IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No.7 of 2001 alongwith ITA Nos.12 of 2002, 13 of 2002 & 3 of 2003. Judgment reserved on:17.9.2008. Date of decision: 11th November, 2008. Commissioner of Income Tax (in all cases) ..Appellants Versus M/s.H.P. State Forest Corporation Ltd. (in all cases) ..Respondents Coram The Hon’ble Mr. Justice Deepak Gupta, Judge. The Hon’ble Mr. Justice V.K.Ahuja, Judge. Whether approved for reporting?1 Yes For the Appellants.: Mr.Vinay Kuthiala, Advocate. For the Respondents: Mr.M.M. Khanna, Senior Advocate with Ms.Pushpa Attri, Advocate. Deepak Gupta, J. The aforesaid four Income Tax Appeals are being disposed of by a common judgment since virtually identical questions of law and facts are involved in the same. The Questions in ITA Nos.3 of 2003 and 13 of 2002 are identical and read as follows: “1.Whether on the facts and in the circumstances of the case the Income Tax Administrative Tribunal erred in holding that the notice issued on 18.11.1997 under Section 148 of the Income Tax Act was illegal because the notice issued on 3.2.1992 under Section 142(1) was pending even though an 1 Whether the reporters of the local papers may be allowed to see the Judgment? 2 assessment order had duly been passed on a return filed by the Assessee pursuant to this notice? 2.Whether the Ld.I.T.A.T. erred in holding that the original notice under Section 142(1) had become time barred despite the order of the Hon’ble High Court dated 20.8.1992? 3.Whether Sections 142/148 of the Income Tax Act permit the assessing office to re-open a case, where prima facie it is found that the income has escaped assessment on receiving information from even an invalid return?” In I.T.A. No.7 of 2001 the following questions have been framed: “1.Whether on the facts and in the circumstances of the case, the I.T.A.T was justified in quashing the assessment proceedings holding the notice issued under Section 148 of the Income Tax Act as illegal? 2.Whether on the facts and in the circumstances of the case, ITAT was right in holding that the notice under Section 148 issued in March, 1991 remained to be disposed off when a return was filed by the assessee in response thereto and an assessment order was duly passed by the Assessing Officer thereon? 3.Whether on the facts and in the circumstances of the case, ITAT was justified in holding that the original notice under Section 148 had become time barred in spite of the order passed by this Court in CWP No.123 of 1995 dated May 5, 1997? 4.Whether on the facts and in the circumstances of the case, ITAT was justified in holding the proceedings to be time- barred and no further proceedings could be initiated by re- opening them?” In ITA No.12 of 2002 the following questions have been framed: “1.Whether in the facts and circumstances of the case the Income Tax Administrative Tribunal Appellate Authority erred 3 in coming to the conclusion that the notice issued in March, 1991 under Section 148 of the Income Tax Act remained to be disposed of and therefore the notice dated 18.11.1997 issued under section 148 of the Act was illegal? 2.Whether the learned Income Tax Appellate Tribunal erred in quashing the assessment made on 31.12.1999 under Section 143(3)/147 of the Income Tax Act, especially in view of the fact that this assessment was made in compliance of the directions of the High Court issued on 20.9.1992? 3.Whether the learned Income Tax Administrative Tribunal erred in holding that the original notice under Section 148 had become time barred despite the orders passed by the High Court on 20.8.1992? 4.Whether Sections 142/148 of the Income Tax Act permit the assessing office to re-open a case, where prima facie it is found that the income has escaped assessment on receiving information from even an invalid return?” Though many questions of law have been framed, the moot question which arises for decision in these cases is whether a fresh notice under Section 148 can be issued when proceedings issued pursuant to a previous notice have not attained finality. The facts of all the four appeals are virtually identical and the only difference is that they relate to different assessment years that is assessment years 1988-89, 1989-90, 1990-91 and 1991-92 that is accounting period from 1.4.1987 to 31.3.1991. The assessee is the H.P. State Forest Corporation. Up to the assessment year 1987-88 it had been filing returns showing positive income. From the assessment year 1988-89 onwards no returns were filed 4 by the assessee. The Assessing Officer had reasons to believe that the income of the assessment for four assessment years had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act). Accordingly, four separate notices were issued to the assessee. It is not in dispute that