Andhra HC (Pre-Telangana)
The Commissioner Of Income-Tax vs V.K. Ferro Alloys Industries (P) Ltd. on 23 November, 2007
Equivalent citations: (2008)214CTR(AP)28, [2008]299ITR191(AP)
Author: Ramesh Ranganathan
Bench: Bilal Nazki, Ramesh Ranganathan
ORDER Ramesh Ranganathan, J.
1. The Income Tax Appellate Tribunal, Hyderabad Bench, by its order dated 23.01.1995, referred the following question, which according to it covered the controversy raised in the four questions proposed by the Revenue, for the opinion of this Court under Section 256(1) of the Income Tax Act:
Whether on the facts and circumstances of the case, the Tribunal, is right in holding that the extended limit as provided under Section 153(1)(b) of the Income Tax Act, 1961 is not available in this case.
2. The assessee is a company carrying on business in trading of steel bars and hiring of cylinders etc. On 24.02.1987, a search was conducted under Section 132 of the Income Tax Act, both in its business premises and the residential premises of its directors. According to the department, valuable incriminating material was found including introduction of certain bogus credits by the assessee. The jurisdiction over the assessee's case was originally with the Income Tax Officer, Company Circle, Hyderabad before whom the assessee had filed a return of income, for the assessment year 1986-87, declaring a total income of Rs. 1900/-. According to the Revenue, the assessee was one among a group of companies whose activities were largely confined to Visakhapatnam. In order to facilitate a detailed and coordinated investigation the Chief Commissioner of Income Tax, Hyderabad, under Section 127(2) of the Income Tax Act, passed order dated 28.07.1988 transferring the asessee's case from the file of the Assistant Commissioner, Company Circle, Hyderabad to the file of the Asst. Commissioner (Investigation), Visakhapatnam with effect from 01.08.1988. The Assistant Commissioner, Hyderabad, vide letter dated 22.08.1988, intimated the assessee that its case had been transferred to the file of the Assistant Commissioner (Investigation), Visakhapatnam. The assessee then filed W.P. No. 15267 of 1988 before this Court seeking to have the said transfer order quashed. This Court, by its order in W.P.M.P. No. 19396 of 1988 dated 10.10.1988, suspended the operation of the said transfer order until further orders. Despite the interim order of this Court, the Assistant Commissioner (Investigation), Visakhapatnam completed ex parte assessment on 31.03.1989. Aggrieved thereby, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) challenging the jurisdiction of the assessing officer to make the assessment as also the correctness of the additions made by him. During the pendency of the appeal, W.P. No. 15267 of 1988 was allowed by this Court on 13.12.1989 and the order of the Chief Commissioner of Income Tax transferring the assessee's case from Hyderabad to Visakhapatnam was quashed. Subsequent to the decision of this Court, the Commissioner of Income-Tax (Appeals), Visakhapatnam, by his order dated 07.02.1990, disposed of the appeal annulling the assessment order dated 31.03.1989 passed by the Assistant Commissioner (Investigation), Visakhapatnam. Thereafter, the assessee's case was transferred back to the Assistant Commissioner, Company Circle, Hyderabad vide proceedings of the Chief Commissioner of Income Tax dated 20.02.1990. The Assistant Commissioner completed the assessment, under Section 144 of the Act, on 07.05.1990.
3. Aggrieved thereby the assessee preferred an appeal, before the Commissioner of Income Tax (Appeals), not only on the additions made by the Assessing Officer but also on the validity of the very assessment on the ground that the time limit, for completing the assessment, expired on 31.03.1989 much before 07.05.1990 when the assessment order was passed. The Commissioner of Income Tax (Appeals), in his order dated 28.01.1991, rejected the assessee's contention with regards limitation on three grounds. Firstly that the Commissioner of Income Tax (Appeals), Visakhapatnam, in his order dated 07.02.1990, while annulling the assessment order, had set aside the assessment in relation to the additions for de-novo consideration on merits by the appropriate assessing authority, secondly that the assessment order dated 07.05.1990 was not barred by limitation in view of Clause (ii) of Explanation 1 to Section 153(3) since the period, during which the order of interim stay passed by the High Court was in force, was required to be excluded while computing the period of limitation, thirdly that it was a case where penalty proceedings had also been initiated against the assessee under Section 271(1)(c) of the Income Tax Act and in that view of the matter the limitation got extended to eight years as per Clause (b) of Sub-section (1) of Section 153 of the Income Tax Act. The Commissioner of Income Tax (Appeals), however, observed that though the assessment was not barred by limitation, the assessment was completed hurriedly to save limitation resulting in denial of reasonable opportunity to the assessee. Consequently the assessment order was set aside and the matter was restored to the assessing officer to redo the assessment after giving reasonable opportunity to the assessee and to carry out the directions given by him in the appellate order for the assessment years 1986-87 and 1987-88.
