Research › Search › Judgment

Gujarat High Court · body

2016 DIGILAW 1238 (GUJ)

Income Tax Officer v. Ketankumar R. Doshi

2016-07-04

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. By way of this appeal, the revenue has challenged the order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'B', in ITA No. 329/Ahd/2005 dated 5.10.2007, whereby the appeal of the assessee is allowed and the assessment framed under Section 143 (3) of the Act was cancelled. 2. At the time of admitting this Appeal, following questions of law were framed by this Court:- "(i) Whether on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that the notice under Section 143(2) of the Income Tax Act was not issued within the prescribed time limit by the Assessing Officer? (ii) Whether on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in reversing the order of the Commissioner of Income-tax (Appeals)-IV, Surat, without assigning any reasons to show that the findings arrived at the conclusions reached by the Commissioner of Income-tax (Appeals)-IV, Surat, are not legal and valid? (iii) Whether on the facts and in the circumstances of the case, and in law, the impugned order passed by the Income Tax Appellate Tribunal is perverse and suffering from non-application of mind or not?" 3. Learned counsel for the appellant submitted that the Tribunal has committed an error in coming to the conclusion that the first notice issued by the Assessing Officer on 27.9.2002 was stated to have been served on 28th September 2002, however the said notice was not served at all and the assessee has received the first letter dated 3rd October 2002 only, which was beyond one year from the filing of the return and, therefore, the assessment is illegal. He submitted that the assessee has not raised this contention before the Assessing Officer and even in the appeal memo, said ground was not raised. Therefore, the Tribunal has committed an error in coming to the conclusion that the notice under Section 143 (2) of the Act was not issued within the prescribed time limit. He further submitted that the Tribunal has not given cogent reasons while reversing the order of the authority below. He, therefore, prayed to allow present appeal. 4. On the other hand, learned counsel for the respondent submitted that no error is committed by the Tribunal while passing the impugned order. He further submitted that the Tribunal has not given cogent reasons while reversing the order of the authority below. He, therefore, prayed to allow present appeal. 4. On the other hand, learned counsel for the respondent submitted that no error is committed by the Tribunal while passing the impugned order. He submitted that the revenue has failed to lead any evidence to prove that notice was served upon the authorized person or to the assessee u/s. 143 (2) within the prescribed time limit. In this regard he has relied upon the decision of this Court in Deputy Commissioner of Income-Tax v. Maxima Systems Ltd. reported in [2012] 344 ITR 204 (Guj). 5. We have heard learned counsel for both sides and gone through the impugned judgment as well as the decision relied upon by the learned advocate. From the record, it is clear that notice issued by the department on 27.9.2002 was stated to have been served on 28th September 2002 however, the revenue could not prove that it was served on 28.9.2001. In this regard, while passing the impugned order, it is observed that, "the notice dated 27-9-2002 was served upon one Shri Bipin R. Shah who is neither a relative nor a friend nor employee of the assessee and that he has not been authorized by the assessee to receive the notice. In the above facts and circumstances of the case, in our considered opinion where the assessee challenged the service of notice upon him claimed to have been issued by the Department u/s. 143 (2) the onus is on the Revenue to lead the evidence in support of the claim that the notice u/s. 143 (2) was issued and duly served on the assessee as per the laws within 12 months from the end of the month in which the return of income was filed by the assessee in terms of proviso to section 143 (2) of the Act. Since the Revenue has failed to lead any evidence of service of notice on authorized person or to the assessee u/s. 143 (2) within the prescribed time limit, the assessment order framed is vitiated and cannot be sustained." 6. Since the Revenue has failed to lead any evidence of service of notice on authorized person or to the assessee u/s. 143 (2) within the prescribed time limit, the assessment order framed is vitiated and cannot be sustained." 6. In the case of Deputy Commissioner of Income-Tax v. Maxima Systems Ltd. (supra), this Court as under:- "In Deputy Commissioner of Income Tax v. Mahi Valley Hotels and Resorts (supra), this Court was considering as to whether an assessment framed under section 143(3) of the Act by issuing statutory notice beyond the prescribed time limit is bad in law, wherein it was held thus: [4] The second contention regarding there being acquiescence and/or waiver on part of the assessee by participating in the proceedings also does not merit acceptance. It is an admitted position that the return of income was filed on 30/03/1997 for Assessment Year 1997-98 and the notice under section 143(2) of the Act came to be issued for the first time only on 20/08/1998. Therefore, the notice was admittedly beyond the period of 12 months which is the statutory period of limitation prescribed under the Proviso to sub-section (2) of Section 143 of the Act. [5] The Scheme of the Act broadly permits the assessment in three formats; (i) acceptance of the returned income; (ii) acceptance of returned income subject to permissible adjustments u/s. 143(1) of the Act by issuance of intimation; and (iii) scrutiny assessment under section 143(3) of the Act. This Scheme was originally introduced by Direct Tax Laws (Amendment) Act, 1989 with effect from 1.4.1989. The issuance of notice under section 143(2) of the Act is in the course of assessment in the third mode, namely, scrutiny assessment. [6] Section 143(2) of the Act requires that where return has been made by an assessee, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income, or has not computed excessive loss, or has not under-paid tax in any manner, he shall serve on the assessee a notice requiring him either to attend his office, or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return. Therefore, the language of the main provision requires Assessing Officer to prima facie arrive at satisfaction of existence of any one of the three conditions. Therefore, the