Indian Tube Co. Ltd. v. Income Tax Officer

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The Tax Publishers2005 TaxPub(DT) 0304 (Cal-HC) : (2005) 003 (II) ITCL 0272 : (2005) 272 ITR 0439 : (2005) 198 CTR 0360 Indian Tube Co. Ltd. v. ITO () INCOME TAX --Reassessment----NOTICE UNDER SECTION 148Validity--Initially, the related two notices dated 11-2-1983, under section 148 were issued for the assessment years on the ground that the AO concerned had reason to believe that the income of the petitioner for the aforesaid periods escaped assessment within the meaning of section 147 . In the last paragraph of those two notices, although it was written that those notices were being issued after obtaining necessary satisfaction of the CIT, but thereafter the said paragraph was deleted. In pursuant to the aforesaid notices the petitioner had filed returns for those two years. Subsequently, AO issued fresh notices dated 29-3-1983, for the same assessment years and in paragraph 2 of those notices, it was specifically stated that those were issued after obtaining necessary satisfaction of the CIT. The assessee contended that it had already filed the returns, there was no scope for giving further notices under section 148 of the Act when no assessment had been made on the basis of the subsequent returns filed by the petitioner, in compliance with the earlier notices dated 11-2-1983. Held: When the petitioner filed returns in compliance with the invalid notices issued earlier under section 148, those returns should be treated as 'returns' and as such before making assessment on the basis of those returns, no further notice under the section 148 could be issued. Income Tax Act, 1961 s.148; Income Tax Act, 1961, s.147; Constitution of India, 1950, Article 226 Indian Tube Co. Ltd. v. ITO In the Calcutta High Court Bhaskar Bhattacharya J. C.R. No. 5743(W) of 1983 24 June 2004. Counsel : Dr. Devi Prosad Pal, Ms. Manisha Seal and Maloy Dhar, for the Assessee Rupendra Nath Mitra and Md. Nizamuddin for the Revenue. JUDGMENT Bhaskar Bhattacharya J. By this writ petition, the petitioner, an assessee under the Income Tax Act, 1961, has challenged four notices, two dated 11-2-1983, and the other two dated 29-3-1983 all issued under section 148 of the said Act. 2. Initially, the first two notices dated 11-2-1983, under section 148 of the Act were issued for the assessment years 1974-75 and 1975-76, respectively, on the ground that the Income Tax Officer concerned had reason to believe that the income of the petitioner for the aforesaid periods escaped assessment within the meaning of section 147 of the Act. In the last paragraph of those two notices, although it was written that those notices were being issued after obtaining necessary satisfaction of the Commissioner of Income-tax/Central Board of revenue but thereafter the said paragraph was deleted. 3. There is no dispute that pursuant to the aforesaid notices dated 11-2-1983, the petitioner had filed returns for those two years. Subsequently, the Income Tax Officer concerned issued fresh notices dated 29-3-1983, for those two assessment years and in paragraph 2 of those notices, it was specifically stated that those were issued after obtaining necessary satisfaction of the Commissioner of Income Tax/Central Board of revenue. 4. Dr. Pal, the learned advocate appearing on behalf of the petitioner, has taken a pure question of law in support of this writ application. 5. Dr. Pal first contends that the first two notices dated 11-2-1983, should be declared invalid, in view of the fact that without taking the necessary satisfaction of the Commissioner of Income Tax/Central Board of revenue, the Income Tax Officer issued such notice for reopening an assessment after the expiry of more than four years as required under the law. 6. As regards the other two notices dated 29-3-1983, Dr. Pal contends that pursuant to the earlier invalid notices dated 11-2-1983, the petitioner having already filed the returns, there was no scope for giving further notices under section 148 of the Act when no assessment had been made on the basis of the subsequent returns filed by the petitioner, in compliance with the earlier notices dated 11-2-1983. In support of such contention, Dr. Pal relies upon a Supreme Court decision in the case of CIT v. S. Raman Chettiar (1965) 55 ITR 630 (SC). 7. This application is opposed by the income-tax authority and Mr. Mitra, learned counsel appearing on behalf of the revenue, has opposed the aforesaid two contentions raised by Dr. Pal. 8. Mr. Mitra contends that the first two notices dated 11-2-1983, were patently illegal, inasmuch as, by those notices the Income Tax Officer tried to reopen assessments made more than four years earlier without taking the required satisfaction of the Commissioner of Income Tax/Central Board of revenue. Mr. Mitra contends, in view of such mistake, the Income Tax Officer concerned after taking satisfaction from the aforesaid authority issued the subsequent two notices dated 29-3-1983. According to Mr. Mitra, if any return is submitted by the petitioner in obedience to the earlier notice dated 11-2-1983, those are to be ignored, inasmuch as those returns were filed pursuant to an illegal demand. Mr. Mitra, thus, contends that there was no illegality in initiating fresh proceeding by giving fresh notice dated 29-3-1983, after complying with the formalities required under the Income Tax Act. In support of such contention, Mr. Mitra, relies upon two decisions of the Allahabad High Court, one in the case of Ashok Kumar Dixit v. ITO (1992) 198 ITR 669 (All) and the other in the case of Sukhlal Ice and Cold Storage Co. v. ITO (1993) 199 ITR 129 (All). 