these notices were within limitation. In response to these notices the assessee filed returns declaring positive income for each of the assessment years. Since the returns filed by the assessee were not accompanied by the statutory audit report as required under Section 44-AB of the Income Tax Act, 1961, the assessee was called upon to remove these defects. The assessee did not remove these defects and consequently the Assessing Officer held the returns filed by the assessee to be invalid returns. The assessee thereafter filed CWP in the High Court of H.P. being CWP No.590 of 1992 and this Court stayed the order of the Assessing Officer declaring these returns to be invalid. Liberty was reserved to the Deputy Commissioner of Income Tax to move, assess and realize the tax of the assessee by presuming that the return filed by the assessee is a valid return subject to final orders of the Court. Thereafter, statutory notices were issued to the assessee and the assessee Corporation filed revised 5 returns declaring income on the basis of the audited accounts. Assessment was completed on the basis of the audited accounts produced by the assessee and the returns filed by it. The Assessing Officer had made certain additions in the returns filed by the assessee. The assessee filed appeal before the CIT (Appeals) who partly allowed the appeals. When the Revenue was in the process of recovering the amount in terms of the order of the CIT the Assessee filed another writ petition being CWP No.125 of 1995 which was disposed of on 5th May, 1997, the operative portion of which reads as follows: “In view of the order passed in CWPs No.190/92 to 593/92, this writ petition does not survive as the entire proceedings commenced from an invalid return. It is needless to say that the subsequent orders of assessment passed by the Income-tax Officer and the Appellate orders passed on the appeals filed against the said assessment orders are invalid consequentially. The writ petition is dismissed with the above observations. Interim order is vacated.” It is apparent that the entire proceedings commencing from invalid returns were held to be invalid and the orders passed by the Income Tax Officer as well as the Appellate Authorities even on the basis of the revised returns filed were set-aside only on the ground that the original returns filed by the assessee were invalid. Thereafter, fresh notice under Section 148 was issued to the assessee on 18.11.1997 to file its return but no return of income was filed in response 6 thereto. A notice under Section 142(1) calling for the return of income was issued and thereafter returns declaring positive income were filed for each of the four years. Thereafter, the assessment was framed by the assessing authority. Aggrieved against the said assessment order the assessee filed appeals before the Commissioner of Income Tax (Appeals) and one of the main grounds raised in these appeals was that the notice issued in the year 1997 was an invalid notice. Though the appeals were partly allowed on some other grounds the CIT rejected the plea of the assessee that the second notice issued in the year 1997 was an invalid notice. Thereafter, the assessee filed an appeal before the Income Tax Appellate Tribunal challenging the entire assessment proceedings on the ground that they are based on an invalid notice. The Tribunal came to the conclusion that till the proceedings pursuant to the earlier notices were pending and had not been disposed of or given the colour of finality the assessing officer was precluded in law from commencing second proceedings under Section 148 and held that subsequent proceedings under Section 148 should not have been commenced until there was a disposal of the earlier proceedings. It is not disputed before us by both the parties that the original notices issued in March, 1991 were never 7 quashed by the High Court. On behalf of the assessee it has been urged that since these notices have not been quashed the second notice could not have been issued and second proceedings could not be started. On the other hand Sh.Vinay Kuthiala has contended that the second set of notices were virtually in the nature of continuation of the first notice and he has also urged in the alternative that the assessee had waived the right to raise any objection because he filed returns in response to the second set of notices. We are not going into the second contention raised by Shri Kuthiala since this was not a point raised before any of the authorities below and in fact is not even a point raised at the time of admission of the present appeals. To appreciate the rival contentions of the parties it would be apposite to refer to certain provisions of the Income Tax Act. Section 142 of the Income Tax Act empowers