4. On further appeal by the assessee the Tribunal, in its order dated 25.05.1993, held that the assessment order dated 07.05.1990 was barred by limitation and not saved by Clause (ii) of Explanation 1 to Section 153(3) of the Income Tax Act. The Tribunal held that the normal period prescribed under Section 153(1)(b) expired on 31.03.1989 and, even if any notice was issued under Section 271(1)(c) after expiry of the period of limitation, it would be of no avail to the Revenue and it would not bring the case within the scope of Section 153(1)(b). The Tribunal relied on Commissioner of Income Tax v. Suraj Pal Singh 188 ITR 297 in this regard. The Tribunal observed that the passing observations of the Commissioner, Income Tax (Appeals), Visakhapatnam in his appellate order, arising out of the assessment made by the Assistant Commissioner (Investigation) Visakhapatnam, could not be treated as a direction contemplated under Section 153(3)(ii) and his action of remitting the matter, for de-novo consideration by the appropriate authority, did not save limitation. The Tribunal relied on Dy. Director of Inspection (Intelligence) v. Vinod Kumar Didwan 160 ITR 969 to hold that if, during the pendency of the writ proceedings before the High Court, the assessment got barred by limitation the assessee could not be faulted and, therefore, the impugned order of assessment dated 07.05.1990 was barred by limitation.
5. The Revenue filed an application seeking reference of the following questions, as arising from the order of the Tribunal dated 25.05.1993, for the opinion of the High Court:
1. Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the extended time limit of eight years as provided Under Section 153(1)(b) of the Income Tax Act is not applicable to the facts of the case particularly when the Assessing Officer having original jurisdiction has brought on record sufficient material and finding that it was a case of concealment within the period of limitation Under Section 153(1)(a)?
2. Whether, on the facts and in the circumstances of the case, on the basis of the ratio laid down by the Supreme Court in the case of CIT v. Suraj Pal Singh reported in 188 ITR 297, is it still necessary to serve a notice under Section 271(1)(c) of the Act before the expiry of limitation period under Section 153(1)(a) to get the extended time limit of 8 years Under Section 153(1)(b) to complete the assessment?
3. Whether, on the facts and in the circumstances of the case, the I.T.A.T. is correct in law in observing that the CIT (Appeals) Visakahaptnam, appellate order setting aside the assessment for the A.Y. 1986-87 on other grounds is only a passing remark and not binding on the Assessing Authorities as the assessment was annulled on the ground of jurisdiction?
4. Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the period between passing the interim suspension order by the Andhra Pradesh High Court in W.P.M.P. No. 19396 of 1988 dated 10.10.1988 and final order in W.P. No. 15267 of 1988 dated 13.12.1989 on the C.C.I.T's order Under Section 127(2) cannot be taken as extended period as laid down Under Section 153(3)(ii) for completion of assessment?
The Tribunal was of the opinion that a referable question of law did arise for consideration out of its order dated 25.05.1993 and, accordingly proceeded to draft the statement of the case and to refer the question stated therein for the opinion of the High Court.
6. In the Statement of Case the Tribunal recorded that, aggrieved by the assessment order dated 31.03.1989 made by the Assistant Commissioner (Investigation) Visakhapatnam, the assessee had preferred an appeal before the CIT (A), Visakhapatnam challenging the jurisdiction of the assessing officer to make the assessment as also the correctness of the additions made by him, that subsequent to the decision of the A.P. High Court, the CIT (A), Visakhapatnam had disposed of the appeal before him by annulling the assessment order dated 31.03.1989 made by the Assistant Commissioner (Inv.), Visakhapatnam, that while annulling the assessment order the CIT(A) had observed that regarding the remaining grounds concerning the merits of the additions etc., the assessment deserved to be set aside for de-novo consideration by the appropriate assessing authority, that thereafter the case of the assessee came to be transferred back to the Asst. Commissioner, Company Circle, Hyderabad as per the proceedings of the Chief Commissioner dated 20.02.1990, that the Assistant Commissioner, Hyderabad had hurriedly completed the assessment under Section 144 of the Income Tax Act on 07.05.1990 on the ground that inspite of service of notice dated 25.04.1990 the assessee failed to comply with the said notice and that, while making the said assessment under Section 144, he made huge additions and also mentioned that penalty proceedings under Section 271(1)(c) had been initiated separately against the assessee.
