1. The assessee has filed appeals against the consolidated order passed by the CIT(A) in A. No. C1T(A)/IT/ BTI/458 to 463/92-93 dated 11-12-1992 for the assessment years 1979-80 to 1984-85 and taken following common grounds in appeals in all the assessment years : "1. That the learned Commissioner of Income-tax (Appeals) grossly erred in holding that the proceedings were initiated under section 147(a) and not 147(b) and further that the return was not filed voluntarily under section 139. He failed to realise that it was humanly not possible for the appellant to file a return under section 139 when the interest income was received in the years 1987 and 1988. The assessment made is clearly barred by limitation.
2. Without prejudice to above, it is further submitted that the learned Commissioner of Income-tax (Appeals) grossly erred in holding the status of the appellant as HUF (Specified). He took cognizance of a statement which was procured by the Income-tax Officer after the conclusion of the assessment proceedings and appeal proceedings and that too, no opportunity was ever given to the appellant for rebutting the same, thus denying elementary principle of Income-tax (Appeals) is bad in law.
3. Without prejudice to above, it is submitted that expenses allowed by the Commissioner of Income-tax (Appeals) are very much on the lower side. These should be enhanced suitably." 2. The Revenue has also filed appeals for the assessment years 1985-86 and 1986-87 against the order of the C1T(A) dated 12-11-1992 and the assessee has filed cross objections for the assessment years 1985-86 and 1986-87. The grounds taken by the Revenue in their appeals are as under: "1. That on the facts and in the circumstances of the case the Ld.
CIT(A) has erred in deleting the addition of Rs. 6,70,895 made on account of capital gain on enhanced compensation.
2. That on the facts and in the circumstances of the case the Ld.
CIT(A) has erred in deleting the addilion of Rs. 27,940 made on account of income from undisclosed sources.'' "1. That on the facts and in the circumstances of the case the Ld.
CIT(A), Bhatinda has erred in deleting the addition of Rs. 2,23,631 made on account of capital gain on enhanced compensation.
2. That on the facts and in the circumstances of the case, the Ld.
CIT(A) has erred in deleting the addition of Rs. 1,54,800 made on account of income from undisclosed sources.' "1. That the learned CIT(A) grossly erred in holding that the proceedings were initiated under section 147(a) and not 148(6) and further that the return was not filed voluntarily under section 139.
He failed to realise that it was humanly not possible for the appellant to file a return under section 139 when the interest income was received in the years 1987 and 1988. The assessment made is clearly barred by limitation.
2.. Without prejudice to above, it is further submitted that the learned CIT(A) grossly erred in holding the status of the appellant as HUF (Specified). He took cognizance of a statement which was procured by the ITO after the conclusion of the assessment proceedings and appeal proceedings and that too, no opportunity was ever given to the appellant for rebutting the same thus denying elementary principle of natural justice. The order passed by the CIT(A) is bad in law." 4. First of all, we would take up the appeals filed by the assessee.
Since the issue and grounds of appeal filed by the assessee are common in all the appeals, they are disposed off in a consolidated order for the sake of convenience.
