Damodarlal Badruka v. The Income-tax Officer, Ward I (4), Hyderabad
[Citation -2015-LL-0317-57]

Citation 2015-LL-0317-57
Appellant Name Damodarlal Badruka
Respondent Name The Income-tax Officer, Ward I (4), Hyderabad
Court HIGH COURT OF HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
Relevant Act Income-tax
Date of Order 17/03/2015
Assessment Year 1985-86
Judgment View Judgment
Keyword Tags re-opening of assessment • production of evidence • fresh assessment • revisional power • issue of notice • valuation cell • capital gain • market value
Bot Summary: The Commissioner accordingly set aside the order dated 22.07.1985 of assessment made under Section 143 of the Act, and directed the Assessing Officer to conduct local enquiries into the correct value of the property as on 01.01.1964 and determine the correct amount of taxable capital gains, and to recompute the income for the assessment year 1985-86 taking into consideration the correct amount of capital gain. In pursuance thereof, the Assessing Officer reopened the assessment under Section 143 by issuing a notice under Section 143 of the Act. During the fresh assessment under Section 143, the property was referred to Valuation Cell of the Department under Section 55-A and thus the correct market value was arrived at on 01.01.1964 and it was accordingly adopted as cost of the land and capital gain was thus computed on the basis thereof. The question raised is, whether the assessment under Section 143 of the Act, would vitiate for want of previous approval of the Inspecting Assistant Commissioner. A) Where a return has been made under section 139, the Assessing Officer may, without requiring the presence of the assessee or the production by him of any evidence in support of the return, make an assessment of the total income or loss of the assessee after making such adjustments to the income or loss declared in the return as are required to be made under clause, with reference to the return and the accounts and documents, if any, accompanying it, and for the purposes of the adjustments referred to in sub-clause of clause, also with reference to the record of the assessments, if any, of past years, and determine the sum payable by the assessee or refundable to him on the basis of such assessment. The question is, where the assessment made under sub-section of Section 143 of the Act is set aside by the revisional authority under Section 263 of the Act, whether the previous approval contemplated by sub-section of Section 143 of the Act is necessary. In the present case, the assessment under Section 143 of the Act was set aside by the Commissioner, the higher authority, in exercise of his powers under Section 263 of the Act, and therefore, it ceased to operate or in other words the Assessing Officer had to pass order under Section 143 as if there was no assessment under Section 143.


HON BLE SRI JUSTICE DILIP B.BHOSALE AND HON BLE SRI JUSTICE A.RAMALINGESWARA RAO I.T.T.A.No.299 OF 2003 % 17.03.2015 # Sri Damodarlal Badruka .. Appellant And $ Income Tax Officer, Ward I (4), Hyderabad .. Respondent ! Counsel for Appellant : Sri A. Sanjay Kishore Counsel for Respondent : Sri J.V. Prasad Standing Counsel for Income Tax < Gist : > Head Note : ? Citation: HON BLE SRI JUSTICE DILIP B.BHOSALE AND HON BLE SRI JUSTICE A.RAMALINGESWARA RAO I.T.T.A.No.299 OF 2003 ORAL JUDGMENT: (per Hon ble Sri Justice Dilip B.Bhosale) This Appeal under Section 260 (A) of Income Tax Act, 1961 (for short, Act ), preferred by appellant assessee, is directed against order dated 13.06.2001 passed by Income Tax Appellate Tribunal (for short, Tribunal ), Hyderabad Bench B in I.T.A.No.1398/Hyd/1995 for assessment year 1985-86. By this order, Tribunal dismissed appeal filed by assessee against order dated 10.05.1995 passed by Deputy Commissioner of Income Tax (Appeals) (DCIT). substantial question that falls for consideration in instant appeal reads thus: Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was justified in law in holding that prior approval of Deputy Commissioner for issue of notice under Section 143 (2) was not required? facts leading to this appeal, to extent they are necessary, are as under: assessee-HUF sold property situated at Parbhani for total consideration of Rs.1,35,500/-. He incurred expenditure of Rs.3,380/- for selling property and arrived at net taxable capital gains of Rs.26,620/-, after deducting Rs.1,05,500/- as value of property on 01.01.1964 exercising his option under Section 49 (1) (i) read with Section 55 of Act. assessment was accordingly completed under Section 143(1) of Act accepting returned income. Subsequently, order under