P. Devadhar, J. Heard.

Rule made returnable forthwith.

By consent of parties, all these writ petitions are taken up for final hearing.

In all these group of writ petitions, notices issued under Section 148 of the IT Act, 1961.

(the Act for short) are challenged.

By the said notices all dt.

30th March, 2006, the Revenue seeks to reopen the assessments for asst.

1989-90 to asst.

According to the Revenue the impugned notices have been issued as per the directions given by CIT(A) by his order dt.

24th Dec, 2004 to disallow bank interest in the respective assessment years aggregating to Rs. 2,39,65,498 and also to disallow depreciation in the respective assessment years aggregating to Rs. 10,66,429 by initiating proceedings under Section 148 r w Section 150(1) and Expln.

2 to Section 153 of the Act.

The question, therefore, to be considered in all these petitions is, whether the CIT(A) has in fact issued such directions and if so, whether such directions are valid.

To appreciate the dispute, we may note few facts.

The petitioner (hereinafter referred to as the assessee) is an investment company.

The return of income for asst.

1989-90 (Writ Petn.

Number 2465 of 2006) was filed by the assessee on 31st Dec, 1991 declaring income of Rs. 19,56,261.

In the return of income, the assessee had claimed depreciation on depreciable assets under Section 32 of the Act.

On 30th March, 1995 an assessment order under Section 143(3) of the Act was passed by the AO for asst.

1989-90 determining total income at Rs. 21,71,830.

By the said assessment order, depreciation as claimed by the assessee was allowed.

The appeal filed by the assessee against the said assessment order was disposed of by the CIT(A) on 29th Aug., 1996.

Similarly, in all other group petitions the depreciation claimed by the assessee has been allowed in the respective assessment orders passed under Section 143(3) of the Act.

For asst.

1995-96 (Writ Petn.

Number 2471 of 2006), the return of income was filed on 31st (sic) Nov., 1995 declaring loss of Rs. 51,51,518.

During the year relevant to asst.

1995-96, the assessee had obtained short-term loan of Rs. 5 crores from the Vysya Bank Limited It is the case of the assessee that the loan sanction letter and other terms and conditions relating to the grant of Rs. 5 crores loan as well as the full particulars relating to the interest paid to the bank during the years under consideration were furnished during the assessment proceedings.

On 11th March, 1998 assessment order under Section 143(3) of the Act was passed by the AO for asst.

1995-96 determining total loss at Rs. 8,20,310 after allowing the bank interest as claimed by the assessee as business expenditure except to the extent of Rs. 37,65,773 and disallowing the depreciation on computer printer.

The appeal filed by the assessee against the said assessment order was disposed of by the CIT(A) on 21st Oct., 2002.

Similar assessment orders under Section 143(3) of the Act have been passed for asst.

1996-97 to asst.

1999-2000 by allowing interest paid by the assessee to the banks as allowable business expenditure.

On 17th Sept., 1998, the premises of the petitioner were searched by the officers of the IT Department and on 1st March, 1999 a notice under Section 158BC of the Act was served thereby calling upon the assessee to file block return for the block period from 1st April, 1988 to 30th Sept., 1998.

Accordingly, the assessee filed a block return for the block period in question by declaring nil undisclosed income.

By a block assessment order dt.

29th Sept., 2000 passed under Section 158BC of the Act, the AO computed the undisclosed income for the block period at Rs. 2,50,31,927.

In the block assessment order, it was held that the loan of Rs. 5 crores obtained by the assessee in September, 1994 from Vysya Bank Limited has been used for non-business purposes to the extent of Rs. 4.55 crores and, therefore, interest of Rs. 2,39,65,498 paid to the bank during the block period on the said loan of Rs. 5 crores was not allowable as deduction.

It was further held that during the course of search and post-search enquiries, certain assets which are reflected in the books were not found at the premises of the assessee and, therefore, the depreciation allowed thereon amounting to Rs. 10,66,429 was not allowable.

Accordingly, by disallowing the bank interest and depreciation, the undisclosed income of the assessee for the block period was computed at Rs. 2,50,31,927.

On an appeal filed by the assessee, the CIT(A) by his order dt.

24th Dec, 2004 set aside the block assessment order by holding that the undisclosed income computed by the AO cannot be sustained inter alia on the ground that there was no evidence or any material found during the search proceedings on the basis of which the undisclosed income could be assessed under Section 158BC of the Act.

The CIT(A) further held that even the statements of Mr. Stany Saldanha, director of the assessee-company do not contain any admission regarding the undisclosed income.

Accordingly, the CIT(A) held that the undisclosed income computed in the block assessment order by making disallowances of bank interest and depreciation cannot be sustained.

The CIT(A) however observed that the AO is free to look into and consider the said disallowances under Section 148 of the IT Act in the relevant assessment years in terms of Section 150(1) r w Expln.

2 of Section 153 of the Act.

Challenging the aforesaid order of CIT(A), the Revenue has filed an appeal before the Tribunal and the same is pending.

In the meantime based upon the aforesaid observations made by the CIT(A), the Asstt.

CIT, Central Circle-13, Mumbai issued the impugned notices all dt.

30th March, 2006 under Section 148 of the Act so as to reopen the assessments for asst.

1989-90 to asst.

The reasons recorded for reopening all these assessments are identical and they read thus: Reasons for reopening assessments under Section 148 of the IT Act in the case of M s Lotus Investments Limited The assessee-company M s Lotus Investments Limited, is an investment company on which a search and seizure action was carried out on 17th Sept., 1998.

Subsequently, the block assessment under Section 158BC of the IT Act, 1961 for the block period 1st April, 1988 to 30th Sept., 1998 was completed on 29th Sept., 2000 disallowing the interest amounting to Rs. 2,39,65,498 as non-business expenditure and disallowing depreciation of Rs. 10,66,429 for the block period thereby determining the undisclosed income at Rs. 2,50,31,927.

Being aggrieved by the block assessment order under Section 158BC passed by the AO the assessee-company filed an appeal before the CIT(A) (C)-VII, Mumbai on 31st Oct., 2000.

The CIT(A) (C)-VII, Mumbai vide its order Number CIT(A)-VII DCCC-13/ROT-118/01/02/258 dt.

24th Dec, 2004 deleted the disallowances made by the AO on account of interest of Rs. 2,39,65,498 and depreciation of Rs. 10,66,429.

The assessment under Section 158BC dt.

29th Sept., 2000 has been finalised on the basis of statements recorded of Mr. Stany Saldanha, director of the assessee-company on 22nd Oct., 1998.

No evidence in respect of disallowances was found during the search on 17th Sept., 1998, thus, it cannot be said that any material was found on 22nd Oct., 1998 relating to any evidence found on 17th Sept., 1998.

Even the statements recorded on 22nd Oct., 1998 in form of preliminary or final statements do not show any admission by Mr. Stany Saldanha which can be used as a material relatable to any evidence found on 17th Sept., 1998 as none was found on that date i.e., the day of search (17th Sept., 1998) or the appellant.

