1. The assessee moved the present miscellaneous petition under Section 254(2) against the order passed in ITA No. 1109/Cal/2001 for the asst.
yr. 1997-98 by the Tribunal 'E' Bench, Kolkata, vide its order dt. 28th Feb., 2002.
2. The contention of the assessee is that the mistakes are in the nature of wrong recording of facts, applicable dates, non-consideration of the relevant evidence produced in the appellate proceedings. Also, on certain issues the order suffers from non-application/not noticing, the decisions of the Hon'ble Supreme Court and of jurisdictional and other High Courts. It is mentioned that in para 2 of the order, the date of notice under Section 142(1) has wrongly been recorded as 24th Aug., 1997, whereas the correct date of notice is 24th Aug., 1998. The order of the AO as well as the CIT(A) correctly records the date as 24th Aug., 1998. However, the Tribunal has committed mistake in recording date as 24th Aug., 1997. Consequently this mistake is apparent on record which requires to be rectified.
3. On rectification of the above date, the first ground will have to be considered in the light of the correct date whether the notices under Section 142(1) have been issued after the end of the assessment year.
The assessment has been completed on the basis of the said notices under Section 142(1). Since the said notices were issued after the end of the relevant assessment year, the notices become illegal and invalid. In support of this argument, the assessee relied on the decision of the Hon'ble Supreme Court in case of CIT v. Narsee Nagsee & Co. and also mentioned several other decisions of various Courts as well as that of Tribunal. Further reliance was also placed on the decision of the Hon'ble Supreme Court in the case of Union of India and Anr. v. British India Corporation Ltd. and Ors.
(2004) 190 CTR (SC) 385 : (2004) 268 ITR 481 (SC). It was also mentioned that no notice under Section 148 of the Act was ever issued before passing the assessment order. Hence, this assessment becomes invalid.
4. The AO has power to assume jurisdiction which in itself is challengeable when he has issued notice under Section 142(1) beyond the expiry of time and when no notice under Section 148 of the Act has been issued, the AO completely overlooked the point of jurisdiction. The assessee has raised the question of jurisdiction on the validity of the assessment in ground Nos. 1 and 2 and the same has been summarily disposed of without going into the factual and legal aspect and on consideration of wrong facts and law on the issue.
5. It is further pointed out that the ground No. 2 raised by the assessee had been summarily rejected for the reasons stated in para 6 of the Tribunal order as under : As the assessee did not file the return within the prescribed limit and as the return filed on 16th Feb., 2000 was beyond the time-limit prescribed under Section 139(4) i.e., on or before 31st March, 1999, the AO had no alternative but to make the assessment under Section 144. The first part of the ground against making of an order under Section 144 is accordingly rejected.
While giving the decision, the Hon'ble Bench of the Tribunal has failed to consider the question of validity of assessment when no notice was issued before the best judgment assessment was passed. In this case, the assessment has been made by rejecting the books of account as well as without a valid return under the law. The return filed on 16th Feb., 2000 beyond the time-limit prescribed under Section 139(4) was invalid return. In such circumstances, it was mandatory for the AO to issue notice before resorting to best judgment assessment as per the specific provision under Section 144 of the Act. The learned counsel for the assessee has invited our attention to the provision of Section 144(1), where it says that before making an assessment under Section 144 opportunity shall be given by the AO by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment. This requirement is not necessary where AO issues a notice under Sub-section (1) of Section 142 of the Act. Since in this case, notice under Sub-section (1) of Section 142 was issued beyond time, it was incumbent upon the AO to give opportunity as provided in the proviso to Section 144 as mentioned above. No hearing was ever given when order under Section 144 was passed.
6. It is further mentioned that the requirement of notice is mandatory even under Section 145(3) of the Act, though the section does not specifically provide for it. But the Hon'ble Supreme Court in the case of C.B. Gautam v. Union of India and Ors. had held that the principles of natural justice have to be read into the Act even in instances of no specific provision or provision contrary to providing opportunity. Our attention was invited to the portion of the said decision given at p. 552 in para F to p. 553 para C. It was pointed out that in this case, no opportunity had been given what to say about adequate opportunity. Thus the assessee in this case was served with the assessment order as 'fait accompli' on 31st March, 2000 without a prior show-cause notice, which was mandatory as per Section 154 of the Act. Besides the above said decision of the Hon'ble Supreme Court, the specific wordings under Section 144 warrant that a proposition notice ought to have been given before the assessment is completed, whereas in this case no such notice was given and this fact has not been considered by the Hon'ble Bench of the Tribunal. Thus the order passed by the Hon'ble Bench without considering the said provision. The mistake apparent from record which requires to be rectified for non-consideration of relevant facts and law and the principles laid down by the Hon'ble Supreme Court on the issue of natural justice.
