Mittal Court Premises Co Operative Society Ltd Vs Ito - Citation 369113 - Court Judgment

Judgment:
ORDER

D.K. Srivastava, AM

All the aforesaid appeals filed by the assessee and cross-appeals filed by the revenue involve common facts and raise common issues. Hence they were heard together are being disposed of by a consolidated order for the sake of convenience.

Appeals filed by the assessee:

(ITA Nos. 2649 and 2441 to 2443/Mum./02: Assessment years 1994-95 to 1997-98).

2. We shall first take up the appeals filed by the assessee, a co-operative society, against the orders of the learned Commissioner (Appeals) for the respective assessment years. The assessee has taken three grounds of appeal in all the appeals. First Ground of appeal is regarding taxability of transfer fee received by the assessee during the years under appeal as a result of transfer/sale of certain office premises by the existing members of the assessee-society to third parties (known as incoming members) in lieu of which the incoming members paid to the assessee-society certain charges/ fee described by the assessee-society as 'Capital Assets Replacement Fund/Common Amenity Fund/Repairs & Welfare Fund/Transfer & Entrance Fee.' Second Ground relates to the validity of the notice issued by the assessing officer under section 148/147. Third Ground relates to the validity of the impugned orders of assessment passed by the assessing officer without serving the notice as per the time provision of sub-section (2) of section 143. We shall first take up the appeal filed by the assessee for assessment year 1997-98 which shall also form the basis for disposal of other appeals filed by the assessee.

Assessee's appeal: ITA No. 2443/Mum./02: Assessment year 1997-98.

Ground No. 1: Taxability of 'Transfer fee'

3. Ground No. 1 as taken by the assessee reads as under:

'Transfer fees of Rs. 1,63,77,681

(1. 1) The learned Commissioner (Appeals) erred in holding that the transfer fees of Rs. 63,77,681 is income of the appellant society and that it is not governed by the principle of mutuality.

(1.2) The learned Commissioner (Appeals) failed to appreciate that the judgment of the Hon'ble Supreme Court, Hon'ble Bombay High Court and other High Courts and the Hon'ble Tribunal clearly established that the transfer fees is governed by the principle of mutuality and as such does not constitute taxable income.

(1.3) The learned Commissioner (Appeals) erred in ignoring the judgments relied on by the appellant which were binding on him.

(1.4) The learned Commissioner (Appeals) erred in relying on the judgment of the Hon'ble Bombay High Court in CIT v. Presidency Co-operative Housing Society Ltd. : [1995]216ITR321(Bom) ; which did not consider the principle of mutuality.

(1.5) The learned Commissioner of Income-tax (Appeals) erred; in observing that under the bye-laws the transferor is required to pay the transfer fees.

(1.6) The learned Commissioner (Appeals) failed to appreciate that the transfer fees is paid by the incoming member (transferee) in accordance with the bye-laws'.

4. Briefly stated, the facts of the case, as relevant to this ground of appeal, are as follows:

(i) During the previous year relevant to the assessment year under appeal, the assessing officer as well as the learned Commissioner (Appeals) have concurrently recorded a finding that certain office flats/premises were transferred by the existing members of the assessee-society to the outsiders as a result of which the assessee received a sum of Rs. 1,63,77,681 from them as under :

Sl No.

Name of the transferees (Office No. in bracket)

Amount received Rs.

Date of Cheque

Date of receipt issued by assessee

1 .

Capt. Suresh Khurana (156C)

1,09,812

16/17th May, 1996

22-6-1996

Sh. AT Shah & others (113C)

3,29,409

16th Aug., 1996

7-9-1996

Sh. Jawahar bhai Javeri (136C)

1,76,814

21st August, 1996

21-8-1996

United Western bank (161C)

3,97,500

20th June, 1996

4-7-1996

SEBI (1BC)

65,83,802

25-9-1996/1-10-1996

3-10-1996

IDBI (2A, B and C)

80,37,309

11-11-1996

1-11-1996

Ogilvi & Mather Ltd. (164/165B)

4,01,091

Nov. 1995

3-4-1996

Sudima Impex (61 C)

2,64,002

24/25-7-1996

21-11-1996

(ii) The payments made by the transferees were shown by the assessee as 'contribution' towards 'Common Amenity Fund/ Repair& Welfare Fund/Transfer & Entrance Fee'. The entire amount received from the transferees has been put in lump sum under a combined head without making any bifurcation of the said amount separately under the heads 'Common Amenity Fund', 'Repair & Welfare Fund and 'Transfer & Entrance Fee'.

(iii) The said receipts were treated by the assessing officer as taxable and hence were added to the total income returned by the assessee.

On appeal, the learned Commissioner (Appeals) confirmed the addition made by the assessing officer against which the assessee is in appeal before the Tribunal.

5. In support of the ground of appeal, Shri Patil, the learned senior counsel for the assessee, invited our attention to Bye-law No. D.3.4. of the Byelaws of the assessee-society which provides: 'A member desiring to purchase office premises shall contribute to the society for Common Amenity Fund /Repairs & Welfare Fund sum or sums as may be prescribed by the Managing Committee from time to time for Offices/Godowns, etc. according to the area subject to ratification by the General Body Meeting' and submitted that the amounts received by the assessee were not in the nature of 'transfer fee' but in the nature of contributions to various funds as indicated in the said Bye-law. He submitted that there was no profit motive involved in raising the said contributions as they were meant for the benefit of the members of the assessee-society. He further submitted that the aforesaid contributions received by the assessee were covered by the principle of mutuality and hence were not exigible to tax. Referring to the order dated 4-7-2003 passed by the Special Bench of the Tribunal in Walkeshwar Triveni Co-operative Housing Society Ltd. v. Income Tax Officer (AT), he submitted that the said decision was in the context of transfer fee and not in the context of contribution to various funds as raised by the assessee in the matter under appeal and hence the learned senior counsel contended that the said order did not cover the issue in hand and therefore was not a rule of precedent to be followed by us. In support of his submissions, the learned counsel for the assessee has relied upon the following judgments/orders:

'3. Principles of Mutuality

(a) Surat District Cotton Dealers Association v. CIT : [1959]35ITR121(Bom)

(b) CIT v. Merchant Navy Club : [1974]96ITR261(AP)

(d) CIT v. West Godaiari, : [1984]150ITR394(AP)

(e) CIT v. Natraj Finance Corporation, : [1987]169ITR732(AP)

(f) Sports Club of Gujarat v. CIT : [1988]171ITR504(Guj)

(g) CIT v. Ranchi Club Ltd., 196 ITR 37

(h) CIT v. Bombay Oilseeds & Oil Exchange Ltd. : [1993]202ITR198(Bom)

(i) CIT v. Ceivent Allocation & Coordination Org. : [1999]236ITR553(Bom)

(j) CIT v. Royal Western India Turf Club Ltd. : [1953]24ITR551(SC)

(k) CIT v. Bankipur Club Ltd. : [1997]226ITR97(SC)

(l) Chelmsford Club v. CIT 243 ITR 89 .

4. Transfer Fees - Mutuality Concept

(a) Walkeshwar Triveni Co-op. Hsg. Soc. Ltd. v. CIT (SB-Mum)

(b) CIT v. Apsara Co-op. Housing Society Ltd. : [1993]204ITR662(Cal)

(d) CIT v. Presidency Co-op. Housing Society, Ltd. : [1995]216ITR321(Bom)

(e) Sagar Sanjog Co-op. Hsg. Soc. Ltd. v. ITO (ITA No. 7385/M/2002 (Mum.), dated 23-12-2003)

(f) Nutan Abhisehek Co-op. Hsg. Soc. Ltd. v. ITO (ITA No. 6025/Bomd 1999 dated Nov. 2001)

(g) Asstt. CIT v. Friends Co-op. Hsg. Soc. Ltd. (I. 5960/Bom/94, dated 30-8-2002)

(h) Lothe Co-op. Hsg. Soc. Ltd. v. Income Tax 51 ITD 608 (Mum.)

(i) Ludhiana Aggarwal Co-op. Hsg. Soc. Ltd. v. ITO, 55 iTD 423 (Chd.)'

6. Shri Maheshwari, the learned CIT-DR, on the other hand, invited our attention to the various clauses in the Bye-laws of the assessee-society and submitted that the membership of the assessee-society was a precondition before a transferee can own the office premises in the society and it was in pursuance of the aforesaid that the assessee insisted on transferees making certain payments before the premises could be registered in the records of the society in their names. He took us through all the copies of the receipts placed by the assessee in its paper book and contended that the assessee-society always obtained the payments first and only then it registered the names of the transferees in the records of the society. He submitted that the impugned payments described as 1 contribution' to various funds were, in substance, 'transfer fee' realized from the aforesaid parties as a condition for transferring the office premises sold to them in their names. Elaborating his submissions that the alleged 'contributions' received by the society were nothing but 'transfer fee', he submitted that such payments were one-time payment made by the above noted parties, in lieu of the assessee-society agreeing to register the transfer of the property in their names. He submitted that the issue was squarely covered by the decision of the Special Bench of the Tribunal in Walkeshwar Triveni Co-operative Housing Society Ltd.'s case (supra) in favour of the revenue and against the assessee.

7. We have considered the rival submissions and perused the judgments and orders relied upon by them. Both the authorities below have concurrently recorded a finding that a sum of Rs. 1,63,77,681 was received from the parties mentioned in their orders (as extracted in para 4(1) above) as a condition for having the transfer of the properties sold by the members effected in the names of the transferees. The claim of the assessee was that the aforesaid transferees had paid the amount to the assessee-society in pursuance of Bye-law No. D. 3.4., as reproduced in para 5 above.

8. Thus, it is not in dispute that the amounts were paid, as held concurrently both by the assessing officer and the learned Commissioner (Appeals), by the transferees in pursuance of the aforesaid bye-laws. The finding of the authorities below that the impugned payments were made by way of 'transfer fee' is, however, disputed. Thus, the first issue to be decided is whether the amounts received by the assessee as 'contributions' were in reality 'transfer fee'. It is well accepted that the nomenclature assigned to a transaction is riot decisive of the true nature of transaction. All relevant facts of the case therefore need to be closely examined to decide whether the amounts received by the assessee were mere 'contribution s' to the various funds or were, in reality, transfer fee. Facts available on record clearly indicated that, like 'transfer fee', the amounts in question were paid to the assessee-society at the time of transfer of the office premises and for registering such transfer in the records of the society. In the event of sale of accommodation, it is necessary, under the Bye-laws of the assessee-society, for the transferee to acquire membership of the assessee-society before the same is registered in his name. In order to acquire the said membership, it is necessary to pay certain amounts loosely described as 'transfer fee' which has now been replaced by other nomenclatures like contributions' to various funds of the society. The fact however remains that all such payments, whether called transfer fee or something else, are required to be made only at the time of transfer and in lieu of the society agreeing to transfer the accommodation in the name of the transferee. Thus, the impugned payments, regardless of the nomenclature, are linked with the event of transfer and are a necessary pre-condition without fulfilling which the transferee would not be granted membership of the assessee-society and thereby would not be able to hold the property in his name. Thus the point of time at which the said payment is made and the immediate purpose for which it is made are linked with the transfer of property in the name of the transferee. It is essentially a kind of payment required to be made to the assessee for having the transfer effected in the name of the transferee. Besides, the amount whether called 'transfer fee' or by any other name is ultimately realized from the transferees without paying which they will not be admitted as members. In all material respects, there is no difference between 'transfer fee' and so-called 'contributions' to the society.