Section 263 of Act was passed by Commissioner on 28.09.1987 having found order of Assessing Officer prejudicial to Revenue. Commissioner accordingly set aside order dated 22.07.1985 of assessment made under Section 143 (1) of Act, and directed Assessing Officer to conduct local enquiries into correct value of property as on 01.01.1964 and determine correct amount of taxable capital gains, and to recompute income for assessment year 1985-86 taking into consideration correct amount of capital gain. Thus, revisional authority cancelled assessment made vide order dated 22.07.1985. In pursuance thereof, Assessing Officer reopened assessment under Section 143 (3) by issuing notice under Section 143 (2) of Act. During fresh assessment under Section 143 (3), property was referred to Valuation Cell of Department under Section 55-A and thus correct market value was arrived at on 01.01.1964 and it was accordingly adopted as cost of land and capital gain was thus computed on basis thereof. On appeal, DCIT (A) upheld order of assessment. Tribunal dismissed appeal preferred by assessee by order dated 13.06.2001. In this backdrop, aforementioned question has been raised by appellant based on provisions of Section 143 of Act, as it stood at relevant time. It is not in dispute that after setting aside assessment made under Section 143 (1) of Act, by Commissioner in exercise of his powers under Section 263 of Act, Assessing Officer made fresh assessment under Section 143 (3) of Act. Assessing Officer had, accordingly, issued notice under sub-section (2) of Section 143 of Act to assessee. Further, it is not in dispute that while issuing notice, previous approval of Inspecting Assistant Commissioner was not sought. Therefore, question raised is, whether assessment under Section 143 (3) of Act, would vitiate for want of previous approval of Inspecting Assistant Commissioner. We are concerned with provisions of Section 143 of Act, as it stood at relevant time. Section 143, to extent it is relevant for our purpose, reads thus: S. 143. Assessment._ (1)(a) Where return has been made under section 139, Assessing Officer may, without requiring presence of assessee or production by him of any evidence in support of return, make assessment of total income or loss of assessee after making such adjustments to income or loss declared in return as are required to be made under clause (b), with reference to return and accounts and documents, if any, accompanying it, and for purposes of adjustments referred to in sub-clause (iv) of clause (b), also with reference to record of assessments, if any, of past years, and determine sum payable by assessee or refundable to him on basis of such assessment. (b) . (i) . (ii) . (iii) . (iv) . (2) Where return has been made under section 139, and- (a) assessment having been made under sub-section (1), assessee makes within one month from date of service of notice of demand issued in consequence of such assessment, application to Assessing Officer objecting to assessment, or (b) whether or not assessment has been made under sub-section (1), Assessing Officer considers it necessary or expedient to verify correctness and completeness of return by requiring presence of assessee or production of evidence in this behalf, Assessing Officer shall serve on assessee notice requiring him, on date to be therein specified, either to attend at Assessing Officer s office or to produce, or to cause to be there produced, any evidence on which assessee may rely in support of return: Provided that, in case where assessment has been made under sub-section (1), notice under this sub- section except where such notice is in pursuance of application by assessee under clause (a) shall not be issued by Assessing Officer unless previous approval of Deputy Commissioner has been obtained to issue of such notice: Provided further (3) On day specified in notice issued under sub- section (2), or as soon afterwards as may be, after hearing such evidence as assessee may produce and such other evidence as Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered. Sub-section (2) of Section 143 of Act provides for issue of notice by Assessing Officer, requiring assessee, on date to be therein specified, either to attend at Assessing Officer s office or to produce or to cause to be there produced any evidence on which assessee may rely in support of return. first proviso to sub- section (2) provides that, in case where assessment has been made under sub-section (1), notice under this sub-section, except where such notice is in pursuance of application of assessee under clause (a), shall not be issued by Assessing