9. The only question that arises for determination, therefore, in this writ application is whether the Income Tax Officer could initiate fresh proceeding under section 148 of the Act on 29-3-1983, when pursuant to the earlier invalid notice dated 11-2-1983, the petitioner had already submitted the returns. 10. After hearing the learned advocates for the parties and after going through the aforesaid materials, I find that the question involved herein has practically been answered by the Supreme Court in the case of CIT v. S. Raman Chettiar (1965) 55 ITR 630 (SC) relied upon by Dr. Pal. In the said case, an invalid notice under section 34 of the Indian Income Tax Act, 1922, which is equivalent to section 148 of the present Income Tax Act, was served and the return was submitted pursuant to such notice. The question was whether that was a valid return and whether the notice of assessment ignoring such return could be upheld. 11. In such facts, the Supreme Court was of the view that although the notice under section 34 was invalid, the return submitted pursuant to that invalid notice was a 'return' within the meaning of section 22(3) of the said Act and the Income Tax Officer could not ignore or disregard that return and issue a fresh notice under section 34 on the assumption that there had been an omission or failure on the part of the assessee to make a return of his income under section 22, and on that ground the assessment under section 34 was held to be invalid. In the said case, the Supreme Court further held that there was no warrant in the Income Tax Act for treating returns as 'voluntary returns' and 'non-voluntary returns' and whatever be the impelling cause or motive, if a return, otherwise valid, is filed by an assessee before the receipt of a valid notice under section 34, it is to be treated as a return within the meaning of section 22(3) of the 1922 Act. 12. Applying the aforesaid principles to the facts of the case, it is clear that when the petitioner filed returns in compliance with the invalid notice dated 11-2-1983, under section 148 of the 1961 Act, those returns should be treated as 'returns' and as such before making assessment on the basis of those returns, no further notice under section 148 of the Act could be passed. 13. I now propose to deal with the two decisions cited by Mr. Mitra. In the case of Sukhlal Ice and Cold Storage Co. (1993) 199 ITR 129 (All), for reassessment, the Income Tax Officer issued a notice under section 148 of the Income Tax Act, 1961, for the assessment year 1982-83 but the Tribunal held that the notice was illegal because the reason for the issue of the notice was not on record. Subsequently, the Income Tax Officer issued another notice under section 147 of the Act for the same assessment year by setting out the necessary reason and after removal of defects pointed out earlier. In such a case, it was held that since the Tribunal had recorded a finding to the effect that the very initiation of the proceeding under section 147 by the earlier notice was without jurisdiction, there was no earlier proceeding subsisting when the second notice was served upon the assessee. 14. In the case before us, the earlier notice has not been declared by any Tribunal as invalid and at the same time the returns submitted pursuant to the earlier notices have not been assessed and thus the earlier proceedings were pending at the time of issuing the second notice and as such the principles laid down in the said decision cannot have any application to the facts of the present case. 15. In the case of Ashok Kumar Dixit (1992) 198 ITR 669 (All), during the pendency of a proceeding in pursuance of a notice issued earlier against the petitioner under section 148, a second notice under section 148 had been issued; but it does not appear from the judgment passed in the said case whether the assessee filed any return pursuant to such notice. Under such circumstances, the Division Bench of the Allahabad High Court was of the view that only because the earlier notice had been issued, that by itself in law cannot be a bar for issuing the second notice. Therefore, the said decision cannot have any application to a case, where pursuant to the first notice a return has already been filed. I have already pointed out that in this case, the second notice under section 148 was issued at a point of time when the assessee had already filed the return for the self-same period and no assessment had been made on the basis of such return. Therefore, in the case of Ashok Kumar Dixit (1992) 198 ITR 669 (All), the court had no occasion to deal with a situation like the one involved herein. 16. I, therefore, find that those two decisions cited by Mr. Mitra are of no avail to his client. 17. I, thus, quash the first two notices dated 11-2-1983, on the ground that the required satisfaction of the officer concerned was not taken for reopening assessments more than four years old. The other two notices dated 29-3-1983, are set aside on the ground that those were issued at a point of time when the assessee had already submitted the returns for those periods pursuant to an earlier invalid notice and so long as those two returns are not assessed in accordance with law, there was no scope for issuing further notice under section 148. 18. The writ application, thus, succeeds. Those four notices under section 148 are quashed. The respondents are directed to proceed with the assessment on the basis of the returns filed by the petitioner pursuant to the earlier notices. 19. There will be no order as to costs. OPEN SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2005 TaxPub(DT) 0304 (Cal-HC) : (2005) 003 (II) ITCL 0272 : (2005) 272 ITR 0439 : (2005) 198 CTR 0360

