ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 1 IN INCOME TAX APPELLATE TRIBUNAL, BENCH , KOLKATA [Before Hon ble Shri N.V.Vasudevan, JM and Dr.Arjun Lal Saini, AM] ITA No.578/Kol/2015 Assessment Year : 2005-06 Smt. Puneet Kaur Dhupia -versus- A.C.I.T., Circle-35, Kolkata. Kolkata (PAN:ACYPD 14444 K) (APPELLANT ) (RESPONDENT) For Appellant : Shri Vigyaneshwar Nath Dutta, Advocate For Respondent : Shri Pinaki Mukherjee, JCIT, Sr.DR Date of Hearing : 19.9.2016. Date of Pronouncement : 19.10.2016. ORDER This is appeal by assessee against order dated 23.03.2015 of CIT(A)-11, Kolkata relating to A.Y.2005-06. This appeal was originally heard and order dated 9.12.2015 was passed. Assessee filed M.A.32/Kol.2016 pointing out certain apparent errors in order dated 9.12.2015. This tribunal by order dated 13.7.2016 recalled its order dated 9.12.2015 in so far as validity of service of notice u/s.143(2) of Income Tax Act, 1961 (Act) is concerned. 2. issue with regard to validity of issue of notice u/s.143(2) of Act is contained in Ground No.2 raised by assessee which reads as follows :- 2. For that notice u/s 143(2) of Act is not served within stipulated time prescribed in Act resulting in reassessment order is without jurisdiction, opposed to requirement of law and bad in law. 3. Assessee is individual. She derives income in form of commission from acting as Agent for selling insurance policies. She filed return of income for AY 2005-06 on 1.8.2005 declaring total income of Rs.3,35,970/-. same was processed u/s.143(1) of Act. Subsequently it was found that Assessee had claimed deduction of interest on loans against her income from insurance commission. There being no nexus between utilization of loan fund and earning of insurance ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 2 commission, AO was of view that income of Assessee had been under assessed. Accordingly notice u/s.148 was issued. Assessee filed letter on 15.5.2007 requesting AO to treat return filed on 1.8.2005 be treated as return filed in response to notice u/s.148 of Act. Therefore date of filing of return of income in response to notice u/s.148 of Act is 1`5.5.2007. 3.1. requirements of service of notice u/s.143(2) of Act is governed by following provisions of Income Tax Act, 1961 (Act). 3.2. following amendments were made in section 143 by Finance Act, 2002, namely : (a) for sub-section (2), following sub-section was substituted with effect from 1st day of June, 2002, namely: "(2) Where return has been furnished under section 139, or in response to notice under sub-section (1) of section 142, Assessing Officer shall, (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in return is inadmissible, serve on assessee notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which assessee may rely, in support of such claim; (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that assessee has not under-stated income or has not computed excessive loss or has not under-paid tax in any manner, serve on assessee notice requiring him, on date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which assessee may rely in support of return: Provided that no notice under this sub-section shall be served on assessee after expiry of twelve months from end of month in which return is furnished."; Amendment by Finance Act, 2008, w.e.f. 1.4.2008. In sub-section (2), in clause (ii), for proviso, following proviso was substituted, "Provided that no notice under clause (ii) was served on assessee after expiry of six months from end of financial year in which return is furnished.". ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 3 3.3. It can be seen from aforesaid provisions that notice u/s.143(2) of Act as per law as it prevailed prior to 1.4.2008 is that said notice has to be served within period of 12 months from end of month in which return of income was filed. return of income in this case is deemed to have been filed on 15.5.2007 when Assessee requested AO to treat return originally filed as return filed in response to notice u/s.148 of Act. limitation of time would therefore be 31.5.2008 for service of notice u/s.143(2) of Act on Assessee. In present case notice u/s.143(2) was served on Assessee on 5.9.2008. AO was of view that as per amended provisions of Sec.143(2) by Finance Act, 2008 referred to above, limitation of time for service of notice u/s.143(2) would be 6 months from end of financial year in which return of income was filed. That time would expire only on 30.9.2008. AO was of view that at relevant time when notice u/s.143(2) was issued aforesaid amended provisions has come into force and requirements of service of notice being procedural law and not substantive law, said amended provisions will apply and therefore service of notice u/s.143(2) of Act was within time as contemplated in law. This view of AO was also endorsed by CIT(A). 4. Before us learned counsel for Assessee submitted that law applicable will law that prevailed during relevant AY for which assessment is sought to be made and in this regard placed reliance on following two judicial pronouncements, viz., Krishna Mohan Banik Vs. ITO 232 ITR 339 (Gau.) and Ashok B.Bafna Vs. DCIT (2012) 18 ITR (Trib.) 43 (ITAT) (Mum). If law applicable for service of notice u/s.143(2) of Act is held to be law as it prevailed when Assessee filed her return of income, then notice u/s.143(2) of Act in case of Assessee, was served on Assessee beyond time limit laid down in Sec.143(2) of Act, and therefore order of assessment will have to be held as bad in law. 5. question that arises for consideration therefore is: Whether law as it prevailed when return of income was filed i.e., as on 15.5.2007 which gives time limit of 12 months from end of month in which return of income was filed by Assessee i.e., on or before 31.5.2008 ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 4 or law that prevails when AO conducts Assessment proceedings when AO issued notice u/s.143(2) of Act on 5.9.2008 i.e., after insertion of proviso to Sec.143(2)(ii) of Act by finance Act, 2008, w.e.f. 1.4.2008 whereby time limit for service of notice was 6 months from end of financial year in which return of income was filed by Assessee i.e., on or before 30.9.2008. 