Punjab & Haryana H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the assessee to raise objection regarding the non-issuing of notice under s. 146 after the ITO stage ?

High Court Of Punjab & Haryana

CIT vs. Pearl Mechanical Engg. & Foundry Works (P) Ltd.

Sections 144, 146, 246

Gokal Chand Mital & S.S. Sodhi, JJ.

IT Ref. No. 108 of 1979

1st February, 1989

Counsel Appeared

Ashok Bhan with Ajay Mittal, for the Revenue : S.S. Mahajan, for the Assessee

S.S. SODHI, J.:

The matter here pertains to the asst. yr. 1963-34. The original assessment for the assessment year in question was completed on 21st March, 1968. This assessment was, however, later reopened under s. 147(a) of the IT Act, 1961 (hereinafter referred to as ‘the Act’), on the ground that the ITO had reason to believe that certain income of the assessee-company chargeable to tax had escaped assessment. As the assessee, despite several opportunities failed to account for the imports on the basis of which the ITO had come to believe that certain income had escaped assessment, he proceeded to frame assessment under s. 144 of the Act on 12th Sept., 1973. Earlier a specific notice had been served upon the assessee under s. 142(1) of the Act, on 17th Aug., 1973 which the assessee had not complied with.

The assessee thereafter filed an application under s. 146 of the Act against the assessment framed by the ITO on 12th Sept., 1973. This was rejected by the order of 25th Feb., 1974. No appeal was thereafter filed against this order but the assessee proceeded instead to file an appeal against the assessment order of 12th Sept., 1973. The main ground urged being that no notice had been served upon it under s. 143(2) of the Act and the assessment framed was, therefore, a nullity. This contention prevailed with the Tribunal and the reassessment was consequently cancelled. It is in this factual background that the following questions of law have now been referred to this Court for its opinion:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the assessee to raise objection regarding the non-issuing of notice under s. 146 after the ITO stage ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessment framed was contrary to law and had to be struck down ?

Whether, on the facts and in the circumstances of the case and in any view of the matter, the Tribunal was justified in quashing the assessment instead of merely setting aside the same with a direction to redo it from the point of irregularity or illegality, if any?”

In dealing with this matter, the first question that arises is with regard to the competency of the appeal filed by the assessee seeking to challenge the assessment framed by the ITO under s. 144 of the Act in the context of the facts and circumstances of the case here. The view of this Court as expressed in Gopal Singh vs. CIT (1968) 70 ITR 840 (P&H) : TC6R.282 is clearly against the assessee on this point. That was a case under the Indian IT Act, 1922. It was held there that in an appeal against the assessment under s. 23(4) of that Act, the validity of the notice under s. 34(1) (a), in pursuance of which the assessment was made, cannot be raised without resorting to proceedings under s. 27. The law, is thus, well settled that without filing an appeal against the order passed under s. 146 of the Act, the appeal against the assessment framed under s. 144 is not maintainable. To overcome this hurdle, learned counsel for the assessee sought to press in aid, the plea that notice under s. 143(2) was mandatory and as no such notice had been served upon the assessee, therefore, the assessment framed by the ITO on 12th Sept., 1973 could not be sustained. Counsel for Revenue, on his part, sought to contend that the notice served upon the assessee by the ITO on 17th Sept., 1973 could be read as a notice under s. 143(2) of the Act. In the alternative, the argument raised was that this was, at any rate, a notice under s. 142(1) of the Act, which had not been complied with by the assessee and such non-compliance fully justified the framing of the assessment under s. 144 of the Act, as was done by the ITO on 12th Sept., 1973. This alternative plea must indeed prevail. A reference to the record here would show that there is a clear finding by the ITO, not upset in appeal in any manner, that there has been non- compliance on the part of the assessee with the terms of the notice issued to it under s. 142(1) of the Act, on 17th Sept., 1973. Such non-compliance having been established, the requisite jurisdiction was thereby clearly conferred upon the ITO to frame the assessment under s. 144 of the Act. This being so, there can be no escape from the conclusion that the Tribunal clearly fell in error in holding the assessment framed to be contrary to law. The second question referred must, consequently, be answered in the negative, in favour of the Revenue and against the assessee. In view of this answer, the two other questions referred are rendered academic and are consequently returned unanswered. This reference is disposed of accordingly. There will, however, be no order as to costs.

[Citation : 179 ITR 144]

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