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Pfizer Ltd. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1983)3ITD67(Mum.)
AppellantPfizer Ltd.
Respondentincome-tax Officer
Excerpt:
.....by the amount paid out of the general reserve for the year.2. the assessee's appeal against the reassessment was both on the validity thereof and the validity of the notice served. the commissioner (appeals) rejected the assessee's claim. it is thus that the matter is in appeal before the tribunal.3. the learned counsel for the assessee has pointed out at least three palpable defects in the reassessment : firstly, that there was no information justifying the reopening of the assessment; secondly, even if there was information, the ito could have made a reassessment only in respect of items for which admittedly there was further information ; and thirdly, that the notice not having been validly served, the reassessment was ab initio void and liable to be set aside.4. after hearing the.....
Judgment:
1. An original assessment was made in this case (sic), subsequently the ITO received some information from the Internal Audit section of the department leading to a belief that the income has escaped assessment.

He, therefore, reopened the surtax assessment made for the year under appeal, under Section 8(b) of the Companies (Profits) Surtax Act, 1964 ('the Act'). The assessment was made under Section 6(2) of the Act, wherein the ITO reduced for the purposes of capital computation a proportionate amount under Rule 4 of the Second Schedule to the Surtax Act. He also reduced the capital by the amount paid out of the general reserve for the year.

2. The assessee's appeal against the reassessment was both on the validity thereof and the validity of the notice served. The Commissioner (Appeals) rejected the assessee's claim. It is thus that the matter is in appeal before the Tribunal.

3. The learned counsel for the assessee has pointed out at least three palpable defects in the reassessment : firstly, that there was no information justifying the reopening of the assessment; secondly, even if there was information, the ITO could have made a reassessment only in respect of items for which admittedly there was further information ; and thirdly, that the notice not having been validly served, the reassessment was ab initio void and liable to be set aside.

4. After hearing the parlies we would decide the appeal mainly on the last ground relating to the service of the notice. In view of our decision on this point, the other grounds require no decision.

5. The original assessment was completed on 30-11-1971. Evidence on record shows that a notice for reopening was issued on 30-3-1974 and served on 2-4-1974. According to the provisions of Section 8(6), a notice to be valid should be served before 31-3-1974. The Commissioner (Appeals) has found as a matter of fact that the parties before us accept that a valid notice duly complete in all respects and issued by registered post, properly addressed and prepared, was sent to the assessee on 30-3-1974. 31-3-1974 and 1-4-1974 happened to be holidays.

The notice was served on 2-4-1974. The Commissioner (Appeals) upheld the service of the notice as proper, relying on the provisions of Section 27 of the General Clauses Act. For the department reference is made to the decision of the Punjab and Haryana High Court in the case of Jai Hanuman Trading Co. (P.) Ltd. v. CIT [1977] 110 ITR 36 (FB) to stress the point that what was required was only issuance of the notice and not service thereof.

6. Section 148 of the Income-tax Act, 1961 ('the 1961 Act'), provides for service of a notice on the assessee. The time-limit for notice obtains in Section 149 of the 1961 Act which provides that no notice under Section 148 shall be issued after the prescribed time-limit. The time-limit for taking action for reassessment under the Companies (Profits) Surtax Act obtains at Section 8(6) of the same, which runs as under : (b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that chargeable profits assessable for any assessment year have escaped assessment or have been under-assessed or assessed at too low a rate or have been the subject of excessive relief under this Act, he may, in cases falling under Clause (a) at any time and in cases falling under Clause (b) at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Section 5 and may proceed to assess or reassess the amount chargeable to surtax and the provisions of this Act shall, so far as may be, apply as if the notice were a notice issued under that section.

It would be clear that Section 8(b), which provides the limitation for reassessment proceedings, is similar to Section 148 and not Section 149. Section 8 even as Section 148 refers to the service of a notice.

In Jai Hanumaris case (supra) referred to by the learned counsel for the department a Full Bench of the Punjab and Haryana High Court as at page 44 of the report refers to the dis-similarity between Section 34(1) of the 1922 Act and Section 149 of the 1961 Act for coming to the conclusion that for the purpose of the 1961 Act, issuance is relevant rather than service. Their Lordships observed : ...The departure from the old provision in Section 34 of the 1922 Act is a conscious departure and it is our duty to give full effect to it.... (p. 45) The decision cited by the department in effect thus supports the assessee'e case, Section 8 of the Act being similar to Section 34 of the 1922 Act, rather than Section 149 of the 1961 Act. Under the Act, therefore, the limitation is to be spelt out from service of the notice rather than issuance of the same. Though the notice has been issued in this case on 30-3-1974, it was served only after the due date, viz., 31-3-1974. The notice, therefore, must be held to have been not validly served and the reassessment made on the basis of such a notice should be cancelled.

7. In view of our above finding, the other points raised are not gone into.


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