language of the main provision requires Assessing Officer to prima facie arrive at satisfaction of existence of any one of the three conditions. Proviso under the said sub-section states: provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. On a plain reading of the language in which the proviso is couched it is apparent that the limitation prescribed therein is mandatory, the format of provision being in negative terms. The position in law is well settled that if the requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language, that is to say, if the statute enacts that it shall be done in such a manner and in no other manner, such requirements are, in all cases absolute and neglect to attend to such requirement will invalidate the whole proceeding. [7] When the provision was first introduced in the statute the Central Board of Direct Taxes issued departmental Circular No. 549 dated 31/10/1989 and the necessity of the proviso as well as the consequences flowing on failure to issue notice within the limitation have been explained in the following words: 5.13 A proviso to sub-section (2) provides that a notice under the sub-section can be served on the assessee only during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later. This means that the Department must serve the said notice on the assessee within this period, if a case is picked up for scrutiny. It follows that if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the Department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. (Ref: CBDT Circular No. 549, dated 31st October, 1989, Chaturvedi & Pithisaria's Income Tax Law, Fifth Edition, Vol. 3, Pg. 4737 at Pg. 4742). [8] Originally the period of limitation was provided as during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished. (Ref: CBDT Circular No. 549, dated 31st October, 1989, Chaturvedi & Pithisaria's Income Tax Law, Fifth Edition, Vol. 3, Pg. 4737 at Pg. 4742). [8] Originally the period of limitation was provided as during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished. By Finance (No.2) Act, 1991 the proviso was substituted by the present proviso extending the period of limitation to twelve months and vide departmental circular No. 621 dated 19/12/1991, it was stated in paragraph No. 49.1 of the circular that: The aforesaid period of limitation for the service of a notice under sub-section (2) of Section 143 of the Act does not allow sufficient time to the Assessing Officers to select returns for scrutiny before assessment. Therefore, the provision was amended to provide that the notice can be served within twelve months from the end of the month in which the return is furnished. (Ref: CBDT Circular No. 621, dated 19th December, 1991 Chaturvedi & Pithisaria's Income Tax Law, Fifth Edition, Vol. 3, Pg. 4747 at Pg. 4748). [9] It goes without saying that the departmental authorities are bound by the circulars issued by the Central Board of Direct Taxes. In the circumstances, it is not open to the revenue to contend otherwise. These Circulars are explanatory. They give contemporaneous exposition of legal position. Even otherwise, on a plain reading of the section and the proviso it is more than abundantly clear that the proviso prescribes a mandatory period of limitation in light of the scheme of assessment wherein majority of returns are required to be accepted without scrutiny and only certain returns are taken up for scrutiny. (i) Thus, the controversy in issue in the present case stands concluded by the above cited decision and all the contentions raised by appellant-revenue stand answered against the revenue and in favour of the assessee. The said view also finds support in the decision of the Supreme Court in Assistant Commissioner of Income Tax and another v. Hotel Blue Moon (supra) wherein the Court held that if an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority in issuing notice under section 143(2) cannot be a procedural irregularity and is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. (ii) The decision of this Court in Madanlal Mathurdas v. Chunilal, Income Tax Officer (supra) does not in any manner support the case of the appellant-revenue inasmuch as the said decision was rendered in a totally different set of facts, in relation to the provisions of section 34 of the said Act and the question as to whether notice was required to be served within the prescribed period did not arise in the said case. (iii) The decision of the Apex Court in Commissioner of Income-tax, Shillong v. Jai Prakash, (1996) 3 SCC 525 on which reliance has been placed by the learned advocate for the appellant-revenue, also does not carry the case of the revenue any further inasmuch in the facts of the said case pursuant to the death of the assessee, his eldest son Jai Prakash filed returns. Returns filed by Jai Prakash were scrutinized by the Income-tax officer and notices under sections 142(1) and 143(2) was served upon the said Jai Prakash. The deceased had, in all, ten legal heirs. During the course of assessment proceedings no objection was raised by Jai Prakash as regards non-service of notice to the other heirs till the assessment order was passed. It was only at the stage of appeal, that the said Jai Prakash contended that the assessment stood vitiated on the ground that the other heirs were not served with notice under section 143(2). Thus, the facts of the said case were totally different and as such the said decision has no relevance insofar as the present case is concerned. (iv) Insofar as the issue regarding the notice under section 143(2) of the Act not being a valid notice, the same does not arise out of the question formulated by the Court at the time of admission of the appeal, nor does the same arise out of the question proposed by the revenue in the memo of appeal. In the circumstances, it is not necessary to go into the merits of the said issue." 7. In view of above, it is clear that the Notice issued before 30th September 2002 could be served upon the assessee only on 3rd October 2002. In the circumstances, it is not necessary to go into the merits of the said issue." 7. In view of above, it is clear that the Notice issued before 30th September 2002 could be served upon the assessee only on 3rd October 2002. Therefore, in our opinion, the Tribunal has not committed any error while passing the impugned order. Accordingly, the question No. 1 posed for our consideration is in favour of the assessee and against the department. In view of answer to question No. 1, question Nos. 2 and 3 would not survive. Accordingly, this appeal is disposed of.