High Court Of Bombay At Goa
V.A. Kamat Bros. & ORS. vs. ITO
Section 144, 148, 149(b)(iii), 184(5), 234A, 234B
Asst. Year 1994-95
B.P. Dharmadhikari & U.D. Salvi, JJ.
Tax Appeal No. 27 of 2003
14th July, 2009
Counsel appeared :
Shivan Dessai, for the Appellants : S.R. Rivonkar, for the Respondent
JUDGMENT
B.P. Dharmadhikari, J. :
The assessee’s appeal came to be admitted on 7th Oct., 2003 without formulating any substantial questions of law. On 22nd Jan., 2009, this Court directed the assessee to submit these questions and accordingly on 17th Feb., 2009 following two questions have been formulated :
“1. Whether the assessment proceedings are ab initio void being barred by the limitation prescribed under the IT Act and the said proceedings having been commenced after the limitation period are non est and ab initio void ?
2. Whether the provision of s. 184(5) of IT Act, 1961 could be invoked by the AO in the absence of proceeding under s. 144 being initiated by the authorities ?”
In this background, we have heard advocate Mr. Shivan Dessai for the appellants and Mr. Rivonkar for the Department.
The facts are not much in dispute. The challenge is to the order of the Tribunal, Panaji Bench, Panaji, dt. 17th March, 2003 whereby the appeal filed by the assessee came to be dismissed and order of CIT(A) against him was maintained. The relevant assessment year is 1994-95. 31st Aug., 1994 was the date by which return for the said year ought to have been filed. The assessee who had paid advance tax of Rs. 8,000 did not file any return. He however on 9th Jan., 1998 voluntarily filed a return for that year. On 8th Aug., 2000 notice under s. 148 of the IT Act, 1961 was then served upon the appellant calling upon him to file his return in the prescribed form. The appellant/assessee did not comply with it and on 6th Sept., 2000 he was served with another notice purporting to be under s. 142 calling for accounts, certain documents and particularly informing him that he was to explain why the assessee firm should not be treated as AOP as he did not furnish return under s. 139(1) or 139(4). The appellate authority in its order dt. 12th July, 2002 has mentioned “that the appellant has given its constructive acceptance to such a treatment which is evident from the facts that notices under s. 143(2) on 6th Sept., 2000 and 27th Nov., 2001 and notice issued under s. 142(1) on 6th Sept., 2000 were responded to by the appellant without taking any objection whatsoever.” The assessment officer therefore, vide his order dt. 12th Dec., 2001 passed under s. 147 r/w s. 143(3) determined the total income to be Rs. 1,61,114 and then after deducting the advance tax payment of Rs. 8,000 arrived at tax liability of Rs. 40,671. He then proceeded to add interest under ss. 234A and 234B and thus determined the total tax liability to be Rs. 1,73,809.
On 2nd Feb., 2002 the assessee approached CIT(A) and his appeal came to be dismissed on 12th July, 2002. Then he approached Tribunal on 7th Oct., 2002 and Tribunal dismissed his appeal on 17th July, 2002.
In this background advocate Mr. Dessai for the assessee has invited our attention to the provisions of s. 153(1) to urge that the time-limit for undertaking the exercise of assessment expired on 31st March, 1997. He states that the return filed by the assessee was on 9th Jan., 1998 and under wrong advice. As there was no scope for assessing the income at that time, the return filed ought to have been ignored as it has no legal recognition in the scheme of IT Act. He has further invited our attention to the provisions of s. 148 to point out that the said notice was issued for exercise of powers under s. 147 and that also is subject to the provisions of ss. 148 to 153. He invites attention to the provisions of s. 149(1)(a) to show that it prescribes period of four years within which the action for reassessment could have been taken and as the said period expired on 31st March, 1999, the assessment or reassessment exercise as undertaken by the AO in the present matter on 12th Dec., 2001 is void ab initio. In support of his contention, he relied upon the judgment of the Hon’ble apex Court reported at S.S. Gadgil vs. Lal & Co. AIR 1965 SC 171.
He further points out that the assessee has been treated as AOP and deductions claimed under s. 184 have been disallowed only because of alleged reassessment done on 12th Dec., 2001. He argues that if reassessment is barred by limitation, disallowance itself is not legal and deserves to be set aside. He points out that the provisions of s.
184(5) operate only after expiry of particular time-limit but then can be resorted to only if assessment or reassessment is legally sustainable.