9. The reason as to why the societies have started changing the nomenclature of these payments from 'transfer fee' to 'contributions is the restrictions placed by the Government of Maharashtra in charging 'transfer fee'. In the present case also, the assessee-society would not have been able to charge such hefty amounts as transfer fee in view of the restrictions imposed by the Government of Maharashtra. In Pune Middle Class Co-operative Housing Society Ltd. v. Satguru Gopal Pustule CTJ 1991, the Maharashtra State Co-operative Appellate Court, Mumbai has held that the practice of demanding payment by way of donation or transfer fee deserves not only to be discouraged but also to be condemned because the practice was repugnant to the very concept of co-operative housing society. In Shri Ramanna Co-operative Housing Society Ltd. v. S.D. Chittar CTJ 1989 the Maharashtra State Co-operative Appellate court has observed that the society has absolutely no right to charge transfer fee in excess of the provision of Re. 1 under the Bye-laws. In the face of such restrictions discouraging the practice of charging transfer fee or even donation in excess of the limits laid down in the Bye-laws, the Societies have started charging similar money in the form of 'contributions' which, in no way, are materially different from the 'transfer fee'. In this connection, following observations made by the Special Bench in Walkeshwar Triveni Co-operative Housing Society Ltd's case (supra) are apposite :

'85... Consequently the spirit of mutuality is abused with impunity, To hoodwink the law, premium is worded under different names, viz., Donation. Welfare Fund. Common Amenities Fund, etc. etc., Such contributions are compulsive to effect the transfer Society can put interdict on the transfers de hors such contribution. As such there is quid pro quo in accepting such contributions. Such charges are neither legal nor voluntary. Profit is the primary object for making such charges to effect the transfer. This amounts to malpractice. Such unlawful or illegal means should not be encouraged.'

'86. Bacon said, 'laws are like cobwebs, where the small flies are caught, and the great breakthrough'. To maintain the Majesty of law, it is imperative that innocent should not suffer and recalcitrant should not go scot-free. If a Co-operative Housing Society indulged in malpractices and adopted unlawful or illegal means to achieve the objective, it should face the consequences. But if there is no evidence apropos any malpractice, it won't be fair to view the society with suspicion. If the premium is charged within the limits prescribed under law, no profit motive can be attributed to the Society. It is just to ensure an income to the Society which is to be utilised for the common good. However, if the excess amount is charged - be it donation or payment under any other nomenclature, profit motive will pervade and mutuality will cease to exist. Ex consequent, the profit will be exigible to tax.'

10. Coming to the facts of the case, it is seen that the learned Commissioner (Appeals) has held the impugned receipts as taxable with the following observations:

'5.2 1 have for the detailed reasons mentioned therein, given a clear finding that the transfer fee received by the Appellant is taxable. It may further be noted that so far as the new member is concerned, there is no escape from the payment of transfer fee. In the case of non-payment of transfer fee on sale of premises, the deal fails through and the premises are not transferred. The Appellant itself is accounting regular contributions in the income account and the transfer fee collected from the members are directly capitalized in the Balance Sheet treating the same as capital receipt ......'

11. The transferees were admittedly not the members of the assessee-society on the date on which the payments were made to the assessee-society. It is also clear that the aforesaid transferees were admitted as members of the society and flats entered in their names only after the impugned payments had been made to the assessee-society. In other words, the payments were directly linked with the transfer of flats. Had there been no transfer, the said payments would not have been made to the assessee. Thus, the compulsive nature of payment in order to secure transfer of the premises sold in the name of the transferees and that too in excess of the limits fixed by the State Government is self-evident. These payments would not have been made to the assessee-society if the transferors had continued to own the premises in question. Thus, the said amounts accrued to the assessee as a result of the sale of the premises in question and in lieu of the assessee's registering the transfer of office space in the names of the transferees by admitting the transferees as members of the assessee-society. On these facts, we are of the considered view that the payments in question were, in substance, 'transfer fee' notwithstanding a different nomenclature assigned to them by the assessee to suit its own convenience and purpose.

12. Having held that impugned payments to be in the nature of 'transfer fee' and that too in excess of the limits fixed in this behalf by the government, we find that the issue of taxability of 'transfer fee' is squarely covered by the decision of the Special Bench of the Tribunal in Walkeshwar Triveni Co-operative Housing Society Ltd.'s case (supra) against the assessee and in favour of the revenue. The submissions, judgments and orders relied upon by the parties before us have been duly considered by the Special Bench. Respectfully following the same, we hold that the impugned payments are exigible to tax. The order of the learned Commissioner (Appeals) is therefore confirmed. Ground No. 1 taken by the assessee is dismissed.

Ground No. 2: Validity of notice dated 28-9-1998 is issued under section 147/148

13. Relevant grounds of appeal relating to the aforesaid issue read as under:

'2. Notice under section 148 dated 28-9-1998

2.1 The learned Commissioner (Appeals) erred in holding that the notice under section 148 of the Income Tax Act, 1961, dated 28-9-1998 was valid.

2.2 The learned Commissioner (Appeals) failed to appreciate that there was no escapement of income chargeable to tax.

2.3 The learned Commissioner (Appeals) erred in holding that the assessing officer had reason to believe that the income chargeable to tax has escaped assessment.

2.4 The learned Commissioner (Appeals) failed to appreciate that no valid reasons, as required under section 148(2) of the Act, were recorded before issuing the said notice under section 148.

2.5 The learned Commissioner (Appeals) erred in holding that the notice under section 148 dated 28-9-1998 issued within the period permitted for issuing notice under section 143(2) (ie., upto 30-11-1999) was valid and legal.

2.6 The learned Commissioner (Appeals) failed to appreciate that as on 28-9-1998 the only option with the learned assessing officer was to issue notice under section 143(2) and to complete the assessment under section 143(3) on or before 31-3-2000 and he had no authority or jurisdiction on 28-9-1998 to issue notice under section 148.'

14. Explaining the facts of the case as relevant to this issue, Shri V.H. Patil, the learned senior counsel for the assessee submitted that the assessee society had filed its original return of income on 22-10-1997, which was processed by the assessing officer under section 143(1)(a) of the Income Tax Act, 1961 on 19-6-1998 in pursuance of which 'Intimation' under section 143(1)(a) was issued on 19-6-1998. Thereafter notice under section 147/148 was issued on 28-9-1998 and served on the assessee on 9-10-1998 in response to which the return of income was filed on 3-11-1998. The aforesaid facts as submitted by the learned counsel for the assessee are not disputed by the department. It is also not disputed by the department that since the return of income was filed on 22-10-1997, the assessing officer had jurisdiction to issue notice under section 143(2) till 31-10-1998 and complete the regular assessment under section 143(3) thereafter till the expiry of the period of limitation as prescribed in section 153. The assessing officer, however, preferred to issue a notice under section 147/148 to issuing a notice under section 143(2) and complete the regular assessment under section 143(3). It is this action of the assessing officer that has been challenged by the assessee. The submissions made by the learned counsel for the assessee are on the following three lines:-

(i) 'Intimation' issued under section 143(1)(a) is not 'assessment' within the meaning of section 147 and hence income of the assessee cannot be said to have escaped assessment till the time limit for issue of notice under section 143(2) is available.

(ii) Once a return is filed by the assessee under section 139, the proceedings of assessment as a result thereof continue to be pending till 'the time limit for issue of notice under section 143(2) expires, and hence issue of notice under section 147/148 will be illegal during such pendency of the assessment proceedings till then; and

(iii) Availability of time limit for issue of notice under section 143(2) operates as a bar to the issue of notice under section 147/148.

15. The anchor-sheet of the submissions of the learned counsel for the assessee is that an intimation issued under section 143(1)(a) is not 'assessment' within the meaning of section 147/148 and that so long as the time limit for issue of notice under section 143(2) is available for making the assessment, notice under section 147/148 is not competent. Pointing out the difference between intimation and assessment, he submits that intimation can not be equated with or treated as assessment for several reasons: one, the issue of intimation does not terminate the process of assessment so long as the time limit for issue of notice under section 143(2) and for completion of assessment under section 143(3) is available; two, the issue of intimation does not debar the assessing officer from proceeding with the assessment under section 143(3); three, sub-section (1B) of section 143 permits the assessee to file a revised return, even after the issue of intimation of under section 143(1)(a), upon which the assessing officer is obliged to issue a revised intimation; and, four, the Explanation to section 143(1) creates a legal fiction by which the intimation is deemed to be an order for limited purposes and that the need for creating the said fiction clearly means that the intimation under section 143(1)(a) is not an assessment. The learned senior counsel contends that an intimation issued under section 143(1)(a) is, therefore, not an assessment and hence mere issue of intimation does not mean that the end of the assessment proceedings till the period of limitation for issue of notice under section 143(2) and consequential assessment under section 143(3)/144 is available or till the assessment is completed under section 143(3)/144 whichever is earlier. According to him, when the original assessment proceedings are so pending in consequence of the return filed under section 139, the assessing officer is deprived of his jurisdiction to issue a notice under section 147/148.

16. Shri Patil took us through the provisions of sub-section (2) of section 143 and made two-fold submissions. One, intimation is issued by the assessing officer before service of notice under section 143(2) whereas assessment is made after service of notice under section 143(2). According to him, the provisions of section 143(2) are mandatory for completion of assessment. And this is what, the learned counsel says, distinguishes, an intimation from assessment. If the assessing officer wants to make an assessment, he must, say the learned counsel, issue a notice under section 143(2) as no assessment can be made without issuing the said notice. Two, the powers of the assessing officer are much wider under section 143(2)/143(3) than the powers available to him under section 147/148. He contends that if the assessment is open for completion under section 143(3), the availability of that power ipso facto debars the assessing officer from exercising the jurisdiction under section 147/148 as the option of issuing notice under section 147/148 is available to the assessing officer only where the assessment has been completed and the income of the assessee chargeable to tax has escaped from the said assessment. So long as the assessment is pending under section 143(2)/(3), the assessing officer, according to Shri Patil, can not issue notice under section 147/ 148.