Thus, assessment under Section 158BC r w Section 158BB in determining undisclosed income does not have any leg to stand.

The CIT(A) further in the order, quoted that the AO is free to look into and consider these disallowances under Section 148 of the IT Act, in relevant assessment years in terms of Section 150(1) r w Expln.

2 of Section 153 in respect of deletion of both amounts made in this order.

In the light of the above and reckoning the interest of the Revenue and following the guidance directions issued by the CIT(A) in his order, the assessments for the relevant assessment years involved in the block period are reopened under Section 148 of the Act in terms of Section 150(1) r w Expln.

2 of Section 153 of the Act.

Issue notices under Section 148 of the Act.

The assessee objected to the reopening of the assessments by addressing a letter dt.

15th June, 2006, through their chartered accountants.

By an order dt.

21st Aug., 2006, the said objections have been rejected.

Hence, these petitions have been filed to challenge the validity of the notices all dt.

30th March, 2006 issued under Section 148 of the Act and also the order dt.

21st Aug., 2006 passed by the Asstt.

CIT rejecting the objections raised by the petitioner for reopening the assessments.

Mr. Mistry, learned Counsel appearing on behalf of the assessee submitted that the impugned notices are liable to be quashed and set aside, because firstly, the impugned notices have been issued beyond the period of limitation of six years prescribed under Section 149 of the Act and, hence, time-barred.

Secondly, under the proviso to Section 147 of the Act, an assessment completed under Section 143(3) of the Act can be reopened after the expiry of four years upto six years from the end of the relevant assessment years if it is shown that the assessee had either failed to furnish the return or has not made full and true disclosure of all material facts.

In the present case, the reasons recorded for reopening the assessment do not suggest any such failure and hence, the impugned notices are time-barred.

Thirdly, Section 150(1) of the Act which permits reopening of the assessments beyond six years in order to give effect to any finding or direction of the appellate authority is not applicable in the present case because there is no finding or direction given by any appellate or revisional authority and even the order passed by CIT(A) on 24th Dec, 2004 does not record any such finding and no directions have been given to that effect.

Fourthly, under the proviso to Section 151(1) of the Act, in cases where the assessment order under Section 143(3) or Section 147 of the Act has been made for the relevant year, no notice can be issued after the expiry of four years from the end of relevant assessment year, unless the Chief CIT or the CIT is satisfied on the reasons recorded by the AO that it is a fit case for issue of such notice.

In the present case, the AO has not obtained any sanction from the Chief CIT or the CIT and, therefore, the impugned notices are without jurisdiction.

Fifthly, the disallowances sought to be made by reassessment proceedings have already been done by the block assessment order dt.

29th Sept., 2000.

Though, the CIT(A) has set aside the block assessment order, the Revenue has not accepted the same and has filed an appeal before the Tribunal and the same is pending.

Therefore, it is not open to the Revenue to contend on the one hand that the block assessment order has been correctly passed and at the same time contend that the alleged income which has already been assessed in the block assessment has escaped assessment.

The submission is that it is not permissible for the same income to be assessed twice, i.e. once in the block assessment and again in the regular assessment.

Relying upon a decision of the apex Court in the case of ITO v. Murlidhar Bhagwan Das , Mr. Mistry submitted that the expression finding used in Section 150(1) of the Act would mean a finding which is necessary for the disposal of an appeal and giving relief in respect of the assessment of the year in question.

Similarly, the expression direction means a direction which the appellate or the revisional authority is empowered to give under the section mentioned therein.

In the present case, the CIT(A) has neither given any finding that the income has escaped assessment nor given any direction to the effect that the interest and depreciation have to be disallowed by initiating reassessment proceedings.

Mr. Mistry submitted that the observations made by CIT(A) to the effect that the ITO is free to look into and consider the disallowances under Section 148 of the Act cannot be considered as a direction within the meaning of Section 150(1) of the Act.

Relying upon the decision of the apex Court in the case of Rajinder Nath v. CIT , Mr. Mistry submitted that the discretion given to the ITO to initiate reassessment proceedings if permissible in law cannot be construed as a direction to initiate reassessment proceedings as contemplated under Section 150 of the Act.

Even if there was any direction as contemplated under Section 150(1) of the Act, Mr. Mistry submitted that in view of the bar contained in Section 150(2) of the Act, the CIT(A) could not have issued such directions because, on the date on which block assessment order was passed, the reassessment could not be made in respect of the assessment years in question and, therefore, direction if any given to initiate reassessment proceedings in respect of those assessment years would be time-barred.

In the present case, the block assessment order was passed on 29th Sept., 2000 and on that date the time-limit for making reassessment provided under Section 149 of the Act (which was six years from the end of the assessment year) had already lapsed in respect of the assessment years in question.

Accordingly, Mr. Mistry submitted that the extended period of limitation contained in Section 150(1) of the Act is not applicable in the present case and, therefore, the impugned notices are liable to be declared as time-barred.

Mr. Chatterjee, learned Counsel appearing on behalf of the Revenue submitted that the assessee had not fully and truly disclosed all material facts at the time of original assessment and it is only during the course of search and seizure action carried out on 17th Sept., 1998 the facts suppressed by the assessee came to light.

Since the bank interest and depreciation were erroneously allowed on account of the failure on the part of the assessee to disclose fully and truly all material facts and such disallowances could not be made in the block assessment order, the CIT(A) has directed for initiation of reassessment proceedings.

Mr. Chatterjee submitted that interest on borrowed funds can be allowed as business expenditure only if the borrowed funds are utilized for the business of the assessee.

From the block assessment order it is seen that the bank loan of Rs. 5 crores obtained by the assessee from Vysya Bank has been used for non-business purposes.

The loan amounts were kept as share application money in the front companies of GMR Vasavi Group in violation of the terms of loan agreement.

Since the interest paid to Vysya Bank did not relate to the business of the assessee, the said interest paid to the bank could not be allowed as business expenditure.

Mr. Chatterjee further submitted that during the course of search it was seen that the assets on which depreciation has been allowed were not found in the premises.

Some of the assets like refrigerator, air-conditioner, etc.

which were purchased by the assessee were not used for business purposes but the same were used by the directors of the company.

If the assets were not in existence or were not used for business purposes, then depreciation could not be allowed on those assets.

Since these facts were suppressed and were noticed during the course of search, the CIT(A) by his order dt.

24th Dec, 2004 has directed the ITO to initiate proceedings under Section 148 of the Act.

Relying upon the decision of the apex Court in the case of McDowell Company Limited v. CTO , Mr. Chatterjee submitted that it is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation and it is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and, therefore, in the present case, in view of the findings recorded in the block assessment order and the order passed by CIT(A), no relief be granted in favour of the petitioner.

Mr. Chatterjee submitted that Section 150(2) of the Act is not applicable to the facts of the present case in view of the specific directions given by CIT(A).

He submitted that the initiation of reassessment proceedings being valid, the assessee must be directed to co-operate in the reassessment proceedings, so that if satisfied the AO would drop the reassessment proceedings and if the reassessment order is against the assessee, there is further remedy provided under the statute itself.

