Income Tax Appellate Tribunal - Kolkata
Nawada Investment Ltd., Kolkata vs Department Of Income Tax on 31 August, 2009
आयकर अपीलीय अधीकरण, Ûयायपीठ - " वी", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "B", KOLKATA
(सम¢) ौी बी.
बी. आर.
आर. िमƣल
िमƣल,् Ûयायीक सदःय, एवं/and
Before Shri B.R.Mittal, Judicial Member.
ौी सी.
सी.डȣ.
डȣ.राव, लेखा सदःय
Shri C.D. Rao, Accountant Member
आयकर अपील संÉया / ITA
No.1769/Kol/2009
िनधॉरण वषॅ/Assessment Years : 2005-06
(अपीलाथȸ/APPELLANT ) (ू×यथȸ/RESPONDENT)
M/s. Nawada Investment Ltd., Kolkata -Versus- I.T.O., Ward-10(2),
(PAN:AABCN 0596N) Kolkata
आयकर अपील संÉया / ITA No.1926/Kol/2009
िनधॉरण वषॅ/Assessment Years : 2005-06
(अपीलाथȸ/APPELLANT ) (ू×यथȸ/RESPONDENT)
I.T.O., Ward-10(2), Kolkata -Versus- M/s. Nawada Investment
Ltd., Kolkata
For the Department ौी/Shri Shri D.R. Sindhal
For the Assessee: ौी/Shri A. K. Tulsyan
आदे श/ORDER
सी.
सी.डȣ.
(सी डȣ.राव)
राव लेखा सदःय
Per Shri C.D.Rao, A.M.
These two cross appeals are preferred by the Assessee and the Revenue arising out of the order of the C.I.T(A)-XII., Kolkata dated 31.08.2009 for the assessment year 2005-06.
2. At the time of hearing, the Ld. Counsel, appearing on behalf of the Assessee, referred to ground no.1 of the appeal preferred by the assessee, which reads as under:
"1. That the Ld. CIT(A) failed to appreciate the fact that the order passed by the A.O. on 31.12.08 u/s 143(3) was barred by limitation on 30.09.08 as per provision to Explanation of Sec. 153 of the I. Tax Act read with Sec. 245HA of the I. Tax Act. Hence, the assessment order as bad in law and need to be annulled."
2.1 By referring to the above, the Ld. Counsel contended that the order passed by the AO is bad in law and needs to be annulled. Since this issue goes to the very root of the matter, we have decided to dispose off this ground first.
13. Brief facts of this case are that during the course of the assessment proceedings, the assessee filed a petition before the Hon'ble Settlement Commission on 10.4.07 for the assessment years 2004-05 and 2005-06. The Settlement Commission after examining the disclosure made by the assessee, passed an order on 20.09.07 declaring the petition as invalid. This order was communicated to the Ld. Commissioner of Income-Tax on 16.10.07. Thereafter, the AO resumed the assessment proceedings and completed the assessment on 31.12.2008. The normal time limit for assessment was 31.12.2007. The AO observed that the total time available for completing the assessment including the exclusion period was less than one year i.e. eight months. Hence, the second proviso to Explanation-1 of Section 153, the time limit would get extended by one year from the normal limit. Thus, the AO calculated the exclusive period i.e. one year from the date of normal time barring period i.e. 31.12.2007 and completed the assessment on 31.12.2008. Aggrieved by this, the assessee went in appeal before the Ld. CIT(A) and contended that the assessment order passed on 31.12.2008 is beyond the time period available as per provisions of section 153(1). According to the assessee, the exclusive period should be reckoned from the date of abatement of the order of the Settlement Commission or the date of receipt of the order of the Settlement Commissioner by the CIT. Thus, according to the assessee, the assessment got time-barred on 30.9.2008, as per provisions of the Act and since the assessment was completed by the AO on 31.12.08, it was requested to annul the assessment order which is barred by limitation and relied on the provisions of the Income Tax laws, appearing at Chapters XIVA and XIV, provisions under section 245C, 245HA and 153 about the limitation for making the impugned assessment order and based on these provisions, the assessee submitted that the AO should complete the assessment before 30.09.08 by stating the facts of this case as under:
"Asst. Year 2005-06
Return filed on 24.02.2006
Processed u/s 143(1) 20.09.2006
Notice u/s 143(2) issued 20.10.2006
Petition filed u/s 245C before 10.04.2007
the Hon'ble Settlement Commissioner
Petition was deemed admitted u/s 245D(1) - 13.06.2007
Petition was declared invalid u/s 245D(2C)