Officer unless previous approval of Deputy Commissioner has been obtained to issue of such notice. Thus, this provision would show that where Assessing Officer has made assessment under sub- section (1) of Section 143, he has power to make assessment under Section 143 (3) and for that, issue of notice under sub-section (2) is pre-condition. Opening words of first proviso to sub-section (2) are in case where assessment has been made under sub- section (1) . bare reading of this expression would show that where Assessing Officer has made assessment under sub-section (1) and he chooses to make reassessment under sub-section (3), he has no powers to issue notice, unless previous approval of Inspecting Assistant Commissioner is obtained. words Inspecting Assistant Commissioner in first proviso were substituted by Deputy Commissioner by Act 4 of 1988, Section 2, w.e.f. 01.04.1988. question is, where assessment made under sub-section (1) of Section 143 of Act is set aside by revisional authority under Section 263 of Act, whether previous approval contemplated by sub-section (2) of Section 143 of Act is necessary. In our opinion this question must be answered in negative, since original order under Section 143(1), having been quashed and set aside, it ceases to operate. At this stage, we would also like to have glance at Section 263(1) of Act. relevant portion of Section 263(1) reads thus: Commissioner may call for and examine record of any proceedings under this Act, and if he considers that any order passed therein by Assessing Officer is erroneous insofar as it is prejudicial to interests of revenue, he may, after giving assessee opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as circumstances of case justify, including order enhancing or modifying assessment, or canceling assessment and directing fresh assessment . revisional power, as per provisions of this Section, is supervisory in nature and not like that of appellate authority. For exercising this power, only condition is that order of Assessing Officer should be erroneous insofar as it is prejudicial to interests of revenue. provisions contained in this Section would also show that Commissioner can call for and examine order of any proceeding under Act, and if he considers that any order passed therein by Assessing Officer is erroneous insofar as it is prejudicial to interests of revenue, he may, pass such order thereon as circumstances of case justify, including order enhancing or modifying assessment , or canceling assessment and directing fresh assessment . Thus, he has options, viz., to pass such order as circumstances of case justify or order enhancing assessment or modifying assessment or canceling assessment and in event of canceling assessment, he has power to issue direction for fresh assessment. In present case, Commissioner cancelled assessment and directed fresh assessment. It is well settled that once assessment is re-opened by virtue of order passed by CIT under Section 263 of Act, initial order of assessment ceases to be operative. effect of re-opening of assessment is to vacate or set aside initial order for assessment and to substitute in its place order made of re-assessment. Thus, in present case, in our opinion, after previous assessment, which was set aside by CIT in exercise of his power under Section 263 of Act, whole proceedings started afresh. Moreover, in present case, assessment under Section 143 (1) of Act was set aside by Commissioner, higher authority, in exercise of his powers under Section 263 of Act, and therefore, it ceased to operate or in other words Assessing Officer had to pass order under Section 143 (3) as if there was no assessment under Section 143 (1). In view thereof, it was open to Assessing Officer to make assessment under sub-section (3) of Section 143 without seeking prior approval as contemplated by sub-section (2) thereof. In other words, this is not case where Assessing Officer chose to make reassessment under Section 143 (3) of Act of his own. This being so, in our opinion, it was not necessary to seek previous approval of Inspecting Assistant Commissioner before issuing notice under sub-section (2) of Section 143. question framed, therefore, is answered in favour of Revenue and against assessee. In result, Appeal is dismissed with no order as to costs. Consequently, miscellaneous petitions, if any, also stand disposed of. _____________________ DILIP B.BHOSALE, J ____________________________ A.RAMALINGESWARA RAO, J 17.03.2015 Note:- L.R. Copy to be marked: Y KH Damodarlal Badruka v. Income-tax Officer, Ward I (4), Hyderabad
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