17. Shri Patil, the learned counsel took us through the provisions of section 147 including Explanations 1 and 2 thereto in support of his argument that the provisions of section 147/148 could be invoked to assess that income which had escaped assessment. Escapement of income from assessment pre-supposes, according to the learned counsel, that an assessment has either been made or the time grant for making the assessment has expired. Reiterating the facts of the case under appeal, the learned counsel for the assessee submitted that the proceedings for assessment were wide open in the matter under appeal, notwithstanding the fact that intimation had already been issued under section 143(1)(a), on the date on which the impugned notice under section 147/148 was issued by the assessing officer and hence the assumption of jurisdiction by the assessing officer under section 147/148 was if legal and consequently rendered the impugned notice issued thereunder as null and void. He submitted that the reassessment proceedings initiated by the assessing officer under section 147/148, therefore, deserved to be quashed and consequential assessment also deserved to be annulled.

18. Shri Patil has placed reliance on the following decisions in support of his submissions:

(i) Communicate of Chicalim v. ITO (2001) 247 ITR 271

(ii) Trustees of HEH Nizams Supplemental Family Trust v. CIT (2000) 242 ITR 381

(iii) CIT v. Ranchhoddas Karsondas : [1959]36ITR569(SC)

(iv) CIT v. Central Prov. Railway Co. Ltd. : [1979]119ITR161(Bom)

(v) Sugar Selling Agency (P.) Ltd. v. ITO : [1981]130ITR801(Bom)

(vi) Sheila Brij Jaggi v. ITO (1990) 184 ITR 504

19. In reply, Shri K L Maheshwari, the learned Commissioner (Departmental Representative) submits that the marginal note of section 143 is 'Assessment', which clearly indicates that section 143 deals with several forms/types of assessments spelt out in section 143 and not only with 'regular assessment' alone. According to him, assessments fall in two categories under section 143. In the first category are those assessments which are summarily made by issuing intimations under section 143(1)(a) on the basis of returns submitted by the assessees without any enquiry or seeing the presence of the assessee. Returns submitted by the assessees, according to the learned Departmental Representative, are accepted on their face value and hence only intimations are sent to the assessees conveying the total income determined after making prima facie adjustments, tax and interest payable thereon, taxes actually paid and consequential amount determined as payable or refundable. Shri Maheshwari submits that since such assessments are not accompanied by the Notice of Demand, they are termed as 'intimation' in as much as they intimate to the assessees the total income determined on the basis of the return submitted by them after prima facie adjustments as also the amount of tax payable or refundable as a result thereof. He contends that intimations do not loose the character of assessment only because they are termed as 'intimation' under section 143(1)(a). Inviting our attention to section 151, he submits that the provisions of section 147/148 are applicable to all the forms of assessments regardless of whether they were completed by way of intimations under section 143(1)(a) or regular assessments under section 143(3) or best judgment assessments under section 144.

20. Shri Maheshwari further submits that section 143(2) is indeed mandatory but it is mandatory only when the assessing officer elects to make a regular assessment, i.e., assessment under section 143(3) and not otherwise. He argues that the assessing officer will be well within his powers to proceed against the assessee under section 147/148 once he has reason to believe that the income of the assessee has escaped from the taxation net. According to him, it is not correct to say that section 147/148 is not available to the assessing officer unless the income of the assessee has been assessed to tax by way of regular assessment and his income has escaped from that assessment. He submits that such an interpretation of section 147/148 is untenable in law. He has placed reliance on the decisions in Punjab Tractors Ltd. v. Joint CIT (2000) 254 ITR 242 ; Mahanagar Telephone Nigam Ltd. v. Chairman CBDT : [2000]246ITR173(Delhi) ; and Pradeep Kumar Har Saran Lal v. Assessing Officer : [1998]229ITR46(All) for the proposition that notice under section 147/148 is competent in a case where intimation has been issued by the assessing officer. He has also relied on the order of the Tribunal in Uttam Chand Nahar v. ITO (2002) 77 TTJ (Jodh.) 169, for the proposition that the assessing officer can issue notice under section 148 even when the normal time limit to issue notice under section 143(2) is available to him.

21. We have carefully considered the rival submissions. In order to resolve the controversy before us, two distinct issues arise for consideration i.e., one, whether the term 'assessment' as occurring in the phrase 'income escaping assessment in the marginal note of section 147 or in the phrase 'income chargeable to tax has escaped assessment in the body of section 147 includes 'intimation' issued under section 143(1)(a); and, two, whether the mere availability of time limit under section 143(2) is a bar against the issue of notice under section 147/148.

22. We shall first take up the issue as to whether the term 'assessment' as occurring in the phrase 'Income escaping assessment' or in the phrase 'income chargeable to tax has escaped assessment' in section 147 includes 'intimation' issued under section 143(1)(a). Shri Patil submits that 'intimation' issued under section 143(1)(a) is not 'assessment' within the meaning of section 147 whereas the learned Departmental Representative submits that the said intimation is 'assessment' within the meaning of section 147. The term assessment has been defined in sub-section (8) of section 2 by way of inclusive definition so as to include 're-assessment'. Two important aspects of section 2 in so far as it defines 'assessment' deserve to be noted. One, all the definitions in section 2 including the definition of 'assessment' are subject to the context. Hence, it is permissible in law to assign a different meaning to any word or phrase defined in section 2 if the context so requires. In other words, the meaning of 'assessment' is contextual in nature. Two, the definition of the term 'assessment' is inclusive in nature and hence not comprehensive.

23. The term 'assessment' has been the subject-matter of extensive judicial scrutiny in all the tax systems. In Black's Law Dictionary (Seventh Edition), the term 'assessment' has been defined at p. 111 as follows: . assessment', n. 1. Determination of the rate or amount of something, such as a tax or damages, assessment of the losses covered by insurance, 2. Imposition of something, such as a tax or fine, according to an established rate the tax or fine so imposed, assessment of a luxury tax' In his speech in Commissioners for General Purposes of Income-tax for the City of London v. Gibbs and others, Lord Simon said: 'assessment' is used in the English income-tax code in more than one sense; and sometimes within the bounds of the same section, two separate meanings of the word may be found. One meaning is the fixing of the sum taken to represent the actual profit and the other the actual sum in tax which the taxpayers is liable to pay.' Extracted from the judgment in Kantilal Manilal v. CIT : [1961]41ITR275(SC) . In P. Ramanatha Aiyer's 'The Law Lexicon', Reprint 2002 (General Editor: Justice Y V Chandrachud), a few of the several meanings of the term 'assessment' as given therein (pp. 153-154) are as follows: 'The word assessment has been used in the sense of computation of income'. At best the word is used in the sense of 'the determination of the amount of tax payable'. Madangopal Kabeer v. Union of India (section (14a) Income Tax Act, 1922)'; 'The word 'assessment' used in section 25A (2) Income Tax Act, 1922 means 'computation of income' or the determination or the determination of the amount of taxpayable: Gulabrai Manohar Lall v. CIT AIR 1954 Pat. 155', Assessment is the official determination of liability of a person to pay a particular tax Firm L. Hazari Mal Kuthiala v. ITO (Income Tax Act, 1922, section 35(1) & (5)'.

24. Before we come to any conclusion as to whether the term 'assessment' as used in section 147 includes 'intimation', it is necessary to bear in mind that as a rose would not cease to smell sweet if it was to be called by some other name, an assessment, likewise, would not cease to be assessment only because it is called by some other name, viz., 'intimation' under section 143(1)(a) as a result of the simplified procedure laid down by law to make it. It is therefore necessary to examine the nature and legal effect of 'intimation' issued under section 143(1)(a) vis-a-vis regular assessment contemplated by sub-section (3) of section 143. Chapter XIV of the Income Tax Act, 1961 in which section 143 occurs is captioned as 'Procedure of assessment'. The marginal note of section 143 is 'Assessment. Section 143 provides for two procedures of assessment, which are as under:

(i) First procedure of assessment, which is summary or simplified in nature, is provided by sub-section (1) of section 143 according to which the return of income submitted by the assessee forms the basis for assessment without requiring the presence of the assessee or the production by him of any evidence in support of his return of income. The Public Exchequer, in order to promote voluntary tax compliance and thereby maximise revenue generation by reposing confidence and trust in the taxpayers, accepts the return of income and such acceptance is conveyed by what is called 'intimation' under section 143(1). We have perused the form used by the Tax Administration for sending the intimation issued under section 143(1) to the assessees. We find that it inter alia contains the computation of total income, taxes and interest payable thereon, details of taxes paid by the assessee and the net amount of tax payable or refundable, apart from the details of adjustments made by the assessing officer under section 143(1)(a) to the total income returned by the assessee. It is issued by the assessing officer in the form of a letter and not in the form of an order as required under section 143(3) and is addressed to the assessee which perhaps justifies its name as 'intimation' to the assessee. And this intimation is of the total income assessed and taxes found payable thereon. From a plain reading of sub-section (1) of section 143, it is clear that intimation contemplated by the aforesaid provisions is intimation of tax payable, which, in turn, is preceded by determination/assessment of total income, tax/interest paid thereon and the tax found payable/refundable as a result thereof and this is what is precisely done by the assessing officer in the intimation. Intimation is not required to be accompanied by a notice of demand. Thus, intimation, like a regular assessment under section 143(3), conveys total income determined as also tax payable thereon or refundable and, unlike a regular assessment, it is not required to be accompanied by a notice of demand.

(ii) Second procedure of assessment, termed as 'regular assessment' in sub-section (40) of section 2, is laid down in sub-section (3) of section 143. Regular assessment is completed after giving an opportunity of hearing to the assessee in terms of the provisions of section 143(2) and after considering all the evidence submitted by the assessee as also all the materials collected by the assessing officer. Sub-section (3) of section 143 requires the order to be in writing assessing the total income of the assessee as also the sum payable thereon. Notice of demand as contemplated by section 156 also follows the said order of assessment under section 143(3).

