Punjab-Haryana High Court
Parveen Kumari vs Commissioner Of Income Tax And Anr. on 1 December, 1998
Equivalent citations: [1999]237ITR339(P&H)
Author: N.K. Agarwal
Bench: N.K. Agarwal
JUDGMENT N.K. Agrawal, J.
1. These are two petitions, raising identical questions and filed under Art. 226/227 of the Constitution for quashing the notices issued by the AO under s. 148 of the IT Act, 1961 (for short, the "Act").
2. The petitioner, Nand Kishore, in C.W.P. No. 18676 of 1997, received compensation on the acquisition of his land by the State of Haryana. His land had been acquired by the Improvement Trust, Ludhiana, in the year 1972 under the Land Acquisition Act, 1894. An award was announced by the Land Acquisition Collector on 20th September, 1974. The possession of land was taken on 5th November, 1976. Compensation amounting to Rs. 1,92,246.65 was offered on 4th November, 1976. Since Nand Kishore was a minor and was also demanding higher compensation, the Land Acquisition Collector, Improvement Trust, Ludhiana, by his order dt. 9th November, 1976, deposited the amount of compensation in the United Commercial Bank, Civil Lines, Ludhiana.
The AO, while completing the assessment for the asst. yr. 1978-79 brought the amount of compensation to tax by his order dt. 23rd March, 1989. The assessee went in appeal before the CIT(A), who, by his order dt. 27th December, 1989, annulled the assessment on the ground that the amount of compensation received by the petitioner was assessable in the year in which possession of land was taken by the State Government. The CIT relied upon the decisions of the Supreme Court while taking the view that title to the land vested in the State Government on the date of possession. Since possession of the land was taken on 5th November, 1976, by the Improvement Trust, Ludhiana, the amount of compensation and interest was held to be not assessable in the year 1978-79.
The Revenue, against the order of the CIT, went in appeal before the Tribunal, Chandigarh Bench, but did not succeed. The Tribunal, by its order dt. 14th December, 1995, upheld the view taken by the CIT.
3. In the case of Smt. Parveen Kumari, legal heir and widow of Hari Om (petitioner in CWP No. 18644 of 1997), the facts are similar except for the amount of compensation. Her husband, Hari Om, owned certain agricultural land, which was acquired by the Improvement Trust, Ludhiana, in the year 1972. An award was announced by the Land Acquisition Collector on 20th September, 1974. A sum of Rs. 53,791.25 was paid on 20th March, 1976, and another sum of Rs. 96,123.32 was paid to her husband on 20th March, 1978. Possession of the land was taken by the Improvement Trust on 5th November, 1976. The petitioner, not being satisfied with the award of the Land Acquisition Collector, filed an application under s. 18 of the Land Acquisition Act seeking reference to the Land Acquisition Tribunal. The said Tribunal, by order dt. 23rd April, 1986, enhanced the amount of compensation and also granted interest. The Land Acquisition Collector had divided the land into two blocks, whereas the Land Acquisition Tribunal divided the land into three blocks. The petitioner filed an application for review of the order. The application was allowed by the Tribunal by order dt. 9th September, 1987. The petitioner filed a petition (CWP No. 8997 of 1988) in this Court for further enhancement of compensation. The Improvement Trust, Ludhiana, also filed petitions (CWP Nos. 5551 of 1989 and 5547 of 1990) seeking reduction of compensation.
The AO initially assessed the petitioner ex parte under s. 144 of the Act, by order dt. 31st December, 1983. That order was set aside under s. 146 of the Act on 5th March, 1984. The assessment was again framed under s. 143(3) on 27th March, 1986. That was also set aside in appeal. A fresh assessment was again made under s. 143(3) on 30th January, 1989, on the income of Rs. 1,24,564. The petitioner went in appeal before the CIT(A), who annulled the assessment on 29th March, 1990. The CIT took the same view as he had taken in the case of Nand Kishore (petitioner in CWP No. 18676 of 1997). The Tribunal, on 14th December, 1995, in the appeal filed by the Department, upheld the view taken by the CIT.
The Tribunal, while deciding the Department's appeal in the case of Nand Kishore, observed in para 9 of the order as under :
"We have carefully considered the submissions of both the sides. We agree with learned counsel for the assessee that the capital gains is exigible in the year in which the possession was taken. The facts in the present case show that the possession was taken by the acquisition authorities on 5th November, 1976. The AO could have taken proceedings for assessment of the capital gains in the hands of the assessee-firm for the asst. yr. 1977-78. He, however, took action in the year relevant to the asst. yr. 1978-79. The case law relied on by learned counsel for the assessee referred to above supports the case of the assessee that the relevant year for assessing capital gains in respect of compulsory acquisition of lands is the date of possession. We accordingly hold that the AO was not justified in assessing the capital gains in the hands of the assessee for the asst. yr. 1978-79 and the learned CIT(A) was perfectly justified in annulling the assessment for the asst. yr. 1978-79."
