B.R. Jain, Accountant Member. - A Special Bench was constituted by the Hon’ble President, Income Tax Appellate Tribunal, under section 255(3) of the Income-tax Act, 1961 (the Act) to hear the appeals in the cases of S/Shri Raj Kumar Chawla, Rajiv Chawla and Ajay Chawla for assessment year 1995-96 and by general consent the questions required to be answered are taken as under :
"1. Whether the proviso to section 143(2) of the Income-tax Act, 1961 which mandates the service of notice within 12 months from the end of the month in which return is filed, also applies to the returns filed pursuant to notice under section 148 of the Income-tax Act, 1961?
2. If the answer to the aforesaid question is in the affirmative then what is the effect of non-service of notice under the proviso to section 143(2) within the time prescribed, to the return filed pursuant to section 148 of the Income-tax Act, 1961?"
2. Shri K. Sampath appearing for the appellant contends that proviso to section 143(2) of the Act enjoins a duty upon the Assessing Officer to serve notice on the assessee before expiry of twelve months from the end of the month in which return is furnished. Procedure for making assessment is prescribed under Chapter XIV of the Income-tax Act. Cases where income has escaped assessment, the law mandates that the Assessing Officer has to serve a notice on the assessee requiring him to furnish a return of his income and provisions of the Act shall so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 of the Act. Section 148 thus envisages a return as if such return was a return under section 139. The words "so far as may be" as appearing in section 148 has always been construed to mean that those provisions may generally be followed to the extent possible. A notice having been issued under section 148, the procedure set out in the sections subsequent to section 139 has to be followed "so far as may be". For this principle, reference was made to the Apex Court judgment in R. Dalmia v. CIT [1999] 236 ITR 4801, 487. In the same report at page 488, it has been stated "We do not doubt that assessment under section 143 and assessments and re-assessments under section 147 are different, but in making assessment and re-assessments under section 147 the procedure laid down in sections subsequent to section 139, including that laid down by section 144B has to be followed". From this it follows that limitation as prescribed under the proviso to section 143(2) of the Act shall also come in operation to the return filed pursuant to notice under section 148 of the Act.
3. Learned counsel further placed reliance on the decision of Punjab & Haryana High Court in the case of Mrs. Rama Sinha v. CIT [2002] 256 ITR 4811, where the Hon’ble Court upheld the contention that once a notice under section 148 of the Act is issued, the assessment has to be completed under section 147 and not under section 143(3) is totally devoid of any merits. The Hon’ble Court also observed that the position was the same even prior to the amendment of section 148 with effect from April 1, 1989 and as the return filed in response to notice under section 148 has to be treated as if it has been filed under section 139, the procedural provisions for making an assessment under section 143(3) of the Act also come into play.
4. It has further been contended that the view taken by the Full Bench of the Kerala High Court in Mrs. Lally Jacob v. ITO [1992] 197 ITR 439 that any assessment made for the first time by resort to section 147 will also be a regular assessment for the purpose of invoking section 217 of the Act. This decision has been confirmed by the Apex Court in the judgment in K. Govindan & Sons v. CIT [2001] 247 ITR 192.2
5. Learned counsel cited judgments in the case of Orissa State Warehousing Corporation v. CIT [1999] 237 ITR 5893 (SC), for the proposition that a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. No words ought to be added and only the language used ought to be considered so as to ascertain the proper meaning and intent of legislation. The Court is to ascribe the natural and ordinary meaning of the words used by the Legislature and the court ought not under any circumstances, substitute its own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions. In Keshavji Ravji & Co. v. CIT [1990] 183 ITR 14 (SC), it was stated that as long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words, it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature. When words acquire a particular meaning or sense because of their authoritative construction by superior courts, they are presumed to have been used in the same sense when used in a subsequent legislation in the same or similar context. In Prakash Nath Khanna v. CIT [2004] 266 ITR 11 (SC), the Apex Court has said that while interpreting a provision, the court only interprets the law and cannot legislate it. The legislative casus omissus cannot be supplied by judicial interpretative process. Reference was made to the judgments of Asstt. CIT v. Velliapa Textiles Ltd. [2003] 263 ITR 5502 (SC), State of West Bengal v. Kesoram Industries Ltd. [2004] 266 ITR 721 (SC), [Padmasundara Rao v. State of Tamil Nadu], CIT v. Vasvi Pratap Chand [2002] 255 ITR 5173 (Delhi), Modipon Ltd. v. CIT [2001] 247 ITR 404 (Delhi) and Federation of Andhra Pradesh Chamber of Commerce & Industries v. State of Andhra Pradesh [2001] 247 ITR 365 (SC).
6. The ld. counsel further contends that in construing the provisions for period of limitation, equitable considerations are out of place and the strict grammatical meaning of the words is the only safe guide. Reference was made to the judgment in the case of M.K. Srikantasetty v. CIT [1986] 160 ITR 5176 (Kar.).
7. Learned counsel also contends that the decision of Agra Bench of the Tribunal in Chander Bhan Bansal v. Dy. CIT [2001] 79 ITD 639 , was relevant to assessment year 1988-89 and the Tribunal while holding proviso to section 143(2) as a substantive law, missed the mandatory provision of section 148 which deems such a return as if it were a return under section 139 of the Act. The Bench at Agra in Asstt. CIT v. Baikunth Nath Singhal [2004] 89 ITD 109, did not follow this earlier decision. Likewise, Delhi Bench of the Tribunal in Vishal Gupta v. Jt. CIT in [ITA Nos. 3256 to 3260 (Delhi) of 2000, dated 23-10-2001] have taken a view favourable to the assessee. The decision of Special Bench of Lucknow in Nawal Kishore & Sons Jewellers v. Dy. CIT [2003] 87 ITD 407 is with respect to block assessment procedure prescribed under Chapter XIV-B which contains special procedure. This judgment has no application to the returns filed pursuant to notice under section 148. He, therefore, concludes his submissions by saying that the first question in the present appeals is covered by the judgments of Supreme Court and various High Courts and keeping in view the mandate, it has to be answered by holding that proviso to section 143(2) of the Act also applies to the returns filed pursuant to notice under section 148 and as such where the Assessing Officer has not served the notice within the period of 12 months from the end of the month in which the return is filed, that will be a case of proceedings as dropped, as there is no waiver in the matter where there is a question of jurisdiction. The Tribunal has entertained such a view in Dr. K.C. Verma v. Asstt. CIT [2003] 84 ITD 33 (Delhi).