While the Tribunal had referred only one question to this Court it had, in its order dated 23.01.1995, opined that the question referred by it covered the controversy raised in the four questions proposed by the revenue. It is, therefore, implicit in the question referred to this Court, that all the four questions which the Revenue had sought to be referred has, in fact, been referred for the opinion of this Court.
7. Sri S.R. Ashok, learned Senior Counsel appearing on behalf of the Revenue, would submit that since the Tribunal, in its Statement of Case, had observed that the question referred by it for the opinion of the High Court covered the controversy raised in the four questions proposed by the Revenue, all the four questions required to be answered. While fairly conceding that questions 1 and 2 were covered by the Judgment of the Supreme Court in Surjit Pal Singh1 against the Revenue, Learned Senior Counsel would submit that questions 3 and 4 alone need be answered.
8. On question No. 4, learned Senior Counsel would contend that, under Explanation I (ii) of Section 153(3), the period during which assessment proceedings were stayed by an order or injunction of any Court must be excluded in computing the period of limitation. Learned Senior Counsel would submit that, since operation of the order of the Chief Commissioner of Income Tax dated 28.07.1988 was suspended by this Court, in its order in W.P.M.P. No. 19396 of 1988 in W.P. No. 15267 of 1988 dated 10.10.1988, and as the order of suspension continued to remain in force till W.P. No. 15267 of 1988 was allowed by order dated 13.12.1989, the period from 10.10.1989 to 13.12.1989 is required to be excluded in computing the period of limitation. Learned Senior Counsel would place reliance on Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association in this regard.
9. On the other hand Sri K.K. Viswanatham, learned Counsel appearing on behalf of the assessee, would contend that this Court, by its order dated 10.10.1988, had merely suspended the order of the Chief Commissioner of Income tax transferring the assessee's case from Hyderabad to Visakhapatnam. Learned Counsel would submit that consequent thereto, while the Assistant Commissioner (Investigation), Visakhapatnam no longer had the jurisdiction to pass the assessment order, nothing prevented the Assistant Commissioner, Company Circle, Hyderabad from passing the order of assessment within the period of limitation on or before 31.03.1989. Learned Counsel would submit that the Tribunal had rightly held that Explanation 1(ii) of Section 153(3) of the Act had no application and, therefore, question No. 4, as raised by the Revenue should be answered in favour of the assessee and against the Revenue.
10. Before examining the aforesaid contention, it is necessary to take note of Section 153 which, as it then stood, read thus:
153. Time limit for completion of assessments and reassessments.-
(1) No order of assessment shall be made under Section 143 or Section 144 at any time after-
(a) the expiry of -
(i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967;
(ii) three yeas from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968;
(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or
(b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within Clause (c) of Sub-section (1) of Section 271; or
(c) the expiry of one year from the date of filing of a return or a revised return under Sub-section (4) or Sub-section (5) of Section 139;
(d) the expiry of six months from the end of the month in which an application under Clause (a) of Sub-section (2) of Section 143 is made by the assessee.
(2) No order of assessment, reassessment or re-computation is to be made under Clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice under Section 148 was served;
(a) where the assessment, reassessment or re-computation is to be made under Clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice under Section 148 was served;
(b) where the assessment, reassessment or re-computation is to be made under Clause (b) of that section, after-
(i) the expiry of one year from the date of service of the notice under Section 148,
(ii) the expiry of one year from the date of service of the notice under Section 148, whichever is later.
(2A) Notwithstanding anything contained in Sub-section (1) 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 under Section 146 or in pursuance of an order under Section 250, Section 254, Section 263 or Section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order under Section 146 cancelling the assessment is passed by the Income-tax Officer or the order under; Section 250 or Section 254 is received by the Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Commissioner.