Mr. Chatterjee further submitted that the impugned notices have been issued with bona fide intentions and if such actions taken by the AO are stalled at this stage, then the Department will not be in a position to bring the escaped income to tax by way of reassessment.

He submitted that the Revenue is seeking to recover tax on the escaped income either under Section 148 proceedings or in the block assessment proceedings which are pending before the Tribunal and, therefore, no prejudice will be caused to the assessee if the reassessment proceedings are permitted to be proceeded with during the pendency of the appeal before Tribunal.

Relying upon the decision of the Allahabad High Court in the case of Ashwani Dhingra v. Chief CIT , Mr. Chatterjee submitted that where Section 148 notices are issued in consequence of an order passed by the appellate authority or a Court the period of limitation would not be applicable.

Accordingly, he submitted that all these petitions are liable to be dismissed.

We have carefully considered the rival submissions as also the decisions cited before us.

The power conferred upon the AO to issue notice under Section 148 of the Act for reopening the assessments in cases where income has escaped assessment, is subject to the time-limit prescribed under Section 149 of the Act.

Section 149 of the Act (as substituted by Finance Act, 2001) provides that no notice under Section 148 shall be issued after the expiry of six years from the end of the relevant assessment years in cases where the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more.

In the present case, the assessments for asst.

1989-90 to asst.

1999-2000 are sought to be reopened by issuing notices on 30th March, 2006 which is beyond six years (except for asst.

1999-2000) from the end of the relevant assessment years.

Thus, the notices issued for all the assessment years (except for asst.

1999-2000) are beyond the period of limitation prescribed under Section 149 of the Act and hence they are time-barred.

To get over this difficulty, it is contended by the Revenue that in the present case the limitation prescribed under Section 149 of the Act has no application because, the impugned notices have been issued to give effect to the findings and directions given by the CIT(A) on 24th Dec, 2004 and, therefore, the impugned notices are saved from limitation in view of Section 150 r w Expln.

2 to Section 153.

Section 150 of the Act provides that notwithstanding the limitation prescribed under Section 149, notice under Section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceedings under the Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.

The question, therefore, to be considered in all these petitions is, whether, the Revenue is justified in contending that the impugned notices have been issued in furtherance of any finding or direction given in the order passed by the CIT(A) on 24th Dec, 2004 and if so, whether such direction are valid in law ? The CIT(A) by his order dt.

24th Dec, 2004 has set aside the block assessment order dt.

29th Sept., 2000.

In the block assessment order, the AO had computed the undisclosed income of the assessee for the block period (1st April, 1988 to 30th Sept., 1998) at Rs. 2,50,31,927.

While setting aside the block assessment order, the CIT(A) has observed thus: After going through the statements it is seen that no evidence or any material relating to such evidence was found during search proceedings on the basis of which undisclosed income can be computed under Section 158BC so as to complete and determine undisclosed income to be assessed under Section 158BC of the IT Act.

No statement was made on 17th Sept., 1998 where Mr. Stany Saldanha conceded that both the claims are not correctly made.

Statements recorded of Mr. Stany Saldanha by Asstt.

DIT, Hyderabad on 22nd Oct., 1998 (after about a month) during survey proceedings as a follow up action in GMR group of companies as a witness produced that group and physical verification of the premises belonging to the appellant company on 22nd Oct., 1998 cannot be regarded as any evidence found during search dt.

17th Sept., 1998 which had concluded on 17th Oct., 1998 itself nor any materials can be said to be found relating to such evidence having no evidence found against the appellant as on 17th Sept., 1998.

Thus assessment done under Section 158BC in determining undisclosed income at Rs. 2,50,31,927 is without any support of statutory provisions of Act and cannot also be done in view of the decisions by jurisdictional High Courts decision relied upon by the appellant in the case of CIT v. Vikram A. Doshi and in CIT v. Vinod Danchand Ghodawat .

Disallowance of interest in respect of which regular entries are made in books of account and no evidence is found thereagainst during search on 17th Sept., 1998 and entries in respect of depreciation being part of regular entry to compute total income in its regular return of income and no material having been found during search dt.

17th Sept., 1998 to deny such a claim, no undisclosed income can be determined under Section 158BC of the IT Act.

The assessment under Section 158BC dt.

29th Sept., 2000 has been finalized on the basis of statements recorded of Mr. Stany Saldanha on 22nd Oct., 1998.

No evidence in respect of disallowance was found during the search on 17th Sept., 1998.

Thus, it cannot be said that any material was found on 22nd Oct., 1998 relating to any evidence found on 17th Sept., 1998.

Even the statements recorded on 22nd Oct., 1998 in form of preliminary or final statements do not show any admission by Mr. Stany Saldanha which can be used as a material relatable to any evidence found on 17th Sept., 1998 as none was found on that date, i.e. the day of search (17th Sept., 1998) on the appellant.

Thus, assessment under Section 158BC r w Section 158BB in determining undisclosed income does not have any leg to stand.

Thus, undisclosed income determined at Rs. 2,50,31,927 thus does not survive.

The order under Section 158BC passed by AO to charge undisclosed income of Rs. 2,50,31,927 to tax under Chapter XIV-B of IT Act cannot be said to be a correct order as there is no basis to pass such order for the reasons assigned above.

The additional grounds of appeal are admitted as they are necessary to decide the appeal and these go to the very root of the matter in respect of assessability of the amounts of Rs. 2,39,65,498 and Rs. 10,66,431 as undisclosed income under Chapter XIV-A of IT Act that their admission is considered necessary to correctly decide the tax liability of the appellant in accordance with law.

I am also within my powers as per ratio of decision of Bombay High Court in case of Inventors Industrial Corporation Limited v. CIT to permit the appellant to raise above two additional grounds of discussion made above.

The AO is free to look into and consider these disallowances under Section 148 of the IT Act in relevant assessment years in terms of Section 150(1) r w Expln.

2 of Section 153 in respect of deletion of both amounts made in this order.

The question is, whether the above observations made by the CIT(A) constitute any finding or direction to the ITO for initiating reassessment proceedings by issuing notice under Section 148 of the Act.

Under Section 150 of the Act, irrespective of the limitation prescribed under Section 149, reassessment proceedings can be initiated at any time if the initiation of reassessment is in consequence of or to give effect to any finding or direction contained in any order passed by any authority under the Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.

While construing similar provisions contained in the 1922 Act, the apex Court in the case of Murlidhar Bhagwan Das (supra) held that the word finding can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year.

The apex Court further held that the appellate authority may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the assessment year in question.

Similarly, the expression direction has been construed by the apex Court to mean a direction which the appellate or revisional authority as the case may be, is empowered to give under the sections mentioned therein.

In the present case, the CIT(A) has neither given a finding to the effect that the income chargeable to tax has escaped assessment nor given any direction to the ITO to initiate reassessment proceedings for the block period by issuing notices under Section 148 of the Act.

The clear finding recorded by the CIT(A) is that there is no evidence or any material found during the search proceedings on the basis of which undisclosed income can be computed under Section 158BC of the Act.

