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Judgment
Satish Kumar Mittal, J.—The assessee has filed this appeal u/s 260A of the Income Tax Act, 1961 (''the Act'') against the order dated 13-9-2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ''A'' in ITA No. 739/Chandi./2001 for the assessment year 1991-92.
The brief facts of the case are that the assessee is a Co-operative Society at the apex level in the State of Punjab. The assessee had filed the return of income for the assessment year 1991-92 claiming exemption u/s 80P(2)(a)(iii) and u/s 80P(2)(a)(iv) of the Act to the tune of Rs. 57,05,31,469. The assessment was framed u/s 143(3) of the Act vide order dated 16-12-1993 and the deduction was allowed to the assessee in accordance with the view expressed by this Court in case of Commissioner of Income Tax Vs. Punjab State Co-operative Supply and Marketing Federation Ltd., . Later on, the decision of this Court, was reversed by the Supreme Court in case of The Assam Co-operative Apex Marketing Society Ltd., Assam Vs. Additional Commissioner of Income Tax, Assam, , whereunder it was held that deduction u/s 80(P)(2)(iii) is to be allowed only to those co-operative societies whose membership consists of agriculturists.
Subsequently on the basis of the said judgment, the case of the assessee for the assessment year in question was re-opened by the Assessing Officer by issuing notice u/s 148 of the Act. The Assessing Officer was also of the view that as per the judgment of the Supreme Court in Assam Co-op. Apex Marketing Society Ltd.''s case (supra), the assessee was not entitled to deduction u/s 80P(2)(a)(iv), though the said judgment dealt with only the deduction u/s 80P(2)(a)(iii) of the Act. In response to the notice u/s 148 of the Act, the assessee filed the return of its income on 11-4-1996. The Assessing Officer vide order dated 30-3-1998, on the basis of the aforesaid judgment, denied the deductions claimed by the assessee u/s 80P(2)(a)(iii) and 80P(2)(a)(iv) of the Act amounting to Rs. 50,16,08,596 and Rs. 6,85,05,352 respectively.
Feeling aggrieved against the said order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who vide his order dated 2-3-2001 upheld the disallowance of deduction u/s 80P(2)(a)(iii) on the basis of the judgment in Assam Co-op. Apex Marketing Society Ltd.''s case (supra), but allowed the claim of deduction u/s 80P(2)(a)(iv) while holding that the aforesaid judgment was not applicable to this clause.
Against the order of the Commissioner of Income Tax (Appeals), the assessee went in appeal before the Tribunal. In the meanwhile, the judgment of the Supreme Court in Assam Co-op. Apex Marketing Society Ltd.''s case (supra), was overruled by the Larger Bench of the Supreme Court itself in case of Kerala State Co-operative Marketing Federation Ltd. and Others Vs. Commissioner of Income Tax, vide its judgment dated 30-5-1998 in which it was held that deduction u/s 80P(2)(a)(iii) of the Act is admissible to a Co-operative Society irrespective of whether the agricultural produce marketed by the Society was produced by its members or not. It is relevant to state here that after this judgment of the Supreme Court, the provision of Section 80P(2)(a)(iii) was amended retrospectively with effect from 1-4-1968 vide Income Tax (Second Amendment) Act, 1998 providing that deduction under the aforesaid clause will be admissible to a Co-operative Society only if the agricultural produce marketed by the Society is grown by its members.
During the pendency of its appeal, the assessee moved an application before the Tribunal by taking up a new ground of appeal in view of the aforesaid judgment of the Supreme Court in Kerala State Co-op. Marketing Federation Ltd.''s case (supra) that since the assessment of the appellant was re-opened on the basis of judgment of the Supreme Court in Assam Co-op. Apex Marketing Society Ltd.''s case (supra), which has been over-ruled by the Supreme Court in Kerala State Co-op. Marketing Federation Ltd.''s case (supra), the notice issued u/s 148 of the Act for re-opening the assessment and subsequent reassessment framed arc invalid in law. The Tribunal vide its order dated 13-9-2007 rejected the ground taken by the appellant and upheld the re-opening of the case and re-assessment framed by the Assessing Officer while observing as under:
...In this case the Assessing Officer had recorded reasons before the service of notice u/s 148 on 12-3-1996. As per the decision of the Supreme Court in case of The Assam Co-operative Apex Marketing Society Ltd., Assam Vs. Additional Commissioner of Income Tax, Assam, , order dated 25-4-1993, the assessee was not entitled to deduction u/s 80P(2)(a)(iii). When the Assessing Officer formed the belief, the law declared by the Hon''ble Supreme Court was sufficerient to form an opinion that income of the assessee had escaped assessment. So on the date of issuing of notice u/s 148, the formation of the belief by the Assessing Officer that income had escaped assessment was valid. If the judgment of the Supreme Court is overruled subsequently, the Assessing Officer would be bound to apply the law laid down by the Hon''ble Supreme Court subsequently. However, the validity of notice u/s 148, in our considered view, would not be affected merely because the Hon''ble Supreme Court has taken a different view subsequent to the issue of notice u/s 148. One has to take into account the facts and circumstances of the case and the law as it existed on the date of issue of notice to determine the validity of the notice. Once a valid notice is issued u/s 148, it is open to the Assessing Officer in proceedings u/s 147 to bring to change items of income which had escaped assessment in addition to the item