Commissioner of Income Tax vs Trilokchand Swaroop Chand

A.R. Tiwari, J.—These miscellaneous civil cases are being heared as connected matters and are being disposed of by this common order :

Briefly stated, the facts of the cases are as under :

MCC No. 218 of 1991

The assessee was assessed as HUF for the assessment year 1975-76. Return of income was filed as ''individual''. The assessment was completed u/s 143(a) of the income tax Act, 1961 (''the Act'') on 23-1-1976 in the status of ''HUF''. On 10-1-1978, a notice was served on Trilochand u/s 148 of the Act. The assessee filed fresh return on 4-2-1982 in the status of HUF repeating the same income as was mentioned earlier. On 26-3-1985, assessment was made u/s 143(3) on the basis of fresh return. Aggrieved, the assessee filed the appeal before the AAC which was dismissed. The assessee then filed appeal before the Tribunal. The assessee impugned the order as invalid on the ground that notice u/s 148 was not served on proper person. The Tribunal accepted the contention and set aside the assessment. The application was rejected. The applicant-revenue has thus, filed this application u/s 256(2) arising out of the common order dated 23-8-1989 passed in IT Appeal No. 1144 (Indore) 1985, after rejection of the application on 19-11-1990 presented u/s 256(1) Registered as 63 of 1989 for reference of the question as extracted below.-

"Whether on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the reassessment of Assessment 1975-76 was invalid and without jurisdiction.?"

MCC No. 217/1991

The non-applicant assessee filed the return on 30-6-1976 in the status of individual'' for the assessment year 1976-77 showing loss of Rs. 12,088. No assessment was made on the basis of this return. On 18-11-1977, notice u/s 148 was issued and served on Trilokchand on 10-2-1978. The assessee filed second return showing the loss of Rs. 24,613. The assessment was made u/s 143(3). Aggrieved, the assessee filed the appeal which was dismissed. The assessee then filed an appeal before the Tribunal which was numbered as IT Appeal No. 1145 (Indore) 1985. The appeal was allowed by the common order dated 23-8-1989 passed in this appeal and the connected appeal IT Appeal (Indore) 1985. Dissatisfied, the applicant-revenue filed an application u/s 256(1) which was registered as RA No. 64 (Indore) of 1989 that application was rejected on 19-11-1990. Thereafter, the applicant-revenue has filed this application u/s 256(2) for consideration of the question as extracted below :

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the reassessment of the assessment year 1976-77 was invalid and without jurisdiction ?"

We have heard Shri Anand Mohan Mathur, the learned senior counsel with Shri A. Shrivastava, for the applicant and Shri P.M. Chaudhary, the learned counsel for the non-applicant.

We notice that before the Tribunal, the applicant-revenue had raised as many as three questions, but in these cases, only one question (which was question No. 1 before the Tribunal) is proposed and projected.

During submission, it was contended that the Tribunal was not justified in entertaining the additional ground of objection at the stage of second appeal. On this basis, it is urged that the Tribunal committed an error of law. In our view, there is no error in entertaining a ground which went to the root of the matter. Law is laid down in CIT v. Indian Express (Madurai)(P.) Ltd. [1983] 140 ITR 705 (Mad.).

Even in the CPC Or. XLI Rule 2, it is provided as under :-

" Grounds which may be taken in appeal.- The appellant shall not, except by leave of the Court, urge or be heard in support of any ground of objection not set forth in the memorandum of appeal, but the Appellate Court, in deciding the appeal, shall not be confined to the grounds of objections set forth in the memorandum of appeal or taken by leave of the Court under this rule :

Provided that the Court shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of contesting the case on that ground."

It is not contended before us that the applicant-revenue was not afforded sufficient opportunity of contesting the case on additional ground.

The Tribunal reached the conclusion that the notice as required u/s 148 despite another return was not validly served and that the requirement of notice was not waived. The finding about absence of valid service is reached on appreciation of facts.

In CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC) and CIT v. Kotrika Venkataswamy & Sons [1971] 79 ITR 499 (SC), it is held that the conclusion based on appreciation of facts does not give rise to any question of law.

It is not disputed before us that there must be proper reasons for reopening of the assessment proceedings, in ITO v. Shri Biju Patnaik AIR 1991 SC 464, it is held as under :

"Section 147(a) postulates two conditions, namely, that the income tax Officer must, on the basis of material facts on record, prima facie, to be satisfied that the income of the assessee is exigible to tax for the relevant assessment year and that he had reason to believe that it had escaped assessment. He must have reason to believe that the escapement of income was on account of the omission or failure on the part of the assessee to fully and truly disclose all the material facts necessary for the assessment. Both the conditions are conditions precedent to the exercise of the jurisdiction u/s 147(a), read with section 148...."

The Tribunal perused the record and found that no reasons were available on record. That being so, the action was without jurisdiction. The Tribunal reached the conclusion on the basis of absence of reasons. This finding, supported by record, is not liable to be faulted with.

The Tribunal declined to state the case and refer the aforesaid question holding as under :

"It is further to be seen that in view of CIT v. Indian Express 140 ITR 705: the Tribunal was justified in entertaining the additional ground of objection at the stage of second appeal. The said judgment is based upon three decisions of Hon''ble Supreme Court. The question Nos. 1 and 3 are, therefore, no more referable questions of law. The assessee, though filed return of income in compliance with the notices u/s 143, but it could not be thereby taken that he had waived the objection as to the jurisdiction of the ITO when the notices u/s 148 were not validly served. The question of waiver has been discussed by the Hon''ble Gujarat High Court in P.V. Doshi v. CIT in the light of the decisions of the Hon''ble Supreme Court. The question No. 3 is, therefore, not a referable question of law."

We are satisfied that the common question as proposed in these two cases is not a referable question of law. Accordingly, we dismiss these cases, but with no orders as to costs. Counsel fee for each side in each case is, however, fixed at Rs. 750, if certified.