The ITO, on the basis of the aforesaid observation recorded by the Tribunal in its appellate order, issued notices to both the petitioners, namely, Nand Kishore and Parveen Kumari, under s. 148 of the Act on 1st March, 1996, to file the return of income for the asst. yr. 1977-78. These notices are under challenge in the present writ petitions.
4. Shri A. K. Mittal, learned counsel for the petitioners, has argued that the notices under s. 148 of the Act issued to the two petitioners are bad in law inasmuch as no assessment could be framed for the asst. yr. 1977-78 in the case of either of the petitioners as the assessment had become time-barred. It is also argued that s. 147 is not attracted at all. The argument put forward by Shri Mittal is two-fold. First, the Tribunal did not give any direction to the AO to initiate action for the purposes of reopening the assessment under s. 147 of the Act for the asst. yr. 1977-78. In the absence of any clear direction by the Tribunal, there could not be any presumption that the AO proceeded to initiate action under s. 147 of the Act in pursuance of the order of the Tribunal. The second limb of argument of Shri Mittal is that notices for reopening the assessment for the asst. yr. 1977-78 could not be issued in view the bar of limitation contained in s. 150(2) of the Act.
5. On a perusal of the order of the Tribunal in the case of Nand Kishore, as reproduced above, it is found that the Tribunal has recorded a finding to the effect that the AO could have taken proceedings for assessment of the capital gains in the hands of the assessee for the asst. yr. 1977-78. Since the action had been taken by the AO to bring the amount of compensation to tax in the asst. yr. 1978-79, the assessment was held to be wholly unjustified and uncalled for. Therefore, the assessment made for the asst. yr. 1978-79 was annulled.
6. Shri R. P. Sawhney, learned senior counsel for the Department, has argued that the finding recorded by the Tribunal was clear and unambiguous and, in that light, the AO was justified in exercising jurisdiction under s. 147 of the Act for the purposes of reopening the assessment. Sec. 150(1) empowers the AO to issue a notice under s. 148 if it is found that reassessment is necessary in consequence of or to give effect to a finding or direction contained in an order passed by any authority in any proceeding under the Act. The Tribunal, while deciding the Department's appeal for the asst. yr. 1978-79, had explicitly recorded a finding that the amount of compensation and interest was assessable in the preceding assessment year. Therefore, the AO rightly exercised jurisdiction under s. 147 r/w s. 150 of the Act.
7. It would be relevant to read s. 150 of the Act :
"150. Provision for cases where assessment is in pursuance of an order on appeal, etc. - (1) Notwithstanding anything contained in s. 149, the notice under s. 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision.
(2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken."
A perusal of sub-s. (1) of s. 150 leaves no room for doubt that a notice under s. 148 can be issued at any time in consequence of or to give effect to any finding or direction contained in an appellate order. An amendment in sub-s. (1) has been made w.e.f. 1st April, 1989, whereby an order passed by a Court in any proceeding under any other law has also been brought within the scope of the said sub-section. However, for the purposes of the asst. yr. 1977-78, the amendment is not relevant. The question, which arises for consideration is, whether the observation made by the Tribunal in its appellate order dt. 14th December, 1995, is in the nature of a finding or direction and, if it was so, whether the AO was within his jurisdiction to issue a notice under s. 148 so as to give effect to that finding or direction.
8. Sub-s. (1) of s. 150 removes the bar of limitation enacted in s. 149 against the issuance of any notice under s. 148. If a notice under s. 148 is issued for the purpose of making an assessment, reassessment or re-computation in consequence of or to give effect to any finding or direction contained in an order passed by an authority in any proceeding under the Act by way of appeal, reference or revision, that would not be subject to any bar of limitation. Removal of the bar of limitation in the case of a notice issued under s. 148 is confined to items in respect of which the finding or direction is given.
9. Explns. 2 and 3 to sub-s. (3) of s. 153 of the Act are also relevant as they specify the circumstances where an assessment is deemed to be one made in consequence of or to give effect to any finding or direction contained in an appellate order.
