the petitioner to produce all evidence in support of the return of income filed, and in response thereto, the petitioner furnished all the necessary documents, and insofar as submission of Form 10, the petitioner, on specific discussion with the 1st respondent, uploaded the same subsequently, though it was prepared manually prior to filing of the return of income.
6. Further, the 1st respondent, issued a notice, dt.18.01.2019, under Section 142(1) of the Act calling upon the petitioner to furnish various documents/information, including specific details relating to filing of Form 10 and the deposits thereunder, to claim the benefit under Sections 11(2) and 11(5) of the Act, and the petitioner submitted a detailed reply on 24.01.2019 along with all supporting documents and explanation relating to the amount set aside/accumulated along with the bank accounts in which such amounts were deposited. It was specifically urged that the accumulated funds were invested in fixed deposits and savings bank accounts in scheduled banks, which satisfied the requirements of Sections 11(2) and 11(5) of the Act, and a copy of Form 10 was furnished along with the said reply.
7. Further, the 1st respondent had specifically examined the issue relating to non-filing of Form 10 electronically in pursuance of Rule 17(2) and (3) of the Rules, as well as in compliance of investments in terms of Section 11(5) of the Act, granted a personal hearing on 06.03.2019, and upon examination of the explanation submitted by the petitioner along with the documents and information, along with Form 10 filed manually, completed the assessment under Section 143(3) of the Act vide order dt.26.07.2019, by accepting the return of income.
8. While matters stood thus, the 1st respondent having completed the assessment, vide the assessment order dt.26.07.2019, after a period of four years from the end of the relevant Assessment Year(2017-18), issued a notice, dt.27.02.2023, under Section 148A(b) of the Act, directing the petitioner to show cause as to why a notice under Section 148 of the Act should not be issued stating that certain income had escaped assessment. In the said notice it was stated that as per Rule 17 of the Rules, Form 10 was required to be electronically submitted along with the return of income and since the same was not electronically transmitted, as such, the petitioner was not eligible for the benefit under Section 11(2) r/w Section 11(5) of the Act, and accordingly, the amount of Rs.3,43,34,021/- set apart under Section 11(2) was proposed to be added to the total income.
9. In response to the said notice, the petitioner submitted a detailed reply, dt.07.03.2023, inter alia contending that the assessment proceedings under Section 143(3) of the Act had already been concluded by order, dt.26.07.2019, and that the issue relating to filing of Form 10, including its electronic transmission under Section 17(2) & (3) of the Act, had been examined during the original assessment proceedings by accepting the physical filing of the same, by the then assessing officer, and further, once the assessment was completed and orders were passed, the very same authority cannot reopen the same, as it amounts to reviewing its own order, which is impressible under law.
10. Further, in support of the said contentions, the petitioner had placed reliance on the judgment of the Hon’ble Supreme Court in the case of CIT v. Nagpur Hotels Owners Association1 and contends that once the requirements under the Act are fulfilled before the completion of the assessment proceedings, the petitioner is entitled to claim benefit under Sections 11(2) & (5) of the Act.
11. It is further stated that the 1st respondent failed to appreciate the law laid down by the Hon’ble Supreme Court in Nagpur Hotels Owners Association’s case (supra), passed the impugned order dt.31.03.2023 under Section 148A(d) of the Act bearing No. ITBA/AST/F/148A/2022-23/ 105180606401(1) and consequently issued notice bearing No. ITBA/AST/S/148_1/2022- 23/1051806617(1), under Section 148 of the Act on the same day of 31.03.2023, which are challenged in the present writ petition.
12. The 1st respondent filed counter affidavit contending that the assessment for the year 2017-18 was originally completed under Section 143(3) of the Act on 26.07.2019 and subsequently, a revenue audit objection was raised on the ground that the petitioner had filed Form 10 (statement for accumulation under Section 11(2)) in offline mode during the scrutiny proceedings, whereas the law mandates that it must be filed electronically before filing the return of income. Further, it is stated that based on the said audit objection, a notice under Section 148A(d) of the Act was issued on 27.02.2023 to the petitioner, and after considering the petitioner’s response, the order under Section 148A(d), dt.31.03.2023 was passed, recording the satisfaction that income chargeable to tax had escaped assessment on the following grounds:
a) The benefit of accumulation under Section 11(2) can only be allowed to the extent of investments made during the year of accumulation, whereas the petitioner claimed benefits from deposits made in earlier years;
b) Form 10 was filed offline and not electronically prior to the filing of the return of income; and
c) The income alleged to have escaped assessment is Rs.3,43,34,021/-, which exceeds Rs.50 lakhs and is represented in the form of assets, thereby attracting the extended limitation under Section 149(1)(b) of the Act.
13. It was further contended that, in view of the above, as proper procedure was followed, the impugned proceedings are not vitiated by law, and the notice under Section 148 has been validly issued for reopening the case under Section 147 of the Act, as such, there is no legal impediment in the impugned proceedings, and the writ petition is devoid of merit and liable to be dismissed.
14. Heard Sri T. Suryanarayana, learned Senior Counsel representing Sri K. Raghavendra Rao, learned counsel for petitioner, Sri A. Ramakrishna Reddy, learned Standing Counsel for respondent No.1, and Sri Vijay K. Punna, learned Senior Standing Counsel for respondents No.2.
