Income Tax Appellate Tribunal - Delhi
Income-Tax Officer vs Smt. Resham Devi Jain on 30 May, 1997
Equivalent citations: [1997]62ITD204(DELHI)
ORDER
1. The following common ground has been raised in all these appeals filed by the revenue and directed against the separate orders passed by the DCIT(A) :
"On the facts and in the circumstances of the case the DCIT(A) has erred in law in annulling the order under section 154 dated 12-1-1994 giving effect to the findings of the Hon'ble ITAT, Delhi Benches contained in their order dated 18-1-1993."
2. The facts noted by the tax authorities in their respective orders are not in dispute before and the solitary issue which is to be decided is whether the DCIT(A) was right in law in annulling the orders passed by the Assessing Officer under section 154/155 on the ground that these were barred by limitation as provided in sub-section (7) of section 154 of the Income-tax Act.
3. No doubt the basic facts are stated in the orders of the tax authorities as also by the Tribunal if its order dated 18-1-1993 in the case of Smt. Kapoori Devi & Smt. Reshma Devi (the present respondent) for assessment year 1986-87, the following are required to be highlighted.
4. In the return filed for assessment year 1986-87, the assessee appended the following note :
"During the year under assessment, the assessee received enhanced compensation in respect of land acquired earlier alongwith compensation. She also received interest till 30-9-1985. Assessee has declared in the interest on compensation on accrual basis which come to Rs. 29,411.00 for the year under assessment. Assessee received total interest of Rs. 719,628.36 for the period from 5-9-1973 to 30-9-1985. Assessment of previous years can be revised by including the interest accrued during the relevant assessment year. Assessee's claim is based on certain High Court judgments".
5. The Assessing Officer did not accept the stand of the assessee and brought to tax the entire amount of interest during assessment year 1986-87 on receipt basis. On further appeal before the CIT(A), the assessee stated that -
(1) revised returns had been filed for assessment years 1975-76 to 1978-79 in which interest on compensation receivable had been shown on the basis of accrual and assessments in pursuance of the revised returns were pending;
(2) A sum of Rs. 52,541 was received on 6-3-1979 as interest out of which interest amounting to Rs. 8,676 was shown in the return for assessment year 1979-80 on accrual basis and which was assessed under section 143(1). Further the balance of Rs. 43,865 (Rs. 52,541 (-) 8,676) was declared in the returns for assessment years 1975-76 to 1978-79.
(3) No interest had accrued in the period relevant to assessment years 1980-81 to 1985-86 and nothing had been declared either on accrual basis or on receipt basis in these years.
6. The CIT(A) noted in the appellate order that "in the absence of records" it was not possible for him to verify the contentions raised on behalf of the assessee. He, therefore, restored the matter back to the fire of the Assessing Officer observing in the process as under :
"All this verification can be made only from the ITO's record. The ITO is, therefore, directed to make a factual verification of the declaration of the income from interest on compensation received by the assessee in all the years from 1975-76 onwards with reference to the date of the award of the compensation and the interest thereon. If the ITO finds that the interest on compensation had been declared by the assessee in all these years on the basis of receipt he would be justified in including the entire interest received as a result of the order of the Supreme Court in the year under consideration. If, however, the ITO finds that the income from interest had been shown in all the earlier years on the basis of accrual, the interest received by the assessee in October, 1985 as a result of the order of the Supreme Court will have to be spread over from year to year in the light of the following decisions :
(i) to (v) ** ** ** Having regard to the above discussion the ITO is directed to make a factual verification with reference to the records as to whether the interest on compensation and the other interest had been shown by the assessee in the returns for the years 1975-76 onwards on receipt basis or on accrual basis and thereafter he should take a decision as to the assessability of the total amount of interest received on compensation in October, 1985 by spreading over in different years on accrual basis or by including it in its entirety in the year under consideration."
7. Being aggrieved with the order of the CIT(A), the revenue came up in appeal before the Tribunal which upheld the view expressed by the CIT(A).
8. In order to give effect to the order of the Tribunal aforesaid the Assessing Officer took up the case for verification/consideration. It transpired that some of the interest income had been credited on accrual basis and some on receipt basis. The assessee furnished evidence regarding filing of revised returns for assessment years 1975-76 to 1979-80 and for the other years it was stated that the same could not be collected from the previous counsel.
