Income Tax Appellate Tribunal - Hyderabad
Sri S. Sankara Reddy vs Commissioner Of Income Tax [Alongwith ... on 31 December, 2003
Equivalent citations: [2005]92ITD84(HYD), (2005)92TTJ(HYD)223
ORDER
1. These appeals , in all 40 in number, are filed by five different assessees who are assessed in the status of HUF. The first batch of appeals are directed against the orders passed by the revisional authority under Section 263 of the act and they pertain to the assessment years 1980-81, 81-82, 84-85 and 1985-86. Thus in the case of each assessee, 4 orders were passed by the Commissioner of Income-tax under Section 263 of the Act. Aggrieved bye orders of the CIT, Hyderabad, each of the assessees filed four appeals and thus there are 20 appeals filed in the year 1999 (hereinafter called the first batch of appeals).
2. The Assessing Officer passed consequential orders giving effect to the directions of the revisional authority. Appeals filed before the CIT(A) having been dismissed, assessees are in appeals before us (hereinafter known as `second batch of appeals'). These are twenty in number.
3. The facts necessary for the disposal of these appeals revolve in a narrow compass. The assessees herein owned substantial agricultural land at Sahebnagar in the outskirts of Hyderabad. The land was converted into house sites and sold during the assessment years under consideration. Income-tax returns were filed by the assessees wherein the income on the sale of plots was claimed to be not taxable on the ground that the income arises out of the sale of agricultural land and hence exempt from taxation. The Assessing Officer however made an assessment n the status of an association of persons' and treated the sale of plots as `adventure in the nature of trade'. Protective assessments were also made in the year 1986, in the status of respective HUFs by treating the activity on the HUFs as `adventure in the nature of trade.
4. The ITAT, Hyderabad Bench however set aside the orders on the ground that there was no element of trade in these transactions and hence the Assessing Officer was not justified in treating it as an `adventure in the nature of trade' and that there was no question of the assessee forming `association of persons'.
5. However, while disposing of the appeals filed by the HUFs, against the protective assessments made by the Assessing Officer, the ITAT in their common order dated 15-11-1989 in ITA Nos. 1962 to 1966/Hyd/88 and batch held that there was no justification in treating their case as a case of `adventure in the nature of trade'. While holing so, the Bench, meeting the submissions of the learned DR observed in Para-8 as under:-
"However, in view of the assessees succeeding on this ground, we agree with the Senior Departmental Representative that it will be open to the Income-tax Officer to examine the receipt of incomes by all these assessees from the angle of computation of capital gains. We are not impressed by the submission made by the learned counsel for the assessee that this could not e done and that if the receipts were intended to be treated s capital gains the assessment orders should have been framed on alternate grounds. Our reason for saying so primarily is that the Income-tax Officer had no manner of doubt that the activities embarked upon by the assessees were clearly adventure in the nature of trade by an association of persons. That being so, where was the question of examining the case from the angle of capital gains. It is only on account of the Tribunal's decision dated 26-6-1989 referred to supra that the view taken by the authorities below on this count has been negated. Surely if the assessee's liability arises on the count of capital gains they cannot escape therefrom. But this must be properly investigated and ascertained. We order accordingly. Needless to say that the assessees would be entitled to make their submissions before the Income-tax Officer on this count who will dispose of the issue in accordance with the provisions of law after providing the assessee an opportunity of being heard."
6. Aggrieved by the order of the ITAT, assessees filed Reference Applications and the following question was framed and referred to the Hon'ble High court.
"Whether on the facts and in the circumstances of the case, the Tribunal is competent and correct in holding that it will be open to the Income-tax Officer to examine the receipt of income by the assessee on sale of lands from the angle of computation of capital gains and directing him to examine the case from that angle in accordance with law?"
It was numbered as RC No. 236/90. The Hon'ble High Court upheld the order of the ITAT vide its judgment dated 27-1-2000. Since some of the observations of the Hon'ble Court were taken aid of by both the parties in support of their respective contentions as to whether there was a `finding or direction' by the ITAT, it may be useful to extract the operative portion of the judgment and, accordingly, it is extracted below.