25. From the above, it follows that two different procedures of assessment are laid down in section 143. The common genus running all through section 143 is not only computation of total income and determination/ assessment of tax liability but also the procedure to be adopted in that behalf. Though the assessment as contemplated by section 143(3) is termed 'regular assessment' but that does not ipso facto mean that the determination/assessment of total income and tax payable/refundable through intimation as per the summary procedure prescribed by section 143(1) is not 'assessment' with in the meaning of section 147. The difference lies in the procedure adopted for making them. In our view, both of them, i.e., 'regular assessment' under section 143(3) as well as 'intimation' under section 143(1) are different forms of assessments made by following different sets of procedure which justifies differentiation in their names. None of them has been assigned the term 'assessment'; they are called either 'regular assessment' under section 143(3) or 'intimation' under section 143(1). But that does not mean that they are not assessment within the meaning of section 2(8). Though both of them, i.e., summary assessment termed as 'intimation' under section 143(1) and 'regular assessment' termed as such under section 143(3), are 'assessment' within the meaning of section 2(8), they are different from each other in that different procedures have been statutorily laid down for making them. But both of them are assessments in that they intimate or convey to the assessee the total income determined/assessed and tax payable thercon. Nevertheless, Shri Patil. is quite right in his submission that an assessment under section 143(3), termed 'regular assessment' under section 2(40), is materially different from intimation of tax payable/refundable as contemplated by section 143(1) but the difference lies in the procedure prescribed for making them. The word 'assessment' under section 143 includes 'regular assessment sub-under section (3) of section 143 as well as assessment contemplated by sub-section (1) of section 143(1) in as much as in both the situations the total income and the tax payable/refundable are determined and conveyed by the assessing officer to the assessee. Thus while all regular assessments are necessarily assessments, all assessments are not necessarily regular assessments. Procedures for making them are different but that does not denude the intimation from being called or treated as an 'assessment.'

26. The view taken by us above is also supported by the propositions laid down by the Hon'ble Supreme Court. In CA Abraham v. ITO : [1961]41ITR425(SC) , the Hon'ble Supreme Court has held as under:

'The expression 'assessment' as has often been. said, is used in the Income Tax Act, with different connotations. In CIT v. Khemchand Ramdas (1938) 6 ITR 414the Judicial Committee of the Privy Council observed.

'One of the peculiarities of most Income Tax Acts is that the word 'assessment' is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the taxpayer. The Indian Income Tax Act is no exception in this respect.'

A review of the provisions of Chapter IV of the Act sufficiently discloses that the word 'assessment' has been used in its widest connotation in that chapter. The title of the chapter is 'Deductions and Assessment'. The section which deals with assessment merely as computation of income is section 23 but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions therein. Section 23A deals with powers to assess individual/members of certain companies on the income deemed to have been distributed as dividend, section 2B deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons. Section 25 deals with assessment in case of discounted business, section 25A with assessment after partition of Hindu undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34* deals with assessment of incomes which have escaped assessment. The expression 'assessment' used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding that when by section 44, it is declared that the partners or members of the association shall be jointly and, severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof....'

(*Now section 147/148 under the Act of 1961)

27. In A.N. Lakshaman Slienov v. ITO : [1958]34ITR275(SC) , a Bench of the Hon'ble Judges of the Supreme Court has explained the meaning of assessment as under:

'... We can find no good reasons for holding that in the matter of levy, assessment and collection of income-tax, the Finance Act, 1950, contemplated that some persons should enjoy a privilege and escape payment of the full tax leviable under the provisions of the relevant Act. On this point we approve of the decision in Firm L. Hazari Mal v. ITO Ambala, where Bhandari, CJ said :'

'These three expressions 'levy', 'assessment' and 'collection' are of the widest significance and embrace in their broad sweep all the proceedings for raising money by the exercise of the power of taxation.'

28. In the face of such clear exposition of law with regard to the meaning of the term 'assessment' by the Apex Court, we are unable to accept that 'intimation' issued under section 143(1)(a) is not assessment within the meaning of section 147. Intimation issued under section 143(1)(a) is assessment both in its narrow sense, i.e., computation of total income and tax payable thereon as well as in its comprehensive sense, ie., the procedure followed or the proceedings adopted for raising money by the exercise of the power of taxation. Keeping in mind the law laid down by the Honble Supreme Court with regard to the meaning of 'assessment', we hold that the term 'assessment' in section 147 is wide enough to include 'intimation' issued under section 143(1)(a) and hence the assessing officer is competent to issue notice under section 147/148 if the income chargeable to tax has escaped assessment made either in the form of 'intimation' under section 143(1)(a) or 'regular assessment' under section 143(3) or 'best judgment assessment' under section 144 provided other conditions laid down in that behalf are also satisfied.

29. Coming to the other submission of the learned counsel for the assessee that assessment proceedings remain pending even after issue of 'intimation', we are of the view that one intimation is issued by the assessing officer, he becomes functus officio and cannot regain assessment jurisdiction except in accordance with law. The proceedings for assessment stand terminated and come to an end once 'intimation' is issued by the assessing officer unless the assessing officer serves a notice under section 143(2) or 147/148 in which case alone the assessment proceedings get revived but not otherwise. This is exactly what happens with the 'regular assessment' proceedings also which too come to an end upon completion of regular assessment till the assessing officer issues notice under section 147/148 upon which the assessment proceedings get revived once again. Merely because the assessment proceedings can be revived, after issue of intimation under section 143(1)(a), by exercising the power in accordance with law does not by itself mean that the previous assessment proceedings did not stand terminated or come to an end or are pending. We are therefore unable to agree with the learned counsel for the assessee that the assessment proceedings remain pending even after the issue of 'intimation' under section 143(1)(a) till a regular assessment is made under section 143(3) or till the expiry of the time limit for issue of notice under section 143(2), whichever is earlier. In the case before us, the assessing officer did not issue any notice under section 143(2) after issuing the intimation with the result that the assessment proceedings which had commenced on the filing of return by the assessee under section 139 stood completed/terminated upon issue of intimation by the assessing officer under section 143(1)(a). If he had issued a notice under section 143(2), then, in that case and in that case alone, the assessment proceedings would have got revived and hence the assessing officer in such a case would have had no jurisdiction to issue notice under section 147/148 during the pendency of such assessment proceedings on the principle that issue of notice under section 147/148 is not possible so long as the assessment proceedings are pending, a principle vehemently relied upon by Shri Patil and supported by the judicial authorities cited by him. That is not the case before us and hence we are unable to agree with the learned counsel for the assessee that the assessment proceedings were pending only because the assessing officer could have issued notice under section 143(2) and revived the assessment proceedings.

30. We shall now take up the second issue as to whether the mere availability of time limit under section 143(2) is a bar against the issue of notice under section 147/148. The learned counsel for the assessee submits that a notice under section 147/148 cannot be issued during the availability of time limit under section 143(2) for making a regular assessment. His submission is that the power available to the assessing officer under section 143(2) is far wider than the power available to him under section 147/148. According to him, the assessing officer cannot issue notice under section 147/148 unless the time limit for issuing the notice under section 143(2) has expired. He contends that the impugned notice issued by the assessing officer during the availability of time limit under section 143(2) is a illegal and hence should be quashed and the resultant assessment declared a nullity.

31. Twin cardinal principals of Public law are that a public functionary exercising quasi-judicial authority must always keep himself within the jurisdiction assigned to him and the other is that he must always exercise his powers strictly in accordance with law. If the assessing officer wants to exercise his jurisdiction under section 147/148, what, in our view, should be seen in that case is whether all the ingredients of section 147/148 are satisfied. If they are satisfied his action has to he upheld being in consonance with the judicial principle that power must be exercised in accordance with law. Likewise, if the assessing officer wants to exercise the powers under section 143(2)/143(3), he must satisfy all the ingredients prescribed for the exercise of that power. Exercise of power by a public functionary cannot be defeated so long as he satisfies all the requisites statutorily laid down for the exercise of that power. There is a long line of judicial authorities supporting the aforesaid view.

32. In A Pusa Lal v. CIT : [1988]169ITR215(AP) , the Hon'ble High Court has held as under:

'lt is true as contended by learned counsel that the Income Tax Officer could have taken recourse to the issuance of a notice under section 143(2) and corrected the assessment made under section 143(1) by making an appropriate assessment enquiry under section 143(3). That, however, is a matter for the income tax Officer to choose. The power that can be exercised under section 143(2) to correct the assessment made under section 143(1) does not exclude Income Tax Officer's power to reopen the assessment. under section 147, if the ingredients of section 147 are satisfied. It is open to the Income Tax Officer to exercise that power notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under section 148 is vitiated because the Income Tax Officer failed to invoke his power to correct the assessment already completed under section 143(1) by issuing a notice under section 143(2).'

33. In Pramod Kumar Rakesh & Co. v. ITO : [1990]186ITR637(All) , the Hon'ble Allahabad High Court has held as under:

'...we are not inclined to hold that just because an assessment was made under section 143(1)(a) on the basis of the returns said to have been filed under the Amnesty Scheme, the power of the Income Tax Officer under sections 147 and 148 is taken away. It is therefore not possible for us to quash the impugned notices on the said ground.'

In Jorawar Singh Baid v. Asstt. CIT : [1992]198ITR47(Cal) the Honble Calcutta High Court has held as under:

In our view, the power than can be exercised under section 143(2) to correct the assessment made under section 143(1) does not exclude the power of the assessing officer to reopen the assessment under section 147 if the ingredients of section 147 are satisfied. It is open to the assessing officer to invoke the jurisdiction under section 147, notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under section 147 is vitiated because the assessing officer failed to invoke his power to correct the assessment already completed under section 143(1) by issuing a notice under section 143(2) of the Act.'

35. In Pradeep Kumar Har Saran Lal (supra), the Honble Allahabad High Court has held as under:

'We agree with the above reasoning of the Calcutta High Court, in so far as it has been held that so long as the ingredients of section 147 are fulfilled, the assessing officer is free to initiate reassessment proceedings and failure to take steps under section 143(2) will not render the assessing officer powerless to initiate the reassessment proceedings.'

36. In Mahanagar Telephone Nigam Ltd. (supra) the Hon'ble Delhi High Court has held as under:

'Another plea taken by the petitioner was that within that prescribed time limit action for assessment under section 143(3) was not taken. We find no substance in this plea.

So long as the ingredients of section 147 are fulfilled the assessing officer is free to initiate to proceed under section 147 and failure to take steps under section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. A similar view has been taken in A. Pusa Lal v. CIT : [1988]169ITR215(AP) ; Jorawar Singh Baid v. Asstt. CIT : [1992]198ITR47(Cal) and Pradeep Kumar Har Saran Lal v. Assessing Officer : [1998]229ITR46(All)

37. In Punjab Tractors Ltd. (supra) (Punj. & Har.), the Hon'ble High Court has held as under:

'...Mr. Sharma was at pains to point out that till the assessment is finalised, notice for reassessment under section 148 of the Act could not have been issued. He referred to the observations of their Lordships of the Supreme Court in Trustees of H.E.H. the Nizams Supplemental Family Trust v. CIT (2000) 242 ITR 381. In this case, it was held by their Lordships that (headnote) 'unless the return of income already filed is disposed of, notice for reassessment under section 148 of the Income Tax Act, 1961, cannot be issued, i.e., no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated.'