15. Learned Senior Counsel, while reiterating the writ averments contended that as the impugned order, along with the consequential notice issued under Section 148 of the Act, having been passed after a lapse of more than four years from the end of the relevant assessment year, are in violation of the statutory stipulation of revision.
16. It is further contended that the 1st respondent had no jurisdiction to review the earlier orders passed by the very same level of authority on 26.07.2019, and thus, the writ petition is maintainable, and this Court has ample jurisdiction and authority to entertain the same in view of the settled principles of law as enunciated by the Hon’ble Supreme Court in the case of Assistant Commissioner (CT), LTU, Kakinada & Ors. vs. M/s. Glaxo Smith Kline Consumer Health Care Limited2 and Nagpur Hotels Owners Association’s case (supra).
17. On the other hand, Sri Vijay K. Punna, learned Senior Standing Counsel, along with learned Standing Counsel Sri A. Ramakrishna Reddy, appearing for respondent No.1, would contend that the reopening of the petitioner’s case is covered under Explanation I(ii) to Section 148, as inserted by the Finance Act, 2022, which deems any audit objection suggesting improper assessment to constitute valid “information” for the purpose of Section 147 proceedings. It is also contended that, under Section 149(1)(b), since the alleged escapement exceeds Rs.50 lakhs, the respondent authorities have jurisdiction, and the impugned show-cause notice along with the subsequent proceedings have been issued within the prescribed limitation.
18. Having given earnest consideration to the submissions made by the learned counsel appearing for the respective parties, perused the material on record.
19. In the above factual matrix, the points which fall for consideration before this Court are:
1. Whether the impugned proceeding, dt.31.03.2023, amounts to a review of the earlier assessment order passed by the very same authority on 26.07.2019; and
2. Whether the fact that Form 10, which is mandated to be electronically transmitted under Rule 17(2) & (3) of the Income Tax Rules, 1962, was not electronically filed, has any impact on the reopening of proceedings, when the said form had already been verified and accepted by the assessment authorities in the earlier assessment order, dt.26.07.2019.
20. In the light of the points framed as above, the main grievance of the learned Senior Counsel for the petitioner is that once Form 10 was examined, albeit filed manually, and accepted by the authorities as correct and valid, resulting the assessment proceedings being completed and order, dt.26.07.2019, was passed, and the very same authority cannot re-open or review the same order, and thus, the impugned proceedings are bad in law.
21. It is an admitted fact that while Form 10 was required to be electronically submitted under Rule 17(2) & (3) of the Income Tax Rules, 1962, this requirement came into effect from the very assessment year 2017-18(FY 2016-17) in question. Since the Form 10 was not electronically transmitted before filing the return, the petitioner had filed the same manually along with the return. Further, the petitioner, in paras 14, 15 & 16 of its letter, dt.24.01.2019, addressed to the Assistant Commissioner of Income Tax (Exemptions), had clearly stated this fact. Subsequently, in response to a notice, dt.18.01.2019, issued by the 1st respondent, the petitioner uploaded Form 10, which was acknowledged by the 1st respondent vide acknowledgment No.24011911109655, and the 1st respondent by duly examining the return of income for the relevant assessment year, and having satisfied with the same, has completed the assessment and passed the assessment order, dt.26.07.2019.
22. Further, once the assessment proceedings are completed and assessment order is passed, the 1st respondent cannot reopen the assessment proceedings by issuing the impugned show-cause notice, dt.27.02.2023, alleging that Form 10 had not been electronically submitted, thereby disentitling the petitioner to the benefit of Sections 11(2) and 11(5) of the Act in respect of the amount of Rs.3,43,34,021/-, and thus, the impugned show-cause notice is untenable, for the simple reason that the return of income, along with Form 10, though filed manually, was duly examined and accepted by the assessment authorities at the time of the original assessment order, dt.26.07.2019, pursuant to which, the assessment proceedings were completed, in all respects and the order was validly passed, and the assessment officer once accepts the manually submitted Form 10 and completes the assessment, reopening of the said completed assessment would amount to review, which is impermissible under law. Thus, the contention of the learned Senior Standing Counsel as the Form 10 was not electronically submitted as mandated under Rules 17(2) & (3), the earlier assessment is liable to reopened, does not hold merit and is negated.
23. It is settled principle of law that an Assessing Officer cannot review an order already passed by the very same authority, it amounts to change of opinion or review, which is impermissible under law. This principle was upheld by the Hon’ble Supreme Court in Nagpur Hotels Owners Association’s case (supra).
24. In view of the above findings, we are of the considered view that the impugned proceeding, dated 31.03.2023, amount to a review of the earlier assessment order, dt.26.07.2019, passed by the very same authority. Thus, in our considered view, the impugned order suffers from gross illegality, vitiated by law, perverse, and is liable to set aside. Thus, the points framed by this Court are answered in favour of the petitioner and against the respondents.
25. Accordingly, the Writ Petition is allowed and the impugned order, dt.31.03.2023, bearing No.ITBA/AST/S/148_1/2022-23/ 1051806617(1), and the consequential order, dt.31.03.2023, bearing No. ITBA/AST/F/148A/2022-23/ 105180606401(1) are hereby set aside and quashed. No order as to costs.
As a sequel, miscellaneous petitions pending, if any, shall stand closed.
Notes:
1 (2001) 247 ITR 201
2 2020 (19) SCC 681
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