8. Shri M.K. Kulkarni, Advocate and Shri Kangadharan, CA, interveners advanced the same arguments as that of the appellant and contended that the assessment made on the strength of a notice served beyond the period prescribed under the proviso to section 143(2) of the Act shall be vitiated and needed to be annulled.
9. Shri V.S. Rastogi, intervener appearing for Cray Research (I) Ltd. contends that section 148 of the Act applies to assessment as well as re-assessment cases and no different treatment is prescribed for either of the cases when return is required to be furnished by issuance of a notice under section 148. He seeks to refer that section 148 mandates that the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. He, therefore, makes four propositions :—
(i)That this provision has employed the word "shall". By use of the word "shall", the provision has been made mandatory and it cannot be construed as directory.
(ii)What has been made applicable by this provision is the provision of this Act.
(iii)The word "accordingly" used in this provision is to be interpreted to mean and used in a similar manner.
(iv)Deeming provisions are to be extended to the legitimate purpose for which these are enacted. Accordingly, proviso to section 143(2) has to be treated as mandatory. The non-service of notice within the period prescribed will render the notice invalid.
10. Copies of cases relied upon have been filed in two volumes and placed on record. Judgment of the Apex Court in the case of National Insurance Co. Ltd. v. Commissioner Of Income-Tax. AIR 1963 SC 1911, has been cited for the construction of the word "accordingly". It has been construed to mean "in a similar manner". The expression "so far as may be" has always been construed to mean that those provisions may generally be followed to the extent possible. Reference was made to the judgment of Delhi High Court in R. Dalmia v. CIT [1992] 194 ITR 700, for the proposition that the expression "so far as may be" applies to all the provisions and at page 721 of the report the Hon’ble Court has observed :
"How can it be that Parliament would have applied the provisions of section 144B to assessment under section 143(3) of the Act and not to those under sections 147 and 148 of the Act."
11. It has further been stated that the Apex Court in R. Dalmia v. CIT [1999] 236 ITR 4801, has held that in making assessment and re-assessments under section 147, the procedure laid down in sections subsequent to section 139, including that laid down by section 144B has to be followed. The expression "has to be followed" used in this judgment has the mandate of the Apex Court and therefore one has to confine to such a mandate. Reliance was placed on the judgment of ITC v. CCE [2004] 171 ELT (4) 445 (sic). For the analogous expression "so far as may be" appearing in Chapter IV of the Act, reliance was also placed on another judgment of the Supreme Court in C.A. Abraham v. ITO [1961] 41 ITR 425 . In the present appeals, the revenue has not shown any other provision by which the Income-tax Officer is authorized to make an order of assessment under the Act. The Full Bench of Kerala High Court in Mrs. Lally Jacob v. ITO [1992] 197 ITR 439 , has also observed this and the judgment of Kerala High Court has the approval of Supreme Court in K. Govindan & Sons’ case (supra).
12. On the proposition that there exists a fiction of law as the return filed pursuant to notice under section 148 is deemed to be a return under section 139 of the Act, reference was made to the judgment of Commissioner Of Income Tax, Delhi v. S. Teja Singh [1959] 35 ITR 408 (SC), 413 by stating that deeming provisions are to be extended to the legitimate purpose for which they are enacted. Furthermore, there is no inconsistency between section 143(2) and section 148, the same procedure has to be followed in an assessment or re-assessment under section 147. Reference was made to the decision of Andhra Pradesh High Court in CIT v. Supreme Construction Co. [1995] 213 ITR 1371.
13. CBDT Circular No. 549, dated 31-10-1989 reported in 182 ITR (St.) 1, para 5.13, has also been referred to where it is stated that the department must serve the notice on the assessee as required by the proviso to section 143(2) of the Act, within the period specified therein. If the assessee does not receive the notice, he can take it that the return filed by him had become final. The Circulars of Board are binding on the revenue authorities. Reliance was placed on the judgments in CCE v. Dhiren Chemical Industries [2002] 172 CTR (SC) 670, Dabur India Ltd. v. Commissioner Of Central Excise, Meerut [2003] 157 ELT 129 (SC) and UOI v. Azadi Bachao Andolan [2003] 263 ITR 7062 (SC).
14. It has further been contended that the proviso has to be treated as mandatory. The role of proviso came for consideration in several judgments. In CIT v. Indo Mercantile Bank Ltd. [1959] 36 ITR 1 (SC), it has been stated that a proviso has to operate in the same field as the main section. In Kedar Nath Jute Mfg. Co. Ltd. v. CTO AIR 1966 SC 12, the effect of proviso according to ordinary rules of construction, is to except out of the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it. Proviso, therefore, has to be treated as functional. It cannot be ignored. Otherwise, main section will become otiose.
15. Further reference has been made to the judgment in the case of Vipin Khanna v. CIT [2002] 255 ITR 2201 (Punj. & Har.), for the proposition that service of notice within twelve months period as per proviso to section 143(2) is essential. Non-service of notice would render the return invalid. Cases cited are Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC) and A.C. Metal Works v. CIT [1967] 66 ITR 14 (Raj.). It is a jurisdictional requirement to serve notice within the period specified. Lack of jurisdiction cannot be repaired. Assessee cannot confer jurisdiction where limitation has expired. In P.V Doshi v. Commissioner Of Income-Tax, Gujarat [1978] 113 ITR 22 (Guj.), difference in irregularity and illegality has been explained. In K.M Sharma v. Income Tax Officer, Ward 13(7), New Delhi [2002] 254 ITR 7722 (SC), it has been held that a provision regulating period of limitation must receive strict construction.
16. Shri Rastogi also filed the analysis of Lucknow Special Bench order in Nawal Kishore & Sons, Jewellers v. Dy. CIT [2003] 87 ITD 407 . The judgment of the Special Bench was that in contradistinction to the assessment under section 143(3), where jurisdiction is assumed by issue of notice under section 143(2) within the time specified, under section 158BC, the power of jurisdiction to make assessment is duly vested with the Assessing Officer. Such power is not controlled by any period/limitation. The Amritsar Bench of the Tribunal in Sharma & Co. v. Asstt. CIT [2004] 85 TTJ (Asr.) 1, has followed the Special Bench decision in Nawal Kishore & Sons Jewellers’ case (supra) for holding that time-limit as envisaged in proviso to section 143(2) will not apply in relation to assessment completed consequent to notice issued under section 148. This was done by paraphrasing the judgment of the Special Bench rendered with respect to section 158BC of the Act.
