Laxminarayan Agarwal (HUF) v. ITO

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The Tax Publishers2012 TaxPub(DT) 0863 (Mum-Trib) : (2012) 143 TTJ 0175 : (2012) 065 DTR 0070 INCOME TAX ACT, 1961 --Reassessment--Sanction under section 151Challenge after eight years vis-a-vis circumstantial evidence--In respect of the assessment year 1993-94, assessee appears to have filed return of income on 31-3-1996 declaring total income of Rs. 53,860. This return of income was filed beyond the period stipulated under the Act. Assessee, in the computation of income, showed loss in own business to the tune of Rs. 2,62,895 and losses under the head 'Capital gains' at Rs. 3,53,775 whereas 'Income from other sources' was declared at Rs. 3,16,827. Consequent to the reopening of assessment, by issuing a notice under section 148, an assessment was made on 27-3-2001 determining the total income of Rs. 42,35,735. It appears that similar issue was involved in the appeals of the family members of the same HUF. As could be noticed from the reasons recorded on 19-3-1999 the assessments of Members of HUF were completed under section 143(3) for the assessment year under consideration. In the aforementioned cases, losses under the head 'Capital gains' and business was disallowed. Since L (HUF) is also connected to the same group, having similar set of facts, the assessing officer was of the opinion that the income of the assessee had escaped assessment. Consequent to the issuance of notice under section 148, assessment was made in the case of L-HUF by disallowing the claim of loss under the head 'Short-term capital gains' and under the head 'Business'. It appears that the assessing officer, vide letter dated 19-3-1999, requested the Joint CIT, Mumbai to consider the proposal for reopening of assessment. In other words, permission was sought for issuing a notice under section 148. Thereafter, a notice under section 148 dated 23-3-1999 was issued and served on the assessee on 24-3-1999 wherein it was clearly mentioned that the notice was being issued after obtaining the necessary satisfaction of Jt. CIT, Mumbai. Assessee appears to have responded to the notice and finally assessment was completed under section 143(3) r/w section 147 on 27-3-2001 determining the total income at Rs. 43,35,730. It was submitted that the assessment order dated 27-3-2001 was set aside by the Tribunal with a direction to reconsider all the issues and in the consequential order passed by assessing officer sanction of Jt. CIT for issuing a notice under section 148 could not be placed on record but wrongly assumed that reassessment proceedings were validly initiated and this issue is under challenge in the second round of litigation. Against the order dated 27-3-2001 though an appeal was preferred before the Commissioner (Appeals) none appeared for assessee-HUF. Commissioner (Appeals) observed that the assessee-HUF has no material to dislodge the findings of assessing officer and thus affirmed the action of assessing officer, by his order dated 25-2-2002. As regards genuineness of loss he observed that number of transactions in shares were claimed to have been conducted through a person by name A Pinto but his existence could not be proved. Admittedly, the impugned assessment was made in 2001, by issuing a notice under section 148 on 23-3-1999 which date falls beyond four years from the end of the relevant assessment year. Therefore, in order to issue notice under section 148, to bring to tax any income which has escaped assessment, approval of the Jt. CIT has to be obtained, in the light of provisions of section 151(2). However, assessee appears to have not challenged the jurisdiction of the assessing officer in initiating reassessment proceedings, either during the course of assessment proceedings, carried out based on the issuance of notice under section 148, or during the course of first appellate proceedings. No such ground was raised even before the Tribunal when an appeal was preferred in 2003 which in itself was belated. This brings to the second round of litigation. For the purpose of passing an order under section 143(3) read with section 254, assessing officer issued notice under section 143(2)/142(1) from time to time. Though first notice was served upon the assessee fixing the case for hearing on 29-1-2009, in response to notice dated 26-11-2009 assessee filed letter dated 1-12-2009 stating that the conditions precedent required by section 151(2) for assuming jurisdiction under section 147 read with section 148 were not complied with and hence, notice issued under section 148 was without jurisdiction and should be quashed. It deserves to be noticed that the same issue was raised before the Tribunal, 'I' Mumbai Bench, for the first time, after a period of 8 years; reckoned from the date of issuance of notice under section 148. The limited point urged before the Tribunal was regarding the fulfilment of conditions prescribed under section 151(2) which, in turn, speaks of approval of the Jt. CIT in the event of issuing notice under section 148 beyond a period of 4 years from the end of the relevant assessment year. *Held:* The additional grounds raised before the Tribunal after 8 years, reckoned from the date of issuance of notice under section 148, were not admitted and the order of the Tribunal attained finality. It is not the case of the assessing officer that notice under section 148 was issued without obtaining prior approval of the Jt. CIT. On the contrary, the notice served upon the assessee indicates that the then ITO obtained approval from the Jt. CIT, Mumbai. Assessment was finally completed on 27-3-2001. Within this two years period the assessee did not choose to raise this issue before the assessing officer. Long after the file was transferred from the ITO, Ward 17(2), Mumbai to the ITO, Ward 13(1)(2), Mumbai the assessee-HUF sought to raise this issue before the Tribunal. Merely because the letter of the Jt. CIT was not available on record an adverse inference cannot be taken to hold that the assessing officer had not obtained the sanction of the Jt. CIT. As rightly observed by the Commissioner (Appeals) illustration (e) to section 114 of the Evidence Act comes to the aid of the respodnent. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0863 (Mum-Trib) : (2012) 143 TTJ 0175 : (2012) 065 DTR 0070