the Assessing Officer to issue notice to any person who has not filed a return within the time allowed under Section 139(1) to furnish his return and to produce necessary documents as may be directed by the Assessing Officer. Section 147 of the Act provides that if the Assessing Officer has reasons to believe that any income has escaped assessment he may assess or re- 8 assess the same. The proviso to this Section provides that no such action shall be taken after the expiry of 4 years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice under sub Section (1) of Section 142 or Section 148. Section 148 lays down that before making assessment under Section 147 the Assessing Officer shall serve notice upon the assessee. The time limit for issuance of such notice at the relevant time was 7 years but not more than 10 years if the income chargeable to tax which had escaped assessment was likely to exceed Rs.one lakh. It is not disputed that in the present case in all the four years the income which escaped assessment was more than Rs.one lakh. It is not disputed before us that the original notices issued in the year 1991-92 were issued in time. The assessee filed returns in response to these notices but did not file the audited accounts as required under the Act and hence these returns were treated to be invalid returns. This order treating the returns to be invalid was challenged before this Court. This Court stayed the operation of the order and directed the Revenue to assess the income and tax payable by treating this invalid 9 return to be a valid one. Thereafter, admittedly the assessee filed fresh returns along with audited accounts in which also vast income was declared. These returns were processed and orders were passed by the Assessing Officer as well as the Appellate authority. These orders were also challenged by the assessee in this Court and this Court upheld the initial order passed by the Assessing Officer holding the returns to be invalid and therefore quashed all subsequent orders passed. It is in the light of these facts that the case has to be considered. In our considered opinion, notices issued in the year 1997-98 were not in fact fresh notices but only continuation of the original notice. The revenue was entitled under law to have proceeded with the original notice. The mere fact that the fresh notices were couched in language indicating that they were new notices would not make the same invalid. They were basically a continuation of the original notices since the grounds remained the same. The parties have cited various authorities before us which we may now consider. In K.E.M. Mohammad Ibrahim Maracair and another vs. Commissioner of Income-tax Madras, (1964) 52 ITR 890, the Madras High Court held that the fact that the Income-tax Officer has re-assessed the 10 assessee’s income once under Section 34 does not prevent him from taking any proceedings again under Section 34 if he finds that another income has escaped income or has been under-assessed. In Gurdayal Berlia vs. Commissioner of Income-tax, Calcutta, (1966)62 ITR 494, a Division Bench of the Calcutta High Court held that proceedings under Section 34 could be initiated within the period of limitation provided in the said section. It was held that within the period of limitation there is no restriction to the number of proceedings that can be taken to re-open the assessment whether by way of assessment or re- assessment and computation or re-computation. In Commissioner of Income-tax, Calcutta vs. Bidhu Bhusan Sarkar, (1967) 63 ITR 278, the Apex Court was dealing with a matter where the proceedings emanating from the earlier notice were ordered to be filed. It was held that word ‘filed’ should be interpreted to be equivalent to be disposed of. Therefore, the subsequent proceedings could have been initiated. Reliance has been placed by the assessee on this judgment and it is urged that this judgment implies that if the earlier notice is pending second notice cannot be issued. In Commissioner of Income-tax, Andhra Pradesh vs. K.Adinarayana Murthy, (1967)65 ITR 607, 11 first notice was issued to the assessee in his individual capacity and the second notice was issued by treating the assessee to be a Hindu Undivided Family. The Apex Court held that since the assessee was a member of Hindu Undivided Family second notice was valid and merely because of the fact that a notice had been issued to the individual in a wrong capacity the second notice would not be invalid. In Industrial Trust Ltd. Vs. Commissioner of Income-tax (Central and Rajasthan), (1973) 91 ITR 550, the apex Court was dealing with a case where an officer not having jurisdiction gave notice under Section 34. The assessee filed return to this notice and no action taken. Second notice was issued by another Officer whose jurisdiction was not questioned. The Apex Court held that fresh notice was legal and valid and since the earlier notice was invalid and illegal all the proceedings under the said notice were consequently illegal and invalid and second notice could be issued. In Ashok Kumar Dixit vs. Income-tax Officer and another, (1992)198 ITR 669, the Allahabad High Court held that only because an earlier notice has been issued that by itself in law cannot bar the Officer from issuing second notice under Section 148. If fresh facts are noticed second notice could be issued. 