High Court Of Karnataka
DCIT vs. Spences Hotel (P) Ltd.
Sections 147, 149, 150
Asst. Year 1976-77
V. Gopala Gowda & C.R. Kumara Swamy, JJ.
Writ Appeal No. 5507 of 2003 in Writ Petn. No. 9193 of 2000
21st November, 2006
Counsel Appeared
M.V. Seshachala, for the Appellant : Ashok A. Kulkarni, for the Respondent
JUDGMENT
V. Gopala Gowda, J. :
This appeal is filed by the Dy. CIT against the order dt. 4th June, 2003 passed by the learned single Judge in WP Nos. 9193-9194 of 2000 [reported as Spences Hotels (P) Ltd. vs. Dy. CIT (2003) 183 CTR (Kar) 508—Ed.] allowing the writ petitions. The notice dt. 17th Nov., 1998 issued under s. 148 of the IT Act (hereinafter referred to as ‘the Act’) for assessing the escaped tax of the respondent is quashed with a direction not to proceed further in the matter. The issue involved in the case pertains to income-tax liability arising out of an agreement between respondent and another. The dispute between them was resolved through arbitration. The amount payable to the respondent herein in terms of the award was sought to be taxed towards capital gains in the asst. yr. 1980-81. The matter reached the Tribunal. The Tribunal noticed that amount sought to be assessed was offered to tax for the asst. yr. 1976-77 and it was within the knowledge of the AO while concluding the assessment during the said assessment year and therefore issuance of the impugned notice is barred by limitation under the provisions of the Act. Based on the said observation of the Tribunal, the notice under s. 148 of the Act was issued by the appellant to the respondent stating that the tax is escaped, which notice was quashed by the learned single Judge in the writ petition by recording his reasons.
The main objection urged in the writ petition to quash the notice was on the ground of limitation. The learned single Judge held that the notice issued to re-open the assessment against the respondent is barred by limitation. Mr. M.V. Seshachala, learned standing counsel for the IT Department submitted that notice was issued well within the time for reopening the assessment from the date of knowledge of escaped income for payment of income-tax by the respondent. He has further submitted that on the impugned notice issued to the respondent, the assessee should have filed returns and the AO should have passed order thereon. The learned counsel on behalf of the Revenue has relied upon the decision reported in G.K.N. Driveshafts (India) Ltd. vs. ITO (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) in support of his submissions that notice issued to respondent is in conformity with provision of s. 150(1) of the Act and in accordance with law. Per contra, Mr. Ashok A. Kulkarni, learned counsel for the respondent/ assessee justified the impugned order passed by the learned single Judge by placing reliance upon the following decisions : (i) CIT vs. G. Viswanatham (1988) 73 CTR (AP) 123 : (1988) 172 ITR 401 (AP); (ii) Praveen Kumari vs. CIT (1999) 155 CTR (P&H) 610 : (1999) 237 ITR 339 (P&H); (iii) Smt. Savitri Rani Malik vs. CIT (1991) 93 CTR (Gau) 163 : (1990) 186 ITR 701 (Gau). The learned counsel submitted that the learned single Judge has rightly quashed the notice as the same is barred by limitation and therefore no interference is warranted and prayed for dismissal of the appeal.
5. We have examined the order under appeal with reference to the submissions made and the decisions relied upon. It is not in dispute that the income realised by the respondent under the agreement is not taxable or not assessable. It is also not the case of the assessee that it is not an escaped assessment. Sec. 147 of the Act provides for reopening of escaped assessment and it reads as under : “147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in ss. 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-s. (3) of s. 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under s. 139 or in response to a notice issued under sub-s. (1) of s. 142 or s. 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.”
The Tribunal in its order dt. 26th June, 1998 held that the escaped tax shall be assessed for the year 1976-77. That order has become final and the same was within the knowledge of the appellant. On the basis of this finding of the Tribunal in its order regarding escaped income of the assessee, notice under s. 148 of the Act was issued on 17th Nov., 1998, which is quashed by the learned single Judge. Sec. 149 of the Act prescribes the period of limitation within which notice under s. 148 shall be issued to the assessee and it reads as under: “149. (1) No notice under s. 148 shall be issued for the relevant assessment year,— (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under cl. (b); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.” It is pertinent to note that the time- limit prescribed in s. 149 of the Act is not applicable to the case on hand in view of sub-s. (2) which states that : “(2) The provisions of sub-s. (1) as to the issue of notice shall be subject to the provisions of s. 150(1).”
Sec. 150(1) of the Act is as under : “150. (1) Notwithstanding anything contained in s. 149, the notice under s. 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.”
The above provision begins with the words “notwithstanding anything contained in s. 149” and it states that “notice may be issued at any time” to give effect to any finding contained in any order passed by any authority in any proceeding under the Act. The notice issued to the assessee was pursuant to the finding of the Tribunal referred to supra regarding the escaped income for assessment of income-tax. Therefore, the learned single Judge committed an error in law by quashing the same, as the same is contrary to the finding recorded by the Tribunal with regard to the escaped taxable income derived by the assessee, in respect of such cases s. 150(1) of the Act is applicable which relevant provision of the Act has not been properly considered by the learned single Judge by quashing the notice impugned in the writ petition. The legal submission made by the learned counsel Mr. Ashok Kulkarni placing reliance upon s. 150(2) of the Act in justification of the order of the learned single Judge is misplaced for the reason that the above provision is not applicable to the case on hand is the case sought to be established by the Revenue, by refusal of the impugned notice. Prima facie at this stage the submissions of the learned counsel for Revenue are tenable and the same shall be accepted by us.
6. In the decision reported in GKN Driveshafts’ case (supra) upon which learned standing counsel for the Revenue has placed reliance, the apex Court has clarified as to what should follow if a notice under s. 148 of the Act is issued, as under : “…….However, we clarify that when a notice under s. 148 of the IT Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years….” In view of the above clarification made by the apex Court, the quashing of the notice impugned in the writ petition by the learned single Judge is not justified. In view of the foregoing reasons the decisions relied upon by the learned counsel for the assessee are of no assistance and in view of what has been stated above, they are not applicable to the facts of the case.
7. In the result, the writ appeal is allowed. The order of the learned single Judge is set aside. The assessee is at liberty to file revised return. The AO shall consider the same and pass appropriate order.
[Citation : 289 ITR 145]