4.1 The assessee filed returns of his income for the assessment years 1987-88 to 1989-90 on 28-7-1989. One letter was attached with the return for the assessment year 1987-88 to explain the calculations of interest on enhanced compensation received by the assessee. As per the letter, the assessee received on accrual basis following interest relating to various assessment years :Assessment year Interest (Amt.)1979-80 1,18,1391980-81 1,18,1391981-82 1,18,1391982-83 1,18,1391983-84 1,18,1391984-85 1,18,139 The Assessing Officer observed that in accordance with the judgment of the Hon'ble Supreme Court in the case of Rama Bai v. CIT[1990] 181ITR 400' interest income on additional compensation as a result of compulsory acquisition of land is assessable on accrual basis from the date of dispossession of land to the date of payment of interest. The Assessing Officer observed that the assessee had neither filed return of income for assessment years 1979-80 to 1984-85 nor any notice under section 139(2) was issued by the Department for the said assessment years. He, therefore, observed that the income for assessment years mentioned above has escaped the assessment and therefore with the prior permission of D.C.I.T., notice under section 148 dated 9-3-1990 was issued and served on the assessee who filed returns declaring the interest income. The Assessing Officer issued notice under section 142(1) to respond to various queries. On 24-3-1992, the assessee filed legal objection in writing. The assessee took plea that complete disclosure of the receipt of compensation including interest thereon was made in the individual proceedings and, therefore, the proceedings will fall under section 147(b) as stood at the relevant period. The assessee submitted that the time provided by the Act to complete proceedings initiated under section 147(b) as governed by sub-section 2 clause (b) of section 153. It was argued accordingly that the limitation for completing assessment expired within one year from the date of service of notice under section 148. The assessee took plea that time for completion of the assessment being expired, therefore, the proceedings cannot be construed legally and same was requested to be dropped.
4.2 The Assessing Officer discussed this issue in para-3 of the order which is reproduced as follows : "3. Assessee's objection in toto has been mentioned in the foregoing paras and needs not to be reproduced again. The assessee has stated that his case falls under section I47(b) of the Income-tax Act, 1961. It may be mentioned that every case is an independent case.
So, no cognizance can be taken whether any information disclosed in the individual status (Asst. file) or not. The relevant point is whether the omission was on the part of the assessee or on the part of the Assessing Officer owing to which the income of the assessee escaped assessment. The assessee never furnished the return of his income for the assessment year 1979-80 under section 139. The information came to the notice of the Assessing Officer that income chargeable to tax has escaped asst. The asst. of income occurred only due to non-furnishing of return of income by the assessee. The omission will, therefore, always fall on the part of the assessee in such cases within the meaning of section 147(a). The assessee has wrongly stated that the case fell under section 147(b). Time limit for making assessment under section 148 where the proceedings have been started under seclion 147(a) is upto two years from the end of financial year in which the notice under section 148 was served. The notice under section 148 in this case was served on 14-3-1990 (Financial year 1989-90). Time limit for completion of the asst is, therefore, upto 31-3-1992." The Assessing Officer observed that it is immaterial whether the information was shown in the assessment file in case of individual or otherwise but the relevant fact remains that the assessee did not file return of income-tax for these assessment years under section 139 of the Act. According to the Assessing Officer information came to his notice that income chargeable to tax has escaped assessment. He, therefore, observed that the case will fall within the ambit of section 147(a) and for completing assessment under section 147(a), the assessment was made within a period of two years from the end of the financial year in which notice under section 148 was served He observed that notice under section 148 was served on 14-3-1990, and as such assessment could be completed on or before 31-3-1992.
4.3 Aggrieved against the finding given by the Assessing Officer the appellant filed appeal before the Ld. C1T(A). Similar plea was taken before the Ld. C1T(A) and the Ld. CIT(A) has given finding of fact in para 2.3 of his order which is reproduced as below : "2.3 I have given careful consideration to the entire matter and I am not inclined to agree with the Ld. Counsel. Proceedings under section 147(a) were initiated since assessee had not filed returns of his income for the assessment years 1979-80 to 1984-85. Thus, there was omission and failure on the part of the assessee to make the returns under section 139 as mentioned in section I47(a). For the sake of facility, section 147(a) is reproduced below:-- 'the Income-lax Officer has reason to believe that, by reason of the omission of failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year.' There is no dispute about the fact that returns were not filed for these years voluntarily by the assessee. Merely writing a letter to the Assessing Officer on 26-7-1989 stating that appellant had received interest in the status of HUF would not absolve the assessee from the omission or failure as mentioned in section 147(a) i.e. omission on the part of the assessee to make returns under section 139. No assessment could have been framed on the basis of letter of the assessee which was filed much after the time for filing the return under section 139 had expired. The Assessing Officer was, therefore, justified in stating that proceedings were started under section 147(a) and not 147(6). In view of the foregoing discussion, the ground of appeal is rejected.'' Aggrieved against the finding given by the Ld. CIT(A), the appellant is in appeal before us.