"In our view, the contention advanced on behalf of the assessee stems from a misconception as to the true scope and effect of the Tribunal's order. Let us analyse what the Tribunal has said:
1) It will be open to the ITO to examine the receipts of the incomes by all these assessees from the angle of computation of capital gains.
2) Surely if the assessees' liability arises on the ground of capital gains, they cannot escape therefrom.
Having said thus, the Tribunal finally observed "but, this must be properly investigated and ascertained. We order accordingly".
As far as extracts 1 and 2 are concerned, the Tribunal has only reiterated something obvious and which admits of no controversy. Whether the Tribunal had made such observation or not it was undoubtedly open to the Assessing Officer to examine the question from the point of view of capital gains, if he had the power to make further assessment or reassessment and subject to following the procedure prescribed by law. With or without those observations, it was open to the Assessing Officer to re-examine the issue if he is therefore endowed with the power to make the assessment and to frame another assessment. By ordering that the question of assessees' liability on the ground of capital gains should be properly investigated, it cannot be said that the Tribunal conferred power on the Assessing Officer to do something which it could not otherwise have done within the four corners of the Act. By making an observation that the liability on the count of capital gains could be fixed on the assessees, the Tribunal cannot be said to have invested the assessing authority with the power not otherwise available to it, not can it be said that the Tribunal compelled the assessing authority to initiate fresh proceedings. What all can be deduced from the Tribunal's order is that the Tribunal gave liberty to the Assessing Officer to proceed further while reiterating the indisputable proposition that if the liability arises on the count of capital gains the liability can be fastened on them according to the provisions of the Act. Nothing more can be read into the words of the Tribunal. We are unable to subscribe to the argument that even such observations do not fall within the ambit of power under Section 254."
7. As the matter stood thus, the Assessing Officer passed orders dated 27-3-1991 under Section 154 read with Section 254 of Income-tax Act, 1961 to give effect to the order of the ITAT dated 15-11-1989. The Assessing Officer brought to tax the profits arising out of the sale of plots in question as `capital gains'. This order was challenged before the DC(Appeals). Vide order dated, 24-3-1994 in the case of Smt. Sama Mohana Reddy, the learned DCIT(Appeals) cancelled the order passed under Section 154 of the Act by observing as under:-
"The observations given by the Tribunal that the assessability for capital gains must be ascertained cannot constitute a finding or direction to levy capital gains tax and does not enable the Assessing Officer to automatically bring to tax and capital gains under Section 154. The Tribunal has specifically given a direction to the Assessing Officer to examine the leviability of capital gains tax after affording an Officer would be to reopen the assessment under Section 147 read with Section 150(1) in case the capital gains if any from the sale of land are to be subjected to tax."
8. On an appeal by the revenue, the ITAT, A-Bench, Hyderabad affirmed the order of the learned DCIT (Appeals) wherein it was observed as under:
"From the above observations and directions, it is clear that the Assessing Officer has to re-examine the issue afresh regarding the liability to capital gains tax. There is also specific direction to the Assessing Officer that the assessee would be entitled to make submissions before the Assessing Officer on this count who will dispose of the issue after providing the assessees opportunity of being heard. But, in utter violation of those directions, the Assessing Officer passed the order under Section 154 without either deciding the issue or giving opportunity to the assessees. The said order was rightly cancelled by the DCIT (Appeals)............"
"But However, this will not preclude the Assessing Officer to give effect to the order of the Tribunal passed on 15-11-1989, the Assessing Officer is directed to give effect to the order of the Tribunal dated 15-11-1989 and decide the issue regarding the liability to capital gains tax as decided by this Tribunal in the said order after giving the assessee an opportunity of being heard."
The order of the ITAT is dated 16-6-1997 whereas the order passed by the DCIT (Appeals) is dated 23-4-1994.