of the I. Tax Act by Settlement Commission
2
order dated : - 20.09.2007
Communication of Order u/s 245D(2C) of the
I. Tax Act & Abetment of proceeding by
Settlement Commission u/s 245HA,
addressed to Commissioner of I.Tax - 16.10.2007
Reassessment proceeding started by the
A.O after abatement of the proceeding
by Settlement Commission - 04.10.2007
1.3 Know, we would like to submit about the time limitation u/s. 153 for completing assessment for Asst. Year 2004-05*.
a) Normal time limit u/s153(1) of the I. Tax Act - 31.12.2007
b) Time available in present case circumstances
i) Time left after the abatement of proceeding u/s 245D(2A) read with 245HA of the I. Tax Act from 20.09.2007 (end of the month) - 3 Month
ii) Additional time available as per provision of Sec.245HA(4) - to exclude the period from the date of filing of petition u/s 245C( 1) to date of declaration of invalid u/s 245D(2C) of the 1.Tax Act, which is in this case are 10.04.2007 to 20.09.2007 or say April, 2007 to Sept.,2007 i.e. 6 months - 6 months
iii) The period i.e. (i) + (ii) - 9 months
iv) However, as per "Further Proviso" to the Explanation-I to Section 153, if the period available u/s 153 after excluding the period u/s 245HA is less than one year, it should be one year.
In the present case period available in this case months from the date of abatement order. Hence the time limit available u/s 153 (proviso further) will be one year from the date of Abatement means from Oct. '07 to Sept. '08 - 30.09.08
v) Proceeding u/s 143(3)/144 got time barred u/s 153 read with Explanation-1, provisions and Sec.245HA is - 30.09.08
vi) Assessment order passed u/s 143(3) is - 31.12.08"
*wrongly stated as Asst. Year 2004-05. It should be Asst. Year 2005-06.
4. After taking into consideration of the above submissions of the Ld. Counsel for the Assessee, the Ld. CIT(A), vide para 3.5, has confirmed the action of the AO by observing as under:3
"I have also considered the submissions and the case laws relied on by the Ld. AR of the appellant. I have also considered the comments of the A.O. mentioned in the report.
The A.O considered the 'exclusion period' from the date of normal time limit available i.e. 31.12.2007 in the present case. According to A.O, the time available after abatement of proceedings was two months calculated from 1.11.2007 (from the end of the month order communicated to CIT i.e. 16.10.07) to 31 .12.2007 (normal time limit). After adding the 'exclusion period' of 6 months calculated from 10.4.2007 (date of application filed before Settlement Commission) to 20.9.2007 (date of declaration as invalid by Settlement Commission), the total limit available was only 8 months. However time limit available deemed to be one year if the period is less than one year as per second proviso to Explanation-I of Section 153. Thus the A.O calculated the time limit of year from the normal time-bar date i.e. 31.12.2007 and completed the assessment on 31.12.2007*.
The Ld. AR, on the other hand, contended that the 'specified date' is 30.09.2007 (end of the month in which petition declared invalid) in the present case and that 'exclusion time' of one year has to be reckoned with specified date i.e. 30.9.2007 and that the time available to the A.O was upto 30.9.08. As the assessment was completed on 31.12.08, the assessment got barred by three moths. The AR furnished detailed submissions and relied on a case law (CIT Vs. jagadish Chand Agarwal) (supra) in support of his arguments. The Ld. AR, quoting from various related provisions and Sampath Iyengar's Law of Income Tax, vehemently argued that the extension of time available under section 245HA is upto one year for completion of assessment from the date of abatement order.