There is no quarrel with this proposition. However, in the present case, as noticed above, it is the petitioner's own case as pleaded in its representation to the respondent that the assessment for the assessment year 1999-2000 'was completed by your honour vide intimation under section 143(1) dated 23-5-2000'. Still further even an appeal was filed against this order. In this situation, it cannot be said that the assessment had not been made. Factually, even interest under section 234C was levied. The petitioner's liability to pay tax and interest was determined. A demand was raised and an appeal was filed. In this situation, it cannot be said that the return of income had not been 'disposed of'. In our view, the intimation under section 143(1) operates as an order of assessment unless the authority proceeds to give notice under section 143(2) and passes an order under section 143(3). Furthermore, if the competent authority has reason to believe that income had escaped assessment while issuing intimation under section 143(1). It can proceed under section 148. The absence of order under section 143(3) is no bar.'

38. In view of the settled legal propositions, as aforesaid, we are unable to decide Ground No. 2 in favour of the assessee. Ground No. 2 is therefore dismissed.

Ground No. 3: Validity of assessment

39. The grounds of appeal taken by the assessee read as under:

'Notice under section 143(2) dated 15-1-2001:

(1) The learned Commissioner (Appeals) erred in holding that the provisions of section 143(2) and the limitation therein are not applicable to the return of income filed in response to notice under section 148 of the Act.

(3.2) The learned Commissioner (Appeals) erred in ignoring the provisions of section 148(1) which clearly provide that the provisions of the Act (including section 143(2) would apply as if the return is filed under section 139.

(3.3) The learned Commissioner (Appeals) failed to appreciate that the said notice under section 143(2) dated 15-1-2001 was illegal and invalid being served beyond the period of limitation.'

40. The undisputed facts of the case are that the assessing officer issued notice under section 147/148 on 28-9-1998 to bring escaped income to tax in response to which the return of income was filed on 3-11-1998. First notice under section 143(2) was issued, according to the learned senior counsel for the assessee, on 15-1-2001 and the assessment under section 143(3)/147 was completed on 19-3-2001.

41. In short, the case of the learned counsel for the assessee is that the impugned assessment is null and void as the assessing officer has failed to serve the notice under. Section 143(2) within the time limit laid down under the time provision of section 147/148. He has invited our attention to the provisions of sub-section (1) of section 148 and submitted that the return filed in response to the notice under section 148 is statutorily treated as a return filed under section 139 and the provisions of the Income Tax Act, 1961, including section 143(2) apply accordingly. He has heavily relied upon the judgment of the Hon'ble Supreme Court in R. Dalmia v. CIT : [1999]236ITR480(SC) for the proposition that the return of income filed under section 148 has to be treated as a return filed under section 139 and, in that view of the matter, the provisions of section 143(2) would apply to the present case as if it was a return under section 139. He has also relied upon the decision in Mrs. Rama Sinha v. CIT (2002) 256 ITR 481 . Besides, he has cited the following orders of the Tribunal in support of his submissions that failure to issue notice under section 143(2) within the prescribed time limit makes the resultant assessment a nullity:

(i) Asstt. CIT v. Baikunthnath Singhal

(ii) Asstt. CIT v. Samosh Kumar

(iii) Mrs. C Malathi v. ITO (2004) 88 ITD 37 (Che)

(iv) Uma Polymers (P.) Ltd. v. Asstt. CIT 123 Taxman 226 (Mum.)

(v) Bhagat Singh & Virender Singh v. Asstt. CIT (2003) 75 ITD 1 (DelHI)

(vi) Maxima Systems Ltd. v. Dy. CIT (1994) 106 Taxman 133 (Ahd.)

(vii) Shri Murugan Trading Co. v. Assu. CIT ITA No. 900 of 1992 - Cochin

42. In reply, the learned Departmental Representative submits that the time provision of section 143(2) has no application where the return is filed in pursuance of notice issued under section 147/148. According to him, the said provision, i.e., section 143(2) is applicable to the returns filed under section 139. He has invited our attention to the order dated 30-1-2004 passed by Mumbai Bench 'H' of the Tribunal in Bajaj Industries v. Dy. CIT IT Appeal No. 5898 (Mum.) of 1999 for assessment year 1994-95 for the proposition that failure on the part of the assessing officer in serving notice under section 143(2) within the period mentioned therein will not render the resultant assessment under section 143(3)/148 a nullity. He has also relied upon the order of the Special Bench of the Tribunal in Nawal Kishore & Sons Jewellers v. Dy. CIT for the proposition that non-service of notice within the time limit laid down under section 143(2) was at the most an irregularity but would not render the resultant assessment a nullity.

43. We have considered the rival submissions and perused the judgments and orders cited by the parties. It is not in dispute that notice under section 143(2) was not served within the period prescribed by the time provision of section 143(2). We have perused the orders of the Tribunal relied upon by the learned senior counsel for the proposition that non-service of notice within the time limit laid down in section 143(2) makes the resultant assessment a nullity. It is true that some of the Benches of the Tribunal had earlier taken that view. At the same time, some other Benches had taken the view that non-service of notice within the said time limit would not render the resultant assessment a nullity. Considering the divergence of judicial opinion amongst the various Benches of the Tribunal, the Hon'ble President of the Tribunal constituted a Special Bench of the Tribunal in exercise of his powers under section 255(3). The Special Bench of the Tribunal has, after extensively examining the issue, held in Nawal Kishore Jewellers case (supra) as under:

'55. In view of the above legal position we hold that non-issuance of notice under section 143(2) would only be an irregularity which, is curable and not as nullity. Hence the assessment order passed in violation of such requirement cannot be declared as null and void.

56. Having held that non-issuance of Notice under section 143(2) is not a nullity but is an irregularity, the question may arise as to what course should be adopted in such cases by the appellate authority. One easy course would be to set aside the assessment and restore the matter to the file of the assessing officer for fresh assessment after giving, reasonable opportunity of being heard to the assessee. But there may be cases where sufficient opportunity, might have already been given by the assessing officer or the assessee might have participated in the proceedings, before the assessing officer or there may be sufficient materials on the record for adjudication. In such cases; mere restoration may prove to be a futile exercise. Therefore, in such cases, the appellate authority may adjudicate the issue itself after giving reasonable opportunity, to the assessee to explain his case. These observations are mere guidelines and no limitations are being placed on the powers of the appellate authority. The appellate authority would be free to choose the right course depending upon the facts of the each case.'

44. Attention of Shri Patil, the learned senior counsel, was invited to the aforesaid decision of the Special Bench of the Tribunal. In reply, he submitted that the decision of the Special Bench was in the context of block assessment and hence the said decision would not apply to the case under appeal.

45. It is no doubt true, as submitted by Shri Patil, that the effect of non-service of notice within the time limit laid down in the proviso to section 143(2) was considered by the Special Bench in the context of block assessment proceedings, the fact, however, remains that the Special Bench had. the occasion to examine the nature and true legal effect of non-service of notice under section 143(2) on the resultant assessment while pronouncing its order. In our view, the order of the Special Bench of the Tribunal is relevant and binding on us in deciding the matter under consideration. Besides, the said order of the Special Bench is being followed by all the Benches of the Tribunal. In its order dated 27-2-2004 in ITO v. Shakuntala Trading Co. (P.) Ltd. IT Appeal No. 1790 of 2002 for assessment year 1997-98, Kolkata Bench 'B' of the Tribunal to which one of us is a party (the Accountant Member), it has been held that non-service of notice within the time limit stipulated by the proviso to sub-section (2) of section 143 would not make the resultant assessment a nullity. The said order is not reported as vet and hence we consider it appropriate to extract the relevant portions from the said order and reproduce them in this order. The relevant portions of the said order read as under:

'9. We shall, however, like to supplement the reasoning given by the Hon'ble Special Bench of the Tribunal for taking the view that non-service of notice under section 143(2) within the time stipulated by the said proviso would not make the resultant assessment null and void. This requires consideration of three important issues, namely, (1) whether the time provision contained in the said proviso is in the nature of statutory direction to or limitation on the power of the assessing officer (ii) whether the omission to serve the notice as per the said proviso affects the inherent or ab initial jurisdiction of the assessing officer or is an error in the course of exercising the existing jurisdiction and (iii) whether the omission to serve notice as per the said provision renders the resultant assessment null and void or merely invalid capable of being rectified and cured.

Nature of Time Provision contained in section 143(2): Whether a statutory direction or limitation.

10. At the outset, we would like to state that we have deliberately avoided phrasing the issue as to whether the time provision contained in the said proviso is directory or mandatory in nature for, as held by the Hon'ble Privy Council in Wang v. Commissioner of Inland Revenue (infra), their Lordships considered that when a question like the present one arises - an alleged failure to comply with a time provision it is simpler and better to avoid these two words 'mandatory' and 'directory' and to ask two questions. The first is whether the legislature intended the person making determination to comply with the time provision, whether a fixed time or a reasonable time. Secondly, if so, did the legislature intend that a failure to comply, with such a time provision would deprive the decision maker of jurisdiction and render any decision which he purported to make null and void.' In our view, it is the second part of the aforesaid dictum that answers and clinches the issue. The said proviso, as reproduced earlier in the order, contains a time provision requiring the assessing officer to serve the notice of hearing for the benefit of the assessee within a given period or a period of twelve months from the end of the month in which the return under section 139 or 143 is furnished. Though it is worded in negative language, it does not, however, provide for any adverse consequence that may follow in the event of non-service of the notice within the stipulated time. The time provision in the said proviso stops with that direction. As against this, section 153 of the Act which also enacts a time provision provides: '153. Time limit for completion of assessments and re-assessments (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of The difference in the phraseology of the said proviso and section 153 is writ large on its face. It is clear that section 153 expressly enacts a time provision in the nature of limitation on the power of the assessing officer in matter of making the assessment after the expiry of the period specified therein and to that extent, it expressly provides for the consequences that would follow upon the expiry of the aforesaid period of limitation. As against this, the said proviso does not provide for any adverse consequences in the event of non-service of notice under section 143(2). It merely requires the assessing officer to serve the notice within the stipulated period. It however, stops short of indicating what will be result if the assessing officer fails to do so. From this, the distinction between two types of time provisions becomes abundantly clear. First set of time provisions are those which are in the nature of limitation period and second set of the time provision are those which are not in the nature of limitation period but in the nature of statutory directions. As held by the Honble Supreme Court in TV Usman v. Food Inspector : AIR1994SC1818 . It is well to realise that every prescription of a period within when an act must be done, is not the prescription of a period of limitation with painful consequences if the act is not done within that period.' ln cares on Statute Law, pp. 266-267 - Seventh Ed. By SGG Edgar (Universal Law Publishing Company), a reference has been made to Pearse v. Morrice in which TautonJ., said that he understood 'the distinction to be, that a clause is directory where the provisions contain mere matter of direction and nothing more, but not so, where they are followed by such words as, 'that anything done contrary to these provisions shall be null and void to all intents.'