(3) The provisions of Sub-section (1) and (2) shall not apply to the following classes of assessments, reassessments and re-computations which may, subject to the provisions of Sub-section (2A), be completed at any time-
(i) where a fresh assessment is made under Section 146;
(ii) where the assessment, reassessment or re-computation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act;
(iii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under Section 147. Explanation. 1: In computing the period of limitation for the purposes of this section-
(i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re-heard under the proviso to Section 129, or
(ii) the period during which the assessment proceeding is stayed by an order or injunction of any court, or
(iii) the period commencing from the date on which the Income-tax Officer directs the assessee to get his accounts audited under Sub-section (2A) of Section 142 and ending with the date on which the assessee furnishes a report of such audit under that Sub-section, or
(iv) the period (not exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwards the draft order under Sub-section (1) of Section 144B to the assessee and ending with the date on which the Income-tax Officer receives the directions from the Inspecting Assistant Commissioner under Sub-section (4) of that section, or, in a case where no objections to the draft order are received from the assessee, a period of thirty days, or (iva) the period (not exceeding sixty days) commencing from the date on which the Income-tax Officer received the declaration under Sub-section (1) of Section 158A and ending with the date on which the order under Sub-section (3) of that section is made by him.
11. It is clear from Explanation 1(ii) of Section 153(3) that the period, during which assessment proceedings are stayed by an order of Court, is required to be excluded from the period of limitation. What was stayed/suspended by this Court, in its order in W.P.M.P. No. 19396 of 1988 dated 10.10.1988, was the order of the Chief-Commissioner of Income Tax dated 28.07.1988 transferring the assessee's case from the file of the Assistant Commissioner, Company Circle, Hyderabad to the file of the Assistant Commissioner (Investigation), Visakhapatnam. The order transferring the case was suspended and not the assessment proceedings themselves. While the consequence of suspension of the order, of the Chief-Commissioner of Income Tax, Hyderabad dated 28.07.1988, was that the Assistant Commissioner (Investigation), Visakhapatnam was precluded from making the assessment, it did not prevent the Assistant Commissioner, Company Circle, Hyderabad from passing the assessment order within the period of limitation on or before 31.03.1989. As rightly held by the Tribunal, Explanation I (ii) of Section 153(3) has no application to the case on hand as the interim order of this Court dated 10.10.1988 did not amount to stay of assessment proceedings.
12. In Shree Chamundi Mopeds Ltd. 1992(3) SCC 1, proceedings before the BIFR were terminated by order dated April 26, 1990 and the Company was recommended to be wound up. The appeal filed by the Company was dismissed by the Appellate Authority by order dated January 7, 1991. It is in this factual context that the Supreme Court observed:
...As a result of these orders, no proceedings under the Act were pending either before the Board or before the Appellate Authority on February 21, 1991 when the Delhi High Court passed the interim order staying the operation of the order of the Appellate Authority dated January 7, 1991. The said stay order of the High Court cannot have the effect of reviving the proceedings which had been disposed of by the Appellate Authority by its order dated January 7, 1991. While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law and so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and is still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the Appellate Authority dated January 7, 1991 does not have the effect of reviving the appeal which had been dismissed by the Appellate Authority by its order dated January 7, 1991 and it cannot be said that after February 21, 1991, the said appeal stood revived and was pending before the Appellate Authority.... Section 22(1) of the Act could not, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents....
13. It is well settled that observations in a judgment cannot be read out of context as laying down the law and must be examined in the light of the facts which fell for consideration therein. The interim order passed by this Court on 10.10.1988 would only mean that the impugned order would not be operative from the date of passing of the stay order and does not mean that the order had been wiped out from its existence. The interim order, suspending the order of transfer dated 28.07.1988, did not bar the Assistant Commissioner (Company Circle), Hyderabad from passing the order of assessment. Reliance placed by the Learned Senior Counsel on Shree Chamundi Mopeds Ltd3, is misplaced and is of no avail. Question No. 4 is, therefore, answered in favour of the assessee and against the revenue.
14. On question No. 3 Sri S.R. Ashok, Learned Senior Counsel, would submit that the appellate order dated 07.02.1990, annulling the assessment order, amounted to a finding or a direction contained in an order under Section 250 of the Act. Learned Senior Counsel would submit that, in view of Clause (ii) of Section 153(3), the period of limitation prescribed in Sub-sections (1) and (2) of Section 153 did not apply to the assessment order passed on 07.05.1990 as, under Section 153 (3), the assessment may, subject to the provisions of Section 153 (2-A), be completed at any time.
