Income Tax Appellate Tribunal - Delhi
Megha Nand vs Income-Tax Officer on 21 November, 1986
Equivalent citations: [1988]24ITD276(DELHI)
ORDER
B. Gupta, Accountant Member
1. The captioned ITA Nos. 737 and 724/Del/85 filed by Shri Megha Nand and ITA Nos. 3506 and 3507/Del/84 filed by Vijay Prakash S/o Megha Nand raising common contentions against the identical orders passed by the AAC upholding the validity of the assessments reopened and framed Under Section 143(3)/148 in the assessment years 1973-74 and 1974-75, may be conveniently consolidated and disposed of by a common order.
2. Before we proceed to state and adjudicate upon the rival stand points of the assessees and the revenue, the facts leading up to the controversy may be briefly stated.
3. The two assessee appellants had jointly constructed a house property at a plot of land bearing No. A-35, Kailash Colony, New Delhi. The construction of the property was commenced in 1972 and completed by June, 1974. Total investment in the property was shown at Rs. 3,79,476 (Rs. 1,89,738 by each of two joint owners) but after the house had been surveyed in August 1975 by the Government Valuation Officer, the ITO rejected the figure of investment declared by the assessee and instead fixed it at Rs. 5,45,454. The difference in the cost accounted by the assessees and the cost determined by the ITO on the basis of Government Valuation Officer's report was equally added in the total incomes of Megha Nand and Vijay Prakash in the assessment year 1975-76. Aggrieved by the orders passed by the ITO, the two assessees filed appeal before the CIT (A). He marginally reduced the cost of construction fixed by the ITO. Still feeling aggrieved, the assessees filed appeals before the Income-tax Appellate Tribunal. ITA Nos. 3357 and 3356/Del/81 respectively filed by Megha Nand and Vijay Prakash relating to their assessments for the assessment year 1975-76 were decided by the Income-tax Appellate Tribunal by its consolidated order dated October 29, 1982. The Tribunal held after considering all the relevant facts regarding the period during which the construction of the property continued and the prevailing cost of construction that the unexplained investment was not as much as held by the AAC and that as far as the assessment year 1975-76 was concerned only a very small amount could be assessed as unexplained the investment in the hands of Megha Nand and Vijay Prakash. It further held after taking into consideration the chart furnished by the assessees in respect of the investments in the property made year after year, that unexplained investment was assessable in the assessment years 1973-74, 1974-75 and 1975-76. The decision as contained in para 5 of its order is hereunder reproduced :
This leaves the question for decision in which year the unexplained investment would be assessable. The construction of the house was started in 1972-73 accounting year i.e., assessment year 1973-74. It went on during assessment year 1974-75 and was completed in assessment year 1975-76. The chart on pages 1-2 of the paper book gives the investment made in each year. Indeed, the unexplained investment could also have been made in each of these years and not only in the last year. The investment shown in assessment year 1973-74 as per books is Rs. 1,78,666 in assessment year 1974-75 is Rs. 1,69,837 and in assessment year 1975-76 is Rs. 31,764. The unexplained investment shall have to be spread over in these years in the same proportion as the explained investment. Since the appeals before us pertain to assessment year 1975-76 only the unexplained investment so worked out by the ITO as per our directions above shall be reduced in the proportion of Rs. 31,764 to the entire investment shown at Rs. 3,80,267. The ITO may take necessary step in the earlier two years to bring to tax the unexplained investment in those years.
4. Subsequent to the passing of the order by the Tribunal, the assessments of the two appellants for the assessment year 1975-76 were revised and the unexplained investment in their hands was assessed at Rs. 4,940 each. In respect of the assessment years 1973-74 and 1974-75, the proceedings were reopened as a consequence of the above finding of the Income-tax Appellate Tribunal and in these two assessment years, the unexplained investment of Rs. 56,732 and Rs. 53,864 had been assessed as incomes of the two assessees. In the assessments of S/Sh. Megha Nand and Vijay Kumar, Rs. 28,366 each was assessed in the assessment year 1973-74 and in their assessments for the assessment year 1974-75, the father and the son had been assessed on incomes of Rs. 26,932 each as unexplained investment.