Section 153 of the Act provides time limit for completion of assessment or re-assessments. It also provides various time limits in special cases under Explanation-I. In all these cases, it is explicitly mentioned that for computing the period of limitation for the purpose of Section 154**, the 'period spent' shall be 'excluded' (Explanation-I). In the same way, in a case where the assessee gone before the Settlement Commission, it is provided in second proviso to Explanation-I of Section 154** that the period of limitation after the exclusion of the period under sub-section (4) of Section 245HA shall be not less than one year. And now for calculating the 'exclusion period' under section 245HA in respect of Settlement Commission cases, the sub-section (4) of Section 245HA itself provides the time period as 'period commencing from the date of application to the Settlement Commission under section 245C and ending with 'specified date' referred to in sub-section (1). The 'specified date', in cases fall under section 245C read with sub- section (2C) of Section 245D i.e. the cases where the application got declared invalid, it is mentioned that the 'specified date' is the 'last day of the month in which the application was declared invalid'. Thus it is very clearly defined what is the 'exclusion period' in terms of 'commencing date' and 'ending date'. 'Commencing date' is the date of application before the Settlement Commission and 'ending date' is the 'specified date' i.e. the date of invalidation of the application. Thus the significance of 'specified date' is only for the purpose of knowing the cut off 4 date and the same cannot be taken as a starting date for counting the extension period of one year. In my opinion, it is the interpretation of the provisions of second proviso to Explanation-i of Section 153 that is causing ambiguity in calculating the time period available for completion of the assessment beyond normal time-bar period. In the present case, I am of the view that the A.O has interpreted the provisions on the ground that the extension period is the exclusion period to be counted from the date of normal time limit. Had it not been the case of Settlement Commission, the A.O would have completed the assessment within the normal period available.
In view of the above discussion, I am not inclined to agree with the contention of the Ld. AR that in the present case the assessment got barred by limitation. Accordingly the appellant's ground is rejected."
* Date wrongly stated. It should be 31.12.2008 ** The correct section is section 153 of Income-Tax Act, 1961
5. Aggrieved by this, now the assessee is in appeal before us whereas the Revenue is in appeal before us against the deletion of addition on the ground that addition of disclosure on Ad-hoc basis was not correct.
6. At the time of hearing before us, the Ld. Counsel for the Assessee has reiterated the submissions made before the revenue authorities and further referred to the decision of the Hon'ble M.P. High Court in the case of CIT-vs- Late Jagadish Chand Agarwal as reported in 278 ITR 132 and based on the Sampat Iyengar's Law of Taxation, 10th Edition, Volume 5, page no.8469 which is placed at paper book page nos.2 and 3, he contended that the AO should have completed the assessment before 30.09.07 whereas the assessment has been completed on 31.12.07. Therefore, the assessment order is barred by limitation and it may be annulled.
7. On the other hand, the Ld. D.R. heavily relied on the orders of the revenue authorities. He further reiterated the observations made by the Ld. CIT(A) which was already appended in the preceding paragraph no.4 of this order and further stressed that since the AO was left over with only eight months which is less than one year, while calculating the exclusive period, one year from the date of the normal date of the time one year period should be taken. Hence, he supported the orders of the revenue authorities and requested to uphold the action of the revenue authorities.