The CIT(A) has recorded a finding (see p. 141 of the petition) that even the statements recorded in the form of preliminary or final statements do not show any admission by Mr. Stany Saldanha (director of the assessee) which can be used as a material relatable to any evidence found on 17th Sept., 1998 as none was found on that date.

It is further held (see p. 142 of the petition) that there is nothing in the statement expressing any doubt for non-genuineness of the loan transaction as also disallowance of depreciation on fixed assets.

In these petitions, we are not called upon to decide the correctness of the above findings recorded by the CIT(A).

The above observations of CIT(A) may be erroneous and may be set aside by the Tribunal while disposing of the appeal filed by the Revenue.

That is a different matter.

But as the findings recorded by the CIT(A) stand today, there is no evidence or material on record to hold that the income has escaped assessment and there is no direction to the ITO to initiate reassessment proceedings.

Therefore, the contention of the Revenue that the CIT(A) has given a finding and a direction to reopen the assessments cannot be accepted.

The fact that the CIT(A) in his order dt.

24th Dec, 2004 has observed that the AO is free to look into and consider the disallowances under Section 148 of the Act in the relevant assessment years in terms of Section 150(1) r w Expln.

2 to Section 153 cannot be construed to be a direction to reopen the assessments so as to issue reassessment notices even after the expiry of six years from the end of the relevant assessment years, as contemplated under Section 150 of the Act.

The above observations made by the CIT(A) can at best be said to be a suggestion made to the AO to consider as to whether such disallowances could be made by initiating reassessment proceedings.

If the findings given by the CIT(A) were that, there is evidence or material on record to suggest that income has escaped assessment but the same cannot be brought to tax in the block assessment and accordingly if any directions were given for reopening of the assessments then it would be a totally different matter.

However, in the present case, the CIT(A) has given a clear finding that there is no evidence or material on record to sustain the additions and, hence, the CIT(A) could not have given directions to the ITO to initiate reassessment proceedings.

Therefore, the contention of the Revenue that the CIT(A) has directed the AO to initiate reassessment proceedings cannot be accepted.

As held by the apex Court in the case of Rajinder Nath (supra), the observations of CIT(A) that the ITO is free to look into and consider the disallowances, would simply mean, giving an option and discretion to the ITO to take or not to take action as he deems fit and such an observation cannot be said to be a direction given by the CIT(A) as contemplated under Section 150 of the Act.

The decisions of this Court in the cases of CIT v. Vikram A. Doshi , CIT v. Ghodawat Pan Masala Products (P) Limited were relied upon by the counsel for the Revenue in support of his contention that the disallowances in question were liable to be made in regular assessment and not in the block assessment.

In both these cases neither the scope of reassessment proceedings nor the powers of CIT(A) to direct the ITO to initiate reassessment proceedings was an issue.

In any event, once it is held that the CIT(A) has not given any finding or direction for reopening the assessments, the extended period of limitation contained in Section 150 of the Act is not available to the Revenue.

Therefore, these two decisions do not support the case of the Revenue.

As stated earlier, the findings recorded by the CIT(A) may be erroneous, but till it is reversed, it is not open to the Revenue to contend that the CIT(A) has given a finding that the income has escaped assessment and has directed initiation of reassessment proceedings.

Reliance placed by the Revenue on the decision of the Allahabad High Court in the case of Ashwani Dhingra (supra) is also misplaced because in that case, the High Court had granted interest on the compensation awarded under the Land Acquisition Act.

Since the interest on compensation was in the nature of income it was held that the reopening of the assessment was valid.

In the present case, the facts are altogether different.

In the present case, the CIT(A) has held that there is no evidence or material on record to make additions and consequently there is no question of CIT(A) directing initiation of reassessment proceedings.

Apart from the above, Section 150(1) of the Act provides that the power to issue notice under Section 148 of the Act in consequence of or giving effect to any finding or direction of the appellate revisional authority or the Court is subject to the provision contained in Section 150(1) of the Act.

Section 150(2) provides that directions under Section 150(1) of the Act cannot be given by the appellate revisional authority or the Court if on the date on which the order impugned in the appeal was passed, the reassessment proceedings had become time-barred.

In other words, as per Section 150(2) of the Act, the CIT(A) could give directions for reassessment only in respect of those assessments years in respect of which reassessment proceedings could be initiated on the date of passing of the block assessment order on 29th Sept., 2000.

In the present case, on the date of passing of the block assessment order on 29th Sept., 2000, the assessments for most of the assessment years had become time-barred and, therefore, even if the CIT(A) were to give any directions, the same would be hit by Section 150(2) of the Act.

In any event, in the present case, the CIT(A) has not given any finding or direction for reopening of the assessments and, therefore, the provisions of Section 150 of the Act are not applicable, consequently, the impugned notices which are time-barred under Section 149 of the Act are without jurisdiction and are liable to be quashed and set aside.

Once, it is held that the CIT(A) has not given any finding or direction for reopening the assessment, the benefit of Expln.

2 to Section 153 of the Act would not be available to the Revenue.

It was contended on behalf of the Revenue that if the reassessment proceedings are allowed to be continued during the pendency of the appeal filed by the Revenue before the Tribunal against the order of CIT(A), no prejudice would be caused to the assessee.

This argument is wholly misconceived.

Validity of the impugned notices cannot be decided on the basis of the prejudice that may or may not be caused to the assessee.

Whether any prejudice is caused or not, if the notices are without jurisdiction, they are liable to be quashed and set aside.

As stated earlier, validity of the order passed by CIT(A) is not questioned in these petitions and, therefore, we are not expressing any opinion on merits regarding the allowability or disallowability of bank interest and depreciation.

In these writ petitions, we are only concerned with the issue as to whether the impugned notices have been issued pursuant to the directions of the CIT(A).

Once we hold that no directions have been given by the CIT(A) for reopening the assessments, the benefit of Section 150 is not available to the Revenue and the impugned notices which are time-barred under Section 149 of the Act are liable to be quashed.

Though the notice issued under Section 148 of the Act for asst.

1999-2000 falls within six years from the end of the assessment year, in view of the fact that the AO has not obtained approval of Chief CIT CIT before issuing the notice as contemplated under Section 151 of the Act, notice for asst.

1999-2000 is also time-barred.

For all the aforesaid reasons, the reopening of the assessments for asst.

1989-90 to asst.

1999-2000 is quashed and set aside.

We, however, make it clear that the observations made herein shall not affect the case of either of the parties in the appeal pending before the Tribunal against the order of CIT(A) dt.

24th Dec, 2004.

In the result, rule is made absolute in the above terms in all the writ petitions with no order as to costs.

After the judgment and order was pronounced, Mr. Chatterjee appearing for the respondents makes a request for stay.

All that we have done is to quash the reopening of the assessment.

There is no question of any stay.

The request is rejected.

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P. Devadhar, J. Page 2309 This petition is filed to challenge the validity of the notice dated 26th March, 1992 issued under Section 148 of the Income Tax Act, 1961.