5. Appeals were filed before the AAC against the supplementary assessments made in the cases of Megha Nand and Vijay Prakash in the assessment years 1973-74 and 1974-75. It was contended before the AAC that there was no failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for their assessments and that if at all there was any escapement of income, it could not be attributed to any failure or omission on their part. It was further contended that the initiation of proceedings was illegal, without jurisdiction and barred by limitation. The AAC partly allowed the four appeals filed by the assessees (two each by Megha Nand and Vijay Prakash) relating to the supplementary assessments made on them for the assessment years 1973-74 and 1974-75. As far as the reopening of the assessments was concerned, the AAC held that that was in accordance with law and that the proceedings taken by the ITO were neither illegal nor barred by limitation. As far as the quantum of unexplained investment was concerned, the AAC reduced it after taking into account the order of the Income-tax Appellate Tribunal and the order of the CIT(A) in appeal No. 424/81-82 passed in respect of the penalty proceedings for the assessment year 1975-76.
6. It is in the background of the abovementioned facts that the two assessees are in second appeal before us. Shri H.G. Malik, learned authorised counsel of the assessees has vehemently contended that the supplementary assessment proceedings taken against Megha Nand and Vijay Prakash in the assessment years 1973-74 and 1974-75 were wholly against the provisions of law. Firstly, it has been contended by referring to certain pages of the paper book that the fact of construction of property at A-35, Kailash Colony, New Delhi having been duly brought to the notice of the ITO and WTO while filing the returns for the assessment years 1973-74 and 1974-75, there was no omission or failure on the part of the assessees to disclose fully and truly all material facts necessary for their assessments for the abovementioned two assessment years, and that it could not be said that any incomes chargeable to tax had escaped assessments on account of any default on the part of the assessees. In any case, it is contended that the proceedings initiated Under Section 147(a)/148 were barred by limitation inasmuch as, the notices were not issued within the time limit prescribed under the Act. It is next contended by Shri Malik that the order of the Income-tax Appellate Tribunal in ITA Nos. 3357 and 3356/Del/81 dated 29-10-1982 in the cases of Megha Nand and Vijay Prakash for the assessment year 1975-76 could not in law vest any jurisdiction unto the ITO to reopen proceedings which were otherwise barred by limitation. According to Shri H.G. Malik, there was no finding or direction in the order of the Income-tax Appellate Tribunal which required issuance of notices for reassessments for the assessment years 1973-74 and 1974-75, According to him, the Income-tax Appellate Tribunal did not have any jurisdiction to say in para 5 of the Appellate Order dated 29-10-1982 that, "the ITO may take necessary steps in the earlier two years to bring to tax the unexplained investment in those years". In any case, it is contended that if at all the above was to be considered as a finding or direction, it was not a necessary finding for the disposal of the appeal for the assessment year 1975-76. Mr. Malik-has been very emphatic in saying that the word "may" as contained in the abovementioned sentence of the order of the Tribunal could not be said to be tantamounting to either any direction or a finding. According to him, the word "may" left the ITO free to take any action or not to take any action and, therefore, the effect of the Tribunal's order was that it did not give any positive finding or direction for the compliance by the ITO. According to him, the matter was left open to the ITO and that the ITO could in his discretion take any action or avoid it in respect of the assessment years 1973-74 and 1974-75 without in any way violating the findings given by the Income-tax Appellate Tribunal in its order dated 29-10-1982. In support of his contentions, Mr. Malik has specifically placed reliance on the decision of the Hon'ble Supreme Court in Rajinder Nath v. CIT [1979] 120 ITR 14, on a decision of the Hon'ble Karnataka High Court in Consolidated Coffee Ltd. v. ITO [1985] 155 ITR 729 a decision of the Hon'ble Gujarat High Court reported in Tolaram Gangaram v. ITO [1985] 155 ITR 55. Some extracts of certain decisions of the Appellate Tribunal were also made a part of the paper book submitted by Shri Malik but the learned counsel did not refer to any one of those decisions in support of his contentions so far as the quantum of incomes from unexplained investment as were ultimately assessed by the AAC are concerned, learned authorised counsel of the assessees did not dispute the correctness thereof.
