Decided on March 17,1994



S. Bandyopadhyay, Accountant Member - (1.) 1 The appeals bearing Nos. 2755 to 2757 (Bang.)/1991 have been filed by the Department against the orders of the Deputy Commissioner of Income-tax (Appeals) for the three successive years under consideration. The appeals bearing Nos. 65 to 67/Bang./1992 have, on the other hand, been filed by the assessee for the same three years. Since the issues involved in all these appeals are the same and the facts are common, the appeals have been consolidated and a combined order is being passed for the sake of convenience.
(2.) The facts of the case are that Shri S. Dungarnath was engaged in pawn-broking business. The Department conducted a search and seizure proceedings in the premises of the assessee on 20-2-1988. Certain documents were seized during the course of the said proceedings. For the assessment year 1985-86, the assessment had originally been completed under Section 143(1) on 22-7-1985 on a total income of Rs. 13,530 as returned by the assessee. For assessment year 1986-87, however, the return of income filed originally on 30-6-1986 admitting the total income of Rs. 11,274 was ignored and not considered as a valid return by the Assessing Officer on the ground that the income returned was below the taxable limit. Consequent on the search and detection of the seized documents as referred to above, the assessee filed fresh returns of income for the two years viz., assessment years 1985-86 and 1986-87 admitting additional income to the extent of Rs. 10,000 and Rs. 15,000 respectively. The figures of income returned as per these fresh returns were Rs. 2.2,860 and Rs. 26,274 for these two years respectively. These returns were filed on 23-1-1990. The returns were regularised by issue of notices under Section 148 on 25-1-1990. In response to the said notices, the assessee stated that the returns already filed should be considered as returns filed in response to the notices under Section 148. 2.1 For assessment year 1987-88, however, the assessee filed the return of income originally on 23-1-1990 admitting an income of Rs. 34,520. This income included an additional amount of Rs. 20,000 on account of undisclosed Girvis accounts over and above the figure of total income as per the books. In the additional grounds taken up during the course of the proceedings before us, the assessee has challenged the validity of the notices issued under Section 148 for the assessment years 1985-86 and 1986-87. The assessment proceedings under Section 147(a) for these two years are, therefore, claimed to have been invalid and bad in law. The assessee has referred to the recent decision dated 15-2-1993 of the Karnataka High Court in the case of Winter Care (P.) Ltd. [Writ Petition No. 33832 of 1992] in which it has been held by the Karnataka High Court that the assessment proceeding initiated under Section 147 of the Act in that case was invalid and bad in law inasmuch as the notice under Section 148 itself giving the time limit of up to 30 days only from the date of receipt of the notice, in the said notice, for filing of the return in response thereto itself was invalid. The assessment proceeding was, therefore, quashed by the Karnataka High Court in that case. 3.1 In the instant case also, from a perusal of the copies of notices issued by the Assessing Officer under Section 148, it is found that time limit was allowed in the said notices up to 30 days only for filing the returns and hence, the notices concerned are liable to be held as invalid in accordance with the above-mentioned decision of the Karnataka High Court. In the instant case, however, the other fact to be taken into consideration is that the assessee himself had prompted the issuance of notices by filing revised returns for both the years showing substantially higher income than what had been shown in the original returns. Since these fresh returns were not in time, it was necessary to regularise the same by issue of notices under Section 148. The learned Departmental Representative has referred to the decision of the Supreme Court in the case of Director of Inspection v. Pooran Mall & Sons [1974] 96 ITR 390. He has drawn our specific attention to the following paragraph of the order of the Supreme Court as appearing at page 397 of the said reported decision: But, the most important principle on the basis of which the order of the Income-tax Officer should be upheld is that it is in pursuance of an agreement between the parties which has obtained the imprimature of the court that this order has been made. The period of limitation is one intended for the benefit of the person whose property has been seized. It is open to him to waive it. We consider that to hold that the period of ninety days which is mentioned in Section 132(5) is an immutable one would cause more injury to the citizen than to revenue. It is, therefore, open to the aggrieved person, as happened in this case, to agree to a fresh disposal of the case by the Income-tax Officer and thereby waive the period of limitation. The DR has also referred to the comments made in the famous treatise of Mulla on the Code of Civil Procedure at page 227 where the principle of waiver of a notice has been discussed. He has also drawn our attention to the discussions made at page 1190 of the book "The Law & Practice of Income-tax" of Kanga & Palkhivala, 8th edition, Volume I, on the same subject. His argument is that since the returns had already been filed and even subsequent to issue of notices Under Section 148, the assessee did not file fresh returns but stuck to those returns filed already, it must be considered that the assessee had waived his right for getting a fresh time of not less than 30 days for filing the returns. 3.2 The learned DR has also come up with another argument in this connection. He has argued that the assessment years concerned in this case are 1985-86 and 1986-87 and that the amendment brought to Section 148 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 would not cover the proceedings for these two years and hence, the notices issued under Section 148 in the old form would conform to the provisions of law as existing prior to the amendment and hence, neither the notices nor the assessment proceedings can be considered to be invalid. In support of his contention, he has referred to the amended provisions of Sections 187 and 188 and also insertion of Sub-section (5) to Section 143 and Sub-section (2) to Section 144 with effect from 1-4-1989. He argues that these clarify the intention of the Legislature that the amended provisions would be applicable to assessment years 1989-90 onwards only.
(3.) THE learned counsel for the assessee, on the other hand, has drawn our attention to the discussions made at pages 3676 and 3678 of the Book "Income-tax Law" authorised by Chaturvedi & Pithisaria, 5th edition and has pressed that the assessee cannot be considered to have waived his right to the notice inasmuch as there was no conscious abandonment of an existing right known to the assessee. He, therefore, contends that there was lack of jurisdiction on the part of the Assessing Officer consequent on issue of invalid notices. About the intention of the Legislature regarding applicability of the new provisions, he has drawn our attention to the provisions of Sub-section (2) of Section 275.;

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