The said notice was issued by the Assistant Commissioner of Income Tax, Central Circle - 31, Page 2310 Mumbai with a view to reopen the assessment for A.Y. 1981-82 in the case of M s.

Devidayal Rolling Mills -the petitioner Number1 herein.

This petition was admitted on 12th August, 1992 and further proceedings pursuant to the impugned notice dated 26th March, 1992 were stayed.

The facts relevant for the present petition are that : M section Devidayal Rolling Mills -first petitioner herein (hereinafter referred to as the assessee) was engaged in the business of converting copper wire bars into copper rods or coils.

The process of converting copper wire bars into copper rods or coils is known as hot rolling process and involves heating of bars in a furnace to a very high temperature and thereafter feeding the red hot bars through various rolling and stretching processes, whereby the width and diameter of the bars gets reduced to the required dimensions.

It is an admitted fact that the process of converting copper wire bars into copper rods or coils, involves loss of copper metal in the form of copper oxide etc.

which are all collected as waste residue.

Though the metal can be recovered from such waste residue, the assessee instead of resorting to such process, has been selling the waste residue from time-to-time and the amount so realised have been accounted for in the books of accounts maintained by the assessee.

During the assessment year 1981-82, the assessee had sold waste residue for Rs. 4,52,874/- and the same was duly recorded in the books maintained by the assessee.

On 27th August, 1981, the assessee filed its return of income for the assessment year 1981-82.

In the profit and loss account, the assessee had disclosed miscellaneous income of Rs. 6,21,240/-which included waste residue sold at Rs. 4,52,874/-.

During the course of assessment, the Assessing Officer by his letters dated 31st October, 1983 and 30th January, 1984 called for further particulars relating to the collection of waste residue as also the particulars relating to sundry sales of waste residue.

The assessee furnished the requisite particulars and on being satisfied the Assessing Officer accepted the receipts on sale of waste residue and passed an assessment order under Section 143(3) of the Act on 24th March, 1984.

It may be noted that the assessee had filed an appeal against the assessment order on certain other issues and even the C.I.T. had initiated action under Section 263 of the Income Tax Act, 1961 for assessment year 1981-82 on certain other issues, however, those proceedings are not relevant for the purposes of the present petition.

By the impugned notice dated 28th March, 1992, the Assessing Officer sought to reopen the assessment for assessment year 1981-82 by recording the reasons for reopening the assessment.

The said reasons recorded by the Assessing Officer for re-opening the assessment for A.Y. 1981-82 read thus : M section Devidayal Rolling Mills.

A.Y. 1981-82 Column 11 : Reasons : For.

A.Y. 81-82 (previous year 1.5.79 to 30.4.80) the assessee has shown sale proceeds of waste residue (copper oxides amounting to Rs. 4,23,790/- only.

The total quantity of copper bars rolled or processed by the assessee in this period was 12115.591 M.T. The total processing charges received by the assessee are Rs. 56,04,055/-.

During the course of enquiries under Section 131 in the case of M section Omega Rolling Mills Limited it has been observed that these assessees are claiming 1 burning loss from the total processed material.

It Page 2311 has been stated on oath by the Director of M section Omega Rolling Mills Limited that about 90 of the burning loss (i.e. 0.9 of the processed material) is recoverable in the form of copper oxide (waste residue) which is saleable in the market.

The rate of this copper oxide is dependent on the market rate of copper bars and the demand in the market.

M section Omega Rolling Mills Limited has sold copper oxide in the accounting period 1989-90 and 90-91 at the rates varying from Rs. 60/- to Rs. 72/- per kg.

dependent upon the market price of pure copper.

The rate of copper oxide is in general, 25 less than the rate of copper.

The average rate of copper for the accounting period relevant for A.Y.81-82 was Rs. 33.38 per kg.

(M.M.T.C. rates).

Our assessee had claimed total burning loss of 121.15 M.T. for A.Y. 81-82.

Since 90 of this burning loss is recoverable the assessee had prima facie, recovered 109.035 M.T. (90 of 121.15 M.T.) of copper oxide.

Since the average rate of copper was Rs. 33.38 per kg.

at that time, the rate of copper oxide (which is normally 25 less than the market price of copper) works out to be Rs. 25.03 per kg.

(75 of Rs. 33.38).

The total prima facie sale proceeds of copper oxide for A.Y. 81-82 (on the sale of 109.035 M.T. of copper oxide) work out to be Rs. 27,29,690/-.

The assessee has shown such sales to the tune of Rs. 4,23,690/- only.

Thus, there is a prima facie concealment of net income on account of unaccounted sales of copper oxide to the tune of Rs. 23,05,900/-.

On the basis of these facts, I have reason to believe that this income to the tune of Rs. 23,05,900/-has escaped assessment for A.Y. 1981-82.

Hence, it is necessary to re-open the assessment for A.Y. 81-82 under Section.

147 of I.T. Act by issuing notice under Section 148.

As per the provisions of section 151, the prior sanction of CIT is required for issuing such notice for A.Y.81-82.

Hence, the note is put up to the CIT, Central II, Bombay for granting approval for the issue of notice under Section 148 in this case for A.Y.81-82.

Mr. Jhaveri, learned Counsel appearing on behalf of the petitioners submitted that the proceedings under Section 147 of the Income Tax Act, 1961 can be initiated only if the conditions set out therein are fulfilled.

He submitted that reopening of the assessment beyond four years from the end of the relevant assessment year is permissible only if it is established that there was failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment.

He submitted that in the present case, the Assessing Officer before passing the assessment order had called for particulars regarding the collection as well as sales of waste residue and accordingly the assessee had furnished all the particulars and only thereafter the assessment order was passed.

Therefore, it cannot be said that there was any failure on the part of the assessee to disclose fully and truly all material facts.

Moreover, in the reasons recorded by the Assessing Officer, it is neither alleged that there was any failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment nor there is any material to suggest that infact the assessee on sale of waste residue had received amounts more than what was disclosed by the assessee.

In these circumstances, it cannot be said that there was failure on the part of the assessee to disclose all material facts.

Page 2312 Mr. Jhaveri further submitted that the fact that in the A.Y. 1991-92 M section Omega Rolling Mills Limited had recovered of higher percentage of waste residue cannot be a ground to reopen the assessment of the assessee for A.Y.1981-82, because, firstly the business carried on by M section Omega Rolling Mills Limited is not comparable with the business of the assessee and secondly the price of waste residue sold in the A.Y. 1991-92 can be applied for the sales effected in the A.Y.1981-82.

He submitted that in the case of the assessee, the Income Tax Authorities year after year had investigated into the recovery of waste residue and sale thereof and on verification had accepted the sale receipts accounted by the assessee from time-to-time.

He submitted that in a subsequent assessment year, the Assessing Officer infact had made additions on the basis of the sale price recorded by M section Omega Rolling Mills Limited but the same was not approved by the Income Tax Appellate Tribunal.