7. On the other hand, Shri R.S. Adlakha, learned D.R. has referred to the provisions of Sections 150, 153(3) and Explanation 2 of Section 153 and submitted that the reassessment proceedings taken in the cases of Meghanand and Vijay Prakash for the assessment years 1973-74 and 1974-75 were in accordance with law and that as the Tribunal had while deciding the assessees' appeals for the assessment year 1975-76 given certain directions and finding, the reassessments for the assessment years 1973-74 and 1974-75 were properly initiated and completed. According to him, positive findings had been given by the Income-tax Appellate Tribunal in its order dated 29-10-1982 and that since the assessments of the two assessees for the assessment years 1973-74 and 1974-75 were made in consequence of or to give effect to the findings and the directions of the Appellate Tribunal, the usual time limit prescribed for initiation and completion of reassessments did not apply. In support of his contentions, the learned D.R. has placed reliance on decisions in B-. A. R. Abdul Rahman Saheb v. ITO [1975] 100 ITR 541 (AP), Ambaji Traders (P.) Ltd. v. ITO [1976] 105 ITR 273 (Bom.), N. Sastha v. AGED [1984] 146 ITR. 62 (Mad.) and Sukhdayal Pahwa v. CIT [1983] 140 ITR 206 (MP). It is further submitted by Shri Adlakha that the decision of the Hon'ble Supreme Court Rajinder Nath's case (supra) actually supports the case of the department as against that of the assesses. Referring to the two other decisions in Consolidated Coffee Ltd.'s case (supra) and Tolaram Gangaram's case (supra) on which learned authorised counsel of the assessee had placed reliance, Shri Adlakha submits that the facts in those two cases decided by the Hon'ble High Courts were different.
8. We have given our very careful consideration to the submissions made by the learned authorised counsel of the assessee and learned D.R. We have also very carefully gone through the order of the Income-tax Appellate Tribunal dated 29-10-1982, and the relevant provisions of the I.T. Act as contained in Section 149,150 and 153 of the I.T. Act. We find that in Section 149 of the I.T. Act, time limits have been prescribed for issuing notices Under Section 148. If a case falls within Section 147(a), action Under Section 148 can be taken if 8 years have not elapsed from the end of the year in which the income escaped assessment. Similarly, where a case falls within the meaning of Section 147(a) and the income which escaped assessment is likely to amount to Rs. 50,000 or more, action can be taken within a period of 16 years from the end of the assessment year in which the income escaped. In cases falling Under Section 147(6), action can be taken within 4 years from the end of the assessment years in which the income escaped assessment. To these provisions prescribing limits for reopening of assessments and issuance of notices Under Section 148, exceptions have been provided in Section 150 of the I.T. Act, 1961. This section is a non obstante section and it provides that a notice Under Section 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 appellate order or a revisional order. These overriding provisions of Section 150(1) are subject to only one restriction which is spelt out in Sub-section (2) of Section 150. A very well settled principle of law has been incorporated in provisions of Section 150(2) and it is that an appellate order or an order by a revisional authority cannot give direction which goes to the extent of conferring jurisdiction upon the ITO which he was not lawfully seized of at the time of making of the original assessment. In other words, if an assessment of an assessee in respect of a particular assessment year had become barred by limitation at the time of the original assessment then in that case the provisions of Section 150(1) of the Act cannot be called to the aid of the revenue for making an assessment in respect of that assessment year. In the present case, we notice that the assessments for the years 1973-74 and 1974-75, had not become barred by limitation at the time when they were originally framed. The provisions of Section 153(1) and 153(2) lay down the time limits for completion of assessments and reassessments. The provisions of Section 153(3)(ii) provide that the time limits prescribed in Section 153(1) and 153(2) shall not apply where the reassessment is made in consequence of or to give effect to any finding or direction contained in an order made Under Section 250, 254, 260, 262, 263 or 264. It is further provided in Explanation 2 of Section 153 that where by an order referred to in Clause (ii) of Section 153(3), any income is excluded from the total income of the assessee from an assessment year, then an assessment of such income for another assessment year shall for the purposes of Section 150 and Section 153 be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