He contended that in the instant circumstances, the interest levied under ss. 234A and 234B is arbitrary as proper notice as also opportunity to the appellant in that regard was a must. He states that on 12th Dec., 2001 the AO has not passed any order to support levy of such interest. He has relied upon the judgment of the Hon’ble Patna High Court reported in Smt. Tej Kumari vs. CIT & Ors. (2000) 164 CTR (Pat)(FB) 201 : MANU/BH/556/2000 to show that the order of the AO is therefore, liable to be quashed and set aside at least to the extent of levy of interest. Advocate Rivonkar has invited attention to the provisions of s. 260A to urge that the questions as formulated can only be looked into at the stage of final hearing. He further stated that though in appropriate cases this Court can frame even additional substantial question of law, this is not one such matter. He states that the challenge to s. 148 notice or then proceedings under s. 147 was expressly given up before the Tribunal and there is no challenge also to the interest levied under ss. 234A and 234B. In the light of the second question as formulated he has invited attention to the notice under s. 142 dt. 6th Sept., 2000 to show that previous opportunity about proposed treatment as AOP was extended to the assessee and his explanation was called for. He therefore contended that the ingredients of provisions under s. 184(5) which otherwise operate of their own have been satisfied before levying tax as AOP and not as a firm. He therefore, argues that no substantial question of law arises in this appeal and there is no scope for remand also.
In his brief reply, advocate Dessai states that mention by Tribunal that the assessee did not challenge the validity of the proceedings under s. 148 is incorrect because the said challenge was very much raised in the appeal memo filed before the Tribunal and after hearing the parties, this Court has framed the substantial question of law which needs to be decided. He also invited attention to reproduction of part of order by Tribunal to show that the aspect of delay was pressed into service before Tribunal and therefore only it has reproduced the said part.
Before us, it is clear that the assessee paid advance tax of Rs. 8,000 and did not file any return. His return for asst. yr. 1994-95 was tendered by him on 9th Jan., 1998. The provisions of s. 153(1) on which reliance was placed envisage assessment under ss. 143 and 144. It is therefore, obvious that the bar under s. 153(1) is not relevant in the present circumstances. Admittedly as no return was filed, in the light of Expln. (2) of s. 147, the respondents have issued notice under s. 148. As notice under s. 148 was issued, it is clear that the procedure as contemplated by s. 142 needed to be followed and accordingly steps for assessment were taken up. Sec. 149 regulates issuance of notice under s. 148 at the relevant time as per its cl. (b)(i) time-limit for issuing such notice was four years from the end of asst. yr. 1994-95. However, then that cl. (i) has a further rider attached to it and said time-limit of four years is relevant only if the case is not falling under sub-cl. (ii) or (iii). As per sub-cl. (ii) the said period is seven years from the end of relevant assessment year if the quantum of income chargeable to tax which has escaped assessment is likely to amount of Rs. 25,000 or more for that year. As per sub cl. (iii) the said period is ten years, if the quantum of such income is likely to be Rs. 50,000 or more for that year.
The facts on record need to be viewed in this background. The return filed by the assessee under mistaken advise is on 9th Jan., 1998 and even if it is ignored and not accepted as his return, the said disclosure could have been very well used by the AO while passing the order under s. 147 r/w s. 143(3) of the IT Act. The facts and figures disclosed by the assessee pertained to asst. yr. 1994-95. He accepted the advance tax payment of Rs. 8,000 and returned taxable income of Rs. 4,060 only. This exercise of the assessee has been used by the AO and there is no dispute about correctness or otherwise of the figures disclosed therein by the assessee. The AO has implemented the provisions of s. 184(5) and as there was failure on part of the assessee to file return as contemplated by s. 144(1) of the Act, the assessment has been done by treating the assessee as AOP. The allowance claimed by the assessee while returning taxable income of Rs. 4,060 was therefore disallowed by the AO. This disallowance is after issuing notice to the assessee. The income escaping assessment is calculated at Rs. 1,61,144 i.e. in excess of Rs. 50,000. The time-limit therefore was ten years as per cl. (iii) of s. 149(b) then in force. In this view of matter, we do not find any substance in the contention that the notice issued under s. 148 was barred by expiry of time. In view of this, we do not find it necessary to consider the judgment of the Hon’ble apex Court mentioned above.
The levy of interest under ss. 234A and 234B in the present matter is not done independently by the AO and the levy forms part of the assessment order dt. 12th Dec., 2001 itself. The judgment of the Hon’ble High Court particularly para 20 thereof, which has been pressed into service shows that such interest is leviable on the tax on the total income declared in the return and not on the income as assessed and determined by the assessing authority and it cannot be assessed in the absence of specific order of the assessing authority. Here, the total income declared in the return was Rs. 4,060 but it was by ignoring the provisions of s. 184(5) of the IT Act. The allowance wrongfully appropriated by the assessee was corrected by the AO and then the interest has been calculated and charged in the assessment order. Therefore, there is no error in the said levy as it is with previous notice to assessee.
In the circumstances, we do not find any merit in the substantial questions of law as formulated or then as sought to be raised in this Court. It is therefore, not necessary to consider if points were really given up or then pressed before Tribunal. The appeal is therefore, dismissed. No order as to costs.
[Citation : 325 ITR 274]