Sec. 153 provides for the time-limit for completion of an assessment or reassessment. In cl. (ii) of sub-s. (3) of s. 153, a similar provision has been enacted, as in s. 150(1), so as to remove the bar of limitation where assessment, reassessment or recomputation is made in consequence of or to give effect to any finding or direction contained in an order passed in any appeal, reference or revision under the Act. Two other situations have also been specified in sub-s. (3), where the bar of limitation is not attracted. We are here not concerned with the other situations. Explns. 2 and 3 containing the deeming provisions in respect of an assessment or reassessment which is sought to be made in consequence of or to give effect to any finding or direction contained in an order under the Act read as under :
"Explanation 2. - Where, by an order referred to in cl. (ii) of sub-s. (3), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of s. 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
Explanation 3. - Where, by an order referred to in cl. (ii) of sub-s. (3), any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of s. 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed."
The deeming provision in Expln. 2 is relevant to the present case. Under the deeming provision contained in Expln. 2, an assessment of any income in any assessment year shall be deemed to have been made in consequence of or to give effect to any finding or direction contained in any order under the Act if such income has been excluded from the total income of the assessee in another assessment year. As would appear, Expln. 2, containing the deeming provision in s. 153, is applicable for the purposes of s. 150 also. Viewed in the light of this Explanation, sub-s. (1) of s. 150 leaves no room for any doubt so far as any finding or direction in any order under the Act is concerned. In other words, if any income has been excluded from the total income of the assessee in an assessment year under any appellate or other order, it would be open to the AO to bring the excluded income to assessment in another assessment year.
The order of the Tribunal dt. 14th December, 1995, did not permit the assessment of the amount of compensation and interest in the asst. yr. 1978-79 on the ground that the income was assessable in the asst. yr. 1977-78. Thus, it was a finding within the meaning of sub-s. (1) of s. 150 r/w Expln. 2 below s. 153(3) of the Act.
10. A similar matter came up for examination before the Andhra Pradesh High Court in CIT v. V. Viswanatham (1988) 172 ITR 401 (AP) : TC 51R.2015. In that case, the assessee had secured a decree from a civil Court. He was held entitled under the decree to a certain amount with interest from the date of the decree. The AO brought to tax the sum of Rs. 27,340 received by the assessee, by way of interest in the asst. yr. 1966-67. The Tribunal noticed that the assessee had received under the civil Court's decree a sum of Rs. 48,949 as the amount of capital and also a sum of Rs. 62,000 by way of interest at 12 per cent. per annum for a period of 11 years. The assessee's plea was that the interest amount of Rs. 62,000 should be spread over and divided between the relevant years and only the proportionate interest amount should be included in the income of the asst. yr. 1966-67. The Tribunal rejected the argument and held that the entire interest amount of Rs. 62,000 had accrued to the assessee, during the previous year relevant to the assessment year under appeal and ought to have been assessed accordingly. However, there was no appeal by the Department before the Tribunal. In the circumstances, the Tribunal merely dismissed the appeal preferred by the assessee. The ITO reopened the assessment under s. 147 of the Act with a view to including the balance of the interest amount in the income of the said assessment year. The assessee objected to the reopening of the assessment. It was held by the High Court that the finding recorded by the Tribunal that the entire interest amount of Rs. 62,000 had accrued in the asst. yr. 1966-67 was a finding within the meaning of s. 150(1) of the Act.
11. The finding recorded by the Tribunal in the case in hand, in our opinion, is a finding as envisaged in sub-s. (1) of s. 150 r/w Expln. 2 below s. 153(3) of the Act. The first plea raised by Shri A. K. Mittal, learned counsel for the petitioner, is, therefore, found to be devoid of any merit. It is held that the AO was within his jurisdiction to issue a notice under s. 148 of the Act to the petitioners for the purposes of reassessment so as to give effect to the finding contained in the appellate order of the Tribunal.
12. The second limb of the argument put forward by Shri A. K. Mittal is that under sub-s. (2) of s. 150 of the Act, there is a bar of limitation and, in view of that bar, issuance of notice under s. 148 by the AO on 1st March, 1996, was beyond the period of limitation.
Sub-s. (2) of s. 150 lays down an exception and, where such an exception exists, the provisions of sub-s. (1) would not be applicable. Sub-s. (1) of s. 150 shall not apply where the notice for reassessment for an assessment year had become barred by limitation at the time when the order, which was the subject-matter of appeal, revision or reference, was passed. Generally, the time limits prescribed in s. 149 shall not apply where reassessment proceedings are initiated by a notice to give effect to any finding or direction, under sub-s. (1) of s. 150 of the Act. But, under sub-s. (2) of s. 150, the period of limitation as laid down in s. 149 shall come into play. If the action for assessment or reassessment cannot be initiated for an assessment year on the date of the order, which was a subject-matter of appeal, reference or revision, that would prevent the AO from proceeding under s. 148 of the Act.