4.4 The Learned Counsel of the appellant repeated similar arguments and pleaded that the information was already filed in the individual return of the appellant, therefore, the assessment proceedings were initiated under section 147(6) and not under section 147(a). The Ld. Counsel pleaded that the appellant disclosed all primary and relevant facts much before the initiation of the assessment proceedings under section 147 vide his letter dated 26-7-1989 while submitting returns for the assessment years 1987-88 to 1988-89.
4.5 The Learned Counsel also pleaded 147(a) is not applicable because during the previous year relevant to all the assessment years mentioned above, the appellant was not aware of the interest income which was going to be received by him. The Ld. Counsel pleaded that it was not possible for him to file the returns under section 139(1) of the Income-tax Act. The Ld. Counsel pleaded that under these circumstances, section 147(a) is not attracted on the facts and circumstances of the case. The Learned Counsel relied on the decision of the Hon'ble Madras High Court in the case of CIT v. V. Jayaraman [1994] 207 ITR 1038. The Ld. Counsel pleaded that the Hon'ble Madras High Court has given similar finding on similar facts. He relied on the following observations of the Hon'ble Madras High Court: "A. We find that the court, while considering the question of bar of limitation, pointed out that specific provision for removing the bar of limitation in respect of an assessment giving effect to a finding may not have been called for in case a reassessment made in order to give effect to a finding was considered to be a separate class of assessment.
B. However, we are of the opinion that in a proceeding by the Income-tax Officer to give effect to a finding of an appellate authority, he must conform to one or the other of the sections of the Act, such as section 147 of the Act for revision (sic) or section 154 or 155 of the Act for amendment and when the appropriate sections are invoked, the conditions contained in those sections, will have necessarily to be fulfilled.
C. In the present case, having invoked section 147(a) of the Act, the provisions of section 147 of the Act must be fulfilled. Thus, the answer to the question referred to above is self-evident. The Tribunal has only found that the conditions in section 147(a) of the Act have not been fulfilled. Hence, we answer the question in the affirmative ie. against the Revenue with costs of Rs. 500." 4.6 The Learned D.R. on the other hand, pleaded that the controversy raised by the Assessing Officer as well as by the Ld. Counsel is not relevant on the issue under consideration. The Learned D.R. Shri S.C.Pahwa, has drawn our attention to the amended provisions related to section 147. The Ld. D.R. Sh. S.C. Pahwa, pleaded that with the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, the section 147 which was having two different situations like section 147(a) and section 147(b) got replaced by different procedural sections. The Ld. D.R.pleaded that the assessment order itself is very clear and that the action was taken under the amended provisions because notice under section 148 was served on 9-3-1990 and to reopen the case, the Assessing Officer has taken permission from the Deputy Commissioner of Income-tax, Range-I, Jalandhar. The Ld. D.R. pleaded that the facts being so, then amended provisions of section 153 are to be applied to work out limitations for completing the assessment. He pleaded that according to the amended provisions, time limit for completion of assessment, reassessment or recomputation under section 147 is to be completed within two years from the end of the financial year in which notice under section 148 is served upon the assessee. The Ld. DR pleaded that the assessment has been completed within a period of two years, therefore, there is no infirmity and assessment has been passed well within the time provided under section 153.