INCOME TAX ACT, 1961

--Reassessment--Sanction under section 151Challenge after eight years vis-a-vis circumstantial evidence--In respect of the assessment year 1993-94, assessee appears to have filed return of income on 31-3-1996 declaring total income of Rs. 53,860. This return of income was filed beyond the period stipulated under the Act. Assessee, in the computation of income, showed loss in own business to the tune of Rs. 2,62,895 and losses under the head 'Capital gains' at Rs. 3,53,775 whereas 'Income from other sources' was declared at Rs. 3,16,827. Consequent to the reopening of assessment, by issuing a notice under section 148, an assessment was made on 27-3-2001 determining the total income of Rs. 42,35,735. It appears that similar issue was involved in the appeals of the family members of the same HUF. As could be noticed from the reasons recorded on 19-3-1999 the assessments of Members of HUF were completed under section 143(3) for the assessment year under consideration. In the aforementioned cases, losses under the head 'Capital gains' and business was disallowed. Since L (HUF) is also connected to the same group, having similar set of facts, the assessing officer was of the opinion that the income of the assessee had escaped assessment. Consequent to the issuance of notice under section 148, assessment was made in the case of L-HUF by disallowing the claim of loss under the head 'Short-term capital gains' and under the head 'Business'. It appears that the assessing officer, vide letter dated 19-3-1999, requested the Joint CIT, Mumbai to consider the proposal for reopening of assessment. In other words, permission was sought for issuing a notice under section 148. Thereafter, a notice under section 148 dated 23-3-1999 was issued and served on the assessee on 24-3-1999 wherein it was clearly mentioned that the notice was being issued after obtaining the necessary satisfaction of Jt. CIT, Mumbai. Assessee appears to have responded to the notice and finally assessment was completed under section 143(3) r/w section 147 on 27-3-2001 determining the total income at Rs. 43,35,730. It was submitted that the assessment order dated 27-3-2001 was set aside by the Tribunal with a direction to reconsider all the issues and in the consequential order passed by assessing officer sanction of Jt. CIT for issuing a notice under section 148 could not be placed on record but wrongly assumed that reassessment proceedings were validly initiated and this issue is under challenge in the second round of litigation. Against the order dated 27-3-2001 though an appeal was preferred before the Commissioner (Appeals) none appeared for assessee-HUF. Commissioner (Appeals) observed that the assessee-HUF has no material to dislodge the findings of assessing officer and thus affirmed the action of assessing officer, by his order dated 25-2-2002. As regards genuineness of loss he observed that number of transactions in shares were claimed to have been conducted through a person by name A Pinto but his existence could not be proved. Admittedly, the impugned assessment was made in 2001, by issuing a notice under section 148 on 23-3-1999 which date falls beyond four years from the end of the relevant assessment year. Therefore, in order to issue notice under section 148, to bring to tax any income which has escaped assessment, approval of the Jt. CIT has to be obtained, in the light of provisions of section 151(2). However, assessee appears to have not challenged the jurisdiction of the assessing officer in initiating reassessment proceedings, either during the course of assessment proceedings, carried out based on the issuance of notice under section 148, or during the course of first appellate proceedings. No such ground was raised even before the Tribunal when an appeal was preferred in 2003 which in itself was belated. This brings to the second round of litigation. For the purpose of passing an order under section 143(3) read with section 254, assessing officer issued notice under section 143(2)/142(1) from time to time. Though first notice was served upon the assessee fixing the case for hearing on 29-1-2009, in response to notice dated 26-11-2009 assessee filed letter dated 1-12-2009 stating that the conditions precedent required by section 151(2) for assuming jurisdiction under section 147 read with section 148 were not complied with and hence, notice issued under section 148 was without jurisdiction and should be quashed. It deserves to be noticed that the same issue was raised before the Tribunal, 'I' Mumbai Bench, for the first time, after a period of 8 years; reckoned from the date of issuance of notice under section 148. The limited point urged before the Tribunal was regarding the fulfilment of conditions prescribed under section 151(2) which, in turn, speaks of approval of the Jt. CIT in the event of issuing notice under section 148 beyond a period of 4 years from the end of the relevant assessment year. Held: The additional grounds raised before the Tribunal after 8 years, reckoned from the date of issuance of notice under section 148, were not admitted and the order of the Tribunal attained finality. It is not the case of the assessing officer that notice under section 148 was issued without obtaining prior approval of the Jt. CIT. On the contrary, the notice served upon the assessee indicates that the then ITO obtained approval from the Jt. CIT, Mumbai. Assessment was finally completed on 27-3-2001. Within this two years period the assessee did not choose to raise this issue before the assessing officer. Long after the file was transferred from the ITO, Ward 17(2), Mumbai to the ITO, Ward 13(1)(2), Mumbai the assessee-HUF sought to raise this issue before the Tribunal. Merely because the letter of the Jt. CIT was not available on record an adverse inference cannot be taken to hold that the assessing officer had not obtained the sanction of the Jt. CIT. As rightly observed by the Commissioner (Appeals) illustration (e) to section 114 of the Evidence Act comes to the aid of the respodnent.