9. Examining the order of the Income-tax Appellate Tribunal dated 29-10-1982, in the light of the above provisions of the I.T. Act, we find that it is more than abundantly clear from the portion of the order reproduced above that for reaching the finding that the whole of the unexplained investment was not assessable in the hands of Meghanand and Vijay Prakash in the assessment year 1975-76, it had to decide and hold that the action of the ITO was not justified because part of the unexplained investment related to the assessment years 1973-74 and 1974-75. In para 4 of the order of the Tribunal, it had been observed that the Tribunal was dealing not only with the construction of superstructure at A-35, Kailash Colony, New Delhi relating to the assessment year 1975-76 but also relating to the assessment years 1973-74 and 1974-75. It appears that the plea had been raised successfully by the learned authorised counsel of the assessee who argued that appeal that the whole of unexplained investment was not assessable in the assessment year 1975-76 as a substantial part of the investment which was found to be unexplained related to the assessment years 1973-74 and 1974-75. That plea or the question raised on the side of the assessee had been favourably decided and the Tribunal held that only to a certain extent the unexplained investment was assessable in the assessment year 1975-76 and that the rest of the unexplained investment was assessable in the assessment years 1973-74 and 1974-75. When the Tribunal said is the last sentence of paragraph 5 of its order that the ITO may take necessary steps in the earlier two years to bring to tax the unexplained investment in those years, it gave a positive finding. According to us, this was a finding which was a must and which had to be given by the Tribunal in order to decide the appeal for the assessment year 1975-76. Unless it had given a finding that part of the unexplained investment made by the two assessees, actually related to the assessment years 1973-74 and 1974-75 as per chart supplied by the assessees it could not have granted the relief sought by the assessee in the assessment year 1975-76. We would, therefore, hold that the finding which was given by the Income-tax Appellate Tribunal was a necessary finding and which had to be given for the disposal of the appeal for the assessment year 1975-76. In fact, according to us, what was stated by the Tribunal in paragraph 5 of its order was not only a finding but a direction which had been given in order to decide the appeal for the assessment year 1975-76. In the case of Rajinder Nath (supra), the Hon'ble Supreme Court has held that the expressions "finding" and "direction" are limited in meaning. According to it, a finding given in appeal must be a finding necessary for the disposal of the particular case. It has been further held by their Lordships that to be a necessary finding, it must be directly involved in the disposal of the case. Applying these guidelines, it appears to us that what the Tribunal stated in paragraph 5 of its order dated 29-10-1982, was a necessary finding and a finding which was directly involved in the disposal of the appeal for the assessment year 1975-76. As has been stated earlier, the Tribunal decided that the whole of the unexplained investment made by the two assessees in the above named property could not be assessed in the assessment year 1975-76 because it partly related to the assessment year 1973-74 and partly to the assessment year 1974-75. Unless and until, the Tribunal had given a finding, on the basis of facts and figures furnished by the assessees that part of the explained investment was assessable in assessment year 1973-74 and in the assessment year 1974-75, it could not have reduced the assessment of unexplained investment which had been entirely made in the assessment year 1975-76 in the hands of the two co-owners. Thus, it was not a case of any incidental finding on the part of the Tribunal and we would not be able to accept the representation made by the learned authorised counsel of the assessee that the Tribunal had left the entire thing to the sweet will and discretion of the ITO to assess or not to assess the unexplained investment in the assessment years 1973-74 and 1974-75. The word "may" was used not in the sense that any choice was being left to the ITO but was used in a polite manner of directing the ITO to take the necessary action for assessing the unexplained investment in the assessment years 1973-74 and 1974-75. When we hold as above, we are not only supported by the decision of the Hon'ble Supreme Court in Rajinder Nath's case (supra) but also by the decisions in B.A.R. Abdul Rahman Saheb's case (supra), Ambaji Traders (P.) Ltd.'s case (supra), Sukhdayal Pahwa's case (supra) and N. Sastha's case (supra). In the case of B. A. R. Abdul Rahman Saheb (supra), the Hon'ble Andhra Pradesh High Court held that the effect of Section 150 and Sub-section (3) of Section 153 read with Explanation 2 thereto is that if any income is deleted from the assessment by higher authority on the ground that it is not the income of that year, steps may be taken Under Section 147 to assess it as income of another year without any fetters of limitation as prescribed in Section 149 and Section 153. In that case, the A AC had while deciding the appeal for the assessment year 1959-60, held that the unexplained investment related to the assessment years 1956-57 and 