4.7 We have heard both the sides and perused the records available before us. From the assessment order and order of the Ld. CIT(A) it is quite clear that the appellant was not aggrieved regarding initiation of proceedings under section 147. According to his understanding and his submission, on the facts and circumstances of the case section 147(6) was attracted and according to his submission and belief, the assessment could be completed only within one year, from the date of service of the notice under section 148 as provided by section 153(2) of the Income-tax Act. The plea of the Ld. Counsel before the authorities below was that his case has become time barred and therefore, no assessment could be made by the Assessing Officer. During the course of arguments, the Ld. Counsel raised further objection regarding the legality of completion of assessment by the Assessing Officer. The first objection related to the fact that even if amended provisions of section 147 are attracted then law prevailing at the time and during the assessment year will be applicable and therefore, it will be very much material to take note of section 147(a) and 147(b).
The other point raised by the Learned Counsel was that even in the amended provisions he could not have filed the return because during the previous year relevant to the assessment year under consideration, he was not having information regarding his income from the interest on enhanced compensation.
4.8 Mere reading of the section indicates that the controversy of section 147(a) & 147(b) is removed by the legislature by amalgamating both the sections. Now in the amended provisions the Assessing Officer after having reason to believe bas to come to the finding that 'any income' chargeable to tax has escaped assessment for 'any assessment year'. He may assess or reassess such income. The following important limbs have emerged from the section : The Assessing Officer has to frame reasonable belief on the evidence available with him which will include all evidences which are capable of giving reasonable belief and such evidence should lead that any income chargeable to tax has escaped the assessment. Such belief can relate to any assessment year. However, that will be limited to section 149 whereby action cannot be taken after 10 years if income escaped is more than Rs, 1 lac. The second important aspect relates to Explanation-2 to section 147. Explanation-2(d) deals with the situation of the appellant - where no return of income has been furnished by the assessee although his total income under the Act during the previous year exceeded the maximum amount which is not chargeable to Income-tax, is deemed to be income escaped assessment. The appellant received enhanced compensation and that included the element of interest and in accordance with the decision of the Hon'ble Supreme Court, in case of Smt. Rama Bat (supra), the income is to be taxed in the year when such interest accrued to the assessee. It is immaterial that the interest accrued to the assessee subsequent to the relevant assessment year. But the decision of the Hon'ble Supreme Court makes such income as taxable income of the previous year to which such accrued income relates.
4.9 The amendment to sections 147 to 153 made w.e.f. 1-4-1989 are procedural law and will have retrospective effect. Therefore, they will relate to all matters which were pending on 1st April, 1989 and afterwards. But will give power to Assessing Officer for opening or reopening earlier assessment years and after 1st April, 1989, earlier assessment years can be reopened only under amended provisions. The procedural law will deal with all pending actions unless a contrary intention is expressed by the provisions or statute. When procedural laws are introduced, they will have application on all prima facie pending actions and all such actions, which will arise in future.
4.10 The Hon'ble Delhi High Court in the case of Rakesh Aggarwal v.Asstt. CIT [1997] 225 ITR 496' has dealt with the effect of amended provisions of section 147 of the Income-tax Act w.e.f. 1-4-1989. The Hon'ble Justice D.K. Jain has explained the impact of the amended provisions by making following observations : ''The section provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment. The new section not only merges clauses (a) and (b) of the pre-amended section 147 but also brings about a significant change in the preliminary requirement of certain mandatory conditions before reassessment proceedings could be initiated under the old section. Under the old section 147(a), the Assessing Officer could initiate reassessment proceedings if he had reason to believe that income chargeable to tax had escaped assessment by reason of: (a) omission or failure on the part of an assessee to make a return under section 139 for any assessment year, or (b) to disclose fully and truly all material facts necessary for his assessment for that year. As is evident from the amended section, in contradistinction to the original unamended section, requiring fulfilment of twin conditions spelt out in clause (a) of section 147 or in clause (b) of the said section, as conditions precedent for issuing notice under section 148 of the Income-tax Act, it is not so in the amended section and the only condition for action now is that the Assessing Officer should have reason to believe that income has escaped assessment which belief can be reached in any manner, and is not qualified by the pre-condition of full and true disclosure of material facts by an assessee, as contemplated under the old section 147(a) of the Income-tax Act. An Assessing Officer can now legitimately reopen the assessment in respect of an income which has escaped assessment.
