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Surinder Mohan Hans vs Income-Tax Officer. on 17 May, 1989

Delhi High Court
Surinder Mohan Hans vs Income-Tax Officer. on 17 May, 1989
Equivalent citations: 1989 30 ITD 269 Delhi


ORDER

Per J. Kathuria, AM – This is an appeal filed by the assessed and arises out of the AAC, New Delhi order dated 31-1-1986. Though that order relates to assessment years 1976-77 and 1979-80, the present appeal is directed against the AACs order, for the assessment year 1976-77 only.

2. Though the assessed has taken as many as three ground, in substance, he is challenging the making of the order after the expiry of the limitation period.

3. The brief facts of the case are, that the assessed did not file any return under section 139(1) for the assessment year 1976-77. No notice under section 139(2) was issued to the assessed. On 29-3-1979, the ITO issued a notice under section 148 by registered letter. This was served o the assessed on 3-5-79. After the issue of notice under section 148 and before its service, the assessed filed return of income on 30-3-79, purporting to be a return under section 139(4). The ITO passed the order of assessment on 28-2-1983. The assesseds contention was that the order could not have been passed beyond 29-3-80 in view of the provisions contained in section 153(1) (c) of the Income-tax Act. As the order of assessment has been passed beyond 29-3-80, the assessed challenged the same, as having been passed after the limitation period had expired.

4. The learned counsel for the assessed submitted that the assessed had a right to fill the return of income under section 139(4) up to 31-3-79. He was not aware that the department had issued notice under section 148 or not. He had voluntarily filed the return of income on 30-3- 1979, which was a valid return. When the notice under section 148 was served on the assessed, it has been pointed out to the ITO vide letter dated 24-4-79 that a return had already been filed on 30-3-79 within the stipulated time under section 139(4) and so the notice issued under section 148 was invalid and bad in law. Reliance was also placed on a decision of the Supreme Court in the case of CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581. It was also submitted that the ITO had taken into consideration only his return filed on 30-3-79 and passed an order under section 143(3) and not under section 147. He, therefore, prayed that as the assessment was barred by limitation, it may be annulled.

5. The learned Departmental Representative, on the other hand, submitted that the issue of notice under section 148 on 29-3-1979 was an undisputed fact, because it was dispatched under a registered letter on 29-3-79. Relying on the provisions contained in section 153(2) (a), it was submitted that the assessment proceedings could be validly completed up to 31- 3-1984. Since the proceedings has been completed on 28-2-83, the assessment order passed by the ITO was valid in law and there was no infirmity in the same. It was also submitted that once notice under section 148 was issued by the ITO, it shut on the right of the assessed to file the return under section 139(4). Relying on the Supreme Court judgment in the case of R. K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163, it was submitted that once a notice under section 148 was issued within the period of limitation, jurisdiction became vested in the ITO to proceed to make assessment. The submission, therefore, was that the ITO had validly invoked jurisdiction in this case and he could not be divested of his jurisdiction by a subsequent event, under which the assessed filed the return under section 139(4) on 30-3-1979. Regarding the Supreme Court decision in the case of Kundan Lal Behari Lal (supra) it was submitted that, that decision of the Supreme Court R. K. Upadhyayas case (supra) squarely applied to the facts of the instant case. He, therefore, strongly pleaded that the assessment order was made within the limitation period and was valid in the eye of law.

6. We have considered the rival submission. This case involves an interesting question of law. The Supreme Court in the case of R. K. Upadhyaya (supra) has clearly held that, once a notice under section 148 is issued within the period of limitation, jurisdiction becomes vested in the ITO to proceed to assess or reassess the income of the assessed. Section 148(1) provides for service of notice as a conditions precedent to making order of assessment. Service under the Income-tax Act, 1961 is not a condition precedent to conferment of jurisdiction on the ITO but it is a condition precedent only to the making of the order of assessment. The notice under section 148 was clearly issued within the period of limitation. It was, therefore, a valid notice and it validly invested the ITO with the power to assess the income. Once the jurisdiction has been assumed validly by the ITO, it can be divested only when an order is made. A subsequent event, like the filing of return by the assessed on 30-3-79, would not oust jurisdiction of the ITO. The assessed was, therefore, wrong in saying in his letter dated 24-4-79 to the ITO that since the return had been filed on 30-3-79, the notice under section 148 was invalid and bad in law. This plea has no legs to stand upon in the light of the Supreme Court decision in the case of R. K. Upadhyaya (supra).