1957-58. Pursuant to that order of the AAC, notices were issued by the ITO Under Section 148 on the 20th of March, 1969, and their Lordships held that the proceedings were not barred by limitation and that those had been validly initiated in consequence of or to give effect to the finding of the AAC. According to their Lordships the bar of limitation stood lifted in that case as per the provisions of Section 150, Section 153(3) and Explanation 2 of Section 153. In the decision in the case of Ambaji Traders (P.) Ltd. (supra), the Hon'ble Bombay High Court also held the same very views as were expressed by the Hon'ble A. P. High. Court in the decision in B. A. R. Abdul Rahman Saheb's case (supra). The decision of the M. P. High Court in the case of Sukhdayal Pahwa (supra) also took the same view as was taken by the Hon'ble A. P. High Court and Bombay High Court in the abovementioned decisions in B. A. R. Abdul Rahman Saheb's case (supra) and Ambaji Traders (P.) Ltd.'s case (supra). In all these cases decided by the Hon'ble High Courts of A. P. and Bombay and Madhya Pradesh, the cherished decision of the Hon'ble Supreme Court of India in the case of ITO v. Murlidhar Bhagwan Das P [1964] 52 ITR 335 had been followed. The decisions cited on the side of the revenue, therefore, clearly support the standpoint of the ITO and the AAC. We are also entirely in agreement with that point of view. So far as the decisions cited by Shri H. G. Malik are concerned, we have already stated above that the decision of the Hon'ble Supreme Court in Rajinder Nath's case (supra), in fact, goes against the assessees. Since in the present case, the finding given by the Income-tax Appellate Tribunal as contained in paragraph 5 of its order dated 29-10-1982 was an essential finding or a necessary finding or was a finding which was inextricably connected with the decision of the appeal, it was a valid finding and it consequently enabled the Income-tax Authorities to validly reopen the assessments for the assessment years 1973-74 and 1974-75 in the cases of the two appellants.
The decision of the Hon'ble Gujarat High Court in the case of Tolaram Gangaram (supra) on which reliance has been placed by Shri Malik, learned authorised counsel of the assessee had significantly distinguishable facts as in that case, their Lordships were not called upon to consider the provisions of Sections 150, 153(3) and Explanation 2 of Section 153. In the decision of the Hon'ble Karnataka High Court in the case of Consolidated Coffee Ltd. (supra) on which also Shri Malik placed reliance for the case pleaded on behalf of the assessees, the facts were different. In that case, the Income-tax Appellate Tribunal had decided the appeals relating to the assessment years 1964-65 and 1965-66 and 1966-67. The question for consideration before the Tribunal was as to whether the sale of timber was liable to assessment under the head 'capital gains'. The Tribunal held agreeing with the department's alternative contention that the amounts were liable to capital gains tax. Nowhere did the Tribunal give any finding that the assessment of capital gains be made in the assessment year 1963-64. In these circumstances, it was held by their Lordships of the Hon'ble Karnataka High Court that there was no finding or direction of the Income-tax Appellate Tribunal as could justifiably enable the Income-tax Authorities to reopen the assessment of the assessee for the assessment year 1963-64. In contrast with the abovementioned facts which prevailed in the case of Consolidated Coffee Ltd. (supra), the facts in the present case are that an absolutely necessary finding had been given by the Income-tax Appellate Tribunal in paragraph 5 of its order dated 27-10-1982. The Karnataka High Court decision relied upon by the learned authorised counsel of the assessee, therefore, does not go against the findings that we have given.
10. We may also incidentally mention here that the order of the Income-tax Appellate Tribunal dated 29-10-1982 had been accepted by the assessee and no reference application had been filed in respect of that order. We may also mention here that no application Under Section 254(2) had either been filed against the Tribunal's order dated 29-10-1982. This clearly establishes that the assessee itself had raised a plea before the ITAT that the assessment of unexplained investment in the hands of the two assessees in the assessment year 1975-76 was not justified as it partly related to assessment years 1973-74 and 1974-75. When the Tribunal reduced the assessment of unexplained investment in the hands of the two assessees in the assessment year 1975-76, it only gave a finding which the assessee sought and which was to the effect that the part of the unexplained investment related to the assessment years 1973-74 and 1974-75.
11. In conclusion, we are satisfied that as per the provisions of Section 150 read with Section 153(3) and Explanation 2 of Section 153, the bar of limitation stood lifted and the supplementary assessments made on the two assessees for the assessment years 1973-74 and 1974-75 were valid and justified.
12. The appeals filed by the assessees fail and are hereby rejected.