Income Tax Appellate Tribunal - Vizag
Raghava Health Care Ltd. vs Dcit on 16 May, 2008
ORDER
B.R. Baskaran, Accountant Member
1. These three appeals, preferred by the assessee, are directed against the order of Ld CIT(A) Rajahmundry and they pertain to Asst.Years 1989-90 to 1991-92.
2. As the issues contested before us are common in all these 3 appeals, they are disposed off by this common order.
3. The issues that are being contested before us are:
i) Whether Ld CIT(A) is right in holding that the order of Assessing Officer passed Under Section 143(3) r.w.s. 254 of the IT Act is not barred by limitation prescribed Under Section 153(2A).
ii) Whether Ld CIT(A) is right in not going into merits of the case.
4. The facts of the case are that the assessee-company was incorporated in the month of October 1988 and undertook a project for constructing and running a multi specialty hospital. Consequent to the search and seizure operations Under Section 132 of the Act carried out at the residential premises of its Managing Director, the assessing officer issued notices Under Section 148 of the Income tax Act for the Asst. Years 89-90, 90-91 and 91-92. In response thereto the assessee company filed NIL returns. However the assessing officer completed the assessment on 29.3.96 determining the total income as under:
Asst. year 1989-90 Rs. 1,35,350/- Asst. year 1990-91 Rs. 4,60,000/- Asst. year 1991-92 Rs. 10,96,960/-
5. Aggrieved, the assessee carried the matter in appeal before Ld CIT(A). The first appellate authority, by his common order dated 10.10.96, partially set aside the matter for the Asst. Year 89-90 and totally set aside the matter for the Asst. Years 90-91 and 91-92. For Asst. Year 89-90, a consequential order was passed on 19.11.96; however no such order was passed for the other two years. Aggrieved against the order of Ld CIT(A), the assessee went in appeal before Hon'ble ITAT. The Hon'ble ITAT after considering the facts of the case upheld the order of Ld CIT(A) and dismissed the appeal of the assessee for all the three years. The order of ITAT was passed on 29.11.02. Thereafter the Assessing Officer issued notices Under Section 143(2) and according to the assessing officer the said notices were issued for the purpose of giving effect to the decision of ITAT and also to give effect to the directions of Ld CIT(A). The assessee objected to the said notices on the ground that they are barred by limitation specified Under Section 153(2A) of the IT Act. However, the Assessing Officer rejected the contentions of the assessee and completed the assessment by determining the income as detailed below, vide his orders dated 10.3.04 (for 89-90) and 12.3.04 (for other two years).
1989-90 Rs. 45,350/- 1990-91 Nil 1991-92 Rs. 5,37,960/-
It is pertinent to note here that the assessee company, during these three years was not engaged in any income generating activity and hence filed NIL return. The assessing officer completed the assessments based on the materials found during the course of search and adding cash credits Under Section 68 of the Income tax Act.
6. Aggrieved against these orders, the assessee again preferred appeals before Ld CIT(A), who rejected the contentions of the assessee regarding the limitation and affirmed the order of the Assessing officer with regard to this issue. However Ld CIT(A) did not go into the merits of the additions for Asst. Year 89-90. For Asst. Year 1990-91 the assessment has been completed at NIL income. For Asst. Year 1991-92, the Ld CIT(A) considered the additions made and confirmed the additions. Aggrieved, the assessee is in appeal before us for all these three years.