7. On merit, the assessee's learned counsel submitted that in ground No. 3, a disallowance of Rs. 8,36,00,000 has been confirmed by the learned CIT(A) which was written off by the assessee. This order is confirmed by the Tribunal in paras 9 to 11. The Tribunal has assumed that Rs. 8.36 crores was paid during the asst. yrs. 1993-94 and 1994-95 as per the directions of BIFR. Whereas the facts as per the order is not so. The Hon'ble Bench of the Tribunal erred in not looking into the order of BIFR. In this connection, our attention was invited to pp. 200 to 209 particularly p. 204 of the paper book. The assessee-company also gives the following extract of the same : (i) To bring in interest-free funds (Rs. 453 lakhs) to finance cost of the scheme as under : In addition to above, SWC would also undertake to meet any shortfall in the requirement of funds for CCL operations.
(ii) To waive loan of Rs. 458 lakhs included under scheme of arrangement sanctioned by the Calcutta High Court together with interest thereon.
(iii) To finance cash losses, if any, incurred by CCL during the period of implementation and to guarantee the profitability and cash flow projections made in the rehabilitation package.
(iv) To bear salary of personnel on deputation from SWC and to fund future VRS payments, if any.
It is clear that what is written off is not the contribution made in 1993-94 and 1994-95 but the waiver of loan and interest of Rs. 4,58,00,000 under the scheme of arrangement sanctioned by the Calcutta High Court. The outstanding was from the earlier years shown as trade advance. The very restructuring of Calcutta Chemical Company Ltd. (in short CCCL) was to help the trading operations of SWC was interlinked.
Further, these advances were classified as trade advances in the books of earlier years and that the outstanding itself was as a result of earlier accumulation of balance, which has not been looked into by the Bench of Tribunal. The findings of the CIT(A) in earlier years i.e., asst. yr. 1991-92 placed in the paper book at p. 217 specifically in para 6 and p. 220 of the paper book. In respect of this ground, the learned CIT(A) has given the following findings : I have carefully considered the above submissions and I find that the grounds canvassed before me were identical to that taken before my predecessor during appellate proceedings for asst. yr. 1990-91.
It was held in the said proceedings that in the above facts and circumstances, the disallowance of interest was not justified. I have given a careful thought to the reasons to the weighed with my learned predecessor and I am in full agreement that the addition under this head is totally uncalled for. There is "no dispute" (emphasis supplied) that the debts arose out of the business activities of the appellant. There is no dispute that subsequently due to sickness of the companies, the BIFR was trying to formulate a financial package for their reconstruction. As per this package, there was a bar on charging of interest on the outstandings with the appellant-company....
Further, the Tribunal has erred in considering argument of the learned Departmental Representative for the Revenue that in para 10 that the findings in the asst. yr. 1991-92 was not accepted by the Department, which argument militates against the findings given by the learned CIT(A) extracted supra, the advances were trade in nature was undisputed fact. Thus, the learned Departmental Representative argued against an undisputed fact which he could not have contended contrary to record unless and until an affidavit as per r. 10 of the ITAT Rules has been filed by the AO. In the present case, no affidavit has been given contrary to the facts on record. Thereby, mandatory Rule 10 has not been followed giving rise to a mistake apparent on record. The evidence collected by the AO mentioned in the assessment order in para 5.2 and used against the assessee has not been put to the assessee at any point of time. The assessee's objection in this regard has not been considered. Therefore, it is essential that the Bench ought to have directed furnishing of the evidence collected by the AO for rebuttal by the assessee before drawing any conclusion. In this connection, it is submitted that the conclusion arrived at by the Bench is contrary to the decision of the Hon'ble Supreme Court reported in the case of Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri and Anr.
is under : ...Under the provisions of Section 37 of the Indian IT Act, the proceedings before the ITO are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. In other words, the assessee would have a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal....
The CIT(A) as well as the Tribunal has committed error, where it has not looked into the details given by the Tribunal in tabular form in p.
682 of the paper book. Thus, a mistake has occurred for non-adherence to the decision of Hon'ble Supreme Court as well as not following mandatory provision of r. 10. The BIFR order has not been looked into at all. Evidence relied on by the AO has not been put to the assessee for rebuttal. Hence, the mistake in not giving an opportunity to the assessee as well as non-consideration of the details given by the assessee requires to be rectified.
8. With regard to the issue of bad debts, it is submitted that the provision for bad debts of Rs. 3,71,98,000 has been confirmed by the Bench of the Tribunal in para 15 at p. 10 applying the retrospective amendment by the Finance Act, 2001 to Section 36(1)(vii), when amended section has not been made available to the assessee at the time of framing the assessment. The applicability of the amended provision was not discussed by the learned CIT(A) nor the Tribunal. Thereby the provisions of law not applicable have been considered and relied by the Bench. This has resulted in a mistake of non-consideration of relevant provisions of law which is a mistake apparent from the record and requires rectification.
