1. The Revenue is aggrieved by an order dated August 20, 2004, passed by the Income-tax Appellate Tribunal in I.T.A No. 2042.Delhi/2000 relevant to the assessment year 1994-95. The assessee had filed its return of income on September 29, 1994, declaring an income of Rs. 17,88,830.
2. Without processing the return, the Assessing Officer on June 5, 1996, recorded reasons for issuing a notice to the assessee for reassessment on the ground that the assessee has wrongly claimed excessive deduction under section 80-O of the Income-tax Act, 1961, and that income has escaped assessment.
3. Thereafter, on June 11, 1996, the return of income was processed by the Assessing Officer under section 143(1)(a) of the Act and on the same date notice was issued to the assessee under section 148 of the Act requiring it to file its return of income.
4. In CIT v. Kelvinator of India Ltd., [2002] 256 ITR 1, a Full Bench of this court observed that an order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143 of the Act. In so far as the present case is concerned, it is an admitted position that no assessment order was passed under section 143(3) of the Act and that the return of the assessee was processed under section 143(1) of the Act only on June 11, 1996.
5. In Trustees of H.E.H the Nizam's Supplemental Family Trust v. CTT, [2000] 242 ITR 381, the Supreme Court observed (headnote):
“It is settled law that unless the return of income already filed is disposed of, notice for reassessment under section 148 of the Income-tax Act, 1961, cannot be issued, i.e, no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated.”
6. From the dates that we have mentioned above and the law as laid down, it is clear that assessment proceedings terminated under section 143(1) of the Act only on June 11, 1996. In other words, on June 5, 1996, when the Assessing Officer made up his mind to issue a notice to the assessee under section 147/148 of the Act, a valid return of income filed by the assessee was still pending before him and which could have been processed.
7. It is submitted by learned counsel for the Revenue that since the period for issuing a notice to the assessee under section 143(2) of the Act had already elapsed, and the Assessing Officer was of the view that income had escaped assessment, the Assessing Officer had no option but to resort to clause (b) of Explanation 2 to section 147 of the Act for initiating reassessment proceedings. This clause reads as follows:
“Section 147.—……
Explanation 1.—……
Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:—
(a) …..
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;”
8. The submission made by learned counsel for the Revenue is that a return of income was furnished by the assessee and before any assessment was framed, it was noticed by the Assessing Officer that the assessee had understated its income and claimed excessive deduction in the return and, therefore, action could be taken under sections 147 and 148 of the Act. Consequently, the conclusion arrived at by the Tribunal was incorrect.
9. We are of the opinion that in view of the decisions that we have mentioned above, for the purposes of initiating reassessment proceedings, the Assessing Officer could not have made up his mind that the income of the assessee has escaped assessment while a valid return was still pending before him. If the Assessing Officer had allowed the time to elapse for taking action under section 143(2) of the Act, it was entirely his own doing. What the Assessing Officer is now trying to do in an indirect (and incorrect) manner is what he could not have done directly.
10. The further contention raised on behalf of the Revenue is that even if no assessment order was framed, the Assessing Officer could issue a notice for reassessment. We are of the view that if no assessment had been made, there was no occasion for the Assessing Officer to conclude that income had already escaped assessment.
11. This being the position, we are of the opinion that no substantial question of law that arises for our consideration and we do not find any error in the view that has been taken by the Tribunal in this regard. Consequently, the appeal is dismissed.
12. Learned counsel for the Revenue would like us to record that he had relied upon certain judgments. We are not dealing with them because they are not relevant on the given facts of the case.