Thanthi Trust v. Commissioner of Income Tax — 1998 DIGILAW 1032 (MAD)

Judgment :- Babu, J. The assessee is a charitable trust engaged in the business of publishing newspapers. For the assessment year 1957-58, exemption under section 4(3)(1) of the Indian Income-tax Act, 1922 was granted while completing the assessment on 23-2-1966. Subsequently, on 29-10-1969, the Assessing Officer served a notice on the assessee under section 148 of the Act proposing to re-open the assessment. That notice along with other notice was challenged by the assessee. That writ petition, insofar as it related to the assessment year 1957-58 was concerned, was dismissed by this Court on 21-12-1972. The decision of this Court is in Thanthi Trust v. ITO. Thereafter, the reassessment was completed on 22-4-1997. The ITO computed the income at Rs. 4, 20, 000 and levied the tax thereon. The Commissioner to whom the assessee had appealed upheld the order of the Assessing Officer. The assessee went up in further appeal to the Tribunal. The Tribunal gave relief to the extent of Rs. 80, 000. The assessee being aggrieved by the finding of the Tribunal that the re-opening of the assessment was barred by limitation; that the assessee had not been given sufficient opportunity before the order came to be made and that the finding that the Assessing Officer could include a sum of Rs. 2, 25, 000 in the assessed income, although that amount had been treated as deposit in the original assessment and there were no new facts and that no notice had been issued under section 147(b) of the Act, have caused this reference to be made. 2. The first submission of the learned counsel for the assessee was that the proceedings were barred by limitation, as the proceedings were not completed within four years from the end of the assessment year in which the notice under section 148 was served on the assessee. It is not in dispute that the notice was served on 29-10-1969 and the period of limitation would end on 1-4-1974 and that the Explanation to section 153 of the Act had been invoked by the assessing authority; it is the case of the assessee that that explanation is unavailable to the authority. It is not in dispute that the notice was served on 29-10-1969 and the period of limitation would end on 1-4-1974 and that the Explanation to section 153 of the Act had been invoked by the assessing authority; it is the case of the assessee that that explanation is unavailable to the authority. It was also sought to be contended that the period of limitation fixed is four years, that it commences on the last date of the assessment year in which the notice was issued and ends at the expiry of the period of four years from the date. Section 153(2) fixes the time-limit within which period the proceedings should be concluded. It does not impose a bar on the officer from continuing the proceeding till the assessment year in which he issued the notice had come to an end. The entire period commencing from the date of issue of a notice till the expiry of the period of four years from the last date of the assessment year in which that notice was served is available to the authority for completing the proceeding. 3. The contention of the assessee that the word 'assessment' used in the Explanation to section 153 should be read as being applicable only to assessment and not to reassessment, though superficially attractive, cannot be accepted. Section 153 deals with the time-limit for completion of assessments and reassessments. Sub-section (1) refers to orders of assessment under section 143 or 144, sub-section (2) refers to orders of assessment, reassessment or recomputation under section 147, sub-section (2A) which was later introduced with effect from 1-4-1971 overrides sub-sections (1) and (2) in respect of orders made under the provisions mentioned therein for which a special period of limitation is provided for in the sub-section. Sub-section (3) provides that sub-sections (1) and (2) are not applicable to the classes of assessments, reassessments and recomputations mentioned in sub-clauses (i) to (iii) of section 153(3). The Explanation comes thereafter and the Explanation is applicable to the entire section and not to any one part. The Explanation 1 opens with the words 'In computing the period of limitation for the purposes of this section :-'. Sub-clause (ii) under Explanation 1 provides that 'the period during which the assessment proceeding is stayed by an order or injunction of any Court, shall be excluded'. 4. The Explanation 1 opens with the words 'In computing the period of limitation for the purposes of this section :-'. Sub-clause (ii) under Explanation 1 provides that 'the period during which the assessment proceeding is stayed by an order or injunction of any Court, shall be excluded'. 4. The learned counsel for the assessee contended that the scheme of section 143 clearly indicates that the legislative intent was to deal with cases of assessment differently from the cases of reassessment and the periods of limitation specified in section 153 alone are applicable to the proceedings mentioned in the several parts of the section. If after having dealt with cases of re-assessment, Parliament chose to use the term 'assessment' in the Explanation, that would indicate legislative intent to confine the application of sub-clause (ii) in Explanation 1 only to cases of assessment and not to any other proceeding. 5. This argument was advanced in the background of the admitted fact that shortly after the notice had been issued to the assessee under section 148 on 29-10-1969, the assessee had moved the High Court and obtained an order of stay of the proceedings as on 24-11-1969 and that stay order continued to be operative till 21-12-1972. If the period during which the stay was operative is excluded while computing the period of limitation, the order made by the authority would be within the time prescribed under section 153(4). The endeavour of the assessee is to take advantage of its own action in preventing the authority from completing the proceeding for a period of well over two years during which stay was in force. 