9. As regards the issue of prior period expenses of Rs. 18,27,00,543, the Hon'ble Bench in paras 26 to 27 has confirmed the disallowance on this issue. The AO has disallowed a sum of Rs. 16,34,19,000 debited by the assessee under the head 'prior-period expenses'. The learned CIT(A) not only confirmed the addition but also enhanced the same by Rs. 1,92,81,541 without giving notice of enhancement to the assessee. The disallowance had been made largely on the ground that details of expenses were not furnished and the assessee had not submitted any evidence to substantiate the claim of the expenses. The Bench of the Tribunal has upheld the order for the reasons treated by the authorities below. The assessee pointed out the following mistakes in the order of the Tribunal: (1) The assessment was completed by holding the return as defective and after rejecting the books of accounts maintained by the appellant. No show-cause (notice) was issued or any question on the claim was raised before the assessment by the AO. Thus no opportunity was given to the appellant to explain. In the light of this fact, Tribunal's finding that opportunity was given is a factual error. This is evident from the assessment order and the order-sheet notings which are available before the Tribunal. The Tribunal has erred in not looking into these evidences before arriving at the finding.
(2) The details of expenses furnished as Annex. 9 to the audit report in Form 3CD under Section 44AB which gives complete details of the expenditure have not been considered by the Tribunal before a decision was rendered. Thus material evidence available at the time of hearing was not considered.
(3) No notice of enhancement was issued by the CIT(A) required under Section 251(2) of the Act. This aspect is not reckoned by the Tribunal. Thereby, non-compliance of mandatory provision of law by the authorities below has been overlooked.
(4) Even under mercantile system of accounting, all these expenses were allowable based on concept of accrual as explained in various decisions remains to be disposed. Expenses such as stock, which are allowable only on consumption, in which case the expense was allowable for the year has not been considered. The Tribunal has also not given a finding as to which year the expense was allowable while confirming the addition for the year.
The assessee submitted that there is multiple error which is causing extraordinary hardship to the assessee and the net effect of the errors are such that there has been complete denial of justice to the assessee and these errors require to be rectified by recalling the directions on the issue and delete the addition or in the alternative the issue may be sent to the AO for proper consideration.
10. On the issue of levy of interest under Sections 234A and 234B of the Act, the assessee's learned counsel pointed out that interest under Sections 234A and 234B had been levied and confirmed by the Bench of Tribunal without considering the fact that ITNS 7 was issued to the assessee and not ITNS 150. Thus there is a factual error. The fact that no ITNS 150 has been served on the assessee till the date is undisputed. The Tribunal factually failed in error on the issue of ITNS 150. Since no ITNS 150 has been served, the liability to pay the interest merely in the demand notice is contrary to the position of law as explained by the Hon'ble Supreme Court in case of CIT v. Ranchi Club Ltd. . Several decisions on this issue supporting the case of the assessee have not been considered. Further, that no opportunity was given to the assessee before levy of interest which was confirmed by the Tribunal. Even if alleged ITNS 150 was available with the AO, still no liability could arise until ITNS 150 was served which has been ignored by the Bench. In this regard, reliance was placed on the decision of the Hon'ble Supreme Court in case of Kalyan Kumar Ray v. CIT which reads as under : By the Court : To avoid unnecessary controversies like this, the Department should, in future, adopt the salutary and useful practice of incorporating the entire calculations in ITNS No. 65 Form itself or, in the alternative, make the ITNS 150 an Annexure to form part of the assessment order, have it signed by the ITO and have it served on the assessee along with ITNS 65. That will enable the assessee to have the full details necessary to enable him to file a proper appeal, if needed, against the order and demand. If these safeguards are not taken, there is danger of the tax calculations being left entirely to the subordinate staff, the ITO contenting himself with a cursory glance thereat. Though, largely, the tax calculations are only matters of detail and arithmetic, there do arise sometimes difficult questions of interpretation of the provisions relating to tax rates, additional tax, interest and so on, and the assessee should, in all fairness, have full details regarding the computation to enable him to take further steps in the matter.
The Hon'ble Supreme Court laid down the principle that it is mandatory that service of ITNS 150' must be made along with the assessment order.
Non-service of ITNS 150 does not give rise to enforceable demand against the assessee until such time ITNS 150 if any, is not served the service of the assessment order is incomplete and this aspect has been overlooked by the Bench. Further, the basis of levy of interest is not known to the assessee and whether any interest is leviable on the addition in respect of bad debts sustained by the Bench on the basis of retrospective amendment of Section 36(1)(vii) of the Finance Act, 2001, has not been examined by the Bench. The liability for interest on the basis of retrospective amendment is not possible on the principles settled by the Hon'ble Supreme Court in case of CIT v. Hindustan Electro Graphite Ltd. . The learned counsel for the assessee pointed out the following issues which have not been considered : (a) The liability to pay interest under Section 234A when there was no reguirement to file return under law and when there was no taxable income.
(b) The liability to pay interest when the matter was sub-judice before the High Court.
(c) The date from which the liability arises, i.e., quantification of liability have all been left undecided.
(d) When a part of the income is covered under the block assessment and other part under regular assessment, whether any liability arises in the absence of charge and machinery provisions.
(e) The effect of the decision of Calcutta High Court in Monohar Gidwany v. CIT and the decision in CIT v. Wiliard (f) Further, the levy of interest under Section 201(1A) without a specific/separate order has not been dealt by the Tribunal.
