Income Tax Appellate Tribunal - Lucknow
Smt. Neelam Gupta vs Income Tax Officer on 22 May, 2007
Equivalent citations: (2007)110TTJ(LUCK)714
ORDER
H.L. Karwa, J.M.
1. This appeal, filed by the assessee, is directed against the order of CIT(A), Bareilly dt. 31st Oct., 2006 relating to asst. yr. 1997-98.
2. In this appeal, the. assessee has taken the following grounds:
1. That the reassessment proceedings are time barred by limitation and the same may please be cancelled.
2. That the assumption of jurisdiction for reassessment/initiation of proceeding vide notice under Section 148 of the Act, dt. 16th Nov., 2004 and its continuance and culmination vide order under Section 143(3)/147 dt. 13th March, 2006 is bad in law as per facts and circumstances of the case.
3. That the learned CIT(A), Bareilly erred on facts and in law in confirming the addition of Rs. 1,50,000 under Section 69 of the IT Act which is not correct as per facts and circumstances of the case.
3. Firstly I will decide whether the assessment framed by the AO under Section 143(3) r/w Section 147 of the IT Act, 1961 dt. 13th March, 2006 was within limitation. The assessee is an individual and the assessment year involved is 1997-98. In this case, the assessment for asst. yr. 1998-99 was completed under Section 143(3) on 26th March, 2001 wherein an amount of Rs. 1,50,000 was added as unexplained investment under Section 69, being unproved gifts. The assessee had credited Rs. 1,50,000 in her bank on 30th Jan., 1997 and source of such investment was stated to be gifts totalling to Rs. 1,50,000 received from five donors who claimed to have sold their shares of Baba Gauri Roller Flour Mills (P) Ltd., Hardoi. While framing the assessment for asst. yr. 1998-99, the then AO made additions because when the information was required under Section 133(6) of the IT Act, 1961 in two cases, letters were received back with the remark of postal authorities that no such person existed and in other two cases of Mrs. Meena Jhujjhunwala and Smt. Renu Agarwal replies were received to the effect that they had not made any gift to the assessee. Therefore, the AO made addition of Rs. 1,50,000 under Section 69 of the IT Act, 1961. On appeal, the CIT(A) deleted the addition observing as under:
5. I have carefully considered the reply given by the appellant and perused the assessment order. This is undisputed fact that the assessee had received gift from donors on 31st March, 1997 as per copy of bank account of Smt. Neelam Gupta in Oriental Bank of Commerce, Shahjahanpur. The appellant has explained that she has purchased the shares of Omar Cold Co. in financial year 1997-98 i.e. on 3rd April, 1997, therefore, any addition on account of unexplained deposit due non-genuineness of gift can be made in asst. yr. 1997-98 and not in asst. yr. 1998-99 as the appellant has received gift through bank draft in financial year 1996-97 relevant for asst. yr. 1997-98.
6. In view of the above the AO is not justified in making addition of Rs. 1,50,000 towards unexplained investment in asst. yr. 1998-99. The AO is directed to delete the addition of Rs. 1,50,000. The AO is free to take action in asst. yr. 1997-98.
4. Subsequently, the AO issued notice under Section 148 and reassessed the unexplained investment for asst. yr. 1997-98.
5. Aggrieved by the order of the AO passed under Section 143(3)/147 of the Act dt. 13th March, 2006, the assessee went in appeal before the CIT(A). Before the CIT(A), the assessee contended that the reassessment proceedings are barred by limitation. The assessee also submitted before CIT(A) that for asst. yr. 1997-98, notice under Section 148 was issued on 16th Nov., 2004 without approval from higher authorities. The assessee also submitted that no direction has been given by the CIT(A) while disposing of the appeal of the assessee for asst. yr. 1998-99.
6. The learned CIT(A) held that the findings of appellate authority were clear that the amount could be added in asst. yr. 1997-98. According to him, there was a specific and positive finding. He further held that to give effect to the findings of CIT(A), the AO initiated action under Section 148 for asst. yr. 1997-98. According to him, action is permissible under Section 150(1) of the IT Act, 1961. In view of the above, learned CIT(A) held that the assessment order framed by the AO on 13th March, 2006 was within time.