6. The learned counsel placed strong reliance on the judgment of this Court in the case of CIT v. Simson & Mc Conechy Ltd., wherein it was held that though under section 2(4) 7of the Income-tax Act, 1961, assessment includes reassessment, that definition would apply unless the context otherwise requires and the provisions made under section 153(1) and (2) maintaining a clear-cut distinction between the respective cases contemplated by them show that the expression 'assessment' in section 153(1) cannot be understood as including a reassessment as defined in section 2(8) of the Act. To arrive at that inclusion, the Court referred to the fact that the opening words of section 153(1) cannot be construed as including an order of reassessment as - contemplated under section 147(a) or 147(b) with reference to which a separate and independent provision has been made tinder section 153(2). 7. That decision, in our view, does not assist the assessee in any manner. What was held by the Court therein was that the matter which had been specifically dealt within sub-section (2) of section 153, could not be said to have comprehended within sub-section (1) which refers to assessment proceedings alone, while sub-section (2) refers to reassessment proceedings as well, by falling back on the definition of assessment in section 2(8) of the Act. The question here is not as to whether section 153(3) can be invoked for passing an order of reassessment under section 147(a) or 147(b). It is the scope of the Explanation which is in issue, the Explanation is meant to apply to the entire section. The matter dealt within Explanation 1 (ii) is the effect of an order of stay granted by the Court against the completion of the proceedings referred to in the section. If the Parliament chooses to refer all the proceedings referred to in section 153 in the several sub-sections (1), (2), (2A) and (3) by referring to them compendiously as assessment proceeding, there can possibly be no objection to such a course, having regard to the definition of assessment in section 2(8) of the Act. Instead of setting out all the terms 'assessment', 'reassessment' and 'recomputations the term 'assessment proceeding' was used in sub-clause (ii) of Explanation 1. That cannot be a ground, especially in the context of the factor referred to in that class, namely, stay or injunction of any court to confine its operation only to assessment proceedings and not to the reassessment proceedings. 8. It is a settled principle of law in this country that no party shall be allowed to take advantage of his own wrong. We do not find anything in the language of the Explanation which would compel the Court to permit and assist the assessees to escape the proceedings for reassessment, when such assessees secure an order of stay or injunction from a Court and ensure the continuations of stay or injunction till the period of limitation prescribed in the section expires. We do not find anything in the language of the Explanation which would compel the Court to permit and assist the assessees to escape the proceedings for reassessment, when such assessees secure an order of stay or injunction from a Court and ensure the continuations of stay or injunction till the period of limitation prescribed in the section expires. It is significant that the words used in sub-clause (ii) of Explanation I are 'assessment proceedings'. It is the proceeding which is to be kept in abeyance for the period for which the proceeding had been stayed by an order of injunction of a court. That period is to be excluded for the purpose of computing the period of limitation. 9. The definition of assessment in section 2(8) leaves no manner of doubt that the assessment is capable of including reassessment proceeding as well. That meaning has to be given to the term 'assessment' unless the context requires otherwise. The context in which the term 'assessment' is used in sub-clause (ii) of Explanation 1 to section 153 does not require a different meaning being assigned to that term than what is provided in section 2(8) of the Act. 10. The view that we have taken is one which advances the object of the Act and advances the cause of justice. Courts of law cannot be made use of by the assessees seeking to avoid proceedings against them, by obtaining interim orders which though subsequently found to be not warranted would still enable them to escape the proceedings initiated under the Act, on the sole ground that the period of limitation specified for the completion of the proceedings had come to an end during the period when the order of the stay or injunction was in force. In this case, the stay order was vacated on 21-2-1972 and the authority had time, even thereafter, for completing the proceeding till 1-4-1974. On principle, it must be held that the period during which the stay operated by a court necessarily should be excluded while computing the period of limitation, having regard to the definition of assessment under section 2(8) of the Act and the use of the term 'assessment proceedings' in sub-clause (ii) of Explanation 1. 11. On principle, it must be held that the period during which the stay operated by a court necessarily should be excluded while computing the period of limitation, having regard to the definition of assessment under section 2(8) of the Act and the use of the term 'assessment proceedings' in sub-clause (ii) of Explanation 1. 11. The ground of limitation on the basis of which the assessee seeks to avoid the effect of the orders of the authorities below has, therefore, to be rejected. 