(g) No separate order has been made for levy of interest and no prior opportunity has been provided as per law.
All the above results in rendering the order of the Tribunal open for rectification to rectify mistakes apparent on record. As is evident, the order has been rendered overlooking the binding decisions of the Supreme Court, jurisdictional High Court, decisions of other High Courts and decisions of other Benches of the Tribunals as well as non-consideration of express provisions of the IT Act, non-consideration of evidence placed on record, wrong mention of facts and law and miscarriage of justice by denying opportunity of being heard.
The basis of above mistakes, it is submitted that the Bench can rectify the order under Section 254(2) of the Act as held in case of Himachal Pradesh Financial Corporation v. CIT reliance was placed on the decision of the Hon'ble Supreme Court in case of Shivedeo Singh v. State of Punjab AIR 1963 SC 1909 relied on by the Hon'ble Allahabad High Court in case of ITO v. S.B. Singhal Singh & Sons . Further, reliance was placed on the decisions of the Hon'ble Supreme Court in case of Union of India and Anr. v.British India Corporation Ltd. and Ors. (supra), CIT v. Ramesh Chand Modi , CIT v. Dr. K.R. Jayachandran (1995) 124 CTR (Ker) 11 : (1995) 212 ITR 637 (Ker), CIT v. Subodh Chandra S. Patel .
11. In view of the above and the other reasons, the assessee prayed that the order of the Bench be rectified to bring it in conformity with the position of law and facts, thereby the liability foisted on the assessee through the assessment order may be cancelled in the interest of justice. It is submitted that no valid proceeding could be initiated under the Act where notice under Section 142(1) has been issued after expiry of the time and there cannot be escapement of income unless notice under Section 148 has been issued, so the assessment is without jurisdiction. Reliance was placed on the decision of Tribunal, Hyderabad Bench in case of Dr. Vijay Kumar Datla v. Asstt. CIT (1996) 58 ITD 339 (Hyd) at p. 364, para 17, Tribunal Delhi (Special Bench) decision in case of Motorola Inc. v. Dy. CIT (2005) 96 TTJ (Del) I : (2005) 95 ITD 269 (Del). It is submitted that once notice under Section 142(1) is invalid, order under Section 144 cannot be passed because no notice under Section 144 was given nor an opportunity of hearing has been given. Further books of account of the assessee cannot be rejected without giving opportunity of being heard. Reliance was placed on the decision of the Hon'ble Supreme Court in case of Tax Officer-cum-RTO and Ors. v. Durg Transport Co. (P) Ltd. Harakchand v. CIT , ITO v. S.B. Singar Singh & Sons and Anr. (supra).
12. The learned Departmental Representative very vehemently opposed the arguments of the assessee's learned counsel, Shri Pradeep. He submitted that the present rectification petition filed about after three years from the date of the order of Tribunal is a motivated application to take advantage of the decision of. the Hon'ble Tribunal, Special Bench, Delhi, in case of Motorola Inc. v. Dy. CIT and Ericsson Radio Systems A.B. v. Dy. CIT (supra) and other case of Kiran Singh and Ors. v.Chaman Paswan and Ors. . He submitted that though the date of notice under Section 142(1) was wrongly mentioned by the Hon'ble Tribunal, he has no objection correcting the date as 24th Aug., 1998. He objected for holding the assessment as invalid. He further submitted that a number of notices were issued after 24th Aug., 1998, all of which were partially complied or fully complied by the assessee.
The assessee-company never filed a valid return under the Act consequently only recourse available under law is the best judgment assessment under Section 144. He submitted that time-limit for completion of assessment for 1997-98 was available upto 31st March, 2000 under Section 153(1)(a) of the Act.
13. He further submitted that escapement of income, if any, will occur only after 2nd April, 2000. Any assessment after 1st April, 2000 alone requires notice under Section 148 of the Act and in this case the assessment was completed on 31st March, 2000, no notice under Section 148 is required to be given. He further submitted that the AO has a choice to complete the assessment either on the basis of a notice under Section 142(1) or 148 and the choice is provided under the law. Since notice under Section 142(1) does not contain any time-limit, the AO is free to issue notice any time before completion of assessment and in this case issue of notice dt. 24th Aug., 1998 is undisputed fact, is sufficient to support the validity of assessment. The assessee having participated in the proceedings without raising any issue on the validity of notice is estopped from raising the issue of jurisdiction.
He further submitted that the decision of the Hon'ble Supreme Court in case of CIT v. Narsee Nagsee and Co. (supra) is not applicable as it was rendered in the context of Business Profits Taxation Act of 1947.