15. Learned Senior Counsel would submit that the factual matrix on which the question arose, whether the order of Commissioner of Income Tax (Appeals) dated 07.02.1990 annulling the assessment order dated 31.03.1989 and directing denovo consideration by the appropriate assessing authority amounted to a direction under Section 250 of the Act and, if so, whether the assessment order made pursuant thereto on 07.05.1990 was protected by Section 153(3)(ii) and was therefore not barred by limitation, had been considered and rejected by the Tribunal and is reflected in its order dated 25.05.1993. Learned Senior Counsel would submit that, as this question of law arose from the material on record before the Tribunal and from the Statement of Case, this Court should reframe the question and answer it in favour of the Revenue.
16. Sri K.K. Viswanatham, Learned Counsel for the assessee, would, however, contend that the question regarding the order of the Commissioner of Income Tax (Appeals) dated 07.02.1990 amounting to a direction under Clause (ii) of Section 153(3), and consequently Sub-sections (1) and (2) of Section 153 not being applicable to the assessment order dated 07.05.1990, is neither amongst the questions of law proposed by the Revenue nor was such a question referred to this Court. Learned Counsel would submit that this Court would not reframe a question of law raised for the first time before it and that, in any event, the Tribunal had rightly held that the order of the Commissioner of Income-tax (Appeals) dated 07.02.1990, in annulling the assessment order and in observing that the assessment deserved to be set aside for denova consideration, was only a passing remark and was not binding on the assessing authority as the assessment was annulled on the ground of jurisdiction. Learned Counsel would contend that the assessment order of the Assistant Commissioner (Investigation), Visakhapatnam dated 31.03.1989 was without jurisdiction and a nullity, that the order did not have any existence in the eye of law and the mere fact that the assessee had preferred an appeal, which had resulted in the Commissioner of Appeals having annulled the assessment order, was of no consequence. Before examining the aforesaid contentions, it is necessary to take note of the relevant provisions under the Income-tax Act and the extent of power conferred on the High Court to reframe the question referred by the Tribunal for its opinion.
17. Under Section 254(1) of the Income Tax Act, as it then stood, the Appellate Tribunal was empowered, after giving both parties to the appeal an opportunity of being heard, to pass such orders as it thought fit. Under Section 256(1) the assessee, or the Commissioner, was entitled to require the Appellate Tribunal to refer to the High Court any question of law arising out of the order passed under Section 254(1) and the Appellate tribunal was required to draw up a Statement of Case and refer the question of law to the High Court. Under Section 260(1) the High Court, upon hearing such case, was empowered to decide the questions of law raised therein and to deliver its judgment containing the grounds on which such decision was founded and a copy of the judgment was required to be sent under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which was then required to pass such orders as were necessary to dispose of the case confirming to such judgment. A Statement of Case is in the nature of pleadings wherein all the facts found are set out. It is the question of law referred to in it that calls for a decision and it is that that constitutes the pivotal point on which the jurisdiction of the High Court hinges. The Statement of Case is material only as furnishing the facts for the purpose of enabling the High Court to decide the question referred. The High Court acts purely in an advisory capacity on a reference which properly comes before it. It is of the essence of such a jurisdiction that the court can decide only questions which are referred to it and not any other question. A question of law which the applicant cannot require the Tribunal to refer, and which the Tribunal was not competent to refer, cannot be entertained by the High Court. Commissioner of Income Tax, Bombay v. Scindia Stam Navigation Co. Ltd. . The Statement of Case, submitted to the High Court by the Tribunal, would refer to the facts selected by the Tribunal from out of the material already on the record. The High court, in dealing with a question of law arising from the order of the Tribunal, has to answer the said question in the light of the Statement of Case. Keshav Mills Co. Ltd. v. Commissioner of Income Tax, Bombay North, Ahmedabad .