9. It appears that the order of the DCIT(A) acted as an impetus to the Assessing Officer to issue notices under Section 148 of the Act in respect of these 5 assessees and for all assessment years under consideration. The Assessing Officer issued notices o 13-3-1995 under Section 148 of the Act and completed the assessments on 28-3-1997. In the said order, it was observed that the ITAT has given findings to the effect that it would be open to the Assessing Officer to examine the receipt of income by all the assessees under consideration from the angle of computation of capital gains and accordingly it was examined and found that the property is situated beyond the distance of 8 KMs from the Corporation limits of Dilsukhnagar. Thus, the assessment was completed without bringing to tax the income from the sale of land, presumably on the ground that it is not liable to tax. These orders were not challenged by the assessees since there was no additional tax liability.
9(a). However, on 9-3-1999, the CIT, AP-II, Hyderabad passed orders under Section 263 of the Act wherein he observed that the land in question was within 5 KMs distance from the municipal limits and thus the income on the sale of land should have been brought to tax under the `capital gains' Consequently, it was held that the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue. The assessment orders were set aside with a direction to pass fresh orders for all the assessment years under consideration by bringing to tax the income on the sale of land under the head `capital gains'. The orders passed by the revisional authority are challenged and they give rise to the first batch of appeals before us.
10. In the meantime, the Assessing Officer passed fresh assessment orders pursuant to the directions of the revisional authority. The case of the assessee before the CIT(A) was that the provisions of Section 150(1) are not applicable to the assessees' case and the reopening is barred by limitation and also not in accordance with law. The learned CIT(A) was not convinced with the submissions of the assessees and accordingly dismissed the appeals. In this regard, he observed as under:
"12. Without going further into the merits of the arguments and plethora of case law relied upon by the appellant's counsel regarding the validity of notices issued under Section 148 without jurisdiction i.e., after expiry of the time limit available under the Act. IN an appeal filed by the appellant against a fresh assessment made by the officer in pursuance of a revisional order passed by the Commissioner in exercise of his power under Section 263. The appellate authority is not competent to set aside such fresh assessment on the ground that the commissioner's order was not valid unless such order of the Commissioner is held not sustainable in law by the competent appellate authority court as held by the Patna High Court in the case of CIT v. Anardei Devi reported in 173 ITR 69, 71.
13. In view of the above judgment, I am of the firm view that it may not be appropriate for me to adjudicate upon an order passed by the Assessing Officer as a consequence of clear and specific directions given by the CIT in his order dated 9-3-1999 passed under Section 263 of the IT act, 1961. In such a situation the only course open to the appellant is to move the ITAT against the fresh assessment order passed by the Assessing Officer as a consequence of the order of the Commissioner under Section 263. Therefore, I decline to interfere with the Assessing Officer's order passed under Section 143(3) read with Section 263 of the IT Act, 1961 dated 28-3-2001.
11. The orders passed by the learned Commissioner of Income-Tax (Appeals) were challenged before us and they give rise to the second batch of appeals.
12. All these appeals were taken up together since the arguments advanced in all these appeals are common. The learned counsel appearing on behalf of the assessee raised the following contentions:-
"(i) Whether in view of the High Court 's decision the AT"s order contained any finding, order or direction to give effect to which the provisions of Section 150(1) could be invoked regardless of the normal time limits prescribed for reopening of assessments.
(ii) If it is held that the provisions of Section 150(1) cannot be invoked regardless of the normal time limits for reopening the assessments and the assessments could be reopened only according to the time limits prescribed under Section 149 whether the reopening is valid in law.
iii) Whether the reopening is barred by limitation.-
iv) When the reopening is bad in law whatever that follows is bad in law including the proceedings under Section 263."
13. Addressing on the above issues, the learned counsel submitted that the order of the Appellate Tribunal dated 15-11-89 contained no finding or direction which could be given effect to under the provisions of Section 150(1) of the Act. Adverting our attention to Section 150(1) of the Act, learned counsel submits that the sub-section comes into play only when there is a `finding or direction' by the appellate authority. Whereas in the instant case, the Appellate Tribunal has merely made certain observations and there was no specific direction to the Assessing Officer. He had taken us through the observations of the ITAT in the order dated 15-11-89 to submit that only issue before the Tribunal was with regard to the taxability of income by treating it as adventure in the nature of trade and it was not the case of the Assessing Officer that it is assessable under the head capital gains'. Mere suggestion from the Appellate Tribunal to examine the issue from the angle of liability towards capital gains do not carry any force of law and thus cannot be equated to a finding or direction by the ITAT. Learned counsel has adverted our attention to para-8 of the order of the ITAT to emphasise that the Appellate Tribunal has merely left open the issue to the discretion of the Assessing Officer without giving any finding or direction. The following observations of the ITAT were referred to in this regard.