17. Shri Ajay Vohra, Advocate appearing as intervener for Jayco India (P.) Ltd. contends that after a notice under section 148 is issued, four courses are open to the Assessing Officer, (i) the Assessing Officer may drop the notice, (ii) if assessee files the return he may process the same under section 143(1) of the Act, (iii) if he wants to scrutinize the return, notice under section 143(2) has to be issued, and (iv) if the assessee does not file the return, an assessment under section 144 is made to the best of his judgment. Procedure is also prescribed for making assessment. Broad propositions have been set out in the written note filed. The Full Bench of the Allahabad High Court had occasion to consider the true meaning and import of the similar expression in Jai Kishan Srivastava v. ITO [1960] 40 ITR 222, 226-228, where under section 34(1) of the Indian Income-tax Act, 1922, corresponding to section 148 of the Income-tax Act, 1961 also used the similar expression, i.e., "and provision of this Act shall, so far as may be, apply accordingly as if the notice issued were a notice issued under that sub-section". The relevant observations are reproduced below :
17.1 Construing the aforesaid, Their Lordships held that once such a notice was issued under section 34(1) by virtue of the legal fiction created by the expression "as if the notice were a notice issued under that sub- section", the notice issued was treated as a notice issued under section 22(2) of the Indian Income-tax Act, 1922. The Court observed as under :
"The interpretation by learned counsel for the petitioner that the procedure applicable to proceedings for assessment or reassessment or re-computation under section 34(1)(a) of the Act would be that laid down in section 23 of the Act is undoubtedly correct. Under section 34(1)(a) of the Act, the Income-tax Officer is firstly authorized to serve a notice, in the circumstances mentioned therein, on the assessee or the principal officer of the company, if the assessee is a company, which notice may contain all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and upon the service of such a notice, the Income-tax Officer is authorized to take proceedings for assessment, or reassessment or re-computation. Then comes the direction that the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under sub-section (2) of section 22 of the Act This section thus contains a fiction of law which has been introduced for the purpose of making the procedure laid down in section 23 of the Act applicable to the proceedings for assessment, reassessment or re-computation taken by the Income-tax Officer in pursuance of a notice issued under section 34(1)(a). The fiction of law is introduced by using the words "as if the notice were a notice issued under that sub-section. Clearly the effect of this fiction of law is that, even though a notice under section 34(1)(a) is different from a notice under sub-section (2) of section 22 of the Act, the Income-tax Officer, in taking proceedings for assessment/reassessment or re-computation has to comply with the provisions of the Act which apply when he takes proceedings for assessment in pursuance of a notice under sub-section (2) of section 22 of the Act."
18. The Supreme Court, in the case of A.N. Lakshman Shenoy v. ITO [1958] 34 ITR 275, 297 also observed as under :
". . . It is to be remembered that where an assessment starts with a notice under section 34 of the Indian Income-tax Act (or corresponding section of the Cochin or Travancore Act), all the relevant provisions of that Act apply as effectively as where the assessment starts with a notice under section 22(2)."
19. In the light of the judicial precedents in Tribunal and cases cited at the bar by other counsel and the history of section 148 so traced, Shri Vohra submits that the return filed pursuant to a notice under section 148, for all intent and purposes of the Act, must be assumed and treated to be a return filed under section 139 of the Act. The assessment must, thereafter be made under section 143 or 144 of the Act after complying with all the mandatory provisions of the Act. As a necessary corollary, if the Assessing Officer seeks to verify/scrutinize the return, he must issue notice under section 143(2) of the Act in order to assume valid jurisdiction.
19A. Mr. B. Ramakrishnan and Mr. R. Krishnamurthy, interveners, in their joint written submissions have also stated that if the statutory notice is not served within the time stipulated under proviso to section 143(2), it has to be presumed that the matter has become final and the scrutinizing of the return is not possible after the expiry of time-limit as has also been held in Sri Krishna Mahal v. Asstt. CIT [2001] 250 ITR 3331 (Mad.).
20. The Ld. CIT - DR Sri Rajnish Kumar contends that the Revenue is of the considered view that the proviso to sub-section (2) of section 143 of the IT Act does not apply to the returns of income filed in response to the notices under section 148 of the Act. This conclusion would be clearly discernible after proper and objective appreciation of the relevant provisions of the Act.
20.1 The return of income directed to be filed in terms of the notices under section 148 bear different character as compared to the returns required to be filed under section 139 or required to be filed by a notice under sub-section (1) of section 142 of the Act.
20.2 There are preconditions to be satisfied before the Assessing Officer can assume jurisdiction to start proceedings under section 148, which would lead to filing of such returns.
20.3 As per the provisions of section 139 of the Act, a person has to furnish a return of income by the specified date, if his income or the income of the other person in respect of which he is assessable, exceeds the amount which is not chargeable to income-tax.
20.4 Thus the initiation of proceedings under sections 139 and 148 are quite different and distinct. The purpose of proceedings under section 148 is to bring to tax income, which has escaped assessment. Thus, by looking at the very nature of both the proceedings, it is obvious that the proceedings under section 148 are initiated to correct the omissions creeping in the total income determined in the proceedings initiated after returns furnished under section 139 or 142(1) or ex parte assessments in pursuance of notice under section 142(1).
20.5 In the case of a return furnished under section 139 or in response to a notice under section 142(1) of the Act, the Assessing Officer has to take recourse to the provisions of sub-section (1) of section 143 and then consider whether in his opinion, is it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner. If he arrives at such an opinion, then he shall serve on the assessee a notice requiring him to produce evidence in support of the return filed by him.
20.6 The next step, thereafter, is for the Assessing Officer to make an assessment of total income or loss by an order in writing determining the sum payable by him or refund of any amount on the basis of such assessment.
20.7 The Assessing Officer may not take recourse of section 143(2) of the Act in respect of the returns furnished under section 139 or 142(1) of the Act. In that event, the intimation becomes final. The intimation is not an assessment order as is evident from the provisions of section 143(1)(a)( i) where it is deemed to be a notice of demand under section 156 of the Act. Further insertion of clause (b) in section 154(1) and insertion of "or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making of adjustments", in section 246(1)(a) clearly indicate that the process laid down in sub-section (1) of section 143 from 1-4-1989 cannot be termed as making an assessment under section 143(1) upto 31-3-1989.
