Judgment:
1. This is an appeal filed by the assessee against CIT(A)'s order dt.
10th March, 1994. The following grounds are raised in this appeal : "1. That, on the facts and circumstances of the case the learned AO has erred in law as well as in facts in making following additions and the learned CIT(A) has erred in confirming the same : (a) Rs. 2,59,725 and Rs. 29,400 aggregating to Rs. 2,89,125 on account of unexplained cash credit raised by the appellant on 19th Nov., 1988, and 25th Jan., 1989, in cash.
(b) Rs. 1;50,000 peak of unexplained cash credit in the name of M/s Bharat Impex, and interest thereon, and (c) Rs. 10,00,000 on the basis of promissory note seized and treating the same as unaccounted loan given to one Shri Raju Doshi and interest thereon.
2. That the assessing authority and appellate authority both have failed in considering properly the information and explanation, filed and material available on record.
3. That in case of cash credit the appellant assessees has discharged his full legal burden of proving the genuineness of loan, transaction and identified the parties.
4. That in case of pronote the assessee has requested to the Department to recover the pronote if it is valuable document but Department failed in recovery of the value of pronote and now the same is time-barred and cannot be recovered because the debtor has established that he has not received the value of it as it was merely given to procure the loan and the loan is not received by him.
5. That other grounds of appeal shall be urged at the time of hearing." 2. Vide his letter dt. 10th Dec., 1999 (filed on 20th Dec., 1999) the assessee had raised the following additional ground of appeal : "The learned AO erred in adding a sum of Rs. 4,845 and Rs. 19,580 on account of accrued interest from Shri Raju Doshi under the facts and circumstances of the matter he ought not to have made the said additions." 3. Again vide his letter dt. 13th March, 2001, the assessee has raised the following ground of appeal : "That the proceeding under Section 147 having been initiated to circumvent the time barred-assessment which was quashed by the CIT(A) on 17th March, 1992, the proceeding in question was illegal, without jurisdiction and hence bad in law." 4. During the course of hearing, the assessee pressed for the admission of additional ground of appeals, particularly the one at para 3 above.
It was contended that in view of the decision of Hon'ble Supreme Court National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), the additional grounds raised by the assessee are clearly admissible. The learned counsel further pointed out that in the original grounds of appeal, the assessee had mentioned at ground No. 5 that "other grounds of appeal shall be urged at the time of hearing." Thus, it is argued that the assessee is competent to raise the additional ground of appeal.
4.1. On the other hand,, the learned Departmental Representative opposed the admission of additional grounds of appeal.
4.2. After considering the rival submissions and keeping in view that judgment of Hon'ble Supreme Court (1998) 229 ITR 383 (SC) (supra), we are of the opinion that in the interest of substantial justice, the additional ground of appeal is required to be admitted. We, accordingly, admit the additional grounds of appeal raised by the assessee.
5. In this case assessment under Section 143(3) was made originally on 17th March, 1992, which was quashed by the CIT(A) on 24th Aug., 1992, as the proceedings' under s, 143(2) were not initiated in time. The learned counsel . pointed out that the original assessment [which was quashed by the CIT(A)] was completed at total income of Rs. 21,15,040, whereas the reassessment under Section 143(3) r/w Section 147 was also completed at the same total income (of Rs. 21,15,040) on 23rd March, 1993, which was assessed in the original assessment made on 17th March, 1992. The learned counsel stated that it could thus be seen that there was no difference in the total income as originally assessed and that determined on reassessment under Section 147. The learned counsel stated that original assessment being invalid on account of late issue of notice under Section 143(2) was quashed by CIT(A). It was pointed out that Department has not filed any appeal against the annulment of original assessment order. It was, thus, contended that it is a case of backdoor assessment, under Section 147 by issue of notice under Section 148. It was vehemently contended that what cannot be done by an IT authority directly cannot be done indirectly. In this regard, reliance was placed by the learned counsel on the decision of Tribunal, E-Bench, Calcutta, dt. 10th June, 1999, in the case of Plastic Concern v. Asstt.
CIT Cir, 13(1), Calcutta in ITA No. 2322 (Cal) of 1996 (Asst. yr.
1993-94). The learned counsel filed a copy of the above decision and also pointed out that the learned JM was a party to the said decision.
5.1. On the other hand, the learned Departmental Representative contended that the issue regarding reopening of the assessment to circumvent the time-barred assessment was not raised before CIT(A). It was further stated that CIT(A) has no power to cancel or annual the assessment.
5.2. In the rejoinder, the learned counsel contended that even the revised return filed by the assessee was duly considered in the original assessment and hence the proceeding under Section 147 were obviously initiated to circumvent the time-barred assessment which was quashed by the CIT(A). It was contended that proceeding under Section 147 was, thus, illegal, without jurisdiction and hence bad in law.