"...............It will be open to the ITO to examine the receipt of income by all these assessees from the angle of computation of capital gains."
The learned counsel has also adverted our attention to the judgment of Hon'ble High Court of Andhra Pradesh to submit that the observations of the Tribunal were only with regard to facts which are obvious and admits of no controversy and even sans such observations, it was open to the Assessing Officer to examine the question from the point of capital gains provided the Assessing Officer had the power to make further assessment or reassessment. The Court further noticed that the observations of the Tribunal would not confer any power on the Assessing Officer to do something which it would not have otherwise done within four corners of the Act and it cannot be held that the Tribunal compelled the Assessing Officer to initiate fresh assessment proceedings. The learned counsel thus submits that the observations of the Tribunal to the Assessing Officer with regard to the leviability of capital gains tax do not amount to any finding or direction so as to empower the Assessing Officer to reopen the assessment by invoking the provisions of Section 150(1) of the Act. The Assessing Officer gets no extra time to issue notice under Section 148 since the normal time limits prescribed under Section 149 of the Act are applicable to this case. Reliance was placed on the following decisions in this regard.
i)264 ITR 566 (SC)-CIT v. Former Finance
ii) 247 ITR 436-(All)-CIT v. Former Finance
14. Learned counsel further submitted that al the facts were on record before the Assessing Officer at the time of making the original assessment. The assessees' contention all through was that they were not liable to capital gains tax which was negatived by the Assessing Officer at the initial stage; the Assessing Officer choose to tax it as business income. Thus, the Assessing Officer cannot, at this stage, change his opinion and bring to tax the income under the head capital gains. Even if such action is initiated, it is permissible only within the time allowed under Section 149 of the Act. By giving a chart of the dates on which the Assessing Officer initiated the assessment proceedings, completed the assessments, reopened the assessment etc. Learned counsel submitted that the last date for issue of notice under Section 148 for the last assessment year i.e. 1985-86 expired on 31-3-1993 whereas the notices under Section 148 were issued by the Assessing Officer on 13-3-1995 which is beyond the period of limitation provided under Section 149 of the Act. In respect of assessment year 1980-81, the limitation period expires on 31-3-1985, for 1981-82 on 31-3-1986, for 1984-85 on 31-3-1992 and for 1985-86 on 31-3-1993. At the time of receipt of the order of the Appellate Tribunal dated 15-11-1989, limitation period for two assessment years expired. Perhaps, for this reason, the ITAT observed that "it will be open to the ITO to examine the receipt of income by all these assessees from the angle of computation of capital gains".
15. Alternatively, it was submitted that even if assuming that notices under Section 148 read with Section 150(1) were issued consequent to the orders of the ITAT dated 15-11-89, such consequential orders should have been passed within two years from the end of the financial year for which the relevant orders of the ITAT were received by the CIT, according to the provisions of Section 153(2A) of the Act. It was also contended that the reopened assessments ought to have been completed before 31-3-92 whereas they were completed only on 28-3-97 which date falls well beyond the period of limitation. It may be noticed that the assessee did not challenge the assessments made on 28-3-97 because there was no cause of action at that stage; the assessments were completed without bringing to tax the income on the sale of the land on the ground that it was not liable to capital gains tax. However, it was contended that such invalid assessments can be challenged at any stage, when such assessments are the root cause for invoking jurisdiction under Section 263 of the Act. In this regard, he relied upon the decision in the case of Gulab Chand Motilal v. CIT (M.P- Indore Bench) 174 ITR 117.