20.8 Section 147 mandates the Assessing Officer to assess or reassess "such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned". Power of the machinery to make such assessment is provided in section 148. This section empowers the Assessing Officer to require the assessee to file return of income subject to fulfilment of conditions laid down in sections 149 to 153.
20.9 Section 148 stipulates that the provisions of the Act shall, so far as may be, apply accordingly as if such return were a return to be furnished under section 139. Thus, having required the assessee to furnish a return in response to a notice under this section, the other machinery to make an assessment, as available in section 143, is made available by a fictional provision. However, the applicability of these provisions is restricted only as per the requirement to make assessment.
20.10 The phrase ‘so far as may be’ indicates that only those provisions, which facilitate the achieving of the objective of making an assessment shall apply. Section 143(2) incorporates the requirement of ‘Audi alteram partem’, i.e., right of being heard. This requirement is the essence of making an assessment. Therefore, notice under section 143(2) is required to be served in a case where the return has been filed but the limitation of time for service of this notice would have no application in making the assessment so it is not required to be taken into consideration - Dr. Pratap Singh v. Director of Enforcement [1985] 155 ITR 1661 (SC).
20.11 The proviso to sub-section (2) of section 143 was brought into the statute w.e.f. 1-4-1989 and later amended w.e.f. 1-10-1991. According to the explanatory note circulated vide Circular No. 549, dated 31-10-1989, the purpose was to impose a time-limit for the Assessing Officer to reach a decision whether he considers that notice under section 143(2) is required to be issued in respect of a return furnished under section 139 or in response to a notice under section 142(1) of the Act. This was necessitated because the taxpayer was on tenterhook for two years after furnishing his return, whether his return would be scrutinized or not. The proviso was inserted to bring finality to this situation with the service of notice within one year [Para 14 of Nawal Kishore & Sons Jewellers v. Dy. CIT [2003] 87 ITD 407 (Lucknow) (SB) may be referred to].
20.12 The words "as if" appearing in section 148 are presumptive words and should be given a restricted meaning. The applicability of other provisions of the Act would be limited to wherever and whatever is necessary to make the assessment under consideration. In the case of proceedings under section 147, the Assessing Officer is under obligation to make an assessment as is indicated in the opening line of section 148 which read as "Before making the assessment, reassessment or re-computation under section 147, . . .". The Assessing Officer does not have a choice here to accept the return without making an assessment, an option available to him in respect of returns furnished under section 139 or 142(1) of the Act.
20.13 The proviso to section 143(2) has no application to the proceedings under section 148 as it has no contribution in making the assessment under section 148. The Assessing Officer assumes jurisdiction under section 148 to issue notice only after recording reasons for doing so. The limitation to pass the order is laid down in section 153(2). The proviso to section 143(2) cannot come in way and frustrate the entire exercise in spite of the clear indication that the provisions of the Act only to the extent necessary may apply. The Kerala High Court in the case of Tity Thomas v. TRO [1994] 207 ITR 1072 1, 1076-77, has held that the provisions of a taxing statute laying down the machinery for calculation of the tax or the procedure for its collection have to be construed so as to effectuate the intention of the Legislature, which is to make charge effective and to make the machinery of assessment workable.
20.14 The applicability of the proviso to section 143(2) to the proceedings under section 148 may be examined from another angle. The limitation to pass order under section 147 has been made one year from the end of the financial year in which the notice under section 148 was served w.e.f. 1-6-2001. Earlier this period was two years. There is no corresponding amendment in the proviso. The Assessing Officer is under obligation to pass assessment order within one year but the assessee may furnish the required return at the fag end just before the order is passed. In terms of the proviso the Assessing Officer would have time to issue, notice which would extend much beyond the limitation date. It shows that the Legislature never thought of making the said proviso applicable to the proceed- ings under section 148. Otherwise, the period laid down in the said proviso would have been suitably reduced in conformity with the amendment in section 153(2) of the Act.
20.15 All the relevant provisions have to be construed harmoniously to make the machinery workable. The taxpayer does not have a vested right in the procedural provisions. The Kerala High Court in the case of CIT v. Commonwealth Trust (India) Ltd. [1996] 221 ITR 4741, 480 observed that "a resume of the legal situation re-emphasises the basic principles that the law of procedure has to be approached, understood and appreciated as a helpmate in the course of the process of administration of justice and never as a situation of obstruction or obstacle in regard thereto". Only the principles of natural justice as embedded in sections 142(1) and 143(2) are to be observed while making an assessment. The proviso to section 143(2) has application in respect of returns required to be furnished under section 139 or 142(1) only and the same has no application to returns under section 148 as not required and therefore has to be excluded due to the operation of the phrase "so far as may be".
20.16 The Assessing Officer assumes jurisdiction over the case with the issue of the notice under section 148 and non-issue or late issue of notice under section 143(2) would not take away the said jurisdiction to complete the assessment. The jurisdictional foundation is validly laid and another procedural provision cannot take away the jurisdiction to make the assessment. The text and context have to be considered while analyzing the relevant provisions. (Para 23 of Nawal Kishore & Sons Jewellers v. Dy. CIT [2003] 87 ITD 407 (Lucknow) (SB) may kindly be referred to). Further, reliance has been placed on the decision in the case of CIT v. Banshidhar Jalan & Sons [1994] 207 ITR 488 (Cal.) and Vishwanath Prasad Bhagwati Prasad v. CIT [1993] 202 ITR 4692, 473 (All.)
21. Submissions in respect of question No. 2 made by Ld. CIT-DR are as under :
"Where the assessee has participated in the proceedings so initiated, the doctrine of waiver/acquiescence is attracted. While the want of inherent jurisdiction cannot be cured or made good by consent, where there is only an irregularity in the exercise of jurisdiction, it could be waived. If assessee has participated in the proceedings initiated by the Assessing Officer, then later there can be no complain of lack of jurisdiction. The waiver has to be inferred from such an action. In other words, where the basic jurisdiction exists, the doing of things required to be done in exercise of that jurisdiction may be waived and where a party has acquiesced or waived an irregularity, he cannot afterwards complain of it. Reference may be made to the cases cited by the Revenue in paras 18, 19, 20 & 21 of 87 ITD 407 (SB) and discussion in page 4797 of Vol. 3 of commentary of Chaturvedi & Pithisaria (Vth Edition).