Accordingly, Mr. Jhaveri submitted that the reopening of the assessment for A.Y.1981-82 based on the sale price of waste residue recorded by M section Omega Rolling Mills Limited in the assessment year 1991-92 is wholly unjustified.

Relying upon the decision of this Court in the case of Hindustan Lever Limited v. ACIT 268 ITR 339 (Bom), Caprihans India Limited v. DCIT 266 ITR 566 (Bom), Grindwell Norton Limited v. ACIT 267 ITR 673 (Bom), German Remedies Limited v. DCIT (2006) 150 Taxman 398 (Bom), IPCA Laboratories Limited v. Gajanand Meen Dy.

CIT 251 ITR 416 (Bom) and also the decision of the Apex Court in the case of Indian Oil Corporation v. ITO 159 ITR 956 (SC), Mr. Jhaveri submitted that as the the revenue has failed to establish that there was any failure on the part of the assessee to disclose fully and truly all material facts, the reopening of the assessment beyond four years from the end of the relevant assessment year cannot be sustained.

Accordingly, Mr. Jhaveri submitted that the impugned notice dated 26th March, 1992 is liable to be quashed and set aside.

Mr. Kotangale, learned Counsel appearing on behalf of the respondents, on the other hand, submitted that the business carried on by the assessee was similar to the business carried on by M section Omega Rolling Mills Limited and once it is found that in view of the high content of copper the sale value of waste residue should be much more than what is declared by the assessee, then it becomes evident that the assessee has failed to disclose all material facts.

Relying upon the decision of the Apex Court in the case of Phool Chand Bajrang Lal and Anr.

v. Income-tax Officer and Anr.

203 ITR 456 (SC), Mr. Kotangale submitted that the fact that the false statement made by the assessee has been accepted by the Assessing Officer would not preclude the Assessing Officer to reopen the assessment especially when it is found that statement made by the assessee is prima facie found to be false.

Accordingly, Mr. Kotangale submitted that there is no infirmity in the notice issued under Section 148 of the Income Tax Act.

We have carefully considered the submissions made by the counsel on both sides.

It is well established by various decisions of this Court as well as the Apex Court that where an assessment order passed under Section 143(3) is sought to be reopened beyond four years from the end of the relevant assessment year, the revenue must establish that there was failure on the part of the assessee to disclose fully and truly all material facts relevant for Page 2313 the purposes of the assessment.

In the present case during the assessment proceedings for A.Y. 1981-82, the Assessing Officer did call for full particulars relating to recovery of waste residue as well as the sales thereof.

It is only after being fully satisfied, the Assessing Officer accepted the sale price recorded by the assessee in its books of account and passed assessment order under Section 143(3) of the Income Tax Act.

In the reasons recorded for reopening the assessment it is neither alleged that the sale receipts recorded by the assessee in its books of account were incorrect or false, nor any material is adduced to show that the amounts actually received by the assessee on sale of waste residue was higher than what was recorded in the books maintained by the assessee.

It is pertinent to note that even during the assessment proceedings for A.Y.1977-78 and A.Y.1978-79 the Assessing authority had called for full particulars relating to the recovery of waste residue and sales thereof and after detailed discussion, the burning loss waste residue as well as the sales thereof declared by the assessee were accepted.

In these circumstances, when the Income-tax authorities year after year have investigated into the sales of waste residue effected by the assessee and have accepted the sale price recorded by the assessee, in the absence of any material on record to the contrary, it could not inferred that the assessee has failed to disclose fully truly all material facts.

In the present case, the only reason recorded for reopening the assessment is that M section Omega Rolling Mills Limited have shown higher sale value of similar waste residue sold by them during A.Y.1991-92.

There can be no dispute that the sale price depends upon the demand for the goods at the relevant time.

Therefore, the market price of waste residue prevailing in A.Y.1991-92 cannot be taken to be the market price prevailing in A.Y.1981-82.

Even if the market price of waste residue in 1981-82 could be higher than the sale price received by the assessee, unless there is any material on record to show that the assessee had actually received on sale of waste residue more amount than what was declared by the assessee, it cannot be said that there was any failure on the part of the assessee to disclose fully and truly all material facts.

In the present case, there is not an iota of evidence to show that the assessee had received higher sale price than what was declared by the assessee.

The fact that the assessee could have sold the goods at a higher price would not constitute failure on the part of the assessee to disclose fully and truly all material facts.

In these circumstances, the reopening of the assessment on the ground that the income has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts cannot be sustained.

It may be noted that in the regular assessment for A.Y.1988-89, the Assessing Officer sought to reject the sale price declared by the assessee and make additions based on the sale price of M section Omega Rolling Mills Limited However, such additions have not been sustained by the ITAT.

It is not known as to whether the revenue has accepted the above decision of the Tribunal or not.

In any event in the absence of any material on record to show that the amount received by the assessee on sale of waste residue in A.Y.1981-82 was more than the amount offered by the assessee, the concluded assessment Page 2314 for A.Y.1981-82 could not be reopened in the year 1992 on the ground that the market price of waste residue in A.Y.1981-82 was higher than the price at which the assessee had sold the goods.

The decision of the Apex Court in the case of Phool Chand (supra) has no application to the facts of the present case.

In that case there was a confessional statement made by the Managing Director of the assessee subsequent to the assessment.

In the present case, there is no material on record to suggest that the price declared to have been received by the assessee was incorrect, incomplete or false.

The entire case of the revenue is based on the presumption that in view of the higher sale price of waste residue shown by M section Omega Rolling Mills Limited, in the A.Y.1991-92, the sale price in A.Y.1981-82 must have been higher than the price claimed to have been sold by the assessee and, therefore, there is failure on the part of the assessee to disclose fully and truly all material facts.

Unless there is direct or circumstantial evidence to show that the income received on sale of waste residue was more than what has been declared, it cannot be said that the assessee has failed to disclose fully and truly all material facts.

In the present case, the reopening of the assessment is based on the presumption that the assessee might have recovered higher amount than what was declared by the assessee and there is no material on record to suggest that the assessee had received higher amount which has escaped assessment.

In these circumstances, it cannot be said that there was any failure on the part of the assessee to disclose fully and truly all materials.

Consequently, the reopening of the assessment by the impugned notice dated 26th March, 1992 cannot be sustained.

In the result, the petition succeeds.

The impugned notice dated 26th March, 1992 issued under Section 148 of the Income Tax Act, 1961 is quashed and set aside.

Rule is made absolute in the aforesaid terms with no order as to costs.

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I. Rebello, J. Page 1108 Admit on the question of law reproduced below.

Whether on the facts and in the circumstances of the case and in law, the Honble Tribunal was right in cancelling the assessment Under Section 16(3) r.w.

Section 17 of the Wealth Tax Act, by holding that the notice under Section 16(2), being out of time ignoring the sections crucial feature of its applicability to the returns filed under Section 14, 15 or Under Section 16(4)(i) only and not to the one filed Under Section 17, as in the instant case? The appeal is in respect of the assessment year 1989-90.

It is the contention of the Revenue that the reassessment proceedings under Section 17 are entirely different from the regular assessment proceedings.

