T R GUPTA CONTRACTORS LTD Vs. COMMISSIONER OF INCOME TAX
LAWS(J&K)-1999-10-1
HIGH COURT OF JAMMU AND KASHMIR
Decided on October 22,1999

T.R. GUPTA CONTRACTORS LTD. Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

- (1.) A challenge is made to the very jurisdiction of the assessing authority who has issued a notice in terms of S. 147 of the IT Act, 1961 ('the Act'). It is submitted that on account of the statutory bar of limitation indicated in S. 147, no such notice could be issued.
(2.) AS the issue involved in the all three petitions is the same, therefore, these three writ petitions are being disposed of by this common judgment. For these assessment years, namely, 1984-85, 1986-87 and 1988-89, the assessment proceedings came to be concluded when assessment orders were passed. These orders were passed on 16th Nov., 1986, 17th Dec., 1987 and 22nd Dec., 1988 for three assessment years referred to above, respectively. While making the assessment, the assessee was held entitled to the benefit of investment allowance. Later on, a decision was given by the Supreme Court (sic). This is National Organic Chemical Industries Ltd. vs. CIT (1993) 203 ITR 410 (Bom) : 69 Taxman 160 (Bom). The view expressed was that benefit of investment allowance is not available to an assessee who is engaged in construction activity. This investment allowance is available only where an assessee is manufacturing or producing some article or thing. It was this reasoning that led to notice being issued in terms of S. 147. As challenge is being made to issuance of notice, it would be apt to notice the provisions of S. 147. This section insofar as relevant be taken note of. This reads as under: "147. Income escaping assessment.-If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in ss. 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-s. (3) of S. 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the the end of the relevant assessment, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under S. 139 or in response to a notice issued under sub-s. (1) of S. 142 or S. 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." [Emphasis, italicised in print, supplied] The counsel appearing for the revenue submits that the issue regarding limitation cannot be decided in isolation. For deciding this issue, provisions of ss. 148 and 151 of the Act are also required to be taken note of. It is also stated that as the assessment was made before 1st April, 1989, the law as applicable before the above date would apply to these proceedings. It be seen that by the Direct Taxes Amendment Act, 1987 S. 147 and other statutory provisions were amended. These were enforced w.e.f. 1st April, 1989. As the learned counsel for the respondents submits that it is the unamended statute which is required to be taken note of, this aspect of the matter is also taken into consideration. Therefore, unamended ss. 148 and 151 are also being noticed in addition to the amended provision. Amended ss. 148 and 151 as these now exist are reproduced as under : "148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under S. 147, the AO shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under S. 139. 151. Sanction for issue of notice.-(1) In a case where an assessment under sub-s. (3) of S. 143 or s. 147 has been made for the relevant assessment year, no notice shall be issued under S. 148 by an AO, who is below the rank of Asstt. CIT, unless the CIT is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice : Provided that after the expiry of four years from the end of relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisifed on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-s. (1), no notice shall be issued under S. 148 by an AO, who is below the rank of Dy. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Dy. CIT is satisfied on the reasons recorded by such AO, that it is a fit case for the issue of such notice."
(3.) SO far as unamended ss. 147, 148, 149 and 151 are concerned, these are also being noticed. These read as under : "147. Income escaping assessment.ï¿ 1/2If- (a) the ITO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under S. 139 for any assessment year to the ITO or to disclose fully and truely all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in cl. (a) on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned, (hereinafter in ss. 148 to 153 referred to as the relevant assessment year). 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under S. 147, the ITO shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The ITO shall, before issuing any notice under this section, recorded his reasons for doing so. 149. Time-limit for notice.-(1) No notice under S. 148 shall be issued. (a) in cases falling under cl. (a) of section 147- (i) for the relevant asessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-cl. (ii); (ii) for the relevant assessment year, where eight years, but not more than sixteen years have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year; (b) in cases falling under cl. (b) of S. 147 at any time after the expiry of four years from the end of the relevant assessment year. (2) The provisions of sub-s. (1) as to the issue of notice shall be subject to the provisions of S. 151. (3) If the person on whom a notice under S. 148 is to be served is a person treated as the agent of a non-resident under S. 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. 150. Sanction for issue of notice.-(1) No notice shall be issued under S. 148 after the expiry of eight years from the end of the relevant assessment year, unless the Board's is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of such notice. (2) No notice shall be issued under S. 148 after the expiry of four years from the end of the relevant assessment year, unless the Chief CIT or CIT is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of such notice." ;


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