16. Learned counsel has also relied upon the decision of ITAT, Vizag Bench in the case of Jashua Gootam (85 ITD 727 at page 732) wherein it was held that mere acceptance and participation in the proceedings when the notice is served beyond time limits, cannot remedy the defect in the notice. He further contended that legal ground can be taken at any stage provided no further investigation of facts is necessary. Reliance was placed on the decision of Apex Court in the case of NTPC v. CIT (229 ITR 383).
17. In support of his proposition that when reopening is without jurisdiction on account of assessment being barred by limitation whatever follows is bad in law, the learned counsel relied upon the following case-law.
a. 129 ITR 346 (Cal)- Raqwatmal Harakchand v. CIT.
b. 234 ITR 170 (Del)- Jindal Photo Films.
c. 113 ITR 22 (Guj.)- PV Doshi v. CIT.
It was thus strongly contended that the assessments completed in 1997 are liable to be quashed and consequently the revisional authority was not justified in revising such assessments.
18. On the other hand, learned DR adverted our attention to pages 8 and 9 of assessee's Paper Book to submit that there was a clear direction from the ITAT to the Assessing Officer to examine the leviability of capital gains by the use of expression "we order accordingly" and thus the Assessing Officer was justified in invoking the provisions of Section 150(1) of the Act to avail extended period of limitation for reopening the assessments. He has also adverted our attention to pages 18 and 19 of the departmental paper book (order of the ITAT dated 16-6-1997) to submit that the ITAT, A- Bench, Hyderabad had an occasion to consider the scope and ambit of the observations and directions of the Tribunal in its order dated 15-11-1989 and observed that there is a specific direction to the Assessing Officer that assessment would be made after examining the issue regarding the liability to capital gains tax and the Assessing Officer was duty bound to give effect to the order of the Tribunal. It was thus contended that there is a specific direction by the Tribunal which requires to be given effect to by the Assessing Officer and thus the Assessing Officer was justified in taking aid of Section 150(1) of the Act for reopening the assessments. He further submitted that the finding or direction by the Tribunal was very much necessary for disposal of the appeal because it was inextricably linked to the main finding that the income on the sale of plots is not liable to be taxed as business income. Learned DR has also referred to the order of the DCIT(A), B- Range, Hyderabad (page-14 of the assessee's paper book) to submit that even the first appellate authority has understood the order of the Tribunal dated 15-11-1989 as a direction to the Assessing Officer empowering the latter to reopen assessment under Section 147 read with Section 150(1) of the Act. He then referred to the judgment of Hon'ble High Court of Andhra Pradesh in RC No. 236 of 1990 to submit that the question referred to the Hon'ble High Court was only with regard to the power of the Tribunal to issue directions to the Assessing Officer to examine the leviability of capital gains and thus the Court was not called upon to decide whether it was a finding or direction. He has also adverted our attention to page-36 of assessee's paper book to submit that the court has also understood that the observations of the Tribunal amount to a direction though the said direction has not conferred any power on the Assessing Officer to do something which it could not otherwise have done within the four corners of the Act.
19. The learned DR submitted that the decision cited by the learned counsel are distinguishable on facts. In the case of Foramer Fiance (supra), the question was whether the finding in the case of an employer can be taken aid of for making the assessment in the case of an employee, whereas in the instant case, the direction was in the assessee's own case. Similarly, in the case of Jindal Photo Films, no finding was recorded by the Tribunal.
20. Learned DR submitted that when there is direction, the case falls under Section 150(1) of the Act and its automatically excludes the limitation prescribed under Section 153(2A) of the Act which, incidentally, applies only when the assessment is set aside or cancelled and not otherwise. He also submitted that Section 153(3) applied to this case. He has also explained the circumstances under which reassessment proceedings were commenced in the year 1995. He submitted that consequent to the direction of the ITAT, the Assessing Officer has initially passed an order under Section 154 of the Act and upon cancellation of that order by the first appellate authority, notices were issued under Section 150(1) of the Act.
