Karnataka High Court
The Commissioner Of Income Tax vs Sri Paul Noel Rodrigues on 25 August, 2014
Bench: N.Kumar, Rathnakala
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 25TH DAY OF AUGUST, 2014
PRESENT
THE HON'BLE MR.JUSTICE N.KUMAR
AND
THE HON'BLE MRS.JUSTICE RATHNAKALA
INCOME TAX APPEAL NO.796 OF 2008
BETWEEN:
1. The Commissioner of Income-Tax,
Central Circle,
C.R. Building,
Attavara,
Mangalore.
2. The Asst. Commissioner of Income-Tax,
Central Circle,
C.R. Building,
Attavara,
Mangalore.
...APPELLANTS
(By Sri K.V. Aravind, Adv.)
AND:
Sri Paul Noel Rodrigues,
Carmel Corner,
New Shivbagh Road, Kadri,
Mangalore.
...RESPONDENT
(By Sri. A.Shankar and Sri M.Lava, Advs.)
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This Income Tax Appeal is filed under Section 260-A of
I.T. Act, 1961 arising out of Order dated 29/02/2008 passed
in IT(SS)A No.61/BANG/2007, for the Block Assessment
Period 01/04/1987 to 24/09/1997, praying that this
Hon'ble Court may be pleased to:
i. Formulate the substantial questions of law stated
therein,
ii. Allow the appeal and set aside the orders passed by
the Income-Tax Appellate Tribunal, Bangalore in
IT(SS)A No.61/BANG/2007 dated 29/02/2008 and
confirm the order of the Appellate Commissioner
confirming the order passed by the Assistant
Commissioner of Income Tax, Central Circle,
Mangalore, in the interest of justice and equity.
This Appeal coming on for Hearing this day,
N.KUMAR J., delivered the following:
JUDGMENT
This appeal is preferred by the Revenue, challenging the order passed by the Tribunal which has allowed the appeal filed by the assessee directing for deletion of Rs.50,25,000/-.
2. The assessee is engaged in the business of finance, chit funds, real estate and construction. He is a partner in M/s.Erods Caterers, M/s.Erods Investment Corporation and Managing Partner of other companies. A search under Section 132 of the Income Tax Act, 1961 (hereinafter referred -3- to as 'the Act') was conducted in the business premises as well as the residential premises of the assessee on 24.09.1997. A notice under Section 158 BC of the Act on 26.02.1998, calling for the return of the income tax for the block period of 01.04.1987 to 24.09.1997 was served on the assessee, requiring him to file his return of undisclosed income within 16 days of the service of notice. The assessee filed the return of undisclosed income on 12.08.1999, declaring an undisclosed income of Rs.1,42,297/-. There was a delay of 17 months in filing the return. The assessment was completed under Section 158BC r/w. Section 144 of the Act on 30.09.1999, determining the undisclosed income of Rs.2,45,57,160/- as the assessee has not filed any explanation or objections to the issues raised in the notice under Section 144 of the Act, dated 05.07.1999. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by vide order dated 24.10.2000, set aside the assessment directing the assessing authority to re-examine the facts of the case by giving -4- reasonable opportunity to the assessee. Subsequently, a notice under Section 143 (2) and 142 (1) was served. The assessee approached his chartered accountant and put forth his defense. After hearing the assessee, the assessing authority passed an order computing the undisclosed income at Rs.51,67,300/-. Aggrieved by the said order, the assessee preferred another appeal before the Commissioner of Income Tax (Appeals), who dismissed the appeal. Aggrieved by the said order, the assessee preferred an appeal to the tribunal, which allowed the appeal-in-part and granted relief to an extent of Rs.50,25,000/- by deleting the said amount. It is against that order, the revenue is in this appeal.