He further submitted that there is a difference in the provision of the Act and the present IT Act, 1961 (however, he did not elaborate and point out any specific difference). He submitted that the assessment order should be held as proper, however, insofar as the completion of provision of Sections 144 and 145(3) is concerned, those are technical defaults for which the assessment cannot be declared as invalid, but can only be set aside. In support of his argument, he relied on the decision of the Hon'ble Rajasthan High Court in case of CIT v. Agro Engineers which reads as under : Agreed with the CIT(A). He was justified in, remitting the matter back to AO to make a fresh assessment after affording opportunity to the assessee for framing fresh assessment under Section 144 of the Act. The Tribunal has committed error in annulling the assessment made by the AO. If the statutory requirement has not been complied with direction can be given to make a fresh assessment after complying with the provision of Section 144, before framing the fresh assessment.
Accordingly, he submitted that assessment proceedings should not be declared as invalid.
14. In reply, the assessee's learned counsel submitted that the Hon'ble Tribunal should vacate the assessment as invalid and not binding on the appellant assessee for want of proper notice under Section 148 of the IT Act. He further submitted that notice under Section 142(1) be declared as invalid giving rise to the effect of no proceeding under the Act. He pointed out that the best judgment assessment in this case has been completed without a show-cause notice as required under the Act for passing an order under Section 144 of the Act. He invited our attention to the second proviso to Section 142(1), provided further that "it shall not be necessary to give such opportunity in a case where a notice under Sub-section (1) of Section 142 has been issued prior to the making of an assessment under this section". This would not be applicable in the instant case, the assessee will be governed by first proviso i.e., where a show-cause notice is necessary before passing best judgment assessment under Section 144 of the Act. He further invited our attention to Section 145(3), where it is mentioned that before rejecting the books of account it was necessary for the AO to have given an. opportunity even though Section 145(3) does not specifically provide. The duty to give opportunity must be read into the provisions as held by the Hon'ble Supreme Court in the case of C.B.Gautam v. Union of India and Ors. (supra). The learned counsel further brought to our attention the order-sheet and notings of the AO in the assessment proceedings found in the paper book at pp. 96 to 109 and submitted in the original hearing, particularly pp. 102 and 103 which clearly indicates that no hearing was granted after 7th Feb., 2000.
Though voluminous details were filed thereafter by the assessee until the last date of framing the assessment by the AO on 31st March, 2000 under Section 144 of the Act. Thus the' fact that mandatory notice under Section 144 was not issued and the present provisions of 1961 Act are para matetia. The Hon'ble Supreme Court in the case of State of Assam and Anr. v. B.C. Choudhuri and Anr. held that the provision of Business Profits Taxation Act corresponds to provisions under the IT Act of 1922 and are equally applicable. Further the Business Profits Taxation Act, Assam Agrl. IT Act of 1939, IT Act of 1922, 1948 and 1961 have been compared and exhaustively dealt both in (1996) 58 ITD 339 (Hyd) (supra) and by Tribunal, Delhi Special Bench in (2005) 96 TTJ (Del)(SB) 1 : (2005) 95 ITD 269 (Del)(SB) (supra) mentioned supra. Accordingly, the arguments of learned Departmental Representative has been taken note of by the Tribunal in the said decisions and has been discussed. Consequently, the decision of Tribunal, Special Bench, Delhi on this issue should be applied in this case. Further the fact that assessee participated in the proceedings would estopp it from raising the issue of jurisdiction, was raised specifically by the Department as could be found in para 23 of the Tribunal of Special Bench case mentioned supra and the Hon'ble Tribunal has given its consideration on the issue in para 28 onwards particularly in para 36.1 which is extracted as under : 36.1. From the above discussion, one may carry the impression that the Revenue's contention that both the notices i.e., under Sections 142(1)(i) and 148 can be issued simultaneously; both the provisions can operate simultaneously and discretion is vested with the AO to utilize any one of them. This is erroneous and cannot be accepted.
Firstly, it is directly opposed to the decision of the Hon'ble Supreme Court in the case of Narsee Nagsee & Co. (supra). We have noted that this contention was raised and was specifically rejected by the Supreme Court. Secondly, whereas no conditions are prescribed for issuing notice under Section 142(1)(i) of the IT Act, the same is not true of a notice under Section 148 of the IT Act. In the latter case, the AO must have reason to believe that income has "escaped assessment". A notice under Section 148 and "reason to believe" relating to income escaping assessment must be based on material and not on the fancies of the AO. The words "reason to believe" and other conditions are specially provided to control and check the powers of the AO to issue notice under Section 148 of the IT Act. We read no such restriction under Section 142(1)(i) of the Act. The two provisions govern different fields and can be exercised, in different circumstances. There is no similarity, as we have noticed while considering the provisions of Sections 139(1) and 139(2) or those of Sections 139(4) and 148 of the IT Act. Both the sub-sections here relate to the powers of the AO to be exercised in different circumstances. If income "escapes assessment", then the only way to initiate assessment proceedings is to issue notice under Section 148 of the IT Act. There is no such requirement as far as notice under Section 142(1)(i) of the IT Act is concerned. If fact is notice has already been issued under Section 148 of the IT Act calling for a return from the assessee, it looks absurd to call for a return again under Section 142(1)(i). We, therefore, do not find any force in the contention of the Revenue.