Indian Tube Co. Ltd. v. ITO ()

INCOME TAX

--Reassessment----NOTICE UNDER SECTION 148Validity--Initially, the related two notices dated 11-2-1983, under section 148 were issued for the assessment years on the ground that the AO concerned had reason to believe that the income of the petitioner for the aforesaid periods escaped assessment within the meaning of section 147 . In the last paragraph of those two notices, although it was written that those notices were being issued after obtaining necessary satisfaction of the CIT, but thereafter the said paragraph was deleted. In pursuant to the aforesaid notices the petitioner had filed returns for those two years. Subsequently, AO issued fresh notices dated 29-3-1983, for the same assessment years and in paragraph 2 of those notices, it was specifically stated that those were issued after obtaining necessary satisfaction of the CIT. The assessee contended that it had already filed the returns, there was no scope for giving further notices under section 148 of the Act when no assessment had been made on the basis of the subsequent returns filed by the petitioner, in compliance with the earlier notices dated 11-2-1983. Held: When the petitioner filed returns in compliance with the invalid notices issued earlier under section 148, those returns should be treated as 'returns' and as such before making assessment on the basis of those returns, no further notice under the section 148 could be issued.

Income Tax Act, 1961 s.148;

Income Tax Act, 1961, s.147;

Constitution of India, 1950, Article 226

Indian Tube Co. Ltd. v. ITO

In the Calcutta High Court Bhaskar Bhattacharya J.

C.R. No. 5743(W) of 1983 24 June 2004.

Counsel : Dr. Devi Prosad Pal, Ms. Manisha Seal and Maloy Dhar, for the Assessee Rupendra Nath Mitra and Md. Nizamuddin for the Revenue.

JUDGMENT

Bhaskar Bhattacharya J.