12. The second substantial point, urged by the learned counsel for the assessee, was that the ITO failed to give reasonable opportunity to the assessee to place its case and, therefore, the entire proceeding was vitiated. It was the submission of the counsel that even after the stay was vacated by the High Court in 1972, the Assessing Officer did not fix any date of hearing and did not provide an opportunity to the assessee to peruse the material collected by the Assessing Officer on the basis of which reassessment was said to be done. With regard to this aspect, the submission of the counsel for the revenue was that the assessee had no ground whatever to complain as admittedly the notice under section 148 had been served on the assessee as early as on 29-10-1969. The assessee did not file any return in response to the notice even after the dismissal of the assessee's writ petition by the High Court insofar as the notice issued for the assessment year 1957-58 is concerned. The assessee chose to ignore the proceedings and made no attempt to file the return. Despite that conduct of the assessee, the Assessing Officer had been more than fair. He had called upon the assessee by a letter dated 14-3-1977 to file the long overdue return and even thereafter the assessee chose to remain silent and had failed to file the return. The proceeding was by then 8 years old during which period the assessee had ample opportunity to file the return and seek any clarification he may have needed from the assessing authority. The proceeding was by then 8 years old during which period the assessee had ample opportunity to file the return and seek any clarification he may have needed from the assessing authority. The counsel for the revenue also referred us to the relevant provisions of sections 143, 147, 148, 139 and 142 of the Act in support of his submission that after the issue of notice under section 148, it was not necessary for the authority to wait any further even after the return is not filed in response to that notice, before proceeding to complete the assessment on the basis of the materials gathered by the Assessing Officer. 13. The conduct of the assessee, shows that despite the notice having been given, the assessee had chosen to remain silent and even after the dismissal of the writ petition, the assessee had failed to file any return. That conduct continued even after the letter dated 14-3-1977 was sent by the ITO. It is, therefore, not open to the assessee to now complain that it did not have sufficient opportunity to place its case before the Assessing Officer. 14. It was then submitted by the counsel that the material gathered by the Assessing Officer had not been made known to the assessee. The fact that the reopening was on the basis of a certificate obtained by the Assessing Officer from the Audit Bureau of Circulation, which sets out the sales of newspapers published by the assessee, had been known to the assessee as is evident from the fact that in the writ petition filed by the assessee against that notice the Court had declined to grant relief in respect of the notice issued for this assessment year even while it quashed the notices for the other years on the ground that there was prima facie material in the form of the certificate of the Audit Bureau Circulation to warrant the reopening of the assessment. Despite the knowledge of the material, the assessee chose not to furnish any further data to point out as to how or why the figures given in the certificate of the Audit Bureau were incorrect or as to why those figures should not be regarded as the total sales of the assessee's papers in that year. Despite the knowledge of the material, the assessee chose not to furnish any further data to point out as to how or why the figures given in the certificate of the Audit Bureau were incorrect or as to why those figures should not be regarded as the total sales of the assessee's papers in that year. The method adopted by the assesses for reporting the number of copies sold it different from the number of copies printed and the reason for the discrepancy as also the difference in the methodology, if any, adopted by the Audit Bureau in certifying the circulation of the newspapers was though within the knowledge of the assessee, the assessee being the publisher of newspapers and being well-conversant with the work of the Audit Bureau, did not choose to place any such material before the Assessing Officer. The assessee, therefore, has no cause for complaint on the ground that any material required to be disclosed to the assessee had not in fact been disclosed. 15. It was then submitted by the counsel that the certificate issued by the Audit Bureau by itself could not constitute the basis for reopening or for re-computing the income of the assessee as according to the counsel, this Court while declining to interfere with the notice issued under section 148 for the assessment year, had held that the assessee would be liable if it were to be established that there had been deficiency in the reporting of the income on the part of the assessee. The counsel relied upon the judgment of this Court in Thanthi Trust's case (supra). This Court dismissed the writ petition, which had been filed by the assessee, challenging the notice issued under section 148 for the assessment year 1957-58. The observation made by the Court while dismissing the petition that if the facts alleged in the notice are established, that will clearly attract section 147(a) does not amount to a condition being imposed on the assessing authority for proceeding further with the reassessment. It was open to the assessing authority to proceed to reassess in accordance with the provisions of law and no fetter had been placed on his powers under the Act by the judgment of this Court. 16. It was open to the assessing authority to proceed to reassess in accordance with the provisions of law and no fetter had been placed on his powers under the Act by the judgment of this Court. 