6. In support of contention that law with regard to time limit for service of notice u/s.143(2) of Act, as it prevails on date of filing of return of income by Assessee should alone be applied, learned counsel for Assessee had placed reliance on decision of Hon ble Gauhati High court in case of Krishna Mohan Banik Vs. ITO 232 ITR 339 (Gau). 7. In case of Krishna Mohan Banik (supra), facts before Hon ble Gauhati High Court was that Assessee in that case for assessment year 1990-91, filed its income-tax return on March 31, 1992. Notice u/s.143(2) of Act was issued on october 27, 1992. Section 143(2) of Income-tax Act, 1961, and its proviso as it stood prior to its amendment on October 1, 1991, was to following effect : "(2) Where return has been made under Section 139, or in response to notice under Sub-section (1) of Section 142, Assessing Officer shall, if he considers it necessary or expedient to ensure that assessee has not understated income or has not computed excessive loss or has not underpaid tax in any manner,. . . serve on assessee notice requiring him, on date to be specified therein, either to attend his office or to produce, or cause to be produced therein, any evidence on which assessee may rely in support of return : Provided that no notice under this sub-section shall be served on assessee after expiry of financial year in which return is furnished or expiry of six months from end of month in which return is furnished, whichever is later." With effect from October 1, 1991, Finance (No. 2) Act, 1991, substituted following proviso for aforesaid proviso to Section 143(2) : "Provided that no notice under this sub-section shall be served on assessee after expiry of twelve months from end of month in which return is furnished." ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 5 Hon ble Gauhati High Court held that law as on date when return of income is filed by Assessee i.e., as on 31.3.1992, will be applicable and therefore held that notice issued on 27.10.1992 and served on Assessee on that date was not barred by limitation as it was within period of 12 months from end of month in which return is furnished. following were relevant observations of Court: On reading of Finance (No. 2) Act, 1991, or aforesaid substituted proviso, there is nothing to show that Parliament intended that aforesaid proviso was not to apply to assessment year 1990-91 and was only to apply to assessment year 1991-92 onwards as contended by Mr. Osmani. However, it is well-settled principle of law that provision under taxing statute should not be so construed as to affect finality of tax assessment or to open up tax liability which had become barred (see ITO v. S.K. Habibullah [1962] 44 ITR 809). question therefore is as to whether tax liability of petitioner for assessment year 1990-91 had become barred or final and could not be opened by Assessing Officer under Section 143(2) of Income-tax Act, 1961. proviso, as it stood prior to its amendment on October 1, 1991, quoted above would show that no notice under Section 143(2) could be served on assessee after expiry of financial year in which return was furnished or expiry of six months from end of month in which return was furnished, whichever was later. Before October 1, 1991, petitioner's firm had not filed its income-tax return for assessment year 1990-91 and hence even under proviso as it stood prior to its amendment with effect from October 1, 1991, tax liability of petitioner for assessment year 1990-91 had not become final for non-issue of notice under Section 143(2) of Income-tax Act, 1961. With effect from October 1, 1991, aforesaid proviso was no longer in operation and instead substituted proviso introduced by Finance (No. 2) Act, 1991, providing that no notice under Section 143(2) shall be served on assessee after expiry of 12 months from end of month in which return is furnished came into force. It is only after said amended proviso to Section 143(2) came into force that petitioner's firm filed its return for assessment year 1990-91 on March 31, 1992, ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 6 and liability of petitioner for assessment year 1990-91 on basis of said return would have become final if no notice had been issued by Assessing Officer under Section 143(2) within period of 12 months from March 31, 1992, i.e., before March 31, 1993. But well before March 31, 1993, impugned notice dated October 27, 1992, was served by Assessing Officer on petitioner requiring him to produce evidence or cause production of evidence under Section 143(2) in support of return. I am, therefore, of opinion that impugned notice dated October 27, 1992, under Section 143(2) of Income-tax Act, 1961, issued to petitioner for assessment year 1990-91 does not open up any liability of petitioner which had become final, and is not barred by limitation. (emphasis supplied) 8. aforesaid decision of Hon ble Gauhati High Court, clearly supports plea of Assessee that notice u/s.143(2) of Act ought to have been served on Assessee in present case on or before 31.5.2008 as per law as it prevailed when Assessee filed return of income on 15.5.2007, whereas it was served only on 5.9.2008. Hence, entire reassessment proceedings ought to be held as invalid and order of reassessment is hereby annulled. In view of aforesaid conclusion, determination of total income in reassessment order will have no effect. 9. In result, appeal of Assessee is allowed on issue of order of assessment being held to be invalid for want of service of notice u/s.143(2) of Act within time required by law. 10. In result, appeal by Assessee is allowed. Order pronounced in court on 19.10.2016. Sd/- Sd/- [Dr.Arjun Lal Saini] [N.V.Vasudevan] Accountant Member Judicial Member Date: 19.10.2016. SS (.P.S.) ITA No.578/Kol/2015 Smt. Puneet Kaur Dhupia A.Y.2005-06 7 Copy of order forwarded to: 1. Smt. Puneet Kaur Dhupia, C/o Taparia & Co., 28, Black Burn Lane, 6th Floor, Kolkata-700012. 2 A.C.I.T., Circle-35, Kolkata. 3. CIT-13, Kolkata. T 4 4. CIT(A)-11, Kolkata. 5. DR, Kolkata Benches, Kolkata True Copy, By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches Puneet Kaur Dhupia v. A.C.I.T., Circle-35, Kolkata