11. In P.C. Maheshwari v. The Zilla Parishad, AIR 1971 SC 1996, the Hon'ble Supreme Court has held' These rules laying down certain dates by which the work was directed to be taken in hand and completed were merely directory and not mandatory. There was nothing in these rules to suggest that if the dates were not strictly observed any prejudice would be caused to the assessee.

12. In Wang v. Commissioner of Inland Revenue (1995) 1 All ER 367, to which a reference has been made above, the issue before the Hon'ble Privy Council was whether failure to act as per time provision deprived the Commissioner of his jurisdiction to make the determination. It has been held:'...their Lordship consider that when a question like the present one arises - an alleged failure to comply with a time provision - it is simpler and better to avoid these two words 'mandatory' and 'directory' and to ask two questions. The' first is whether the legislature intended the person making the determination to comply with the time provision, whether a fixed time or a reasonable time. Secondly, if so, did the legislature intend that a failure to comply with such a time provision would deprive the decision-maker of jurisdiction and render any decision which he purported to make null and void.' The Hon'ble council further held:' It does not follow that his jurisdiction to make a determination disappears the moment a reasonable time has elapsed. Such a result would not only deprive the Government of Revenue, it would also be unfair to other taxpayers who need to shoulder the burden of government expenditure: the alternative result (that the Commissioner continues to have jurisdiction) does not necessarily involve any real prejudice for the taxpayer in question by reason of the delay.'

13. In Bhaimagar University v. Palitana Sugar Mill (P.) Ltd. : AIR2003SC511 , the Honble Supreme Court has explained the law, with regard to the nature of time provision, in paragraph 42 of the judgment thus. We are not oblivious of the law that when a public functionary is required to do a certain thing within a specified time, the same is ordinarily directory but is equally well-settled that when consequence for inaction on the part of the statutory authorities within such specified time is expressly provided, it must be held to be imperative.'

In Chet Ram Vashisht v. MCD : [1981]1SCR1073 , the Hon'ble court has held.

Sub-sections (3) and (5) of section 313 Prescribe a Period within which the -Standing Committee is at if the standing sub-section (1). But neither sub-section declares tat if the Standing Committee does not deal with the application made under Committee does not deal with the application within the prescribed period of sixty days it will be deemed that sanction has been accorded. The statute merely requires the Standing Committee to consider the application within sixty days. It stops short of indicating what will be result if the Standing Committee fails to do so if it intended that the failure of the Standing Committee to deal with the matter within the prescribed period should imply a deemed sanction it would have said so. They are two district things the failure of the Standing Committee to deal with the application within sixty days and that the failure should give rise to a right in the applicant to claim that sanction has been accorded. The second does not necessarily follow from the first. A right created legal fiction is ordinarily the product of express legislation. It seems to us that when subsection (3) declares that the Standing Committee shall not in any case delay the passing of orders for more than sixty days the statute merely prescribed a standard of time within which it expects the Standing Committee to dispose of the matter. it is standard which the statute considers to be reasonable. But non-completion does not result in a deemed sanction to the layout plan.'

15. In Topline Shoes Ltd. v. Corporation Bank : [2002]3SCR1167 , the Honble court was considering the nature of the provisions of section 13(2)(a) of the Consumer Protection Act, 1986 which fixed the time limit of 30 days for the opposite party for the purpose of giving its version. The Hon'ble court has held. 'The provision, however, as framed does not indicate that it is mandatory in nature. In case the extended time exceeds 15 days, no penal consequences are provided therefor. The period of extension of time 'not exceeding as 15 days', does not prescribe any kind of period of limitation. The provision appears to be deprecatory in nature, which the consumer forums are ordinarily supposed to apply in the proceedings before them.... The provision is more by way of procedure to achieve the object of speedy disposal of such disputes. It is an expression of 'desirability' in strong terms. But it falls short of creating any kind of substantive right in favour of the complainant by reason of which the respondent may be debarred from placing his version in any circumstances whatsoever.'

16. In Pooran Malls case, 96 ITR 390 (supra), the Hon'ble Supreme Court, while dealing with the time provision of 15 days provided in R. 112A of the Income-tax Rules for issue of notice of hearing with reference to the limitation period of 90 days prescribed for passing the order held: 'In this connection we must refer to the decision of the Gujarat High Court, relied upon by the respondents, in Ramjibhai Kalidas v. I G. Desai, Income Tax Officer. In that case it was held that rule 1 12A, which provides that a show cause notice in respect of an enquiry under section 132(5) is to be made within 15 days from the date of the seizure, is mandatory and if that is not done no order under section 132(5) can be passed. it seems to have been admitted before the Bench by the Advocate-General who appeared on behalf of the revenue that he did not dispute that the period of ninety days prescribed under section 132(5) is a mandatory period. The decision is, therefore, no authority for the proposition that the period fixed under section 132(5) is mandatory. But even if it were, the decision that rule 112A is also mandatory is clearly erroneous. When section 132(5) permits an Income Tax Officer to pass an order within ninety days that power cannot be in any way whittle down by a rule made under that section'. The aforesaid proposition holds good for the period laid down in the said proviso for service of notice and the time limit prescribed in section 153 for passing the assessment order. The Honble court further held: 'The question whether a certain provision of law is directory does not fall to be decided on different standards because it is found in a taxing statute. There is no rule that every provision in a taxing statute is mandatory.'

Nature of time provision contained in section 143(2): Whether jurisdictional?

17. The difference between inherent lack or want of ab initio jurisdiction and irregular exercise of jurisdiction is too well known in law to warrant any lengthy discussion here. Section 143(2) comes into play only after the assessing officer has validly assumed the jurisdiction to proceed against the assessee. Therefore, the want or lack of inherent or ab initio jurisdiction need not be confused with irregular or erroneous exercise of jurisdiction. In the first situation, the jurisdiction is absent ab initio while in the later situation the existing jurisdiction is being erroneously or irregularly exercised or an error is being committed within the jurisdiction. The assessing officer can serve a notice under section 143(2) only after he has assumed the jurisdiction. If his jurisdiction does not exist, he has no authority to serve the notice even within the statutory period laid down in section 143(2). It is in the exercise of existing jurisdiction that the assessing officer serves a notice under section 143(2) and not that he is required to serve the said notice without having jurisdiction or seisin over the case. It has been consistently held that lack of notice does not amount to the revenue authority having had no jurisdiction to assess but that the exercise of jurisdiction was defective by reason of notice not having been given to the assessee. It is therefore, quite obvious that since section 143(2) does not confer jurisdiction upon the assessing officer to make the assessment, any omission or defect in issuing or serving the notice under section 143(2) would not take away the jurisdiction of the assessing officer to make the assessment. It would be a defect or irregularity in exercising the existing jurisdiction. In away, these are procedural provisions providing for the machinery to effectuate the tax liability of the assessee. It is for this reason that the provisions of section 143(2) have been consistently held (judicial authorities cited in later paragraphs of this order) to be machinery or procedural provisions.

Omission to serve notice under section 143(2)Whether the resultant assessment is nullity.

18. A long line of judicial authorities, some of which are cited in the succeeding paragraphs make the distinction quite clear in that while the inherent lack of jurisdiction makes the resultant assessment a nullity, mere omission or defect in the service of notice, while exercising the jurisdiction does not make the resultant assessment a nullity. In Estate of Late Rangalal Jajodia v. CIT : [1971]79ITR505(SC) , the Honble Supreme Court held:

'The lack of a notice does not amount to the revenue authority having had no jurisdiction to assess, but that the assessment was defective by reason of notice not having been given to her. An assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected.'

19. In CIT v. Jai Prakash Singh : [1996]219ITR737(SC) , the Hon'ble court has held:

'The principle that emerges from the above decision is that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions (charging sections). Any such omission or defect may render the order made irregular -depending upon the nature of the provision not complied with - but certainly not void or illegal.'

20. In Sant Baba Mohan Singh v. CIT : [1973]90ITR197(All) , the Honble Court held :

'. . . The submission is that a notice under section 23 (2) is a jurisdictional notice, and reliance is placed on Rajmani Devi v. Commissioner of Income-tax where it has been held that such a notice is imperative or mandatory in character. 'The notice being imperative or mandatory, the argument goes on, the Income Tax Officer had no jurisdiction in the absence of such notice to complete the assessment under section 23(3). It is urged that the power conferred under section 31(3)(b) to set aside the assessment and direct the Income Tax Officer to make a fresh assessment is a power exercised when the assessment is a valid proceeding. It seems to us that the contention that the Appellate Assistant Commissioner should have made an order under section 31(3)(a) must be negatived. Section 31(3)(a) speaks of the power of the Appellate Assistant Commissioner to annul an assessment. That is a power to be exercised where the assessment proceeding is a nullity in the sense that the Income Tax Officer had no jurisdiction ab initio to take the proceeding. A proceeding is a nullity when the authority taking it has no jurisdiction either because of want of pecuniary, jurisdiction or of territorial jurisdiction or of jurisdiction over the subject-matter of the proceeding. A proceeding is a nullity when the authority taking it has no power to have seisin over the case. The omission of the Income Tax Officer to issue a notice under section 23(2) does not affect the ab initio jurisdiction enjoyed by the Income Tax Officer in respect of the proceeding. The Income Tax Officer had scission over the case, he had overall jurisdiction over the case and in that sense had power to initiate the proceeding. The omission to issue a notice under section 23(2) does not call, for an order by the Appellate Assistant Commissioner annulling the assessment. The Appellate Assistant Commissioner was right in merely setting aside the assessment.'