15. The assessee's learned counsel further submitted that the issue of statutory notice under Section 148 is mandatory and cannot be waived by consent or participation as clarified by the Hon'ble Supreme Court in case of Kiran Singh and Ors. v. Chaman Paswan and Ors. (supra). Notice under Section 148 is not a mere procedural requirement but a condition precedent to the validity of any assessment. If no notice is issued or notice issued is shown to be invalid, the proceedings taken by the AO would be illegal and void as held by the Hon'ble Supreme Court in case of Y. Narayana Chettiar and Anr. v. ITO and Ors. . He further submitted that mere participation and on failure to raise objection to the validity of notice does not amount to waiver. He further submitted that a jurisdictional provision which was mandatory could never be waived. A proceeding without a valid notice per se is illegal and everything which follows is also illegal. Hence, the assessment must be declared as invalid and cannot be set aside or remanded as suggested by the learned Departmental Representative. In this regard, reliance was placed on the decision of the Hon'ble Gujarat High Court in case of P.V. Doshi v. CIT 1977 CTR (Guj) 683 : (1978) 113 ITR 22 (Guj) which held as under : Held, that as a jurisdictional provision which was mandatory and enacted in public interest could never be waived and the want of jurisdiction was discovered by the AAC, there was no question of waiver by the assessee. No question of finality of the remand order of the Tribunal could arise because the mandatory conditions for founding jurisdiction for initiating reassessment proceedings had not been fulfilled. The order of reassessment was, therefore, not valid.
16. We have considered the rival submissions and have gone through the material available on record. We have perused the order of the Tribunal dt. 28th Feb., 2002 and the material produced by both the parties, vis-a-vis the case laws on this point. We find that the Bench of the Tribunal while passing order dt. 28th Feb., 2002 had committed an error incorrectly recording the date of notice under Section 142(1), which was mentioned by the Bench as 24th Aug., 1997, whereas the correct date as admitted by both the parties is 24th Aug., 1998. Accordingly this is a mistake apparent from the record. We rectify the mistake and mention that the date of notice under Section 142(1) is 24th Aug., 1998.
Consequently the issue of validity of assessment has to be determined in reference to the notice under Section 142(1) dt. 24th Aug., 1998.
The Bench while passing the order has decided the issue taking the date as 24th Aug., 1997 against the assessee on the basis of incorrect recording of the date in the order. On recording the correct date, the issue of jurisdiction becomes important and has to be decided based on the correct date. The Tribunal Bench has sufficient power to rectify the said mistake arising on account of incorrect recording of the date.
Since the issue of jurisdiction and validity goes to the root of the matter, therefore, this issue can be raised at any point of time and even before the Hon'ble Supreme Court. Therefore, there is no substance in the argument of the learned Departmental Representative that this issue cannot be raised before this Bench. It is a trite law that the issue of jurisdiction and validity which goes to the root of the matter can be raised at any stage. For this proposition, reliance is placed on the decisions of Kiran Singh and Ors. v. Chaman Paswan and Ors.
(supra), Manindra Land & Building Corporation Ltd. v. Bhutnath Banerjee and Ors. and KM. Shaima this regard, the assessee's learned counsel Shri Pradeep has cited plethora of decisions before us which is given in the paper book containing decisions to support his view. Accordingly the issue of jurisdiction and the validity of the assessment has to be decided based on the correct date of notice, because the assessee cannot be made to suffer further mistake made by the Bench.
17. It is an admitted position that no return has been filed by the assessee-company as per the provisions of the Act and the so-called return filed beyond the time-limit prescribed under Section 139(4) on 16th Feb., 2000 is an invalid and non est return in the eye of law. The proceedings to fasten liability on the assessee-company was commenced by the Department for asst. yr. 1997-98 by issue of a notice under Section 142(1) dt. 24th Aug., 1998 for the first time. Prior to it, no notice or proceeding has started. Subsequently several notices have been issued by the Department under Section 142(1) but all these notices are apparently issued after the end of the assessment year i.e., 31st March, 1998. As per the provisions of Section 147, the income would be treated as escaped assessment at the end of the assessment year where no return has been filed. In this case, in the absence of return, the provisions are to tax income that escaped assessment and not to tax income which was not assessed as on 1st April, 1998. Thus the income can be assessed only by issuance of notice under Section 148 as it is admitted in this case that no such notice had been issued by the Department under Section 148. Mere issuance of notice under Section 142(1) after the end of the assessment year in the absence of voluntary return by assessee cannot give rise to valid proceedings under the Act.
18. It will be pertinent to mention here that the Bench deciding this issue in the present case were led by the fact that the notice was issued to the assessee on 24th Aug., 1997, whereas the correct fact is that the date is 24th Aug., 1998. Probably that may be the reason, the Tribunal has came to the conclusion that the proceedings are not invalid. However, if we look into the correct fact, the date of notice under Section 142(1) is 24th Aug., 1998. Therefore, the entire issue has to be looked into from this angle. We would like to mention here that in the present case, the learned AM is the author of the order, now the Vice President, had already taken a view in the case of Dr.