9. Keeping in view the judgments of the Hon'ble Supreme Court in the cases of Rama Bai v. CIT [1990] 181 ITR 400 and K.S. Krishna Rao v. CIT [1990] 181 ITR 408, the Assessing Officer worked out the year-wise interest on accrual basis for assessment years 1974-75 to 1986-87. The figure for the last assessment year coming to Rs. 29,985. The taxable income for assessment year 1986-87 was recomputed at a figure of Rs. 71,060 vide order dated 22-10-1993. It is an accepted position between the parties that this order has become final.
10. On the basis of the note given by the assessee in the return for assessment year 1986-87 as also with a view to implement the order of the Tribunal approving the set aside by the CIT(A) the Assessing Officer issued notices under section 154 to the assessee for assessment years 1974-75 to 1985-86. A perusal of the consolidated order dated 12-1-1994 passed for assessment years 1974-75 to 1985-86 under section 154/155 shows that the assessee did not file any objection and nor did anybody attend personally. Taking note of the order of the Tribunal, on the revenue's appeal as also the decisions of the Hon'ble Supreme Court (supra), the Assessing Officer passed a consolidated order under section 154/155 on 12-1-1994 by the adding to the assessee's income the accrued interest year-wise.
11. On further appeals, the DCIT(A), annulled the orders on the ground that it was passed beyond the period of limitation.
12. I have heard both the parties at length on more than one occasion. The Ld. DR strongly supported the consolidated order passed under section 154/155 by the Assessing Officer on 12-1-1994. According to him, the DCIT(A) had clearly overlooked the provisions of sub-clause (ii) of subsection (3) of section 153 which provided no time limit for making an assessment, re-assessment or re-computation on an assessee to give effect to any "finding or direction" contained in an order passed under section 250, 254, 260, 263 or 264 etc. It was pointed out that the assessee at every stage of the proceedings had contended that the interest was taxable on "accrual basis" and the note to the return for assessment year 1986-87 was quite categorical. Attention was also invited to the order of the Tribunal dated 18-1-1993 for assessment year 1986-87 as also the subsequent order of the Assessing Officer dated 22-10-1993 giving effect to the order of the Tribunal. It was stated that both these orders had become final and the assessee had accepted the computation of income. According to the Ld. DR, the styling of the order as one passed "under section 154/155" did not make it illegal inasmuch as it was clearly meant to give effect to the "direction contained in the order of the Tribunal". The Ld. DR further stated that the assessee had accepted the orders of the DCIT(A) (now in appeal) holding that the interest was taxable on accrual basis and that the interest received "had to be spread over and only interest pertaining to the respective year has to be assessed". In concluding, the Ld. DR urged that the consolidated order of the Assessing Officer under section 154/155 be restored.
13. Ld. Council for the assessee on the other hand strong by supported the orders of the DCIT(A) on grounds of limitation according to him, the assessee was not precluded in law from challenging the orders of the Assessing Officer both under section 143(3) for assessment year 1986-87 (the first order) as also the consolidated order under section 154/155 since the Assessing Officer had not accepted the stand of the assessee at the first instance to have the interest income taxed on accrual basis. Referring to the order of the Tribunal dated 18-1-1993 the Ld. Counsel contended that the assessment had to be framed as per law and the power of any appellate authority could be exercised only with reference to the year under appeal and no directions could be given for any other year or years not in appeal. Without prejudice to aforesaid it was stated that no such direction had been given by the Tribunal and there was a reference to verification of the "method of accounting" alone.
14. The Ld. Counsel further argued that the order of the CIT(A) had merged in the order of the Tribunal and the directions given in the latter order were relevant. He also referred to the submission of the Ld. DR to the effect that the consolidated order was passed by the Assessing Officer under section 154 inviting further attention to the fact that no proceedings had been initiated under any other provision of the Income-tax Act to bring to tax the interest income for the period earlier to assessment year 1986-87. In concluding, the Ld. Counsel urged that the order of the DCIT(A) be confirmed. He referred to the decisions reported in T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC) and Rama Bai's case (supra). Reference was also made to the commentary of "Chaturvedi & Pithisaria", 4th Edition, Volume 5, Page 5300 in support of the view point canvassed.
15. After considering rival contentions, I am of the view that there is ample merit in the arguments advanced by the Ld. DR. for the revenue. Taking up first the argument of the Ld. Counsel with regard to the legal impact of the Tribunal order dated 18-1-1993, I would reiterate that this order had become final vis-a-vis the parties and it in fact confirmed earlier order of CIT(A) dated 27-2-1989 for assessment year 1986-87 which became final vide the assessee as it was the revenue which filed second appeal to the Tribunal.