16. In the absence of any rebuttal by the assessee to show that the certificate given by the Audit Bureau did not contain the correct figures relating to the circulation of the newspapers published by the assessee and in the absence of any effort on the part of the assessee to demonstrate that the figures so given by the Audit Bureau were not capable of being regarded as the actual sales of the newspapers published by the assessee in that year, it was in such circumstances open to the Assessing Officer, especially in the light of the fact that the assessee had failed to file a return despite ample time having been allowed for the purpose after the issue of notice under section 148, to adopt the figures set out in the certificate issued by the Audit Bureau as the figures representing the sales of the assessee's newspaper and that it was done by the Assessing Officer. It was never the case of the assessee that tic Audit Bureau has nothing to do with the reporting of the circulation of newspapers or that it was incompetent to determine and publish the extent of circulation of the newspaper published by the assessee. The authority of the Audit Bureau to determine and publish the circulation figures of newspapers was never in question. It was also not the case of the assessee that the methodology adopted by the Audit Bureau for determining the circulation was in any manner not valid or that the methods by which the extent of circulation of the assessee's newspaper had been determined was vitiated on account of any particular factor or any act of omission or commission. The Audit Bureau occupies a special place in the matter of ascertaining the extent of circulation of newspapers and periodicals. The circulation figures as published by it form the basis on which newspapers make claims for the popularity of the publication or the wide readership that they claim to possess. The Audit Bureau occupies a special place in the matter of ascertaining the extent of circulation of newspapers and periodicals. The circulation figures as published by it form the basis on which newspapers make claims for the popularity of the publication or the wide readership that they claim to possess. It is evident that the assessee did not wish to challenge or cast doubt in any manner on the competence and the reliability of the certificate that had been issued by the Audit Bureau as it is apparent that it also relied on those certificates for the purpose of reinforcing its claim about the extent of its circulation. 17. In these circumstances, the reliance placed by the Assessing Officer on the certificate issued by the Audit Bureau cannot be held to be arbitrary or whimsical. The assessee, who had special knowledge of its own affairs about number of copies printed, the number of copies given away free, the extent of wastage, the number actually sold, the number sold on credit for which monies were due even at the end of the accounting year, failed to file a return before the Assessing Officer in response to his notice, to demonstrate that there was in fact no deficiency in the income reported by the assessee in its original return. 18. The Assessing Officer computed the income of the assessee on the basis of the sale figures set out in the certificate of the Audit Bureau and after giving credit for the sales already reported in the original return determined the extent of deficiency in the report of the assessee's income as Rs. 2, 90, 292. The assessee's contention that the material relied on by the Assessing Officer could not constitute sufficient basis for the re-assessment cannot be accepted. 19. The counsel for the assessee then submitted that the figure determined by the Assessing Officer includes a sum of Rs. 2, 25, 000, which had been shown in the assessee's account as deposit from the Young Men's Tamilian Association. The assessee had in the course of original assessment proceedings informed the Assessing Officer that newspapers had been supplied to that Association to the extent of the deposit and that deposit was to be capitalised later. 2, 25, 000, which had been shown in the assessee's account as deposit from the Young Men's Tamilian Association. The assessee had in the course of original assessment proceedings informed the Assessing Officer that newspapers had been supplied to that Association to the extent of the deposit and that deposit was to be capitalised later. Despite that knowledge, the Assessing Officer, who made the original assessment, did not choose to regard that sum as representing the proceeds of sale and includible as income, but treated it as a deposit. The Assessing Officer in the course of reassessment while making a reference to the figure of Rs. 2, 25, 000 did not state specifically as to whether Rs. 4, 19, 892 included that sum of Rs. 2, 25, 000. It is, however, apparent that it does include that sum and has been taken into account while determining the deficiency, although that sum also represents the proceeds of the sales of the newspaper. 