7. Ld Authorised Representative submitted that the order of the Assessing Officer is barred by limitation prescribed Under Section 153(2A) of the IT Act that stood at the relevant point of time. According to Section 153(2A), that stood at the relevant point of time, any order of fresh assessment made in pursuance of order Under Section 250, setting aside or cancelling the assessment, may be made at any time before the expiry of two years from the end of the financial year in which the appellate order is received by the Chief commissioner/Commissioner. However with effect from 1.6.2001, this time limit was reduced to one year. In the present case, Ld CIT(A) had passed the order on 10.10.96 and accordingly, the consequential order should have been passed before 31.3.99. Since the Assessing Officer has passed the order only in March 2004, the same is barred by limitation and hence the assessment orders are liable to be quashed. In this connection he relied upon the following decisions:
CIT v. Smt. Kamala Devi Gulabchand Motilal v. CIT 174 ITR 117 (MP)
8. On the contrary, Ld Authorised Representative, by adverting our attention to Section 153(2A) and 153(3)(ii) of the IT Act, submitted that the Act prescribes time limit only of two years or one year, as the case may be, in respect of orders which are passed Under Section 153(2A) and the Act does not prescribe any time limit for the orders passed Under Section 153(3)(ii). In the present case under consideration, the assessee had preferred appeal before Hon'ble ITAT against Commissioner of Income Tax's order dated 10.10.96 and Hon'ble ITAT passed its order on 29.11.02. According to amended Section 153(2A), one year time limit is available from the end of the financial year in which order of the Hon'ble ITAT was passed and accordingly the time limit expires only on 31.3.2004. As the Assessing Officer has passed consequential orders giving effect to the order of Hon'ble ITAT on 10.3.04/12.3.04, they are not barred by limitation. He further submitted that Assessing Officer had postponed the passing of the revision order till the receipt of the order of Hon'ble ITAT, only at the request of the Ld Counsel of the assessee, though the A.O. initiated the proceedings in March, 1999 itself. In this connection, he adverted our attention to para 5 of Ld CIT(A)'s order dated 10.12.04 wherein Ld CIT(A) has extracted the order sheet notings of the Assessing Officer, where-in the request of the assessee's representative has been noted. Accordingly he submitted that the assessee is now precluded from contesting about the time limitation. He further invited our attention to the decision of Allahabad High Court in the case of Renusagar Power Co. Ltd. v. ITO 196 ITR 903 which was relied upon by the Ld CIT(A) to come to the conclusion that the present assessment is not barred by limitation. He also contented that the assessee's case would also fall under the purview of Section 153(3)(ii), as the Ld CIT(A) in his order dated 10.10.96 had given a direction to the Assessing Officer and in that case, there is no time limit for completing the assessment. Accordingly he supported the order of Ld CIT(A) with regard to the time limit.
9. We heard the rival contentions. The time limit for completing the assessment and reassessment are prescribed in Section 153 of the Act. Under Section 153(2A), as it stood before its amendment from 1.6.2001, an order of fresh assessment in pursuance of an order Under Section 250 or 254 or 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 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. The time limit of two years was reduced to one year with effect from 1.6.2001 by the Finance Act 2001. Under Section 153(3)(ii), an assessment, reassessment or re-computation may be completed at any time 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 the 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. This Sub-section is however subject to Sub-section 2A.
10. The core words which are relevant are "fresh assessment", "finding" anc "direction". The Hon'ble Supreme Court in the case of ITO v. Muralidhar Bhagwandas has explained the meaning of terms 'finding' anc 'direction'. "Finding" means a finding necessary for giving relief in respect of the assessment for the year in question. Therefore a 'finding' can only be that which is necessary for the disposal of an appeal with respect to a particular asst. year. The term 'direction' means a 'direction' which the appellate authority is empowered to give while deciding the case before it. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the Assessing Officer whether or not to take action, it cannot be described as a "direction". The plain meaning of "fresh assessment" would mean "assessment done afresh or de novo assessment".
11. Thus there is fine distinction in the application of Section 153(2A) and 153(3)(ii). When a fresh assessment is required to be made in pursuance of an order Under Section 250 or 254 or 263 or 264, setting aside or cancelling an assessment, then Section 153(2A) would apply. Whereas Section 153(3)(ii) would apply in the case where an assessment or reassessment or recomputation 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 etc and subject to Section 153(2A), there is no time limit for passing such orders. Both these Sections will come into operation only in respect of matters sent to the file of assessing officer only. Under Section 153(2A), the fresh assessment order has to be passed on the same assessee for the same assessment year, where as Under Section 153(3)(ii), the assessment, reassessment or recomputation may be passed for any assessee and also for any assessment year. This proposition becomes clear on the combined reading of Explanations 2 and 3 to Section 153 and Section 153(3)(ii). An important point to be noted here is that the provision of Section 153(3) is subject to the provisions of Section 153(2A), which should mean that the assessment or reassessment made to give effect to the finding or direction results in 'fresh assessment', then the time limit prescribed Under Section 153(2A) shall apply even if the finding or direction is made by an order passed Under Section 260 or 262 of the Income tax Act, though both these Sections do no find place in Section 153(2A). Fresh assessment would mean a situation where the earlier assessment as a whole is set aside or cancelled. When several additions have been made by the assessing officer and the appellate authority set aside one some of the issues to the file of the assessing officer, that situation would not give rise to "fresh assessment" and in that case Section 153(3)(ii) would apply. Based on these legal propositions, we may now consider the issues before us.