16. Ld. Counsel has raised an argument to the effect that directions for a year other than the one under appeal were not valid in law and alternatively he had urged that directions were only given to verify the "method of accounting". In my opinion, the order of the Tribunal has to be read along with the order of the CIT(A) vis-a-vis the subject matter of appeals before them by the parties. It was the assessee's case all along with interest was taxable from year to year on accrual basis and not in the year of receipt i.e. assessment year 1986-87 and this was quite apparent from the note appended to the return for that year. This was also the case made out in the appeal to the CIT(A) for assessment year 1986-87 and he accepted the same and issued certain directions (reproduced earlier) which were upheld by the Tribunal in toto. This also takes care of the argument of the Ld. Counsel on the question of "merger" of the order of CIT(A) with the order of Tribunal. Going on the assumption that the order of the Tribunal contained directions for earlier years I am of the view that nothing can be done in the present proceedings since directions even if not valid in law are final till modified or reversed by a superior Court. The decisions relied upon by the Ld. Counsel do not come to his aid.
17. Coming to the question of limitation, the Ld. DR has rightly pointed out to the provisions of section 153(3)(ii) which read as under :
"(3) The provisions of sub-section (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, (subject to the provisions of sub-section (2A) be completed at any time -
(ii) where the assessment, 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 sections 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) :
17A. It is apparent on a reading of the aforesaid provisions that the normal time limit for completion of assessment or reassessment as contained in section 153(1) and (2) will not apply where assessment, reassessment or recomputation is made on an assessee or any person in consequence of or to give effect to any "finding" or "direction" contained in an order of the first appellate authority, the Tribunal, the High Court, the Supreme Court or by any other Court otherwise by appeal or reference under Income-tax Act or by the CIT under section 263 or section 264. Explanation 2 to section 153 is also relevant and this reads as under :
"Explanation 2 - "Where, by an order (referred to in clause (ii) of subsection (3), any income is excluded from the total income of the assessee for an assessment year, than, an assessment of such income for another assessment year shall, for the purpose of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order."
The assessee's case in my opinion falls under the language of the main section i.e. 153(3)(i) as a specific finding/direction has been recorded by the appellate authorities which was necessary in this case while deciding the appeal for assessment year 1986-87. One therefore need not resort to Explanation 2 which is of a deeming nature. This comes into operation only where there is no finding/direction in the order of a higher authority. Sub-section (2A) to section 153 is not a bar since this deals with cases where a fresh assessment order is to be passed pursuant to an order under section 146, 250, 254, 263 or 264 cancelling an assessment whereas section 153(3)(ii) speaks of orders to be passed giving effect to "any finding or direction" contained in orders passed by appellate authorities, the administrative CIT, the High Court and Supreme Court as also any other Court in proceedings otherwise than in appeal or reference under the Income-tax Act. Even otherwise the time limit stipulated by subsection (2A) is adhered to vis-a-vis the order of Tribunal dated 18-1-1993 although not applicable. The Ld. DR rightly argued that in case the argument of the Ld. Counsel was to be accepted than it would mean that matters decided by the High Court and the Supreme Court after many years from the date of the assessment order would not be given effect to on grounds of limitation.
18. I am also of the view that the nomenclature given to the consolidated order as one passed "under section 154/155" would not invalidate the same as it is quite apparent that it is an order passed to give effect to a "finding or direction" contained in the order of the Tribunal dated 18-1-1993 for assessment year 1986-87 read with the order of the CIT(A) for the same year and as already held earlier no time limit applies to such an order.
19. It may also be not out of place to mention that pursuant to order of the Tribunal dated 18-1-1993 the Assessing Officer passed an order on 22-10-1993 to give effect to the order of the Tribunal for assessment year 1986-87 and the entire matter has been discussed with reference to even the earlier years including the quantum of interest that relates to each of these years as also the views expressed by the CIT(A) and the Tribunal. There is also a reference to filing of revised returns for certain earlier assessment years showing interest on accrual basis. This order as accepted by the parties became final not challenged by the assessee.
20. I am also of the view that the Assessing Officer rightly by passing a consolidated order for earlier years as all facts and figures were clear and available and it was not necessary to resort to any other proceedings under the Act. In the final analysis, I set aside the orders passed by the DC(A) for each of the years under appeal and restore the consolidated order of the Assessing Officer dated 12-1-1994.
21. In the result, the appeals of the revenue are allowed.