20. The Tribunal while affirming the order of the Commissioner, who had agreed with the ITO, held that the sum of Rs. 2, 25, 200 had continued as deposit in the books of the assessee till 1964 and, therefore, it was not liable for exemption as that sum could not be treated as the accumulation for the purpose of charity. It must be mentioned here that the assessee is a publishes the newspaper and the income from that business had been exempted from tax under section 4(3) of the Act. The Tribunal while reducing the amount ascertained by the ITO as the deficiency by a sum of Rs. 80, 000, which sum the Tribunal found had been received by the assessee in a subsequent year, upheld the inclusion of Rs. 2, 25, 200 on the ground that it did not qualify for exemption. While doing so, the Tribunal failed to advert to the fact, that in the original assessment this figure had been considered and after calling for the explanation of the assessee, the ITO had accepted that amount as deposit. The proposal to re-open the assessment was not on the ground that the sum of Rs. 2, 25, 000 had wrongly been treated as deposit, although that amount represented the amount for which papers had been supplied. The proposal to re-open the assessment was not on the ground that the sum of Rs. 2, 25, 000 had wrongly been treated as deposit, although that amount represented the amount for which papers had been supplied. The counsel for the assessee is right in his submission that it was not open to the Tribunal to include that figure in the figure of deficiency computed on the reassessment as there had been no suppression whatever in relation to that figure and A the facts had been stated before the Assessing Officer. The counsel also pointed out that the notice that was issued to the assessee was under section 147(a) and there was no notice under section 147(b). If at all, the sum of Rs. 2, 25, 200 was to be regarded as part of the assessee's income, it would only have been dealt with under section 147(b). As on the date the order was made by the ITO, any proceeding under section 147(b) was barred by time as the period of well over 5 years had elapsed between the date of notice and the date of the re-assessment order, the order of the Tribunal which upheld the re-assessment to the extent of Rs. 3, 40, 000 cannot be upheld in toto. The sum of Rs. 2, 25, 200 is required to be deleted therefrom as that sum had been wrongly included by the Tribunal despite the bar under section 147(b). 21. The questions being a long list of 9 questions, which apparently the assessee had proposed and which the Tribunal has without proper consideration adopted as its own may now be set out and our answers in relation to each are also stated. The questions referred are, "1. Whether; on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the 'reassessment' was validly done and that the question of establishing the allegation as directed by the High Court would not arise ? 2. Whether, the said interpretation of the High Court's order made by the Income-tax Appellate Tribunal is correct ? 3. Whether the Appellate Tribunal was right in holding that the 're-assessment' made on 22-4-1977 in pursuance of the notice dated 29-10-1969, was within the time prescribed under section 153(2) of the Act and the reassessment is not barred by time ? 4. 3. Whether the Appellate Tribunal was right in holding that the 're-assessment' made on 22-4-1977 in pursuance of the notice dated 29-10-1969, was within the time prescribed under section 153(2) of the Act and the reassessment is not barred by time ? 4. Whether the Appellate Tribunal having accepted that the 'assessment', reassessment and 'recomputation' are separately spelt out in section 153(2) of the Act, was right in holding that the general definition of the term 'assessment' under section 2(8) would apply and that Explanation 1(ii) to section 153 applied to re-assessment proceedings as well ? 5. Whether the Appellate Tribunal was right in holding that Explanation 1(ii) to section 153 will apply to re-assessment proceedings ? 6. Whether the Appellate Tribunal was right in holding that the 're-assessment' proceedings and the 're-assessment' made by the Income-tax Officer are valid in spite of the admitted fact that it is based on change of opinion only ? 7. Whether the Appellate Tribunal was right in saying that the assessee had not established with specific details that the difference in balance was due to difference in the mode of accounting, especially when the co-relation statement filed by the assessee was accepted by the Department ? 8. Whether, on the facts and in the circumstances of the case, the assessee was not entitled to the deletion of the entire addition made by the Income-tax Officer ? 9. Whether, on the facts and in the circumstances of the case, the reassessment made on the assessee on 22-4-1977 is valid in law ?' 22. The first question is not properly worded. It wrongly assumed that this High Court had given a direction to the ITO when no such direction has been given. We, therefore, modify the question and delete the words following the words 'validly done'. Our answer to the first question as reframed is in favour of the revenue and against the assessee. The second question also is answered in favour of, the revenue. The third question is answered in favour of the revenue. The fourth question is answered in favour of the revenue. The fifth question also is answered in favour of the revenue. The sixth question is argumentative and is also based on pre-sumptions. The question is to be re-framed the words following the words 'are valid' in that question shall stand deleted. The fourth question is answered in favour of the revenue. The fifth question also is answered in favour of the revenue. The sixth question is argumentative and is also based on pre-sumptions. The question is to be re-framed the words following the words 'are valid' in that question shall stand deleted. The question as reframed is answered in the affirmative and in favour of the revenue. The seventh question is answered in favour of the revenue. The eighth question has to be answered partly in favour of the revenue and partly in favour of the assessee. Addition made to the extent of Rs. 3, 40, 000 minus Rs. 2, 25, 200 is valid and is not required to be deleted. A sum of Rs. 2, 25, 200 out of the sum of Rs. 3, 40, 000 added by the Tribunal shall stand deleted. The ninth question must be answered again partly in favour of the assessee and partly in favour of the revenue to the same extent as the answer recorded in relation to question No. 8. As each party has succeeded in part, parties shall bear their own respective costs.