By this writ petition, the petitioner, an assessee under the Income Tax Act, 1961, has challenged four notices, two dated 11-2-1983, and the other two dated 29-3-1983 all issued under section 148 of the said Act.

2. Initially, the first two notices dated 11-2-1983, under section 148 of the Act were issued for the assessment years 1974-75 and 1975-76, respectively, on the ground that the Income Tax Officer concerned had reason to believe that the income of the petitioner for the aforesaid periods escaped assessment within the meaning of section 147 of the Act. In the last paragraph of those two notices, although it was written that those notices were being issued after obtaining necessary satisfaction of the Commissioner of Income-tax/Central Board of revenue but thereafter the said paragraph was deleted.

3. There is no dispute that pursuant to the aforesaid notices dated 11-2-1983, the petitioner had filed returns for those two years. Subsequently, the Income Tax Officer concerned issued fresh notices dated 29-3-1983, for those two assessment years and in paragraph 2 of those notices, it was specifically stated that those were issued after obtaining necessary satisfaction of the Commissioner of Income Tax/Central Board of revenue.

4. Dr. Pal, the learned advocate appearing on behalf of the petitioner, has taken a pure question of law in support of this writ application.

5. Dr. Pal first contends that the first two notices dated 11-2-1983, should be declared invalid, in view of the fact that without taking the necessary satisfaction of the Commissioner of Income Tax/Central Board of revenue, the Income Tax Officer issued such notice for reopening an assessment after the expiry of more than four years as required under the law.

6. As regards the other two notices dated 29-3-1983, Dr. Pal contends that pursuant to the earlier invalid notices dated 11-2-1983, the petitioner having already filed the returns, there was no scope for giving further notices under section 148 of the Act when no assessment had been made on the basis of the subsequent returns filed by the petitioner, in compliance with the earlier notices dated 11-2-1983. In support of such contention, Dr. Pal relies upon a Supreme Court decision in the case of CIT v. S. Raman Chettiar (1965) 55 ITR 630 (SC).

7. This application is opposed by the income-tax authority and Mr. Mitra, learned counsel appearing on behalf of the revenue, has opposed the aforesaid two contentions raised by Dr. Pal.

8. Mr. Mitra contends that the first two notices dated 11-2-1983, were patently illegal, inasmuch as, by those notices the Income Tax Officer tried to reopen assessments made more than four years earlier without taking the required satisfaction of the Commissioner of Income Tax/Central Board of revenue. Mr. Mitra contends, in view of such mistake, the Income Tax Officer concerned after taking satisfaction from the aforesaid authority issued the subsequent two notices dated 29-3-1983. According to Mr. Mitra, if any return is submitted by the petitioner in obedience to the earlier notice dated 11-2-1983, those are to be ignored, inasmuch as those returns were filed pursuant to an illegal demand. Mr. Mitra, thus, contends that there was no illegality in initiating fresh proceeding by giving fresh notice dated 29-3-1983, after complying with the formalities required under the Income Tax Act. In support of such contention, Mr. Mitra, relies upon two decisions of the Allahabad High Court, one in the case of Ashok Kumar Dixit v. ITO (1992) 198 ITR 669 (All) and the other in the case of Sukhlal Ice and Cold Storage Co. v. ITO (1993) 199 ITR 129 (All).

9. The only question that arises for determination, therefore, in this writ application is whether the Income Tax Officer could initiate fresh proceeding under section 148 of the Act on 29-3-1983, when pursuant to the earlier invalid notice dated 11-2-1983, the petitioner had already submitted the returns.

10. After hearing the learned advocates for the parties and after going through the aforesaid materials, I find that the question involved herein has practically been answered by the Supreme Court in the case of CIT v. S. Raman Chettiar (1965) 55 ITR 630 (SC) relied upon by Dr. Pal. In the said case, an invalid notice under section 34 of the Indian Income Tax Act, 1922, which is equivalent to section 148 of the present Income Tax Act, was served and the return was submitted pursuant to such notice. The question was whether that was a valid return and whether the notice of assessment ignoring such return could be upheld.