The provisions of the said proviso are not mandatory and rather obligatory and therefore, non-compliance thereof would not render the assessment null and void. The provisions cannot be said to be mandatory unless adverse consequences flow from its non-compliance. Section 143(2) does not bar the order to be passed as laid down in section 153 or 275 of the Act. The purpose of section 143(2) is to afford the assessee an opportunity of being heard. If the ingredients of section 143(2) are not satisfied, the assessment cannot be declared null and void. In following cases, the time-limit have been held to be only directory :
(i )CIT v. Shivanand Electronics [1994] 209 ITR 63 (Bom.)
(ii) Director of Inspection v. Pooran Mall & Sons 96 ITR 390 (SC)
(iii) Topline Shoes Ltd. v. Corpn. Bank [2002] 6 SCC 33 (Paras 6 to 8 at pp. 37-38)".
21.1 Even if the proviso to section 143(2) is held to be applicable to the returns required to be furnished under section 148 of the Act, it has to be only directory because the foundational jurisdiction to make assessment is laid down as soon as the Assessing Officer records his reasons to believe that taxable income has escaped assessment and serves a notice under section 148 on the assessee. With a valid proceedings in existence and mandate to make an assessment, the proviso cannot stand in way of the Assessing Officer to pass the order.
21.2 The present limitation to pass order in a case of proceedings under section 148 as per section 153(2) is one year from the end of financial year in which the notice under section 148 is served. If the said proviso is made strictly applicable, then the Assessing Officer can serve notice under section 143(2) in case of a return furnished under section 148 well beyond the period of limitation to make assessment. This interpretation would result in absurdity and such an interpretation should be avoided.
22. We have heard the parties with reference to material on record and precedents referred. The relevant provisions of section 148 as it stood in the relevant year are reproduced hereunder :
"Section 148 : Issue of notice where income has escaped assessment - (1) Before making the assessment, reassessment or re-computation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.
(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so."
23. Prior to 1-4-1989, the only difference in the provisions was that a notice calling for the return was to be issued containing all or any of the requirements which may be included in a notice under section 139(2) of the Act deeming it a notice under that section, while present provision mandates issuance of notice under section 148 and refers to "as if such return were a return required to be furnished under section 139".
24. Relevant section 143(2) and proviso thereto in assessment year 1995-96 read as under :
"Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under paid the tax in any manner serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office 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."
25. Both these sections, i.e., sections 148 and 143(2) are contained in Chapter XIV and prescribe procedure for making assessment as detailed in sections 139 to 158. Section 147 itself is a machinery provision for assessing escaped income for a particular assessment year. Such assessment can be a first assessment if no return has been filed earlier and reassessment if the same has been filed earlier. But the section does not prescribe any separate methodology of computation of such income, the procedure of such computation or the rate at which such income is to be taxed. In the absence of the same, the provisions from section 139 and onwards become applicable, i.e., starting from section 139 prescribing the form, particulars etc., to be furnished with the return, signed in the manner prescribed by section 140. Section 140A prescribes payment of taxes on the basis of returned income. An enquiry must then be held as required by section 142 and an assessment be made as prescribed under section 143. Section 143(1) of the Act permits the Assessing Officer to frame the assessment on the basis of information available in the return. Section 143(2) talks of a situation where a return filed or in response to a notice calling of return under section 142 in which the Assessing Officer feels it necessary or expedient, making sure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him on a date to be specified therein, either to attend his office or to produce or cause to be produced therein evidence where the assessee may rely in support of the return. This section has a proviso, which says that no notice under this section shall be served on the assessee after the expiry of twelve months after the end of the month in which the return is furnished.
26. The purpose of serving the notice has been explained in Circular No. 545, dated 31-10-1989 as reported in 182 ITR (St.) as under :—
"A proviso to sub-section (2) provides that a notice under the sub-section can be served on the assessee only during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later. This means that the Department must serve the said notice on the assessee within this period, if a case is picked up for scrutiny. It follows if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started."
27. From the reading of the proviso as it stands in the relevant year and the above circular it is clear that Assessing Officer has got no power to make a scrutiny assessment unless he issues a notice in the prescribed time of 12 months making his intentions clear to the assessee. Further, the only procedure of making assessment which the Act prescribes are under sections 143(1), 143(3) and 144 (incidentally we may point out that provisions of Chapter XIV-B prescribing for a separate assessment of undisclosed income are no more applicable on searches initiated after 31-5-2003), therefore, one has to follow the procedure laid down there. Here it is significant to quote the passage from the Full Bench decision of the Kerala High Court in Mrs. Lally Jacob v. ITO [1992] 197 ITR 439 , which was quoted with approval by the Apex Court in K. Govindan & Sons v. CIT [2001] 247 ITR 1921 as under :
"A reading of sections 147 and 148 makes it clear that, at any rate, an assessment for the first time made by resort to section 147 is a regular assessment. Section 148 enjoins the Income-tax Officer before making an assessment under section 147 to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139. The further provision in that section is very significant which provides that the aforesaid notice has to be treated as if it is a notice under section 139(2) and that all the provisions of the Act shall apply to the subsequent procedure and the final assessment. In other words, the notice issued under section 148 has to be deemed to be a notice under section 139(2) and, if the other provisions of the Act have to be applied, an assessment in pursuance of that can be made only under section 143 or section 144. We were not shown any other provision by which the Income-tax Officer is authorized to make an order of assessment under the Act. The provisions contained in section140A also give an indication that an assessment made in pursuance of a notice under section 148 is a regular assessment under section 143 or section 144, for section 140A(2) provides that any admitted tax paid in pursuance of section 140A(1) shall be deemed to have been paid towards the regular assessment under section 143 or section 144. It is pertinent to note that section 140A(1) deals with a return required to be furnished under section 139 or section 148. That makes the provision clear that an assessment made under section 147 also will be a regular assessment under section 143 or section 144. Accordingly, we hold that any assessment made for the first time by resort to section 147 will also be a regular assessment for the purpose of invoking section 217 of the Act. With great respect, we dissent from the view expressed in certain decisions referred to earlier in this judgment which take a contrary view."