58. After hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the decision of the Hon'ble M.P. High Court and the provisions of section 245HA, it is clear that AO for making an order of assessment, re-assessment or re-computation, as the case may be, after the adjustment under sub-clause (4) of section 245HA, shall not be less than one year and whether such period of limitation is less than one year, it shall be deemed to be extended to one year. This does not mean that the AO will get the entire period of one year from the normal completion of the assessment, in the present case, one year from 31.12.07. The intention of the legislature is clear that assessment, reassessment or recomputation, as the case may be, the total period should not be less than one year. In the present case, the notice under section 143(2) is issued on 20.10.2006 whereas the petition under section 145C was filed before the Settlement Commission on 10.04.07 and the communication of order of the Settlement Commission under section 254D(2C) was communicated to the CIT on 16.10.07. The peculiar facts of the present case are that the AO has supported the reassessment proceedings even prior to the receipt of the order of the Settlement Commission under section 245D(2C) communicated to the Ld. CIT(A) which is evident from the notice issued by the AO dated 04.10.07 fixing the case on 11.10.07 placed at page no.40 of the paper book, which reads as under:
No. ITO Wd. 10(2)/07-08/Kol/732 Dated 04/10/2007 To The Principal Officer, NAWADA INVESTMENTS LTD.
582, Diamond Harbour Road, Behala, KOLKATA - 700 034.
Sub : Re-fixation of hearing for the A.Y. 05-06 in continuation to proceeding u/s.143(3).
Re: This office Notice u/s.142(1) dated 15/01/2007 Please refer to the above.
Since you're A/R last appeared on 05/04/2007 your case is further re- fixed on 11/10/2007 at 12.30 P.M. 6 You are requested to furnish the following details on the above mentioned date and time in continuation to the proceedings u/s.143(3) and Notice u/s.142(1).
..........
......... Sd/-
(PAMPA RAY)
I.T.O., WARD-10(2), KOLKATA
Therefore, we accept the contention of the Ld. Counsel for the Assessee that the proceedings under section 143(3) read with 2nd proviso of Explanation -1 of section 153 are to be completed on or before 30.09.08, in view of the fact that Settlement Commission proceedings came to an end on 20.09.2007, the date on which application of the assessee filed before the Hon'ble Settlement Commission was declared to be invalid. Clause (v) and 2nd proviso of Explanation-1 of section 153 are appended as under:
Clause (v) of Explanation-1 of section 153 Explanation 1.- In computing the period of limitation for the purposes of this section-
...........
...........
(v) in a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section.
..........
..........
2nd proviso of Explanation-1 of section 153 Provided further that where a proceeding before the Settlement Commissioner abates under section 245HA, thek period of limitation available under this section to the Assessing Officer for making an order of assessment, reassessment or re-computation, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under sections 149, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or section 244 or, as the case may be, section 244A, this proviso shall also apply accordingly.
7On careful perusal of the above provisions and the facts of this case, we are of the considered view that the assessment order passed by the AO on 31.12.2008 is beyond the time prescribed as per provisions of the I.T.Act. Hence, we find merits in the contention of the Ld. A.R. Therefore, we quash the assessment order passed by the AO on 31.12.2008, being barred by limitation. Accordingly, ground no.1 of the appeal of the assessee is allowed.
8.1 Since we have quashed the assessment order, being barred by limitation, the other grounds raised by the assessee disputing the order of the AO as well as the grounds of appeal taken by the Revenue disputing the deletion made by the Ld. CIT(A) do not require adjudication.
9. In the result, the appeal of the Assessee is allowed and whereas the Revenue's appeal is dismissed.
यह आदे श Ûयायालय मɅ सुनाया गया है THIS ORDER IS PRONOUNCED IN COURT ON 17.9.10.
Sd/- Sd/-
बी.
बी. आर.
आर. िमƣल
िमƣल,् Ûयायीक सदःय, सी.
सी.डȣ.
डȣ.राव, लेखा सदःय
B.R.Mittal, Judicial Member. C.D. Rao, Accountant Member
(तारȣख)
तारȣख)Date: 17.09.2010
MST(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. M/s. Nawada Investment Ltd., 582, Diamond Harbour Road, Kolkata- 700 034.
2. I.T.O., Ward-10(2), Kolkata
3. C.I.T.(A)
4. C.I.T.
5. DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, Deputy /Asst.Registrar, ITAT, Kolkata Benches 8 9 10