18. In some cases, the question of law referred to the High court may have to be considered in several aspects some of which may not have been appreciated by the Tribunal. If a question of law is framed in general terms and, in dealing with it, several aspects fall to be considered, they have to be considered by the High court even though the tribunal may not have considered them. Keshav Mills Co. Ltd. 5. The jurisdiction to reframe a question, in appropriate cases, is conferred on the High Court under Section 260(1) by necessary implication, although it does not specifically invest the High Court with such a power. The High Court is not confined to the questions which the Tribunal was directed to submit. The only condition is that the questions of law should arise from the reference. The High Court has not only the power but it is its duty to reframe the questions in such a way as to bring out the real dispute between the parties. Raja Rameshwara Rao v. Commissioner of Income Tax ; Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax ; Commissioner of Income Tax v. G.M. Chennabasappa ; Scindia Steam Navigation Co. Ltd. , Commissioner of Income Tax v. H.E.H. Mir Osman Ali Khan Bahadur . It is possible that the same question of law may involve different approaches for its solution, and the High Court may amplify the question to take in all the approaches. But the question must still be one which was before the Tribunal and was decided by it. It must not be an entirely different question which the Tribunal never considered. Kusumben D. Mahadevia v. Commissioner of Income-Tax Bombay City (1960 (39) I.T.R 541. If the question actually referred does not bring out clearly the real issue between the parties, the High court may reframe the question so that the matter actually agitated before the tribunal may be raised before the High Court. New Jehangir Vakil Mills Ltd. v. Commissioner of Income-Tax, Bombay North, Kutch and Saurashtra .
19. Since the question, whether the order of the Commissioner of Income-tax (Appeals) dated 07.02.1990, in annulling the assessment order dated 31.03.1989 and in setting it aside for denovo consideration amounted to a direction contained in an order passed under Section 250 attracting the provisions of Section 153(3)(ii) of the Act, is not one amongst the questions proposed by the revenue, it is necessary to examine whether such a question arose for consideration before the Tribunal, whether such a question can be said to have arisen from the facts noted in the Statement of Case drafted by the Tribunal, and whether it can be said to arise out of question No. 3.
20. The Tribunal, in its order dated 25.05.1993, had observed that the passing observation of the Commissioner, Income-Tax (Appeals), in his appellate order arising out of the assessment made by the Assistant Commissioner (Investigation), could not be treated as a direction contemplated under Section 153(3)(ii) of the Income-Tax Act and his action in remitting the matter for denovo consideration by the appropriate authority did not save limitation. These facts are also reflected in the Statement of Case. Since question No. 3 is framed in general terms and does not bring out clearly the real issue between the parties, and with a view to amplify the question to take in all the approaches, we consider it appropriate to reframe the question in the following manner:
Whether, on the facts and in the circumstances of the case, the ITAT was correct in law in holding that the order of the Commissioner of Income-tax (Appeals) dated 07.02.1990 in annulling the assessment order dated 31.03.1989, and in observing that the assessment deserved to be set aside for denova consideration, was not a direction as contemplated under Section 153(3)(ii) and was merely a passing remark as the assessment was annulled on the ground of jurisdiction?
21. Section 246 of the Income-tax Act, as it then stood, related to appealable orders and, under Sub-section 1(b) thereof, any assessee aggrieved by an order of assessment, reassessment and re-computation under Section 147 or 150 was entitled to prefer an appeal against such an order. Section 249 prescribed the form of the appeal and limitation and Section 250 the procedure in appeal. Sub-section (6) of Section 250 required the order of the Commissioner (Appeals), disposing of the appeal, to be in writing, to state the points for determination, the decision thereon and the reason for the decision. Section 250(7) required that, on the disposal of the appeal, the Commissioner (Appeals) should communicate the order passed by him to the assessee. Under Section 251(1)(a), the Commissioner was conferred the power, in an appeal against an order of assessment, to confirm, reduce, enhance or annul the assessment or to set aside the assessment and refer the case back to the assessing officer for making a fresh assessment in accordance with the directions which the Commissioner may give and after making such further enquiry as may be necessary. Exercise of power by the Commissioner (Appeals) to annul the assessment, and to give directions to the assessing officer, under Section 251(1)(a), is reflected in the order passed under Section 250(6) disposing of the appeal.
22. Under Section 153(3)(ii), the provisions of Sub-section (1) and (2) of Section 153 shall not apply to cases of assessment, reassessment and re-computation made on the assessee in consequence of, or to give effect to, any finding or direction contained in an order under Section 250 and, subject to provisions of Sub-section (2-A), the assessment may be completed at any time. The relevant words in Section 153(3)(ii) are "to give effect to any finding or direction contained in an order under Section 250", and the Section does not restrict the amplitude or scope of the direction to be given in an order made under Section 250 of the Act.