Essentially, therefore, there is no choice to apply part of the section and leave the other part when the effect has to be given to the scheme contained in the whole section i.e. section 143(2) of the Act along with the proviso. Proviso, therefore, cannot be divorced from the main section. It has to be construed with reference to the preceding parts of the section to which it is appended and as subordinate to the main provisions of the Act. It has been said that there is no rule that an Act containing a proviso is to be construed as to its first or enacting part without reference to the proviso. The section must be construed as a whole, each portion throwing light on the rest.
Lord Wright in Lemmings v. Kalley (1940) A.C. 206 at page 229 said :
"The proper course is to apply the broad general principle of construction, which is that a section or enactment must be construed as a whole, each portion throwing light if need be on the rest. I do not think there is any other rule even in the case of a proviso in the strictest and narrowest sense."
28. The ld. departmental representative Shri Rajnish Kumar emphasized that the provisions of sub-section (2) of section 143 and other provisions mentioned therein are to be applied to the extent possible/practicable and not in the literal sense. The proviso in section 143(2) which is a part of jurisdictional aspect would be inapplicable to assessment/reassessment to be made under section 147 of the Act. Reference has been made to the decision of Special Bench at Lucknow of the Tribunal in the case of Nawal Kishore & Sons Jewellers v. Dy. CIT [2003] 87 ITD 407 , particularly, contending that the jurisdiction to assess or reassess is conferred by issue of notice under section 148 of the Act. We, however, are not inclined to agree with the learned departmental representative for the reasons given in subsequent paragraphs.
29. Section 148 confers jurisdiction merely to issue notice, calling for a return, in cases where income has escaped assessment, for making assessment or reassessment as provided under section 147. This section however does not make the assessment or reassessment mandatory but leaves it to the discretion of the Assessing Officer when read with section 147 of the Act. Section 147 has used the word "may" for making assessment or reassessment so as to give discretion to the Assessing Officer. For brevity, section 147 is reproduced as under :
"Section 147 :
If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section or re-compute the loss or the depreciation allowance or any other allowance as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."
30. Now it should be appreciated that there is vast difference between an assessment made under section 148 and the assessment made under section 158BC of the Act. They are as under :
1.Chapter XIV-B is a complete code for assessment of search cases. Reassessment under section 148 falls under Chapter XIV which prescribes the procedure for making assessment and incorporates sections 139, 142, 143, 144, 147, 148 and 153 etc. Thus the two falls under different chapter.
2.Sub-section (1) of section 158BA clearly spells out that where search takes place, the Assessing Officer shall proceed to determine the undisclosed income of the person in accordance with the procedure laid down in this chapter.
3.Explanation to sub-section (2) of section 158BA provides that assessment made under this chapter shall be in addition to the regular assessment.
4.The procedure of completing the block assessment has been laid down under section 158BC.
5.158BE provides the limitation of completing the block assessment.
6.158BFA makes the provision of levying interest and penalty in block cases.
7.Section 113 provides the rate at which income determined under the block is to be taxed.
31. In contrast, section 148 does not provide any methodology for computing the income on reassessment or assessment. On the contrary, it creates a legal fiction that such return shall be treated as one made under section 139. By the creation of such legal fiction all the procedures prescribed in and subsequent to section 139 automatically apply in toto. It is a settled principle that a legal fiction has to be taken to its logical conclusion and therefore what is valid for a return under section 139 will be valid with equal force to a return filed under section 148. Therefore, the proviso will apply to a return filed in response to notice under section 148. It is pertinent to note that clause (b) of section 158BC specifically talks of the applicability of section 142, sub-sections (2) and (3) of section 143. There is an omission of sub-section (1) to section 143. This chapter clearly prescribes its own return, form of own methodology for computation of income but falls back on the provisions of sections 142, 143, 144 etc. only for procedural aspect. If the proviso is made applicable, then a clash erupts between the provisions of Chapter XIV-B with section 143(2) as the assessment is mandatory under this chapter. This would be clear by reading the provision of sub-section (1) of section 158BA, which states as under :
"the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this chapter."
32. The word used in the above lines is ‘shall’, thus making assessment mandatory. If the notice is not issued in time then no assessment can be framed and a situation arises which this chapter does not envisage. Further, the purpose of proviso was only to make the assessee aware that his assessment is going to be taken or not under scrutiny. This is not required with this class of assessee as he is already aware that his assessment for the block period is going to be made.
Decision of Lucknow Bench of the Tribunal therefore cannot be made applicable to the provisions of Chapter XIV, which are different to the provisions of special provisions of assessment contained in Chapter XIV-B of the Act.
33. The learned D.R. in his written submission has pointed out that there is a marked difference in the return filed pursuant to notice under section 148 and a return under section 139 or one required to be filed under section 142(1). This difference was highlighted by pointing out that time- limit of filing return under both the provisions are different. The appeal provisions under section 246 and limitation provision under section 153 are different. These are trite arguments and have already been considered in numerous judgments, some of which are as follows :—
a. Mrs. Rama Sinha v. CIT [2002] 256 ITR 481 1, 486-487 (Punj. & Har.)
b. R.B. Seth Shreeram Durga Prasad & Fateh Chand Nursing Das (Export Firm) v. CIT [1989] 168 ITR 6192 (Bom.)
c. R. Dalmia (AOP) v. CIT [1992] 194 ITR 700 (Delhi)
d. R. Dalmia v. CIT [1999] 236 ITR 480 24 (SC)
e. Mrs. Lally Jacob v. ITO [1992] 197 ITR 439 (Ker.) (FB)
f. K. Govindan & Sons v. CIT [2001] 247 ITR 192 25 (SC)
g. CIT v. Usha Aggarwal [1989] 178 ITR 40626 (Punj. & Har.).
Suffice to say that answer to all these lay in the following passage of the Apex Court as stated in R. Dalmia v. CIT [1999] 236 ITR 480 27 (SC), a judgment strongly relied by Shri Sampath, the counsel for the appellants.
"As to the argument based upon sections 144A, 246 and 263, we do not doubt that assessments under section 143 and assessments and reassessments under section 147 are different, but in making assessments and reassessments under section 147 the procedure laid down in sections subsequent to section 139, including that laid down by section 144B, has to be followed."