According to sub-s. (2) of s. 150, the provisions of sub-s. (1) of that section shall not apply where, by virtue of any other provision limiting the time within which action for assessment or reassessment may be initiated, issuance of notice for such assessment or reassessment is barred on the date of the order, which is the subject-matter of appeal, reference or revision, in which the finding or direction is contained. It would, thus, mean that an appellate or revisional authority cannot give a direction for assessment or reassessment which goes to the extent of conferring jurisdiction upon the AO if his jurisdiction had ceased due to the bar of limitation. If the issuing of a notice for assessment or reassessment for a particular assessment year had become time-barred at the time of the order, which was the subject-matter of the appeal, the provisions of s. 150(1) cannot be invoked to the aid of the Revenue for making an assessment or reassessment.
13. In CIT v. G. Viswanatham (supra), the Andhra Pradesh High Court also examined the provisions of sub-s. (2) of s. 150 of the Act and held that an action for reassessment was barred by time if such action could not be initiated at the time when the order, which was the subject-matter of appeal, was made.
14. Sec. 149 specifies the various time limits for issuing a notice under s. 148 of the Act. Prior to the amendment effective from 1st April, 1989, limitation of four years from the end of the relevant assessment year was provided in a case which fell under cl. (b) of s. 147 of the Act. Since this is a case where cl. (b) of s. 147 is attracted, the relevant provisions in s. 149(1)(b) will have to be seen, which read as under :
"149. Time limit for notice. - (1) No notice under s. 148 shall be issued ...
(b) in cases falling under cl. (b) of s. 147, at any time after the expiry of four years from the end of the relevant assessment year."
In the light of the aforesaid provision specifying the period of limitation as four years from the end of the relevant assessment year, the case of the assessee for the purposes of issuance of notice for reassessment for the asst. yr. 1977-78 is found to be barred by limitation. The period of four years from the end of the asst. yr. 1977-78 expired on 31st March, 1982. The assessment for the asst. yr. 1978-79, which was the subject-matter of appeal before the Tribunal, was made in the case of Nand Kishore on 23rd March, 1989. The appellate order was passed by the CIT on 27th December, 1989. Thus, the subject-matter of appeal before the Tribunal was the order of the CIT dt. 27th December, 1989. On the date of the appellate order of the CIT, i.e., 27th December, 1989, the AO had no jurisdiction to issue a notice under s. 148 for the asst. yr. 1977-78 inasmuch as the period of four years had already expired on 31st March, 1982.
In the case of Parveen Kumari, the last assessment order for the asst. yr. 1978-79 had been passed by the AO on 30th January, 1989, and the appellate order annulling the assessment was passed by the CIT on 29th March, 1990. In this case also, the period of limitation for the purposes of reassessment for the asst. yr. 1977-78 had expired on 31st March, 1982. The appellate order of the CIT dt. 29th March, 1990, was the subject-matter of appeal before the Tribunal. On that date, the AO had no jurisdiction to issue a notice to the assessee under s. 148 of the Act for the asst. yr. 1977-78.
15. In the light of the provisions contained in sub-s. (2) of s. 150, it cannot be said that the notices issued by the AO to the petitioners under s. 148 of the Act on 1st March, 1996, were within the period of limitation. Even if it is assumed that the order of assessment was the subject-matter of appeal before the Tribunal, that would also not help the Revenue. The orders of assessment in the cases of both the assessees for the asst. yr. 1978-79 were passed on 30th January, 1989. Thus, the relevant date on which the period of limitation must be available is 30th January, 1989. However, sub-s. (2) of s. 150 refers to the subject-matter of the appeal, reference or revision. In that light, it is actually the appellate order of the CIT which can be said to be the subject-matter of appeal before the Tribunal. In that view of the matter, the order of the CIT dt. 29th March, 1990, is the order which was the subject-matter of appeal before the Tribunal. The period of limitation should have been available on the date of the appellate order of the CIT. Since the notices under s. 148 have been issued by the AO to both the petitioners on 1st March, 1996, these notices are beyond the period of limitation as laid down in s. 149(1)(b) r/w s. 150(2) of the Act.
As a result of the above discussion, both the writ petitions are allowed. The notices issued by the AO to the petitioners under s. 148 of the Act for the asst. yr. 1977-78 are quashed inasmuch as they have been issued after the expiry of the period of limitation. No order as to costs.