Andhra Pradesh H.C : The ITAT was correct in law in cancelling the assessment order for the assessment year 1977-78 passed on March 30, 1987, under section 144 read with section 251

High Court Of Andhra Pradesh

CIT vs. Amarchand Sharma And Udani

Assessment Year : 1977-78

Section : 144, 143, 251, 263

G. Chandraiah And Challa Kodanda Ram, JJ.

R.C. No. 169 Of 2000

February 18, 2014

JUDGMENT

Challa Kodanda Ram, J. -At the instance of the Revenue, two questions of law as set out below arising out of the order dated September 14, 1994, of the Tribunal in I.T.A.No. 1992/Hyd/88 for the assessment year 1977-78, are referred for opinion of this court :

“(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in approving the reasoning of the Appellate Commissioner that the assessment order for the year 1977-78 passed under section 144 read with section 251 of the Act on March 30, 1987, was time barred ?

(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in cancelling the assessment order for the assessment year 1977-78 passed on March 30, 1987, under section 144 read with section 251 of the Act ?”

2. Originally, the assessee was assessed to income-tax under section 143(3) of the Income-tax Act, 1961 (for short “the Act”) on March 26, 1983, and thereafter, assessment order came to be set aside by the Commissioner on March 21, 1985, in exercise of the powers conferred under section 263 of the Act with a direction to make fresh assessment in accordance with law. The case pertains to the assessment year 1977-78. After a long lapse of time, the assessee filed an appeal before the Income-tax Appellate Tribunal against the order of the Commissioner made under section 263 of the Act and during its pendency, the assessee filed a letter dated April 30, 1987, before the Tribunal seeking permission to withdraw the appeal for the reason that the time for making assessment consequent upon the orders under section 263 was March 31, 1987, and inasmuch as no assessment was made on or before March 31, 1987, no assessment could be made, as such, the same is time barred. The appellant’s appeal was dismissed as withdrawn. Thereafter, on September 10, 1987, the assessee received assessment order dated March 30, 1987, said to have been made under section 144 read with section 251 of the Act which was dispatched on May 8, 1987. The Commissioner of Income-tax (Appeals), after going through the records, had found that the assessment order though dated as March 30, 1987, was obviously not made on or before March 31, 1987, and in that view of the matter, had cancelled the assessment made in pursuance of the order passed under section 263 of the Act. For the purpose of coming to that conclusion, the Commissioner also verified the record and on appreciation of the facts on record, found that the notice as required under section 143(2) of the Act was also not issued. The Revenue challenged the order of the Commissioner cancelling the assessment order dated March 30, 1987, made under section 144 read with section 251 of the Act before the Income-tax Appellate Tribunal. Before the Tribunal the Department failed to produce the demand and collection register for the assessment year 1977-78 and made no effort to dislodge the finding recorded by the Commissioner. The Tribunal having verified the facts on record, came to a categorical opinion that the assessment order is ante-dated as March 30, 1987, but was obviously made after that date and in that view of the matter dismissed the appeal filed by the Revenue.

3. The learned senior counsel for the Department/Revenue submits that merely because the order was dispatched on May 8, 1987, and received on September 10, 1987, the Tribunal could not have drawn an inference that it was not made on March 30, 1987. He further submits that the Tribunal had erred in finding that the order was not made on March 30, 1987, merely because the same was served later. The late service by itself cannot be the basis for drawing an inference that the same was not made on the day on which the order bears. Further, section 144 of the Act does not envisage any time stipulation for service of the order and it is enough if the order is served within a reasonable time and what is required to be considered is making of the order and not the service. In that view of the matter, the learned counsel submits that the conclusion arrived at by the Tribunal that the order made under section 144 of the Act in the present case as time-barred is unsustainable. He would rely on the judgment of this court in Shaw Wallace & Co. Ltd. v. State of Andhra Pradesh [1997] 104 STC 497 (AP) and would submit that only when there is an abnormal delay in serving the assessment order and if such delay is not explained, presumption can be drawn that the order though having not been made on that date, it purports to have been made on that particular date.

4. We have perused the orders of the Appellate Commissioner as well as the Income-tax Appellate Tribunal. The crucial aspect of the matter in the present case is non-issuance of notice under section 143(2) of the Act before passing the order under section 144 of the Act.

5. Sections 143(2) and 144 of the Income-tax Act, 1961, at the relevant point of time, may be noticed as under :

“143. (2) In a case referred to in sub-section (1), 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 the tax in any manner, he shall serve on the assessee a notice requiring him, on a date to be specified therein, 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 :

Provided that no notice under this sub-section shall be served on the assessee after the expiry of the financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished, whichever is later.

144. If any person—

(a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or

(b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or

(c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143,

the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment :

Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment :

Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.”

A combined reading of section 143 read with section 144 of the Act would go to show that, firstly, a notice under section 143(2) is mandatory for making an assessment and further, on account of the proviso, no notice shall be issued if the assessment is being made after the expiry of the financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished, whichever is later. In the present case, proviso does not apply as the assessment was made pursuant to the orders made by the revisional Commissioner under section 263 of the Act. Section 144 of the Act, at the relevant point of time, further mandates issuance of a notice and an opportunity of hearing to the assessee before making the best judgment assessment. In this case, the finding of the authorities below is to the effect that no notice under section 143(2) was ever issued to the assessee. Issuance of a notice under section 143(2) is mandatory. Even the requirement of notice of hearing before making the best judgment assessment under section 144 of the Act has not been complied with. Considering all these aspects, both the Appellate Commissioner as well as the Tribunal came to the conclusion that the assessment order dated March 30, 1987, was really not made on that day and obviously the same has been made subsequent to that date. One also should not lose sight of the fact that the order dated March 30, 1987, came to be dispatched on May 8, 1987, and received by the assessee on September 10, 1987, after the assessee filed the letter before the Tribunal pointing out the time for passing assessment order expired. On going through the factual matrix available on record, we have no manner of doubt that there is no error apparent on the face of the record and the Tribunal came to the right conclusion that the assessment order was not really made March 30, 1987, and the same was made subsequent to that date. All this being in the realm of the appreciation of the facts on record, in our considered opinion, there is no question of law which arises from the order of the Tribunal as conclusions reached by the Tribunal are based on appreciation of pure questions of fact. In that view of the matter, we do not find any reason to interfere with the order of the Tribunal and the referred questions of law are answered against the Revenue and in favour of the assessee.

6. Accordingly, the referred case is disposed of. No order as to costs.

7. As a sequel to the disposal of the referred case, miscellaneous petitions, if any pending, shall stand disposed of as infructuous.

[Citation : 364 ITR 203]