34. Now we come to one of the main contentions of the department that section 148 uses the phrase ‘so far as may be’ and therefore the procedural set up in Chapter XIV will apply to the extent it is practical or possible. Consequently, the same is not applicable to the return filed in pursuance to notice under section 148. To buttress their argument, they further relied on the cases of Dr. Pratap Singh v. Director of Enforcement [1985] 155 ITR 1664 (SC), Ujagar Prints v. Union of India [1989] 179 ITR 317 (SC) and CIT v. Bansidhar Jalan & Sons [1994] 207 ITR 488 (Cal.) and Vishwanath Prasad Bhagwati Prasad v. CIT [1993] 202 ITR 469, 473 (All.) for the proposition that jurisdictional foundation is validly laid by issue of notice under section 148 and cannot be taken away by a procedural section.
35. In Dr. Pratap Singh’s case (supra) the Apex Court held that the said phrase would mean, "that those provisions may be generally followed to the extent possible". Similarly in Ujagar Prints’ case (supra) the Apex Court held that it would mean ‘to the extent necessary and practical’. Now saying so, would not mean that what is not followed is not necessary to be followed as the provisions were to be broadly followed and not in its entirety. We are afraid such type of construction would render the adoption of procedure as prescribed in sections 139 to 143 and other provisions as meaningless. The phrase has been used so as to provide that the provision would be generally applicable but to the extent it is not inconsistent with the express provisions of the adopting legislation. Now the Special Bench Lucknow specifically pointed out the inconsistency with the provisions of Chapter XIV if the proviso is made applicable to the Block assessment. No such inconsistency has been pointed out to us in this regard if the proviso is applied to section 147. A feeble attempt was made by the learned D.R. to highlight the so called inconsistency in the provisions of section 147 and proviso by citing an example that in case a notice under section 148 is served in July 2001, then assessment would be required to be completed by 31-3-2003. However, assessee may choose to file return on 31-1-2003. Then as per section 153(2) assessment has to be completed by 31-3-2003 whereas as per the proviso Assessing Officer still has time to issue notice under section 143(2) upto 31-1-2004. We are afraid, this argument is erroneous on its face. The proviso is applicable to a valid return and not to an invalid return. Whenever a notice is issued under section 148 calling for a return, a time-limit of filing return will be prescribed (normally a period of 30 days from the date of receipt of notice is allowed). Assessing Officer will never issue a notice granting the assessee unlimited period to file the return. If he does so, he would be doing so at his own peril. If the return is not filed within that period, that would not amount to a return pursuant to notice under section 148. Therefore a situation envisaged by the ld. D.R. would not arise. Although a situation is quite possible where the period available for filing the return and the period available to complete the assessment may overlap. But this overlapping is based on a misconception that proviso gives a vested right to the Assessing Officer to wait till the last day of the 12th month to issue notice. In the given circumstances, notice could be issued earlier as the Assessing Officer is supposed to act diligently and cannot be expected to act carelessly when the question of due share of tax of the State is concerned. It is pertinent to note that the proviso states the outer limit and not the minimum limit within which a notice could be issued if the other provision warrants this period would get reduced. Supposing that a view is taken that proviso is not applicable and if notice under section 148 was served on 30-3-2002, in that case outer limit for completing assessment would be 31-3-2003. In such a case if the assessee does not file return till the fag end, would the Assessing Officer not complete the assessment/reassessment or was he helpless. The answer is simply no. He would proceed to complete the same by resorting to the provision of section 144. Therefore, proviso nowhere comes in conflict with the provisions of section 147. Had the proviso curtailed the limitation period as prescribed under section 153(2), then certainly it will not apply. Assessing Officer has to be more vigilant in making assessment pursuant to notice under section 148. Therefore, in almost all cases, he will issue notice to the assessee for completion of assessment before the expiry of 12 months from the date of filing a return in response to notice under section 148 and no extra burden is cast upon him by following the proviso. We therefore do not subscribe to the view that it is not practical to follow the proviso. Further, we may also point out that these words have been considered by the Apex Court in R. Dalmia’s case (supra) in the context of section 148 only and applicability of section 144B to the assessment made under section 147. There the contention of the assessee was that the extended limitation as per Explanation IV to section 153 would not apply to assessment made under section 147 since the same is not an assessment under section 143(3) and consequently the provision of section 144B would not apply. The Court answered the said contention as under :—
"It was submitted on behalf of the assessee that the provisions of section 144B were not applicable to assessments and reassessments under section 147 because section 144B stated that it applied only to "an assessment to be made under sub-section (3) of section 143". The submission cannot be accepted because the words we have quoted from section 148 cannot be ignored. A notice having been issued under section 148, the procedure set out in the sections subsequent to section 139 has to be followed "so far as may be". Section 144B is a procedural provision. It fits into the procedural scheme as hereinbefore noted and, therefore, it cannot be excluded by reason of the use of the words "so far as may be". Nor is there any other good reason to exclude it from the procedure to be followed subsequent to notice under section 148."
On the same analogy the provisions of section 143 cannot be ignored.
35A. Finally, by placing reliance on the Apex Court decision in Ujagar Prints v. Union of India [1989] 179 ITR 317 (SC), the ld. DR has argued that it being a referential legislation only machinery provision of section 143 will be applicable and nothing more. This argument of the ld. D.R. is misplaced. By reading the whole judgment, it will be clear that the said judgment does not advance the case in their favour. Before adverting to the same, it is relevant to understand the background of the same. The aforesaid judgment pertains to the dispute under ‘The Central Excises and Salt Act, 1944 (CE Act in short) and The Additional Duties of Excise Act, 1957 (AD Act in short)’. The AD Act, 1957 did not prescribe any procedure for levy and collection of duty leviable under that Act, but provided that the procedure in the CE Act should be followed. The specific dispute was that it did not define the word ‘manufacture’, but by virtue of section 2, it provided that for the purposes of the Act, definition of specified goods as contained in CE Act be adopted. Later, by an Amendment Act, 1980 the definition of ‘manufacture’ in CE Act was enlarged to include ‘processing’. The assessee contended that the enlarged definition of manufacture was not applicable for the purposes of AD Act as the charge of duty in the said Act is determined under section 3 and is only quantified in section 2. Therefore, only the procedural provisions of CE Act would be applicable and not the substantive provisions. In any case the definition as stood in CE Act, 1957 would apply and any subsequent changes made thereto would be inapplicable.