21. In CIT v. Gyan Prakash Gupta the Hon'ble court has held:

'. . . Annulment 'mean to make null, to reduce to nothing, to abolish'. The Appellate Assistant Commissioner has power to annul the assessment under section 251 (1)(a) of the Act. Equally, he has power to set it aside ... To issue a notice under section 143(2) is mandatory and, therefore, if the assessment is made without complying with section 143(2). Then the assessment is, ordinarily invalid. But the contention of Mr. Arora is that in such a situation, the correct order to be passed by the Appellate Assistant Commissioner is to set aside the assessment, whereas according to Mr. Balia, it should have been annulled. As stated above, the assessment order passed without notice under section 143(2); is invalid and; it is vitiated; but the invalidity is not, however, of such a nature which goes to the root of the proceedings and that being so, the Appellate Assistant Commissioner having found it to be invalid, that invalidity did not go to the root of the matter. It could be set aside for being redone de novo. H should not have annulled it. Failure to serve notice on the assessee under. Section 143(2) of the Act is merely an irregularity and the Income Tax Officer., until and unless he gets the notices served cannot complete the assessment. We find it difficult; to hold that the Income Tax Officer has no jurisdiction in respect of the proceedings. As soon as the return is filed, he gets seisin over the case. He has jurisdiction over it, but on failure to comply with section 143(2) of the act, the only limited restriction is that he cannot complete the assessment. In these circumstances, the assessment orders completed without service of notice under section 143(2) cannot be said to be ab initio void and when it is not so, the assessment order cannot be annulled.

22. Now, coming over to section 143(2), it is well-settled that the requirement of hearing is mandatory and hence may denial of such hearing to the assessee, would make the resultant assessment invalid by not void or nullity. In such a case, the resultant assessment is not liable to be annulled it can only be set aside with the direction to the assessing officer to hear the assessee and re-frame the assessment in accordance with law. This course of action has been consistently followed and judicially approved by the Hon'ble Supreme Court in the cases referred to above as on one hand, it removes the prejudice caused to the assessee due to lack of hearing and, on the other, it also effectuates the tax liability created by the charging provisions of law instead of allowing them to be defeated by the machinery or procedural provisions. In view of the unambiguous declaration of law by the Hon'ble Supreme Court that omission or defect in the service of notice may render the order made irregular depending upon the nature of the provision not complied with but certainly not void or illegal, we are unable to subscribe to and endorse the view of the learned Commissioner (Appeals) that such an omission or defect in the service of notice shall make the resultant assessment null and void.

23. In view of the above, we are of the considered view that the requirement of hearing as consigned by section 143(2) is mandatory and any omission or defect in the service of the notice thereunder may make the resultant assessment irregular capable of being rectified or cured; by setting aside the assessment but not null and void. As regards the time provision, we are of the considered view that it is in the nature of a mere statutory direction and not in the nature of limitations on the power of the assessing officer to make the assessment. The period for service of notice fixed by the said proviso is only an expression of desirability in strong terms that the notice should be served within the specified period. The said proviso stops at that end we also therefore need to stop at that instead of reading something over and above in the said proviso which the legislature has deliberately avoided.'

46. In Bajaj Industries case (supra), the Mumbai Bench 'H' of the Tribunal has, following the order of the Special Bench in Nawal Kishore & Sons Jeweller case (supra) held:

'In view of the discussions made by us above and considering all the facts and circumstances of the case, we are of the view that the notice under section 148 having been validly served on assessee, the jurisdiction stood vested with the assessing officer for framing assessment under section 147 and so the failure on assessing officer's part for serving notice under section 143(2) will not render the consequent assessment to be void or nullity liable to be quashed.'

47. We are in complete agreement with the decision as also the reasoning adopted by the Special Bench in Nawal Kishore Jewellers' case (supra) and a Division Bench of the Tribunal in Shakuntala Trading Co. (P) Ltd. (supra) and Bajaj Industries (supra). We pin-pointedly enquired, during the course of hearing, from the learned senior counsel whether the assessee was fully heard by the assessing officer before framing the impugned assessment order. We also enquired from the learned senior counsel whether he would like to have further opportunity to adduce evidence before the assessing officer in support of his return of income. The learned senior counsel replied that adequate opportunity has already been provided to the assessee by the assessing officer and that he did not wish to adduce any further evidence in support of his return. He, however, persisted in his submission that the assessment order under appeal was null and void due to non-service of notice under section 143(2) within the stipulated time limit. Respectfully following the decisions of the Special Bench and other Division Benches of the Tribunal in the cases referred to above, we are unable to agree with the learned counsel for the assessee that the impugned assessment made by the assessing officer is null and void solely on a technical ground that notice under section 143(2) was not served within the stipulated time limit notwithstanding that the assessee was effectively heard by the assessing officer before passing the impugned order of assessment.

48. The learned counsel for the assessee has very heavily relied upon the judgment of the Supreme Court in R. Dalmia's case (supra). The said judgment was rendered in the context of the question whether the provisions of section 144B applied to assessment /re-assessment proceedings initiated under section 147/148 and further whether the extended period of limitation available under section 153 was available for making such assessments and re-assessments under section 147. It is in this context that the Hon'ble Supreme Court made certain observations. The following portion of the said judgment has been highlighted by the assessee and brought to our notice for the proposition that the time provision of section 143(2) was applicable in its entirety to assessment/reassessment proceedings under section 147 /148 and any failure or omission to comply with the same will render the resultant assessment a nullity. The relevant portion of the judgment reads as under:

'A notice having been issued under section 148, the procedure set out in the sections subsequent to section 139 has to be followed 'so far as may be'. Section 144B is a procedural provision. It fits into the procedural scheme as hereinbefore noted and, therefore, it cannot be excluded by reason of the use of the words 'so far as may be'. Nor is there any good reason to exclude it from the procedure to be followed subsequent to a notice under section 148.'

49. In our view, the said portion of the judgment in R. Dalmia is an authority for two propositions. First, section 144B is a procedural provision and fits into the procedural provision relating to the assessment of income. It may be relevant to mention that though the proceedings for assessment/re-assessment of income are initiated under section 147, the procedure of assessment is provided in section 143 and not under section 147/148. In other words, section 147/148 has limited scope restricted to initiating the proceedings. As far as the assessment is concerned, the same cannot be made except, in the manner laid down in section 143 and other related provisions. Second, which follows as a natural corollary of the first, is that the phrase 'so far as may be' as used in section 148 does not exclude the applicability of section 144B of the proceedings under section 147/148. In our view, the said judgment does neither lay down the proposition that non-service of notice within the time limit of section 143(2) will make the resultant assessment a nullity nor that the phrase 'so far as may be' in section 148 has to be universally applied without having any regard to the context in which a given provision of the Income Tax Act has to be applied to the reassessment proceedings. Keeping the aforesaid in view, we now proceed to consider the applicability of the said judgment to the issue before us.

50. We have already noted earlier that two modes of assessment are available to the assessing officer under section 143 once a return is filed: first mode is the acceptance of the return without verification of the return which follows automatically upon the filing of a return unless notice is issued under section 143(2); second is the scrutiny of return which can be undertaken only under section 143(3) after issuing notice under section 143(2). It is quite obvious in the scheme of taxation of escaped income that a return filed under section 147/148 is not liable to be automatically accepted under section 143(1) without making the requisite enquiries with regard to the income that is charged to have escaped taxation. It will therefore be contradiction in terms to say that the assessing officer should accept the return filed under section 147/148 without scrutinising the same. The assessing officer is therefore obliged to verify the correctness of the return filed in response to the notice under section 147/148 which he can do only if he undertakes the requisite enquiry and makes an assessment under section 143(3). The restriction of time as contained in the time provision of section 143(2) may have relevance where the assessing officer has to elect whether he should accept the return of income or verify the return of income or not. To that extent, it also removes the uncertainty from the mind of the taxpayers who have filed their return under section 139/142 that their returns would not be taken up for scrutiny once the time limit envisaged by section 143(2) expires. But there is no such uncertainty in the minds of the assessees charged with the escapement of income as they know it fairly well that their returns will necessarily be examined and verified and that their assessments would be made under section 143(3) and not under section 143(1). If we hold that the assessing officer cannot issue notice after the expiry of the time limit under section 143(2) so as to bring the escaped income to tax, we shall be indirectly holding that that the assessing officer shall necessarily accept the return filed under section 147/148 without making enquiries to verify the correctness of the claim made in the return and, thus, defeat the very scheme of taxation of escaped income. We have, therefore, to avoid an interpretation which defeats the very scheme of taxation of escaped income. This also brings into sharp focus the difference between a return voluntarily filed under section 139 and a return filed in response to a notice under section 147/ 148. In a case where the return is voluntarily filed under section 139, the scheme of section 143 supported by the circulars of the Central Board of Direct Taxes is that the return so filed should generally be accepted without further enquiry and that enquiry into the correctness of return should be made in a few cases, on selective basis, by issuing notice under section 143(2). In our view, same spirit and logic cannot be imported to a case where the assessing officer issues notice under section 147/148 to bring the escaped income to tax. Here the return is neither voluntarily filed nor the scheme is such that such a return should be accepted without making enquiries into the claim made in the return. The return filed in response to notice under section 147/148 is not a return under section 139 in as much as the return under section 139 is filed voluntarily at the initiative of the assessee himself whereas return under section 147/148 is filed at the instance of the revenue to enable the revenue to examine the correctness of the return and bring the escaped income to tax. It is for reasons of this nature, that though section 148 creates a fiction that 'the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139' yet the fiction so created specifically provides that 'the provisions of the Act shall, so far as may be, apply' so as to make it abundantly clear that all the provisions of the Act are not applicable in their entirety but only to the extent they are practicable and reasonable with the scheme of taxation of escaped income. We cannot loose sight of the aforesaid phrase. As observed above, it is neither practicable nor desirable to apply the scheme of automatic acceptance of the return as envisaged by section 143(1) to the returns filed in response to notice under section 147/148 without subjecting them to verification and scrutiny. Hence, the assessment in such a case will have to be necessarily completed under section 143(3)/ 147/148 within the overall period of limitation provided in section 153 which can neither be shortened nor is intended to be shortened by the time provision of section 143(2). We are therefore of the considered view that the time provision of section 143(2) has no application to the proceedings initiated under section 147/148.

51. The implication of the phrase 'so far as may be' has been judicially analysed in several cases. The Special Bench of the Tribunal has also considered the said phrase in Nawal Kishore & Sons Jeweller's case (supra) in the context of the provisions of section 158BC(c). We do not propose to add further bulk to this order by analysing the implications of the said phrase as the same has already been examined in detail by the Special Bench with which we are in agreement.

52. Besides, the applicability of the judgment in R. Dalima (supra) has been considered by the Pune Bench of the Tribunal in ITO v. Masler Vishal D. Ladage (IT Appeal No. 633 (Pune) of 2001) in the context of the provisions of section 143(2) in reassessment proceedings under section 148. It may be relevant to mention that the order of the Pune Bench in the said case was considered by the Special Bench also while passing the order referred to above. The Pune Bench of the Tribunal has held as under :

It would be clear that section 143(2) does not refer to a return which has been furnished under section 148. The restriction placed by the proviso to section 143(2) would not apply to a return filed in response to notice under section 148. In the present case, notices under section 148 were issued and assessments were made within the limitation laid down in sections 149 and 153 of the Income Tax Act, 1961. We find force in the contention of the revenue that so long as ingredients of section 147 are fulfilled and so long as the assessment is made within the limitation laid down in section 153, the assessment cannot be annulled merely because the notice under section 143(2) was issued a ter expiry of period of one year from the end of the month in which the return was furnished. The limitation laid down in the proviso to section 143(2) would not apply to a return, which has been filed under section 147 read with section 148. In our view, therefore, the Ld. Commissioner (Appeals) erred in annulling the assessment.