The notice under Section 16(2) is necessarily and compulsorily to be issued only in a regular assessment.

In the instant case, it is submitted that on notice dated 19.8.1997 being issued under Section 17, the assessee had filed return of wealth on 14.10.1997.

The assessment had to be completed within two years from the end of financial year in which notice was issued which in the instant case would be 31.3.2000.

The Assessing Officer issued notice under Section 16 (2) on 24.9.1999 which is after the expiry of one year from filing of the return.

The assessment notice under Section 16(3) read with Section 17 was issued on 29.3.2000.

It is therefore, submitted that considering the terminology of Section 17, there is no requirement that notice under Section 16(2) has to be served to proceed with the assessment as the assessment under Section 17 is independent.

It is therefore, submitted that the impugned order of the tribunal be set aside.

On the other hand, on behalf of the appellant, the learned Counsel submitted that a perusal of Section 17 of the Wealth Tax Act makes it clear, that other provisions of the Act shall so far as may be apply, as if the return was filed under Section 14.

It is therefore, submitted that the return filed pursuant to proceedings under Section 17 of the W.T. Act has to be treated as return under Section 14 and as the section falls in Chapter IV, of Assessment, the other provisions to the extent applicable would be attracted including Section 16(2) and as such the view taken by the tribunal is the correct view.

It is further submitted that there was similar omission in procedure for reassessment under Section 148 of the Income Tax Act.

Noting the lacunae, Parliament amended Section 148 of the Income Tax Act by Finance Act, 2006 with effect from 1.10.1991.

Consequently it is submitted that the question as framed would not arise.

The learned tribunal by a common order disposed of the appeal from which the present appeal arises along with other appeals by its order dated 4.3.2003 for the assessment years 1987-88 to 1992-93.

The arguments advanced before the tribunal on behalf of the revenue are similar to what were advanced by the learned Counsel before this Court.

The appeal Page 1109 before the tribunal was against the order of the Commissioner (Appeals) which has taken a view that the provision of Section 17(1) of the Wealth Tax Act are similar to Section 14 of the said Act and as the notices were issued beyond the time prescribed, the assessments are not correct in law and therefore, cancelled.

The Tribunal noted that the Assessing Officer himself was of the view that in proceedings for reassessment under Section 17, the procedure under Section 16 was to be followed.

The Tribunal placed reliance on the judgment of the Supreme Court in the case of R. Dalmias v. CIT 236 ITR 480.

The tribunal noted from the facts of that case, that under the I.T. Act, at the material time under Section 144(B) of the Income Tax Act if assessment had to be made under Section 143 (3) of the Act (which corresponds to Section 16(3) of the Wealth Tax Act), if the ITO proposed to make variation to the returned income, the procedure laid down therein had to be followed.

Before the Supreme Court the question was whether in a case of reassessment to be made under Section 147, the I.T.O. can invoke Section 144(B) and thereby extend time limit for completion thereof.

The assessee had contended that Section 144(B) did not apply to assessment made under Section 147 and applies only to assessments made under Section 143.

The contention of Revenue on the other hand was that Section 147 by itself did not permit assessment and determination of tax due and therefore, recourse to Section 143 was necessary.

It was argued that the assessment or reassessment was not under Section 147 but under Sections 143/147.

The argument of the assessee was rejected.

The Supreme Court noted that the submission of Assessee cannot be accepted because the language of Section 148 cannot be ignored.

Section 144(B) the court held is a procedural provision.

It fits into the procedural scheme and, therefore, it cannot be excluded by reason of the use of the words so far as may be Nor was there any other good reason to exclude it from the procedure to be followed subsequent to notice Under Section 148.

The court then observed as under: As to the argument based upon Sections 144A, 246 and 263 we do not doubt that 5 assessments under Section 143 and assessments and reassessments under Section 147 are different, but in making assessments and re-assessments under Section 147 the procedure laid down in section subsequent to Section 139 including that laid down by Section 144B, has to be followed.

Considering this judgment, the tribunal held that Section 16 is applicable to reassessment under Section 17 which goes without saying that the requirement of giving notice under the proviso to Section 16(2) is a mandatory requirement and consequently notice has to be issued before the time prescribed by the proviso to the Section 16(2) expires.

The question that we are called upon to answer is whether the view taken by the tribunal flows from the provisions of Section 17 read with Sections 14 to 16 of the Wealth Tax Act.

The relevant provisions as they then stood read as under: 7(1).

If the Assessing Officer has reason to believe that the net wealth Page 1110 chargeable to tax in respect of which any person is assessable under this Act has escaped assessment for any assessment year (whether by reason of under-assessment or assessment at too low a rate or otherwise), he may, subject to the other provisions of this section and Section 17A, serve on such 6 person a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth the net wealth in respect of which such person is assessable as on the valuation date mentioned in the notice, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such net wealth and also any other net wealth chargeable to tax in respect of which such person is assessable, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section for the assessment year concerned (hereafter in this section referred to as the relevant assessment year) and the provisions of this Act shall so far as may be apply as if the return were a return required to be furnished under Section 14.

Provided that where an assessment under Sub-section (3) of Section 16 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 end of the relevant assessment year, unless any net wealth chargeable to tax has escaped assessment for such assessment year by reason of the 7 failure on the part of the assessee to make a return under Section 16 or this section or to disclose fully and truly all material facts necessary for his assessment for that assessment year.

The crucial words are and the provision of this Act shall so far as may be apply as if the return were a return required to be furnished under Section 14.

Would these words as far as may be mean thereby that Section 17 is the assessing section and for that purpose the provisions of Section 14 to 16 to the extent they are applicable only would apply.

In other words does Section 17 confer power on the Assessing Officer in case where Section 17 is invoked to independently make an order of assessment in a case where a return is filed under Section 14 after notice and after the period of twelve months have expired from the date of filing the return.

Section 16(2) reads as under: Where a return has been made under Section 14 or Section 15, or in response to a notice under Clause (i) of Sub-section (4) of this section the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the net wealth or has not underpaid the tax 8 in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend at the office of the Assessing Officer or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return.

Provided that no notice under this sub section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.

Page 1111 Section 16, therefore, requires that if a return has been made under Section 14 or 15, if the assessing officer considers it necessary or expedient, to ensure that the assessee has not understated the net wealth or has not underpaid the tax in any manner, to serve on the assessee a notice requiring him, on a date to be specified therein either to attend the office of the Assessing Officer or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return.

The proviso lays down a timeframe for serving the notice under Section 16(2).

In other words, if the period of twelve months have expired from the date of filing the return, the A.O. is precluded from serving notice under Section 16(2) and the return filed will have to be accepted.

We may now gainfully reproduce Section 16(5) for the purpose of our discussion and it reads as under: If any person,- (a) fails to make the return required under Sub-section (1) of Section 14 and has not made a return or a revised return under Section 15, or (b) fails to comply with all the terms of a notice issued under Sub-section (2) or Sub-section (4), the Assessing Officer, after taking into account, all relevant material which he has gathered, shall, after giving such person an opportunity of being heard, estimate the net wealth to the best of his judgment and determine the sum payable by the person on the basis of such assessment Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the person to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment.