7. The assessed has relied upon the decision in the case of Kundan Lal Behari Lal (supra). The facts of that case were, that the assessed had filed his return of wealth for the assessment years 1964-65 to 1970- 71 on 2-12-71. As the returns were not filed within the time allowed under section 14(1) of the Wealth-tax Act, the assessed applied to the CWT on 3-12-71 for the waiver of penalty for filing the returns late, as provided under section 18(2A) of one WT Act. On 6-12-1971, he was served with a set of 6 notices under section 17 all dated 29-11-71, issued by the WTO. The return were accepted and assessment were made. The CWT, while disposing of the assesseds application, held that, for the assessment years 1965-66 to 1970-71, the assessed was not entitled to relief by way of waiver/reduction of penalty as the return had been filed after the issue of notices under section 17. For the assessment year 1964-65, no notice under section 17 had been issued and for that year the CWT waived the penalty. The assessed filed writ petition in the Allahabad High Court, challenging the validity of the CWTs order. The High Court noting the fact that the returns had been filed on 2-12- 1971. whereas the notices had been served on 6-12-1971, allowed the petition and quashed the CWTs order and directed him to decide the assesseds application fresh. The CWT filed a Special Leave Petition before the Supreme Court under Article 136 of the Constitution. The Supreme Court dismissed the petition. The decision of the Supreme Court was as follows :-

“The main question on which the High Court decided and which is the only question urged before us for admitting the petition is that the word issued occurring in section 18(2A) of the WT Act means served. This decision is well supported not only by the decision of the High Court but also of this court. In Banarsi Debi v. ITO, Calcutta, this court observed that the expression issued and served are used as inter- chargeable terms and in the legislative practice of out country, they are sometimes used to convey the same idea. Accordingly, it was held that the word “issued” was not used in the narrow sense of sent but that the said expression had received, before the Indian Income-tax (Amendment) Act, 1959, a clear judicial interpretation. Subba Rao J, as he then was, dealing with the purpose which the word issue was intended to serve, after referring to Sri Niwas v. ITO cited in the judgment under attack and a Bombay decision, observed at page 108, the intention would be effectuated if the wider meaning is given to the expression issued. The dictionary meaning of the expression issued takes in the entire process or sending notices as well as service thereof. The said word used in section 34(1) of the Act itself was interpreted by courts to mean served.”

8. From the above, it may be seen that the Honorable Supreme Court had relied upon the decision in the case of Banarsi Debi v. ITO [1964] 53 ITR 100. Reference was also made to section 34(1) of the Indian Income- tax Act. In substances, the decision was that the expressions issued and served were interchangeable terms. The latest decision of the Supreme Court in the case of R. K. Upadhyaya (supra) duly considered the cases of the Supreme Court in Banarsi Debis case (supra), J. P. Jani, ITO v. Induprasad Devshankar Bhatt [1969] 72 ITR 595 and CIT v. Rebert J. Sas [1963] 48 ITR 177 and distinguished the same. Analysing the scheme under the Income-tax Act, 1961, it was held that section 149 referred only to the issue of notice. Once the notice was issued within the period of limitation, jurisdiction became vested in the ITO. The notice under section 148, as mentioned above, had been issued validly by the ITO. The assessed had also filed a return under section 139(4) before the expiry of the limitation period and before receiving the notice under section 148. If these provisions were to be harmonised, then the return of the assessed, perhaps could not be ignored by the ITO. These provisions can be reconciled and harmonised, by saying that the ITO had to consider the return filed by the assessed. This is precisely what the ITO has done. While passing the order (which has been passed under section 143(3) and not under section 144), he has proceeded on the basis of the return filed by the assessed. That, however, would not affect the period of limitation for completing the assessment. Respectively following the latest decision of the Supreme Court, which was rendered in the context of the Income-tax Act, 1961, with which we are concerned in this appeal, we hold that once the notice had been issued by the ITO on 29-3-79, he had validly assumed the jurisdiction. No subsequent even like the filing of return by the assessed on 30-3-1979 would divest the ITO of his jurisdiction. If the ITO had validly invoked the jurisdiction under section 148, he could pass the order of assessment up to 31-3-1984. The order of assessment was, in fact, passed in February 1983, and was, therefore, within time. The ITO treated the return filed by the assessed on 30-3-1979 as a return deemed to have been filed in response to notice under section 148. Even if it is assumed that the return filed by the assessed was under section 139(4) and was not in response to notice under section 148, the ITO could have proceeded to make an ex parte assessment, because he could have as well come to the conclusion that the assessed had not filed any return pursuant to notice under section 148. But the fact remains that the ITO had the power to pass an order of assessment, once the notice under section 148 had been validly issued and that assessment could be made up to 31-3-1984. Mentioning of section 143(3) instead of section 147 would not take away the jurisdiction of the ITO or render it invalid.

9. In view of the foregoing discussion, we hold that the ITO, in this case, had the power to pass an order of assessment up to 31-3-1984. The order passed by the him on 28-2-1983 was, therefore, within time, as contemplated by section 153(2) (a) of the Income-tax Act.

10. In the result, the appeal dismissed.

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