23. It is well settled that in interpreting taxing statutes, one must have regard to the strict letter of the law. Geo Miller & Co. (P) Ltd. v. State of M.P. . If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. CIT v. Kasturi & Sons Ltd. (1999) 3 SCC 346. Courts must adhere to the words of the statute and construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used. It must be interpreted as it reads, with no additions and no subtractions. V.V.S. Sugars v. Govt. of A.P. ; Vikrant Tyres v. First I.T.O, Mysore .
24. The directions, which the Commissioner (Appeals) is empowered to make in an order under Section 250, would include within its ambit the annulment of, and setting aside, the assessment order for denova consideration by the appropriate assessing authority and, in view of Section 153(3)(ii), the assessment order passed on 07.05.1990, pursuant to the order of the Commissioner (Appeals) dated 07.02.1990, cannot be said to be barred by limitation.
25. We must however deal with the contention of Sri K.K. Viswanatham, learned Counsel for the assessee, that, since the assessment order passed by the Assistant Commissioner (Investigation), Visakhapatnam on 31.03.1989 is an order without jurisdiction, is a nullity and must be ignored, any observation made in the appellate order dated 07.02.1990, in an appeal preferred against the assessment order, can, at best, be a passing remark and not a direction in an Order passed under Section 250 of the Act.
26. It is necessary to note that the Chief Commissioner of Income Tax had the power, under Section 127(2) of the Income Tax Act, to transfer the case of the assessee from the file of the Assistant Commissioner (Company circle), Hyderabad to the file of the Assistant Commissioner (Investigation), Visakhapatnam. It is no doubt true that the assessment order dated 31.03.1989, was passed by the Assistant Commissioner (Investigation), Visakhapatnam when the interim order of suspension, passed in W.P.M.P. No. 19396 of 1988 dated 10.10.1988, was in force.
27. This Court, by order in W.P. No. 15267 of 1988 dated 13.12.1989, quashed the order of transfer not on the ground that the Chief Commissioner of Income Tax lacked jurisdiction to pass such an order but for the reason that the order did not contain the grounds for transferring the case and that such grounds were not communicated to the assessee. In fact, this Court left it open to the Chief Commissioner to start fresh proceedings for transfer in accordance with law. Even if we were to presume that the assessment order of the Assistant Commissioner (Investigation) dated 31.03.1989 is an order without jurisdiction, it is well settled that such an order has at least defacto operation until it is declared to be void or a nullity by a competent body or court. An order, even if not made in good faith, is still an act capable of legal consequences. It bears no brand of invalidity on its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity, and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders. This principle is equally true even where the "brand of invalidity" is plainly visible for there also the order can effectively be resisted in law only by obtaining the decision of the court or a competent body. An order will be invalidated only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be hypothetically a nullity, but the court/competent authority may refuse to quash it because of lack of standing, or for some other legal reason. In any such case the 'void' order remains effective and is, in reality, valid. The party aggrieved by the invalidity of the order has to approach the court/competent authority for the relief of declaration that the order against him is inoperative and not binding upon him. State of Punjab v. Gurdev Singh , Smith v. East Elloe Rural District Council 1956 (1) ALL ER 855; Administrative Law: H.W.R Wade: 6th edition).
28. The assessee had rightly preferred an appeal to the Commissioner of Income Tax (Appeals) against the assessment order passed by the Assistant Commissioner (Investigation) dated 31.03.1989 and it is only as a consequence of the order of the Commissioner (Appeals) dated 07.02.1990 that the assessment order dated 31.03.1989 stood annulled. The directions contained in the Appellate Order dated 07.02.1990, annulling the assessment order and in directing denova consideration, cannot be said to be a passing remark as it was a direction which had the effect of setting aside the order of assessment passed by the Assistant Commissioner (Investigation), Visakhapatnam dated 31.03.1989.
29. The Income Tax Appellate Tribunal was, therefore, not correct in holding that the order of the Commissioner of Income Tax (Appeals) dated 07.02.1990, in annulling the assessment order dated 31.03.1989, and in observing that the assessment order deserved to be set aside for denova consideration, was not a direction as contemplated under Section 153(3)(ii) and was merely a passing remark as the assessment was annulled on the ground of jurisdiction. The reframed question No. 3 is answered in favour of the Revenue and against the assessee.
30. Let the reference be answered accordingly.