36. It is in this background the Apex Court discussed the nature of referential legislation and described it as under (pages 360-361) :—
"Referential legislation is of two types. One is where an earlier Act or some of its provisions are incorporated, by reference, into a later Act. In this event, the provisions of the earlier Act or those so incorporated, as they stand in the earlier Act at the time of incorporation, will be read into the later Act. Subsequent changes in the earlier Act or the incorporated provisions will have to be ignored because, for all practical purposes, the existing provisions of the earlier Act have been re-enacted by such reference into the later one, rendering irrelevant what happened to the earlier statute thereafter. Examples of this can be seen in Secretary of State v. Hindustan Co-operative Insurance Society AIR 1931 PC 149, Bolani Ores Ltd. v. State Of Orissa AIR 1975 SC 17, Mahindra and Mahindra Ltd. v. Union of India [1979] 49 Comp. Cas. 419 (SC); AIR 1979 SC 798. On the other hand, the later statute may not incorporate the earlier provisions. It may only make a reference of a broad nature as to the law on subject generally, as in Bajya v. Gopikabai (Smt.) [1978] 3 SCR 561, or contain a general reference to the terms of an earlier statute which are to be made applicable. In this case, any modification, repeal or re-enactment of the earlier statute will also be carried into the later, for here, the idea is that certain provisions of an earlier statute which become applicable in certain circumstances are to be made use of for the purpose of the later Act also. Examples of this type of legislation are to be seen in Collector of Customs v. Nathella Sampathu Chetty [1962] 3 SCR 786, New Central Jute Mills Co. Ltd. v. Assistant Collector [1971] 2 SCR 92 and Special Land Acquisition Officer, City Improvement Trust Board v. P. Govindan [1977] 1 SCR 549. Whether a particular statute falls into the first or second category is always a question of construction. In the present case, in my view, the legislation falls into the second category. Section 3(3) of the 1957 Act does not incorporate into the 1957 Act any specific provisions of the 1944 Act. It only declares generally that the provisions of the 1944 Act shall apply "so far as may be", that is, to the extent necessary and practical, for the purposes of the 1957 Act as well."
Later on at page 362, the Court held as under :—
"There is no reason or logic why all the incidents attaching under the earlier legislation, insofar as they are not clearly inconsistent with the later one, should not be extended to the later legislation as well."
And concluded by saying as under :
"In the circumstances, I agree that we should give full and literal effect to the language of section 3(3) and hold that it has the effect not only of attracting the procedural provisions of the 1944 Act but also all its other provisions including those containing the definition."
37. From the above passages we do not find any limitation put by the Apex Court in the applicability of the referential legislation. Therefore we are of the view that full provisions of section 143 including the proviso, would be applicable to assessment/reassessment done under section 147.
38. The learned D.R. further stated that even if it is assumed that the proviso to section 143(2) of the Act is applicable to returns filed pursuant to notice issued under section 148, the failure to issue notice within the prescribed time of 12 months will not render the assessment as a nullity. Such a failure is to be treated as a procedural lapse which will be construed as mere irregularity and not illegality. This is so because the limitation provisions are directory and not mandatory. For this proposition reliance has been placed on the decisions rendered in the cases of—
l CIT v. Shivanand Electronics [1994] 209 ITR 631 (Bom.)
l Director of Inspection v. Puranmal & Sons [1974] 96 ITR 390 (SC)
l Topline Shoes Ltd. v. Corpn. Bank [2002] 6 SCC 33 [Paras 6 to 8 at pp. 37-38]
39. It may be noted that no doubt, the foundation to assess or reassess is laid by issue of a valid notice under section 148, but such jurisdiction is subject to further compliance as has been stipulated in the statute itself. If compliance of the proviso is not made, the very purpose of creating the proviso is defeated, i.e., uncertainty of assessee with respect to assessment shall continue. It is again a settled principle of interpretation that no construction of a statute should be made in a manner, which leaves a statute redundant. On the contrary, law requires a strict interpretation of the proviso. We may here clarify that provisions of limitation are to be strictly construed. An illuminating reference to this aspect can be found in the following observation of the Supreme Court in the case of K.M Sharma v. Income Tax Officer, Ward 13(7), New Delhi [2002] 254 ITR 772 2 :—
"A fiscal statute more particularly a provision such as the present one regulating period of limitation must receive strict construction. The Law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigants for an indefinite period on future unforeseen events."
If limitations are not followed strictly chaotic situation would follow.
40. In the light of the analysis of the relevant provisions of law and judicial precedents, we are of the considered view that the return filed pursuant to notice under section 148 of the Act must be assumed and treated to be a return filed under section 139 of the Act and the assessment must thereafter be made under section 143 or 144 of the Act after complying with all the mandatory provisions. Accordingly, it is incumbent upon the assessing authority to issue notice under section 143(2) of the Act within the period as stipulated in the proviso thereunder. In this view of the matter, the first question before the Special Bench is answered in affirmative.
41. So far as the issue on question No. 2 is concerned, we hold that no assessment can be made if the notice under section 143(2) of the Act is not served within the time prescribed by the proviso under section 143(2) of the Act and thus the return filed will be deemed as accepted.
42. In the case of appellants/Shri Raj Kumar Chawla, Rajiv Chawla and Ajay Chawla, notice under section 148 was issued on 26-3-1998. Shri Ajay Chawla filed the return of income on 28-4-1998 but notice under section 143(2) of the Act has been issued on 13-7-1999 for 21-7-1999. Shri Raj Kumar Chawla filed return on 15-5-1998 but notice under section 143(2) is stated to have been issued on 13-7-1999 and served on him on 21-7-1999. In the case of Shri Rajiv Chawla the return has been filed on 15-5-1998 and the notice under section 143(2) was issued on 13-7-1999 for 21-7-1999. Parties are not able to state the exact date of service of notice but the admitted fact is that the notice under section 143(2) in respect of the three appellants have been served after the expiry of period of 12 months as provided under proviso to section 143(2) of the Act. Since the assessing authority has failed to serve the notices, within the statutory period provided under section 143(2) of the Act. The Assessing Officer had lost its jurisdiction to make assessment under section 143(3), read with section 147 of the Act in the light of the decision reached by the Special Bench.
43. The interveners shall have the orders in their appeals from the respective Benches as the only purpose of granting an intervention, is to entitle the interveners to address arguments in support of one or the other side. This is so held by the Apex Court in Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 1. Since we have decided in assessee’s favour the interveners may take advantage of that order.
44. In the result, the appeals stand allowed.
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