Vijay Kumar Datia v. Asstt. CIT (supra), where he has elaborately discussed the provisions of Sections 139(1), 142, 148, 153 and also related Section 239, vis-a-vis, the provisions of Sections 11, 14 of old IT Act, 1922 and he has come to the conclusion that "where the assessee had not filed the returns suo motu within the time prescribed under Section 139(1), the Revenue had not issued any notice under Section 142(1) before the end of the assessment year and the returns furnished by the assessee had been filed beyond the time-limit prescribed under Section 139(4) and were rightly treated to be invalid by the AO. In case, the Department was to reopen the assessment by way of escaped assessment, notice under Section 148 has to be issued otherwise the assessments completed without issuing notice under Section 148 will be invalid and bad in law and are to be quashed.
19. We would like to mention here that after the introduction of time-limit for completing the assessments, the proceedings can be said to be pending during the period starting from the date of filing of the return by the assessee suo motu or issuance of notice under Section 142 by the AO and till the time-limit prescribed to complete the assessment under Section 153, i.e., two years from the end of the assessment year in which the income was first assessable. However, Expln. 2(a) to Section 147 of the IT Act includes non-filing of return in the expression "escaped assessment". The scope of Expln. 2(a) to Section 147 has to be restricted to the failure of the assessee to file a return suo motu or a voluntary return under Section 139(1) or Section 139(4) within the prescribed time-limit and not to cases where a notice under Section 142(1) requiring the assessee to file return has already been issued. Otherwise, even on the first day of the assessment year, itself the AO can issue notice under s, 148 when the process of assessment itself has not yet come into being. It would thus be too wide a proposition to be accepted. As regards the outer limit of issuing notice under Section 142(1)(i), there is apparently no time-limit prescribed, but if one reads the other provisions, it gives an impression that the outer limit is one year from the end of the assessment year. Otherwise, the assessee's failure to submit the return under Section 142(1) would not entitle him to file the return thereafter. Once that time-limit is over and the assessee has not filed any return, it becomes a case of income escaping assessment and for that issuance of notice under Section 148 is a must. As per Section 153, time-limit for completing assessment is two years from the end of the assessment year in which it was first assessable. This limit comes into play when the proceedings for assessment have been initiated by filing a return suo motu under Section 139(1) or by issuance of a valid notice under Section 142(1). Clause (i) of Sub-section (1) of Section 142 was amended by Finance Act, 1990, so that if a person fails to furnish a return of income by the due date mentioned in Section 139(1), a notice calling upon him to file the return can be sent to him within the relevant assessment year itself. If no such initiation was taken within the assessment year, it would be a case of escaped assessment within the meaning of Expln. 2 to Section 147 and, therefore, a notice under Section 148 would be a must to empower the AO to proceed with the assessment. We would like to mention here that this view is supported by the decision of the Hon'ble Special Bench of the Tribunal in case of (1) Motorola Inc. v. Dy. CIT and (2) Ericsson Radio Systems A.B. v. Dy.
CIT, etc. (supra) [popularly known as Motorola Inc. and Nokia Networks] particularly in paras 38.1, 38.2, 39 and 40 of the paper book, which reproduced for the sake of brevity, is extracted as under: 38.1 On a careful consideration of the rival submissions, we are of the view that the arguments advanced for the assessees are well taken. Section 142 of IT Act prior to its amendment, had the title "Inquiry before assessment". It started with the words "for the purpose of making an assessment". It then did not have Clause (i) of Sub-section (1) authorizing the AO to call for a return from the assessee. Other clauses empowered the AO to ask the assessee to produce or cause to be produced accounts and documents and give information in writing and verified in the prescribed manner. In the present appeal, there is no quarrel that as far as powers given to the AO in the provisions other than Clause (i) of Sub-section (1) of Section 142 are concerned, they can be exercised for the purpose of making an assessment at any time before the assessment is made. The AO can ask the assessee to produce accounts, etc. and do everything provided in clauses (ii) and (iii) of Sub-section (1) upto the time of making the assessment. But it does not follow that the AO for making an assessment, can exercise any power at any time without satisfying the conditions attached to the exercise of the power.
Issue of notice calling for a return i.e., the power which was earlier exercised under Section 139(2) of IT Act for initiation of assessment proceedings, cannot be exercised after the end of the assessment year without recourse to Section 147/148 of the Act. The question of making an assessment would arise only if some proceedings have been initiated and are pending. Only then the question of exercising the powers "for the purpose of making an assessment" would arise. The power for initiation of proceedings as per the scheme of the Act is very different from the power of making an assessment. Therefore, the contention that the power of making an assessment or reassessment can only be exercised after initiating the assessment or reassessment proceedings is well taken. It is further rightly contended that there is no good reason why the decision of the Supreme Court in the case of Narsee Nagsee & Co, (supra) should not be applied and why the AO should be held to be entitled to issue notice under Section 142(1)(i) where he is required to issue notice under Section 148 r/w Section 147 treating it to be a case of escaped assessment. If income has escaped assessment, the AO has to issue notice under Section 148 after satisfying the conditions of Section 147 of IT Act recording reasons and establishing 'reasons to believe' that income had escaped assessment. These requirements would be given a go-by in case the AO is held to be entitled to call for a return under Section 142(1)(i) of the IT Act. Both the sections cannot operate in the same field at the same time. Moreover, the provisions of Section 142(1)(i) as they stood in the assessment years, with which we are concerned, were quite similar to the provisions considered the their Lordships in the case of Narsee Nagsee & Co. (supra). No plausible reason has been put forward to convince us not to apply the aforesaid decision.