Undoubtedly, under the new section, power to reopen assessment is much wider and can be exercised even if an assessee had disclosed fully and truly all material facts."Chandi Ram v. ITO [1997] 225 ITR 611 has held that decision of the Hon'ble Supreme Court would constitute information. While dealing with the issue whether the amended provisions of section 147 will be termed as procedural or substantive. The Hon'ble High Court has held as follows :-- "On the basis of the changes which have been brought by the Amendment Act of 1987, it is evident that there are substantial changes. The question, therefore, arises as to whether such changes could be considered to be procedural or substantive. In accordance with law as it was in existence, the assessment on the same change of opinion was not possible and the assumption of jurisdiction was based on the information coming in possession of the Income-tax Officer, on the basis of which he could have reason to believe that the income chargeable to tax has escaped assessment to tax to it could have been on account of not fully and truly disclosing the material facts necessary for assessment. In the case of Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), it was considered that the word 'information' would embrace information as to fact as also to law. It is no doubt true that there should be a matter as to whether the investment allowance could be given has been considered by the Apex Court in the cases of CIT v. Shakar Construction Co.
[1993] 204 ITR 412 and Builders Associations of India v. Union of India [1994] 209 ITR 877. Any exposition of law by the Apex Court is not enactment of law and is only exposition of correct position of law and, therefore, even if the notice for reassessment has been issued before the decision of the Apex Court, it would not make any difference as while deciding this writ petition, the decision of the Apex Court cannot be ignored. The judgment of the Apex Court is binding under article 141 of the Constitution and any judgment which has been given by the Apex Court could be considered as information as contemplated under section 147(b) and even in accordance with the existing provisions, can be ground for reason to believe to the Income-tax Officer that the income chargeable to tax has escaped assessment. The question as to whether the proceedings should have been taken under the provisions of section 147 as were existing earlier or as they were brought into force with effect from April 1, 1989, is merely of academic interest because even if the proceedings were considered to be under section 147(6) of the repealed section, then there was limitation and the Income-tax Officer could validly be said to have the information in his possession and has the reason to believe that the income chargeable to tax has escaped assessment." This settles the issue that decision of the Hon'ble Supreme Court read with the settlement of the claim by the competent authority as a valid information with the Assessing Officer to initiate proceedings under section 147 of the Income-tax Act. The C.B.D.T. has also issued clarificatory circular and according to para 7.13, the amendments will have retrospective effect. According to para 7.14 of the Circular and clarification in Circular No. 549, dated 31-10-1989 and according to para 7.14 of the said circular, from 1-4-1989 onwards, any action for opening or reopening an assessment for the assessment year 1988-89 and earlier assessment years will have to be taken in accordance with the amended provisions. For making matters very clear, 7.14 is reproduced as follows : "7.14 Thus, from 1-4-1989, onwards, any action for opening or re-opening an assessment for the assessment year 1988-89 and earlier assessment years will have to be taken in accordance with the amended provisions. The following examples will clarify the position: (i) No notice under section 148 can now be issued for the assessment years 1973-74 to 1978-79 even if the escaped income is Rs. 50,000 or more in each year, although under the old provisions this could have been done with the Board's approval.
(ii) Notice under section 148 can now be issued for any of the assessment years 1979-80 to 1981-82 if the following conditions are fulfilled:-- (a) In a scrutiny case [ie. where an assessment order had been passed under section 143(3) or 147], if the escaped income is Rs. 1 lakh or more in each year and approval of the Chief Commissioner of Income-tax or Commission has been obtained.
(b) In a non-scrutiny case, if the escaped income is Rs. 50,000 or more in each year, and approval of the Deputy Commissioner has been obtained.