3. Learned Counsel for the assessee raised preliminary objections to the effect that the assessment order passed by the assessing authority was clearly barred by law of limitation and the tribunal before whom the said ground was urged has declined to answer the said question on the ground that the scheme of framing assessment requires total co-operation and faith, which appears to be -5- lacking and insofar as the assessee is concerned, may be the rigours of search proceedings had left the assessee with trying to gather his confidence along with professional advise sought for to explain the basic entries to be related inter se ending on a happy note. Therefore, they were of the view that the deletion of additions on merits, they refrain from commenting on various aspects leading to limitation and search material relied upon along with statement under Section 132 of the Act to establish undisclosed income. Accordingly, to the Tribunal it was purely academic and leading to no fruitful conclusion. Therefore, he submits that the question of limitation is purely question of law and also strikes at the jurisdictional authority to pass an order and it should be considered at the threshold. Therefore, he submits that the substantial question of law may be framed by the High Court and may not decide the case on merits.
4. When the assessee raised the said question, a duty was cast on the authorities to consider the said question of limitation. If the assessment order was passed beyond the period of limitation prescribed under law and no order can -6- be passed and no liability is fastened on the assessing authority. In that view of the matter, the Court is empowered by virtue of Section 260A (4) and (6) to formulate the question and hence, we formulate the following substantial question:-
Whether, Section 153(2A) of the Act is attracted to a block assessment framed in pursuance to an order under Section 250 and Chapter XIV B of the Act?
5. The undisputed facts are:
The assessing officer passed an order under Section 158 BC r/w. Section 144 of the Act on 30.09.1999 for the block period 01.04.1987 to 24.09.1997, under chapter XIVB of the Act. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) against the said order under Section 250 of the Act. The appellate authority by order dated 24.10.2000 passed an order setting aside the assessment and directing the assessing officer to re-examine the facts of the case. The order of the Appellate Commissioner was received on 15.01.2001. After hearing -7- the parties, the assessing officer passed an order on 28.03.2003, again under Section 158 BC r/w. Section 250 of the Act. The question for consideration is, whether this order passed on 28.03.2003 is in time as stipulated under Section 153 (2A) of the Act or not?
6. Learned Counsel for the Revenue contended that Chapter XIV B of the Act is complete code in itself, on the subject of prescription and computing limitation for complete block assessment. Section 153 (2A) prescribes the time limit for orders passed under Sections 153 (1), 153 (1A), 153 (1B) and 153 (2). In view of the non-obstante clause and Section 158 (BC) is not included in the said provision, as it has no application. In support of his contention, he relies on the judgment of the Rajasthan High Court in the case of Commissioner of Income Tax Vs. Ramesh Chand Soni reported in (2005) 194 CPR (Raj) 84 and submits that the order passed by the assessing authority cannot be said as barred by limitation.
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7. Per contra, learned Counsel for the assessee submits that it is no doubt true that Chapter XIV B is a complete code in itself, however, a specific provision is provided under the said Chapter. But in the said chapter, if no specific provision is provided, then the provisions of the Act are made applicable expressly by Section 158BH. Though the said Chapter prescribes the time limit for completion of the block assessment by way of Section 158BE of the Act, there is no express provision in the said Chapter for framing an assessment when the assessment order made under the provisions is set aside under Section 250 of the Act. Therefore, by virtue of Section 158BH, Section 153(2A) is attracted and admittedly, the assessment order is not passed within the time prescribed therein, which is barred by law of limitation. Therefore, the question for consideration is, whether Section 153(2A) of the Act is applicable to an assessment order passed under Chapter XIV B of the Act or not?
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8. Section 153 (2A) of the Act deals with the time limit for completion of assessments and reassessments, which reads as under:-
Section 153 (2A): Notwithstanding anything contained in sub-sections (1) [(1A), (1B)] and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner:
Provided that where the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such
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an order of fresh assessment may be made at any time up to the 31st day of March, 2002 :] [Provided further that where the order under section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Commissioner on or after the 1st day of April, 2005 [but before the 1st day of April, 2011], the provisions of this sub-section shall have effect as if for the words "one year", the words "nine months" had been substituted:] [Provided also that where the order under section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Commissioner on or after the 1st day of April, 2006 53a[but before the 1st day of April, 2010], and during the course of the proceedings for the fresh assessment of total income, a reference under sub-section (1) of section 92CA--
(i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or
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(ii) is made on or after the 1st day of June, 2007, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "twenty-one months" had been substituted:] [Provided also that where the order under section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Commissioner on or after the 1st day of April, 2010, and during the course of the proceedings for the fresh assessment of total income, a reference under sub-section (1) of section 92CA--
(i) is made before the 1st day of July, 2012, but an order under sub-section (3) of section 92CA has not been made before such date; or
(ii) is made on or after the 1st day of July, 2012, the provisions of this sub-section shall, notwithstanding anything contained in the
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second proviso, have effect as if for the words "one year", the words "two years" had been substituted.]