This sub section therefore, will confer a power on the Assessing officer in case of failure to file 10 return under Section 14 or revised return under Section 15 or to comply with the terms of a notice under Section 16(2) to make a best judgment assessment.

Section 17A provides a time limit for making an order of assessment both under Section 16 and Section 17.

The normal period for assessment under Section 16 is two years from the end of the assessment year in which the net wealth was first assessable and for an assessment under Section 17 within two years from the end of the financial year in which the notice under Sub-section (1) of Section 17 was served.

Section 17 can be invoked when the Assessing Officer has reason to believe that the net wealth chargeable to tax in respect of an assessee has escaped assessment for any assessment year for the reasons set out therein.

The A.O. may serve on such person a notice.

If on the notice being served the assessee fails to file a return, there is no independent provision in Section 17 to make a best judgment assessment like in Section 16(5).

The language used in fact is that the A.O. may proceed to assess or reassess such net wealth.

If the argument of the Revenue has to be accepted, it must mean that once Section 17 has been invoked and the notice served on the assessee and the assessee either does not furnish the return in the prescribed form, then the A.O. is empowered to proceed to 11 assess or reassess such net wealth and also any other net wealth chargeable to tax in respect of which such person is assessable irrespective of the requirement of Section 16(2), under Section 17 itself.

This submission if accepted must Page 1112 lead to the conclusion that Section 17 is a self contained code for assessment of wealth tax which has escaped assessment.

In that event, will not the expression the provisions of the Act shall, so far as may be, apply as if the return were a return required to be furnished under Section 14, be defeated.

The Assessing Officer may be satisfied with the return deemed to be filed under Section 14 and choose not to proceed further.

In such a case we shall have to read Section 16(5) into a case of re-assessment under Section 17.

What would happen in the case where the Assessing Officer is not satisfied with the return and wants to proceed to reassess.

Firstly is there a power outside Section 16 to pass an order of assessment and or re-assessment.

Secondly in such cases, is there a limitation for issuing notice of assessment or reassessment if the A.O. is not satisfied with the return filed or is there no such limitation as set out in the proviso to Section 16(2) and it would wholly lie within the discretion of the Assessing Officer to proceed to reassess in a case where the A.O. is of the belief that the income has accepted assessment except as to the time limit as set out in Section 17A. Section 17A applies to both assessment and reassessment under Section 16 and 17.

In our opinion, this would defeat the scheme of the chapter.

Section 17 only use the expression assess or re-assess, however, the expression as contained in Section 16(3) namely order in writing is missing.

Even if we assume considering the first proviso to Section 17 that the assessment is under Section 17, in issuing notice if dissatisfied with the return filed, the proviso to Section 16(2) would be applicable.

The effect of accepting the argument of Revenue would be that in so far as the assessment under Section 16, if the A.O. in order that the assessee has not understated the net wealth or has underpaid tax in issuing notice, there is time limit, in so far as Section 17, there is no such limitation once jurisdiction is invoked under Section 17.

Further the expression as far as may be in the context of the returns being treated as a return under Section 17 would be rendered meaningless.

In our opinion, it will not be possible to construe the provisions as are sought to be contended on behalf of the revenue.

All the provisions of Chapter IV will have to be read in tandem so as to bring about an uniformity and certainty to an order of assessment.

Proviso to Section 16(2) is in the nature of an embargo on the Assessing Officer, if the period has expired not to issue notice after that period.

In other words, the Assessing Officer is bound to accept the return as filed.

Though the notice under Section 16(2) may be procedural, the proviso is not merely procedural but is in the nature of a limitation on the power of the Assessing Officer not to proceed further in a case where return has been filed under Section 14 or under Section 15.

That will have to read as applicable to a case of re-assessment under Section 17.

Let us now examine Sections 143 and 148 of the provisions of the Income Tax Act, where similar language had been employed.

Under Section 143(2)(ii) there is a limitation on the A.O. not to issue notice if the period of twelve months had expired.

Section 148 of the I.T. Act had come up for consideration before several High Courts.

A learned Bench of the Madras High Court in Page 1113 Commissioner of Income Tax v. M. Chellappan and Anr.

had occasion to consider the provision.

The Assessing Officer proceeded to reassess under Section 147 of the I.T. Act and completed the assessment without issuing notice under Section 143(2) within the time stipulated.

The order was confirmed in appeal.

The Tribunal had set aside the order on the ground that notice under Section 143(2) was not served on the assessee within the stipulated period.

The learned Bench of the Madras High Court held that as the notice under Section 143(2) was not served within the stipulated period, the procedure under Section 143 came to an end and the matter attained finality.

Similarly is the judgment of Gauhati High Court in Smt.

Bandana Gogoi v. Commissioner of Income Tax and Anr.

which also dealt with an issue of reassessment under Section 147.

That was a case of Block assessment.

It was found that notice under Section 143(2) was not issued.

The learned Bench came to the conclusion that requirement of Section 143(2) cannot be dispensed with as it is mandatory.

Parliament subsequently by Finance Act 2006, with effect from 1.10.1991 introduced the second proviso to Section 148 saving proceedings where return had been filed pursuant to proceedings under Section 147 and no notice had been served under Section 143(2) within the period prescribed by the proviso to Section 143(2).

The language used in Section 143(2) is similar to the language used in Section 16(2).

Parliament in the case of I.T. Act under Section 148 noting, the omission in the section which was likely to affect assessments done, pursuant to powers conferred under Section 147, inserted the proviso to Section 148 to protect the assessments already done.

It is true that merely because Parliament has as a matter of abundant caution intervened and amended the provisions of Section 148 cannot be read to mean that there is a lacunae.

Two High Courts, Madras and Gauhati, have taken a view that notice under Section 143(2) is mandatory even in a case of re-opening of assessment under Section 148 of the I.T. Act.

In our opinion, the view taken by the two High Courts reflects the language of Section 147.

Therefore, even in a case of re-opening of assessment under Section 147, the A.O. is bound to comply with the requirement of Section 143(2) of the I.T. Act.

Even independently, we have examined the scope and effect of Sections 14 to 16 on the one hand and Section 17 on the other.

In our opinion, there is no escape from arriving at the conclusion that when the Assessing Officer invokes Section 17, the provision of Section 14 and 16 to the extent applicable, for the purpose of making an order of reassessment will have to be followed which will include the time limit for notice under Section 16(2).

Once the language of Section 17 itself requires that other provisions to the extent applicable would apply considering the return as filed under Section 14, it contemplates that both procedural and substantive provisions will apply.

In our opinion, therefore, while invoking powers under Section 17, the Assessing Officer is bound by the mandate of the proviso to Section 16(2) and on failure the order of reassessment will be without Page 1114 jurisdiction and consequently the order of reassessment will have to be set aside.

Having said so, we are clearly of the opinion that no error of law can be found with the view taken by the tribunal.

Consequently the appeal is dismissed.

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