6. We have considered the rival submissions and facts and circumstances of the case relating to the reopening of assessment under Section 147.
We are of the opinion that the contention of learned Departmental Representative that CIT(A) has no power to cancel or annul the assessment cannot be raised in this appeal. If the Department had any grievance regarding the annulment or quashing of the original assessment order by CIT(A), it should have filed appeal against the (sic) order of CIT(A). This was not done. Therefore, this issue cannot be raised by the Department in the present appeal.
The objection of the learned Departmental Representative that since this point has not been raised before CIT(A), the same cannot be raised before the Tribunal, cannot be sustained because this is a legal issue and the assessee challenges the very jurisdiction of the AO, which goes to the root of the matter. Further, the relevant facts and dates are not in dispute and no investigation is necessary. Therefore, we overrule the objection of learned Departmental Representative.
6.1. The assessee had duly filed a valid return of income and a revised return of income before completion of original assessment. In the original assessment total income was determined at Rs. 21,15,040. But the original assessment had to be quashed by CIT(A) as the proceedings by way of issue of notice under Section 143(2) were initiated beyond time. The reassessment proceeding under Section 117 was initiated by the AO and the total income was assessed at Rs. 21,15,040 as was determined in the original assessment.
Thus, it appears that reassessment proceeding was initiated not because any income had escaped assessment to tax but to circumvent the time-barred assessment. Thus, the reassessment proceeding under Section 147 amounts to extending the limitation which the AO is not empowered to. It is trite law that limitation period under Section 145 cannot be extended by an IT authority and it is also quite recognised principle of law that an act, which cannot be done by an authority directly, cannot be done indirectly by him. The decision of Tribunal, Calcutta Bench in ITA No. 3522 (Cal)/1996 (supra) relied upon by the learned counsel does assist the case of the assessee. 6.2. Once the original assessment was quashed, it could be argued that the return was pending for disposal and hence reopening of the assessment was in order. In our opinion, this cannot constitute a valid/reason for reopening the assessment, even under the amended Section 147. Prior to 1st April, 1989, it was well-settled that the notice for reopening an assessment can be issued when a valid return filed by the assessee be pending with the AO. Though Section 147, after the amendment, has widened the powers of the AO to reopen the assessment, still there is intrinsic evidence in the section itself to show that cases where returns validly filed have not been disposed of, have not been brought under the net of the section. This is clear from Expln. 2(b) which says that for the purpose of the section, a case where a return of income has been furnished by the assessee, but no assessment has been made, is to be deemed as a case where income chargeable to tax has escaped assessment, but only if it is noticed by the AO that the assessee has understated the income or claimed excessive loss, deduction, etc. in the return. Thus, though under the new Section 147, the AO can issue a notice of reassessment, even where a valid return filed by the assessee has not been disposed of, the power is hedged in by a condition that there should be a finding that income has been understated in the return or the assessee has claimed excessive loss, deduction, etc. therein. There is no such finding in the present case. On the other hand, by framing an illegal assessment under Section 143(3), which was quashed by CIT(A), it cannot be said that the AO has unearthed understatement of income or excessive claim, etc. in the return. In fact, it is not the case of the AO that Expln. 2(b) is invoked. In the absence of any such finding, the pendency of the return filed by the assessee places a fetter upon the power of the AO to reopen the reassessment. We may notice that the intimation under Section 143(1)(a) if at all issued cannot be equated to an assessment and, therefore, for the purpose of the section, the return could be considered to be pending when the AO issued the notice under Section 148. Further, the fact that the assessee's return was not disposed of cannot be valid ground for reopening the assessment, because as we have noticed earlier, even under Expln. 2(b), the mere pendency of the return would not be sufficient to consider the case as one where the income chargeable to tax has escaped assessment, it should be coupled with a finding by the AO that there was an understatement of the income or excessive claim of loss, etc. by the assessee in that return. There is no such finding and, therefore, the mere pendency of the return cannot constitute "reason to believe" within the meaning of Section 147. 6.3. He, therefore, hold that the proceedings under Section 147 were initiated to circumvent the time-barred assessment (which was quashed by CIT(A) (sic) and hence they are illegal without jurisdiction and bad in law. The order of CIT(A) is, therefore, set aside. The assessee, therefore, succeeds on the additional ground of appeal pertaining to initiation of proceedings under Section 147.
7. As the reassessment was void ab initio, we are of the opinion that any additions made by the AO and sustained by the CIT(A) in that assessment automatically stand deleted. Though the arguments by both the sides were given on the additions as listed in the original grounds of appeal, yet, we are of the opinion that no mention of the same is required to be made here and no adjudication is required in respect of the same, the reassessment having been declared ab initio void.
Similarly, the other additional ground of appeal filed on 20th Dec., 1999, is also not required to be considered as all the additions stand automatically deleted when the reassessment, is declared ab initio void.