or items which led to the issuance of notice u/s 148. The language of Section 147 also indicated the clear legislative intent of bringing to tax all the escaped income even when proceeding u/s 148 had been initiated in respect of only some of the items. In other words, it is material to find out as to whether on the date of issue of notice u/s 148 the Assessing Officer had exercised the power of formation of belief in accordance with law. Subse-quent developments of law are bound to be taken into consideration by the Assessing Officer while making the reassessment. So, however, subsequently, development of law will not affect the validity of the reopening of the assessment if it is found to be valid on the basis of the law as it existed on the date of issue of notice u/s 148. In this case, the Assessing Officer had issued notice on the basis of the decision of the Supreme Court in the case of Assam Co-op. Apex Marketing Society (supra). (Notice u/s 148 was served on 12-3-1996). Subsequently, the said decision has been overruled. However, further to it, there has been a retrospective amendment in Section 80P. At the time of framing the assessment, the Assessing Officer was empowered, in fact, bound to reassess the income on the basis of retrospective amendment. The assessment had been re-opened on the basis of the decision of the Supreme Court in case of Assam Co-op. Apex Marketing Society (supra). So, however, the Assessing Officer would not be entitled to reassess the income on the basis of the said decision as the same had been overruled. So, however, as stated earlier during the course of reassessment proceedings, the law had been amended. The income on the basis of the amended law (section 80P) had escaped assessment, Since the reopening of assessment on a different ground was validly initiated, the Assessing Officer was entitled to bring to tax any other income that had escaped assessment which came to the notice of the Assessing Officer after the issue of notice u/s 148. Therefore, the reassessment made by the Assessing Officer, in our view, is valid, in accordance with law and does not suffer from any infirmity.
Against the aforesaid order, the assessee has filed the present appeal raising the following substantial question of law for consideration of this Court:
Whether the learned Tribunal was right in law in upholding the re-opening of assessment by issue of notice u/s 148 and the consequent re-assessment framed, when the judgment of the Hon''ble Supreme Court The Assam Co-operative Apex Marketing Society Ltd., Assam Vs. Additional Commissioner of Income Tax, Assam, , on the basis of which the case was re-opened, had been wiped out by virtue of it being overruled by Hon''ble Supreme Court itself in Kerala State Co-operative Marketing Federation Ltd. and Others Vs. Commissioner of Income Tax,
We have heard the counsel for the appellant and gone through the impugned order passed by the Tribunal.
Learned Counsel for the assessee submitted that the Assessing Officer had re-opened the assessment under Sections 147 and 148 of the Act only on the basis of the decision given by the Supreme Court in Assam Co-op. Apex Marketing Society Ltd.''s case (supra) and when the said judgment was subsequently overruled by the Supreme Courtin Kerala State Co-op. Marketing Federation Ltd.''s case (supra), the very basis for issue of notice to the assessee and framing the assessment, became invalid, therefore, the reassessment made by the Assessing Officer should have been quashed. Learned Counsel submitted that even retrospective amendment made in Section 80P of the Act on 1-4-1968 by the Income Tax (Second Amendment) Act, 1998 could not make the notice u/s 148 as valid because the said notice was not issued on the basis of the said amendment.
After hearing the counsel for the assessee and going through the impugned order, we do not find any merit in this appeal.
In this case, the Assessing Officer had issued the notice u/s 148 of the Act for re-opening the assessment on 12-3-1996 on the basis of the decision of the Supreme Court in case of Assam Co-op. Apex Marketing Society Ltd. (supra) dated 25-4-1993, therefore, the validity of the notice u/s 148 would not be affected merely because subsequently the Supreme Court has taken a different view in case of Kerala State Co-op. Marketing Federation Ltd. (supra). However, while framing the assessmerit, the Assessing Officer was required or bound to take into consider-ation the subsequent judgment. In this case, the assessment was framed on 16-12-1993. Not only the judgment of the Supreme Court in Assam Co-op. Apex Marketing Society Ltd''s case (supra) was overruled by the Supreme Court itself in Kerala State Co-op. Marketing Federation Ltd''s case (supra); but the provision of section SOP of the Act was also amended retrospectively with effect from 1-4-1968 by Income Tax (Second Amend-ment) Act, 1998 by virtue of which the assessee was not entitled to deduction claimed. We are of the opinion that since the amended law is deemed to exist from the date it is stated to be operating, therefore, re-assessment made by the Assessing Officer was perfectly valid. Therefore, in this case the notice u/s 148 of the Act was validly issued on the basis of the decision of the Supreme Court in case of Assam Co-op. Apex Marketing Society Ltd (supra) and the assessment was also validly framed in view of the retrospective amendment made in Section 80P of the Act by Income Tax (Second Amendment) Act, 1998. Therefore, we do not find any illegality and infirmity in the order passed by the Tribunal.
Thus, there is no merit in this appeal. No substantial question of law is arising for consideration from the impugned order passed by the Tribunal.
Dismissed.