Subject to our aforesaid conclusions, we agree with other submissions advanced on behalf of the assessee's learned representatives without repeating here each one of those submissions. For all the above reasons, we are inclined to hold that the decision given in the case of the Dr. Vijay Kumar Datla (supra) is correctly decided and has to be given preference cover the decision of the Delhi Bench in the case of Sheraton International (supra).
38.2 It follows from the foregoing discussion that notice under Section 142(1)(i) cannot be issued after the end of the relevant assessment year.
39. In both the cases, viz., Motorola and Ericsson, the notices under Section 142(1)(i) were issued after the end of the relevant assessment years and hence invalid. Therefore, the assessments made pursuant thereto are invalid.
40. This decision of ours is sufficient to dispose of the appeals in the cases of Motorola Inc. and Ericsson and there is no need to decide the other issues. However, since the other issues have to be decided in the case of Nokia, and further since both the sides requested that all issues may be adjudicated upon having regard to their importance and also to avoid multiplicity of proceedings, we proceeded to hear arguments on all those issues and our findings thereon are recorded in the following paras.
It will not be out of place to mention here that while deciding the matter, Special Bench of the Hon'ble Tribunal in case of Motorola Inc.
and Ericsson (supra) has taken support of the decision of the Hon'ble Supreme Court in case of CIT v. Narsee Nagsee & Co. (supra), where the provisions of the IT Act, 1922 in Sections 11, 14 and 22 are in pan' materia with the provisions of the IT Act, 1961 which has been highlighted by the Tribunal, Hyderabad Bench, in case of Dr. Vijay Kumar Datia v. Asstt. CIT (supra) also. It will be pertinent to mention here that the Special Bench of the Tribunal while deciding the issue had mentioned the comparative provisions of the two Acts i.e., old and new of the Act.
20. The Hon'ble Supreme Court in case of CIT v. Narsee Nagsee & Co.
(supra) has observed as under : The words "escaping assessment" in Section 14 apply equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee and, therefore, there was no assessment of his income-When a notice is issued under Section 14 all the requirements of the notice under Section 11 apply and the ITO has to proceed in the manner as if the notice was issued under Section 11-Therefore, any advantage or relief which was available to the assessee under Section 11 as to allowable deductions, deficiency etc., would be equally available, if the notice is issued under Section 14-The words "assess" and "reassess" do not mean the same thing and signify two different cases.
21. In this way, we find that the facts and law involved in the present case are identical. In the present case, the assessee had not. filed the return suo motu within a time prescribed under Section 139(1), the Revenue had not issued any notice under Section 142(1) before the end of the assessment year, and the return furnished by the assessee on 16th Feb., 2000 had been filed beyond the time-limit prescribed under Section 139(4) and was invalid return. Therefore, a notice under Section 148 has to be issued when an assessment, reassessment or recomputation is made under Section 147 to tax income which has escaped assessment. This is a case of assessment without there being an earlier assessment. Therefore, the assessments completed without issuing notice under Section 148 are invalid and bad in law and are accordingly liable to be quashed.
22. We are not agreeable to the argument of the learned Departmental Representative that the assessment involved is a technical defect and the matter can be set aside for re-determination. This is because the Hon'ble Supreme Court in the case of Narsee Nagsee & Co. (supra) has declared that the assessment is invalid and similarly the Hon'ble Tribunal of Hyderabad in the case of Dr. Vijay Kumar Datla v. Asstt.
CIT (supra) and the Hon'ble Special Bench of Delhi Tribunal in the case of Motorola Inc. and Ericsson, etc. mentioned (supra) have held that the assessment shall be an invalid assessment and bad in law. We, therefore/respectfully following the above decisions of the Tribunal, Hyderabad Bench, Special Bench, Delhi and taking support from the decision of the Hon'ble Supreme Court in case of CIT v. Narsee Nagsee & Co. (supra) hold that the assessment is invalid and bad in law and, therefore, annulled. We are also guided by the principles where the notice is invalid, the entire proceeding is a nullity and whatever follows thereafter is also nullity and void. Therefore, the assessee's case succeeds on this primary issue itself. Accordingly, the order of the Bench dt. 28th Feb., 2002 stands rectified.
23. We find that both the parties have argued at length in the petition on all other issues. However, we are not recording arguments of findings on this issue as we have already held that the assessment is null and void and we do not find it necessary to deal it with other issues raised in the impugned miscellaneous petition and leave it open.
24. In the result, the miscellaneous application filed by the assessee-company is allowed in its favour.