7. Now the assessee is in second appeal before this Bench of the Tribunal.
8. We have carefully considered the rival submissions and have also perused the orders of the authorities below. Shri Amit Shukla, learned Counsel for the assessee reiterated that the reassessment proceedings are time barred by limitation and the same may be quashed. On the other hand, Smt. Mini Sinha Verma, senior Departmental Representative relied on the orders of the authorities below. The paramount question before me is whether in this case any finding or direction was issued by CIT(A), Lucknow while deciding the appeal of the assessee for asst. yr. 1998-99. I have already reproduced the relevant paras i.e. paras 5 and 6 of the CIT(A)'s order dt. 10th June, 2004 relevant to asst. yr. 1998-99. In my opinion, the observation made by CIT(A) vide paras 5 and 6 of the order dt. 10th June, 2004 (supra) could not be described as a direction. The learned CIT(A) has observed vide para 6 of the order for asst. yr. 1998-99 "the AO is however free to take action in asst. yr. 1997-98". In my considered view, the above observation of the CIT(A) could not be held as a direction. A similar issue has been decided by the Hon'ble Supreme Court in the case of Rajinder Nath v. CIT . The Hon'ble Supreme Court, at p. 15 (headnote), held as under:
That the observation that the ITO was "free to take action" to assess the excess in the hands of the cross-objection owners could not be described as a "direction". A direction by a statutory authority was in the nature of an order requiring positive compliance. When it was left to the option and discretion of the ITO whether or not to take action it could not be described as a direction.
9. Respectfully following the decision of Supreme Court (supra), in the instant case, it can be safely held that the learned CIT(A) has not given any direction to the AO to initiate reassessment proceedings for the asst. yr. 1997-98. Therefore, the notice issued under Section 148 on 16th Nov., 2004 is beyond the time limit as per IT Act, 1961, therefore, reassessment order dt. 13th March, 2006 is not tenable in law. In this case assessment year ended on 31st March, 1998 and, therefore, no notice under Section 148 could have been issued after 31st March, 2004. Shri Amit Shukla, learned Counsel for the assessee also submitted that in view of the provisions of Section 150(2) of the IT Act, 1961 also, the reassessment proceedings are time barred by limitation. It is seen that the appeal for asst. yr. 1998-99 has been passed by the CIT(A) on 10th June, 2004 and as per law, no reassessment for asst. yr. 1997-98 could have been made after 31st March, 2004. For argument's sake if it is admitted that the CIT(A) has given directions to the AO to initiate reassessment proceedings for asst. yr. 1997-98 in its order dt. 10th June, 2004, even then under the law, the direction given by the CIT(A) on 10th June, 2004 was against the provisions of Section 150(2) of the Act. In the case of Spences Hotels (P) Ltd. v. Dy. CIT (2003) 183 CTR (Kar) 508 : (2003) 263 ITR 263 (Kar), the Hon'ble Karnataka High Court has held that "now, according to Sub-section (2) of Section 150, the initiation of reassessment proceedings would be vague, even when they initiated in consequence of or to give effect to any finding or direction contained in the appellate order, if such initiation of reassessment proceedings is barred by any other provision of the Act on the date of the order which was the subject-matter of appeal." In the instant case, initiation of reassessment proceedings was barred by other provision of the Act on 10th June, 2004 when the appellate order for asst. yr. 1998-99 was passed. It is observed that the asst. yr. 1997-98 has ended on 31st March, 1998. Reopening of the assessment for asst. yr. 1997-98 was permissible under the IT Act upto 31st March, 2004. However, the appellate order, on the basis of which reassessment was initiated, has been passed on 10th June, 2004. On the said date initiation of reassessment for asst. yr. 1997-98 was prohibited by law, and hence reassessment proceeding initiated after 31st March, 2004 is clearly barred by limitation in view of the decision of Hon'ble High Court of Karnatak (supra). The Hon'ble Karnataka High Court further held that "Sub-section (2), however, is again in the nature of a proviso to Sub-section (1). It says that the provisions of Sub-section (1) shall not apply where, by virtue of any other provision limiting the time within which action for assessment, reassessment or recomputation may be taken on the date of the order which is the subject-matter of the appeal, reference or revision in which the finding or direction is contained." In view of the judgment of Hon'ble Karnataka High Court (supra) also, the reassessment proceeding initiated, vide notice under Section 148 dt. 16th Nov., 2004, is barred by limitation.
10. Viewed from any angle, the reassessment proceeding order framed by the AO is time barred by limitation and, therefore, the same is quashed.
11. No findings are required on merits since I have already quashed the assessment order.
12. In the result, the appeal is allowed.