11. In such facts, the Supreme Court was of the view that although the notice under section 34 was invalid, the return submitted pursuant to that invalid notice was a 'return' within the meaning of section 22(3) of the said Act and the Income Tax Officer could not ignore or disregard that return and issue a fresh notice under section 34 on the assumption that there had been an omission or failure on the part of the assessee to make a return of his income under section 22, and on that ground the assessment under section 34 was held to be invalid. In the said case, the Supreme Court further held that there was no warrant in the Income Tax Act for treating returns as 'voluntary returns' and 'non-voluntary returns' and whatever be the impelling cause or motive, if a return, otherwise valid, is filed by an assessee before the receipt of a valid notice under section 34, it is to be treated as a return within the meaning of section 22(3) of the 1922 Act.

12. Applying the aforesaid principles to the facts of the case, it is clear that when the petitioner filed returns in compliance with the invalid notice dated 11-2-1983, under section 148 of the 1961 Act, those returns should be treated as 'returns' and as such before making assessment on the basis of those returns, no further notice under section 148 of the Act could be passed.

13. I now propose to deal with the two decisions cited by Mr. Mitra. In the case of Sukhlal Ice and Cold Storage Co. (1993) 199 ITR 129 (All), for reassessment, the Income Tax Officer issued a notice under section 148 of the Income Tax Act, 1961, for the assessment year 1982-83 but the Tribunal held that the notice was illegal because the reason for the issue of the notice was not on record. Subsequently, the Income Tax Officer issued another notice under section 147 of the Act for the same assessment year by setting out the necessary reason and after removal of defects pointed out earlier. In such a case, it was held that since the Tribunal had recorded a finding to the effect that the very initiation of the proceeding under section 147 by the earlier notice was without jurisdiction, there was no earlier proceeding subsisting when the second notice was served upon the assessee.

14. In the case before us, the earlier notice has not been declared by any Tribunal as invalid and at the same time the returns submitted pursuant to the earlier notices have not been assessed and thus the earlier proceedings were pending at the time of issuing the second notice and as such the principles laid down in the said decision cannot have any application to the facts of the present case.

15. In the case of Ashok Kumar Dixit (1992) 198 ITR 669 (All), during the pendency of a proceeding in pursuance of a notice issued earlier against the petitioner under section 148, a second notice under section 148 had been issued; but it does not appear from the judgment passed in the said case whether the assessee filed any return pursuant to such notice. Under such circumstances, the Division Bench of the Allahabad High Court was of the view that only because the earlier notice had been issued, that by itself in law cannot be a bar for issuing the second notice. Therefore, the said decision cannot have any application to a case, where pursuant to the first notice a return has already been filed. I have already pointed out that in this case, the second notice under section 148 was issued at a point of time when the assessee had already filed the return for the self-same period and no assessment had been made on the basis of such return. Therefore, in the case of Ashok Kumar Dixit (1992) 198 ITR 669 (All), the court had no occasion to deal with a situation like the one involved herein.

16. I, therefore, find that those two decisions cited by Mr. Mitra are of no avail to his client.

17. I, thus, quash the first two notices dated 11-2-1983, on the ground that the required satisfaction of the officer concerned was not taken for reopening assessments more than four years old. The other two notices dated 29-3-1983, are set aside on the ground that those were issued at a point of time when the assessee had already submitted the returns for those periods pursuant to an earlier invalid notice and so long as those two returns are not assessed in accordance with law, there was no scope for issuing further notice under section 148.

18. The writ application, thus, succeeds. Those four notices under section 148 are quashed. The respondents are directed to proceed with the assessment on the basis of the returns filed by the petitioner pursuant to the earlier notices.

19. There will be no order as to costs.

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