12 In Commissioner of Income-tax vs. Jaideo Jain and Company, (1997) 227 ITR 302, the Rajasthan High Court was dealing with a case where fresh notice under Section 148 was issued when the proceedings under the original notice were still pending. The original assessments were barred by time therefore the Tribunal annulled the re-assessment. The Rajasthan High Court upheld the order of the Tribunal holding that no question of law arises. Much reliance was placed on this judgment by the learned Tribunal. In our opinion this judgment is not at all applicable to the facts of the case. In the case before the Rajasthan High Court there was a finding of fact that the original assessment proceedings had got time barred. It was on this ground that the second proceedings on the same grounds were held to be not maintainable. In Smt.Nilofer Hameed and another vs. Income-tax Officer, (1999) 235 ITR 161 the Kerala High Court held that an Assessing Officer can issue any number of notices under Section 148 of the Act provided the conditions stipulated in Section 147 are satisfied and the same are within the period specified under Section 149 read with Section 151. It however went on to hold that if an assessment is pending either by way of original assessment or by way of reassessment proceedings, the 13 Assessing Officer cannot issue a fresh notice under section 148. In the case before the Kerala High Court notices were issued to the assessee in respect of the assessment years 1986-87 under Section 148 of the Act. The assessee did not file any returns pursuant to the notice. The Revenue did not complete the assessment of the petitioners on the basis of the aforesaid two notices whereas the assessment for the said two years should have been completed on or before March 31, 1998 as the law stood at the relevant time. The fresh notices were issued on March 25, 1997 and the Kerala High Court found that the second notice had not been issued after taking the approval of the competent authority. In Commissioner of Income-tax vs. Indo Marine Agencies (Kerala) P. Ltd., (2005) 279 ITR 372, the Kerala High Court was considering a case in which the assessment proceedings pursuant to the first notice were closed as not assessable. Even though this order was not communicated to the assessee the Kerala High Court held that this was not a bar to the issue of a fresh notice for re-assessment. We have considered the entire law cited by both the parties. There can be no dispute with regard to the legal position that successive notices can be issued as long as they are within a period of limitation. There are 14 few judgments which hold that in case the first proceedings are pending second notice cannot be issued. However, the facts of the present case are rather peculiar. As pointed out above, the second set of notices were issued because of the fact that the High Court upheld the earlier order of the Assessing Officer treating the returns to be invalid returns. We cannot loose sight of the fact that even in response to the earlier notices the assessee himself had declared positive income running into crores of rupees along with audited accounts. The subsequent assessment returns were quashed only on the ground that they emanated from an invalid return. Thereafter, the Revenue could have easily continued with the earlier notices. The second set of notice raises no new grounds. In the factual background of the case it is apparent that the second set of notices may not have been couched in proper language but should be treated to be continuation of the earlier notices. Even if we treat the second set of notices to be independent notices then also the same are within limitation if the time during which the proceedings were stayed by the High Court are excluded from consideration. In view of the above discussion, we are of the view that the order of the learned tribunal holding that the second set of notices were illegal and improper is 15 incorrect. The Appeals are accordingly disposed of. The questions of law framed in the four appeals are decided in favour of the Revenue and against the Assessee. ( Deepak Gupta ), J. November 11, 2008 ( V. K. Ahuja ), J. PV