12. Before going into the main issue, let us consider one of the arguments of Ld Departmental Representative, i.e., with regard to estoppel or res judicata, He contended that the assessment proceedings were postponed till the receipt of order from Hon'ble ITAT only on the request of the assessee's Ld Counsel. It is to be noted here that any admission made by the assessee with regard to facts may be a good piece of evidence but an admission on question of law is not binding on any body and the law alone will prevail in that kind of situations. When the Income tax officer who computed the loss in an assessment year, recorded that the loss cannot be set off against the income of the subsequent year, the Hon'ble Supreme Court Commissioner of Income Tax v. Manmohan Das 59 ITR 699 held that the noting of the Income Tax Officer is not binding on the assessee as the question of carry forward and set off of the loss, under the law, has to be considered by the Income tax officer who deals with the assessment of the subsequent year. In this case, the Assessing officer should not have been carried away by the representations made either by the assessee's Counsel, but should have acted strictly in accordance with the law. Hence the principle of estoppel shall not come to the help of the department.
13. The contention of the Ld Departmental Representative that the consequential order has been passed to give effect to the order of Hon'ble ITAT is also not correct according to the facts of this case. The Hon'ble ITAT has not given any finding or direction; nor has it set aside or cancelled the assessment order. After considering the facts, the Hon'ble ITAT has upheld the order of Ld CIT(A) and has dismissed the appeal of the assessee. In that kind of orders, there is no obligation or statutory duty cast upon the assessing officer as he is not required to do any thing based on the order of ITAT. In the case of Renusagar Power Company, supra, the Hon'ble ITAT had set aside the order of the Ld CIT(A) and hence the assessing officer had to pass a consequential order. Hence the reliance placed upon the above decision is also not apposite.
14. Now, coming to the facts of the case, we find that Ld CIT(A) vide his order dated 10.10.96 had partially set aside the assessment order of Asst. year 89-90 and fully set aside the asst orders of other two years. Based on the legal proposition enumerated supra, let us decide the issues before us year wise.
(A) ASST. YEAR 1989-90:
For this year, the assessing officer has passed a consequential order on 19.11.96 to give effect to the order of Ld CIT(A) dated 10.10.1996. i.e. within the prescribed time limit. As stated earlier, there is no need for the assessing officer to pass any consequential order after the receipt of Hon'ble ITAT's order. Hence the consequential order passed on 10.3.2004 for the second time becomes infructuous and is non est in the eyes of law. Hence the question of application of Section 153(2A) or Section 153(3)(ii) does not apply to this assessment year. Accordingly the present appeal originating from such infructuous and non est order, which is passed on 10.3.04, is also liable to be quashed and we order accordingly.
(B) ASST. YEARS 1990-91 and 1991-92:
For these two years, the assessee has filed NIL return as the assessee company was in the construction stage and also it was claimed by the assessee company that there was no income generating activity. The assessing officer has framed the assessment order based on the materials gathered during the course of search and also made additions Under Section 68 of the Act based on the books of the assessee which were maintained during the construction stage. In this situation, the assessing officer, in pursuance of order dated 10-10-96 passed Under Section 250 of the Act by the Ld CIT(A) setting aside the assessment, had to pass an order ofjfresh assessment for these two years. If a fresh assessment order is required to be made, then clearly the time limit prescribed Under Section 153(2A) would apply. Accordingly the assessing officer, in pursuance of Ld CIT(A)'s order dated 10-10-1996, should have passed the consequential order latest by 31.3.1999. As the assessing officer has passed the order of fresh assessment only on 12-03-2004, his order for these two years viz., Asst. year 1990-91 and 1991-92 are barred by limitation and are liable to be quashed and we order accordingly. As the impugned assessment orders have been quashed, we need not go into the merits of the additions made.
14. In the result, the appeals of the assessee for all the three years stand allowed.
Pronounced accordingly on 16.5.2008.