9. It starts with a non-obstante clause. It states that 'notwithstanding anything contained in sub-sections (1) [(1A), (1B)] and (2)', which makes it clear from the aforesaid provision that the period of limitation is prescribed for passing orders and the same has no application when an order for fresh assessment in pursuance of an order under Section 250 or 254 or 263 or 264, setting aside or cancelling an assessment is passed and a fresh order has to be passed by the assessing authority. Because Chapter XIV B is a complete code by itself, in the said provision, they have not included Section 158 BE, as the said provision falls under Chapter XIV B. When an assessment order passed under Chapter XIV B is also subjected to appeal under Section 250 of the Act and if under Section 250 of the Act, the appellate authority has set aside the order passed under Section 158BC of the Act and remanded the matter for fresh consideration, then fresh order has to be passed within the prescribed period for framing assessment. The Legislature
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having treated this Chapter XIV B as a complete code by itself, in the same way, they have enacted Section 158 BH, which deals with "Application of other provisions of this Act - Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter". Therefore, the intention is very clear that though Chapter XIV B is a complete code by itself and an assessment order has to be passed under the said Chapter and passing the assessment order under other provisions of the Act are not permissible. If the Chapter do not provide for contingency, then Section 158BH makes all other provisions of the Act apply to an assessment made under the said Chapter. Therefore, Section 158BC of the Act, provides for framing of assessment order for the block period. The provisions of the Act are not applicable for passing an order under Section 158BC of the Act. The time prescribed for passing such an order is prescribed in Section 158BE of the Act, within which time limit the order under Section 158BC has to be passed. The Chapter does not prescribe any limitation, in case, the block assessment is set aside and the
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matter is remanded back to the assessing authority for framing fresh assessment and after such remand, the assessing authority has to pass an order under Chapter XIV B of the Act itself, wherein the time is not prescribed and then, Section 158BH is attracted and it provides that in such a situation, all provisions of the Act is attracted to this Chapter. Therefore, Section 153 (2A) being a provision which provides for limitation to pass assessment order under pursuance of Section 250 or 254 or 263 or 264 of the Act. The said provision is attracted to an assessment which has to be made under Chapter XIV B of the Act. In fact, in the aforesaid judgment of the Rajasthan High Court, at Para 19, it has been categorically stated that "Section 158 BH permits to look at the other provisions of the Act in the field in respect of which no provisions are made under Chapter XIV B. Therefore, we are of the view that Section 153 (2A) of the Act is attracted to an order for fresh assessment to be passed under Chapter XIV B of the Act in pursuance of the order of the Section 250 of the Act.
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10. The Supreme Court interpreting Section 158 BH of the Act, in the case of Assistant Commissioner Of Income-Tax & Another vs. Hotel Blue Moon reported in 321 ITR page 362, held that Section 158 BH is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment.
11. In the instant case, the assessment order for the block period was passed by the assessing authority on 30.09.1999. The appellate authority under Section 250 of the Act had set aside the order by order dated 24.10.2000. The said order was communicated on 15.01.2001. The period prescribed under Section 153 (2A) of the Act is before the expiry of one year from the end of financial year in which order under Section 250 of the Act is received by the Chief Commissioner or Commissioner as the case may be. The copy of the appellate authority was received on 15.01.2001, 31.03.2001 is the end of the financial year and 31.03.2002 is one year there from before which the fresh assessment order ought to have been passed. The fresh assessment order is
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passed on 28.03.2003, nearly one year after the expiry of the period of limitation. Therefore, it is barred by time.
In that view of the matter, the said substantial question of law is answered in favour of the assessee and against the revenue. For the aforesaid reasons, we dismiss this appeal.
In view of the fact that the appeal is dismissed, we find no reason to go into the legality of other substantial questions of law which arise for consideration in this appeal.
Sd/-
JUDGE Sd/-
JUDGE nvj