The reliance placed by the assessee on the decision of the Hon'ble Apex Court in the case of R. Dalmia v. CIT (supra) is misplaced as both the fetes and the issue involved were different in the said case from those in the present case. In the said case, the question was whether section 144B had applicability to reassessment being made under section 147. Scope of Proviso to section 143(2) was not the subject-matter of the said decision of the Apex Court.'

53. In view of the above, we are unable to hold that the impugned assessment framed by the assessing officer is null and void on the ground urged by the assessee. Since the assessing officer has already heard the assessee effectively and the assessee has no grievance on that count, no useful purpose will be served by setting aside the assessment and restoring the matter to him for fresh assessment. Ground No. 3 taken by the assessee, therefore, fails and is dismissed.

54. Both the parties have cited a large number of judicial authorities in support of their submissions which we have duly considered in arriving at our decision though we have not dealt with each of them individually as this would have added bulk to the order.

55. In view of the above, the appeal filed by the assessee is dismissed.

Assessee Appeal: ITA T No. 2442/M/2002: Asstt. Year 1996- 97

56. In the appeal directed against the order of the learned Commissioner (Appeals) for assessment year 1996-97, the assessee has raised exactly similar grounds of appeal, as in its appeal for assessment year 1997-98.

57. Ground No. 1 relates to taxability of transfer fee. We have already decided this ground against the assessee and in favour of the department in assessee's appeal for assessment year 1997-98. Following the same Ground No. 1 is decided against the assessee and is therefore dismissed.

58. Ground No. 2 relates to validity of the notice issued under section 148. The assessee admitted that notice under section 148 was issued on 28-9-1998 after the expiry of the prescribed time limit for issue of notice under section 143(2) on 30-11-1997 and not during the availability of time limit thereunder. The learned counsel for the assessee, in all fairness, submitted that the assessment proceedings were not pending on the date on which notice under section 148 was issued and hence he would not object to the validity of the impugned notice on that ground. Keeping the aforesaid in view and following our order in assessee's appeal for assessment year 1997-98, Ground No. 2 as taken by the assessee is dismissed.

59. Ground No. 3 as taken by the assessee relates to validity of assessment due to non-service of notice within the time limit laid down under section 143(2). This issue is also covered against the assessee by our order in assessee's appeal for assessment year 1996-97. Following the same, Ground No. 3 taken by the assessee is dismissed.

60. In view of the above appeal filed by the assessee is dismissed.

Assessees appeals: ITA Nos. 2441 & 2649/M/2002: A.y. 1995-96 & 1994-95

61. In both the appeals directed against the order of the learned Commissioner (Appeals) for assessment years 1995-96 and 1994-95, the assessee has raised exactly similar grounds of appeal as in its appeal for assessment year 1997-98.

62. Ground No. 1 in both the appeals relates to taxability of transfer fee. We have already decided this ground against the assessee and in favour of the department in assessee's appeal for assessment year 1997-98. Following the same, Ground No. 1 in both the appeals is decided against the assessee and is therefore dismissed.

63. Ground No. 2 in both the appeals relates to validity of the notice issued under section 148. The assessee admitted that it had not filed any return of income under section 139 for assessment year 1995-96 and assessment year 1994-95 and that it was called upon, by notice dated 28-9-1998 issued under section 148, to file its return of income for the aforesaid assessment years. The learned counsel for the assessee, in all fairness, submitted that the assessment proceedings were not pending on the date on which notice under section 148 was issued and hence he would not object to the validity of the impugned notice on that ground. Keeping the aforesaid in view and following our order in assessee's appeal for assessment year 1997-98, Ground No. 2 as taken by the assessee in both the appeals is dismissed.

64. Ground No. 3 in both the appeals as taken by the assessee relates to validity of assessment due to non-service of notice within the time Iii-nit laid down under section 143(2). This issue is also covered against the assessee by our order in assessee's appeal for assessment year 1997-98. Following the same, Ground No. 3 taken by the assessee in both the appeals is dismissed.

65. In view of the above, appeals filed by the assessee for assessment years 1995-96 and 1994-95 are dismissed.

Department's appeals: ITA Nos, 2568 to 2571/M/2002: A. Y. 1994-95 to 1997-98

66. All the aforesaid appeals filed by the revenue are directed against the orders of the learned Commissioner (Appeals) holding that the amounts received by the assessee-society on account of non-occupancy charges are not taxable. Relevant ground which is common in all the appeals, except for the amounts involved in the respective assessment years under appeal, reads as under:

'On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding that a sum of Rs. 10,28,476 received by the society on account of non-occupancy charges are not taxable when such charges have not been received from every member of the society. The appellant prays that the order of the Commissioner (Appeals) on the above ground(s) be set aside and that of the Income Tax Officer restored.'

67. Briefly stated, the facts of the case are that the assessee-society received, during the previous years relevant to the assessment years under appeal, the amounts paid by its members as non-occupancy charges due to their non-occupation of the allotted premises. The assessing officer taxed the same as income of the assessee on the ground that they were not covered by the principle of mutuality. On appeal, the learned Commissioner (Appeals) allowed the appeal of the assessee against which the revenue is in appeal before the Tribunal.

68. Appearing for the department, the learned Commissioner Departmental Representative submitted that the non-occupancy charges were riot voluntarily paid by the members to the assessee-society. They were paid as a matter of compulsion so as to augment the profits of the assessee-society. He further submitted that realization of such charges was not permissible under the Notifications issued by the Government of Maharashtra and hence was illegal source of profit for the assessee-society. He submitted that such collections were not made from all the members but only from those members who could riot occupy the premises during the relevant previous years. According to him, the principle of mutuality was not applicable to the non-occupancy charges realized by the assessee from its members and hence the assessing officer was justified in taxing the same as income of the assessee.

69. In reply, Shri Patil, the learned counsel for the assessee has relied upon the orders of the learned Commissioner (Appeals) and submitted that the non-occupancy charges collected by the assessee- society were not taxable as they were covered by the principle of mutuality. He also refuted the submission of the learned Departmental Representative that the non-occupancy charges collected by the assessee were illegal and in violation of the Notifications issued by the State Government. He submitted that the Notification of the State Government referred to by the learned Departmental Representative came into force with effect from 2001 and hence were not relevant for the assessment years under appeal. He has relied upon the following decisions in support of the proposition that collection of non-occupancy charges is not exigible to tax in the hands of the Assessee-society ,

(i) ITO v. Meher Dad Co-op. Housing Society Ltd. (IT Appeal Nos. 287 to 291 (Born.) of 1992 dated 11-6-2002)

(ii) Sunny Side Co-op. Housing Society Ltd. v. ITO (IT Appeal No. 2100 (Mum.) of 2002, dated 18-11-2003)

(iii) Dy. CIT v. Maker Chambers (IT Appeal No. 5490 (Mum,) of 2000, dated 5-4-2004).

70. We have considered the rival submissions. It is true that Notification No. SYG- 1 094/15165/P.No. 317/14-C dated 1-8-2001, as referred to by the learned Commissioner Departmental Representative, has been issued by the Government of Maharashtra on 1-8-2001. The said notification provides that a Society should not collect the non-occupancy charges at a rate exceeding 10 per cent of the Service Charges (excluding Municipal Corporation/ Nagarpalika taxes). The non-occupancy charges collected by the assessee-society are in excess of the limits laid down by the aforesaid Notification. The learned counsel for the assessee, however, submits that the said Notification has been made effective from 1-8-2001 and hence would not be applicable to the assessment years under appeal. He further submits that the assessee-society has collected non-occupation charges strictly in terms of Notification dated 9-3-1995, which was in force during the previous years relevant to the assessment years under appeal.

71. The aforesaid submission of the learned counsel for the assessee does not appear to be correct in view of what is stated at the last page (p. 620) of the (2003) Maharashtra Co-operative Societies Act, 1960 by Mahendra C. Jain and H.M. Bhati (published by Bombay Law House). The relevant portion from the said book is reproduced below:-

'Non-occupancy Charges at 10 per cent of Service Charges. The Maharashtra Government has rescinded its earlier order dated 9-3-1995, which had fixed Non-occupancy Charges at one time payment of service charges. The new order issued in 1-8-2001 (which is published in Marathi section of this issue) stipulates that the Non-occupancy Charges should not exceed 10% of the service charges (excluding Municipal Corporation /Municipalities taxes). The new rates have come into force from retrospective effect i.e. from 9-3-1995.'

72. The observations made by the Special Bench of the Tribunal in its order in Walkeshwar Triveni Co-operative Housing Society Ltd (supra) as re-produced above, are also apposite. The learned Commissioner (Appeals) has not examined the issue of taxability of non-occupancy charges in the light of the relevant Notifications issued by the Government of Maharashtra and in the light of the order of the Special Bench in Walkeshwar Triveni Co-operative Housing Society Ltd. (supra). He has relied upon the decisions in CIT v. Bankipur Club Ltd. : [1997]226ITR97(SC) and CIT v. Adarsh Cooperative Housing Society Ltd. : [1995]213ITR677(Guj) without comparing the factual aspects and the relevant rules regulating the non-occupancy charges in Gujarat and Maharashtra in proper perspective. His order on the point of taxability of non-occupancy charges is therefore, set aside and the matter is restored to him with the direction to bring all the relevant factual and legal aspects of the case on record and re-decide the issue in accordance with law after giving reasonable opportunity of hearing to both the parties.

73. All the aforesaid appeals filed by the revenue are treated as allowed for statistical purposes in terms of the directions given above.

74. To sum up, all the appeals filed by the assessee are dismissed while all the appeals filed by the revenue are treated as allowed for statistical purposes.

Subject	Direct Taxation
Court	Mumbai High Court
Decided On	Jun-29-2004
Case Number	IT Appeal Nos. 2441 To 2443, 2568 To 2571 and 2649 (Mum) of 2002
Reported in	[2010]320ITR414(Bom); [2004]140TAXMAN145(Bom)
Appellant	Mittal Court Premises Co-operative Society Ltd.
Respondent	ito
Advocates:	V.H. Patil for the Assessee K.L. Maheshwari for the Revenue.

Mittal Court Premises Co-operative Society Ltd. Vs. Ito - Court Judgment