(Under the old provisions, there was no distinction between a scrutiny and a non-scrutiny case. Action could have been taken in respect of both type of cases for the assessment year 1981-82 with the approval of the Chief Commissioner or Commissioner, whatever be the amount of escaped income, while for the assessment years 1979-80 and 1980-81 action could have been taken with the Board's approval if the escaped income was Rs. 50,000 or more in each year. These old provisions, however, have no application now from 1-4-1989 onwards) (iii) Notice under section 148 can now be issued for any of the assessment years 1982-83 to 1984-85 if the following conditions are fulfilled:-- (a) In a scrutiny case, if the escaped income is Rs. 50,000 or more in each year and approval of the Chief Commissioner or Commissioner has been obtained.
(b) In a non-scrutiny case, if the escaped income is Rs. 25,000 or more in each year and approval of the Deputy Commissioner has been obtained.
(Under the old provisions, action could have been taken for all these assessment years, in respect of both types of cases, with the approval of the Chief Commissioner or Commissioner, whatever be the amount of escaped income. These old provisions, however, have no application now from 1-4-1989 onwards).
(iv) Notice under section 148 can now be issued for any of the assessment years 1985-86, whatever by the amount of income which has escaped asst., if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment.
(Under the old provisions action could have been taken for these assessment years, if the circumstances mentioned in clause (a) or (b) of the old section 147 were satisfied. These old provisions, however, have no application now from 1-4-1989 onwards).
4.11 Keeping in view the above discussions, we are of the opinion that on or after 1-4-1989, the initiation of reassessment proceedings will be governed by the provisions of sections 147 to 151 as amended w.e.f.
1-4-1989. It will not be of any material difference if the assessment involved is 1989-90 or subsequent year or earlier assessment year. This is the ratio of Rakesh Aggarwal's case (supra) as decided by the Hon'ble Delhi High Court. If one has to make comparison between section 147(a) and (b) as it stood prior to 1-4-1989 viz. section 147 which is in operation from 1-4-1989, one of the basic features in the amended provisions is that it included both the options provided in 147(a) as well as in 147(b). The amended provisions have wider scope regarding reason to believe as well as escapement of income. The section provides Assessing Officer with the powers to frame a belief from the examination of record and information which he receives and if prima facie he satisfies himself that the taxable income has escaped assessment then he can take action under section 147. This view has been held by the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel v. M.J. Makwana1 Asstt. CIT [1999]236 ITR 832. In the case of the appellant not only there was information available with the Assessing Officer but also Explanation 2(a) to section 147 is clearly attracted. With the amendment to section 147, section 153 has also been amended and according to the amended provisions section 153(2) speaks as follows : "No order of assessment, reassessment or recomputation shall be made under section 147 after expiry of two years from the end of the financial year in which notice under section 148 was served." These amended provisions are effective from 1-4-1989. In accordance with these amended provisions, the assessment was made well within two years and, therefore, is not barred by the limitation.
4.12 The Learned Counsel of the appellant pleaded that he was not in a position to file the return of income under section 139(1) of the Income-tax Act. We are of the opinion that the Explanation 2 to section 147 makes such situation as income escaped assessment because where no return of income has been furnished by the assessee, although total income exceeded the maximum which is not chargeable to Income-tax. The Hon'ble Gujarat High Court has decided this issue in the case of VXL India Ltd. v. AsstL CIT [1995] 215 ITR 295 and in the case of Praful Chunilal Patel (supra).
4.13 Keeping in view, our above discussions, we are of the opinion that the proceedings initiated by the Assessing Officer under section 147 were valid and legal. We are also of the opinion that the assessment has been made well within the time provided under section 153(2) of the Income-tax Act, 1961. Therefore, the assessments are valid. This ground of the appellant on this account is dismissed.
5. The second ground of appeal was not pressed by the Learned Counsel of the appellant and the same is, therefore, dismissed.
7 to 10. [These paras are not reproduced here as they involve minor issues.]