21. He has also relied upon the following decisions in support of his contention that the reopening of assessment is valid in law and the order passed by the CIT is also in accordance with law.
d. 100 ITR 541 (AP)- B.A.R Abdul Rahman Saheb v. ITO e. 243 ITR 19 (Kar)- CIT v. Army Colabawal f. 167 ITR 370 (Kar)- Mysore Cements Ltd. ITO g. 135 ITR 817 (Del)- Khalsa Provisions h. 24 ITD 276 (Delhi)-Megha Nand i. 105 ITR 273 (Mum.)- Ambani Traders (P) Ltd. v. ITO J. 140 ITR 206 (MP)- Sukhdayal Pahwa v. CIT k. 129 Taxman 430(AP) CIT v. NT Rama Rao l. 243 ITR 83 (SC)- Malabar Industrial Co. Ltd. v. CIT.
m. 129 Taxman 70(SC)- Shambhu Investmentj (P) Ltd. v. CIT.
n. 260 ITR 599 (Mad)-Ashok Leyland Ltd., v. CIT.
o. 253 ITR 286 (Mad)- Bundy Tubing of India Limited v. CIT.
p. 87 ITD 527 (Mum)-Jewel of India v. ACIT.
q. ITA No. 1167/Hyd/96 dated 27-11-2003 in the case of M/s. VBC Ferro Allloys Ltd., Hydrabad.
22. Joining the issue, the learned counsel submitted that Section 153(3) has to be read with Section 153(2A) of the Act and thus the reassessment proceedings were barred b limitation. He further submitted that the observations of the Appellate Tribunal were correctly understood by the Hon'ble High Court as having no binding force on the Assessing Officer and thus it cannot be equated to a finding or direction within the meaning of Section 150(1) of the Act. He has also submitted that the case-law relied upon by the learned DR are distinguishable on facts.
23. We have carefully considered the rival submissions and perused the record. Before we proceed to analyse the facts of the case, it may be relevant to notice the scope and ambit of the provisions concerning the reopening of the assessment and completion of such assessment. Section 149 of Act provides time limit for issuing notice under Section 148; if the income chargeable to tax is likely to e less than Rs. 50,000/-, notice has to be issued within four years and if it is less than Rs. 1 Lac, proceedings can be initiated within 7 years from the end of the relevant assessment year. In the Instant case, even for the last of he assessment years under consideration, the limitation period expires on 31-3-93 whereas the notices for reopening the assessments were issued in 1995.
24. However, time limit for issuance of notice is extended by virtue of the provisions of Section 150(1) of the Act. Section 150 speaks of issuance of notice under Section 148 and Section 153(3) extends the time limit for completion of assessments. The extended period is available only in a case where the Assessing Officer acts upon "finding or direction of an appellate authority". Section 153(2A) applies in a case where the assessment order is set aside or cancelled" by a superior authority. There may be cases where the appellate authority might not have cancelled the assessment and may not have recorded a finding or direction. To meet such situations, explanations 2 and 3 were inserted below Section 153(3) of the Act to deal with these specific situations i.e., (a) where by an order of superior authority, any income is excluded from the Total income of one year and held to be income of another assessment year and (b) where it is held to be income of another person. By explanations 2 and 3, a fiction is created by which, for the purpose of Sections 150 and 153, the assessment would deemed to be made "in consequence of or to give effect to any finding or direction" contained in the appellate order.
25. Reverting to the facts of instant case, admittedly, the assessment order was neither et aside nor cancelled by the ITAT in its order dated 15-11-89. Thus, Sub-section (2A) of Section 153 has no application at all. In fact, the thrust of the argument of the learned DR is that there is a finding or direction contained in the order of the ITAT, as understood by a later Bench of the ITAT in the assessee's own case (while dealing with the matter arising out of the order passed under Section 154 read with Section 254 of the Act). Thus the issue centers round the question as to whether there is a `finding or direction' by the ITAT in its order dated 15-11-1989. No doubt, the DCIT(A) and the ITAT, while dealing with the matter arising out of the order passed under Section 154, understood the earlier order of the Tribunal as a direction issued to the Assessing Officer, but, going by the hierarchy of the judicial set up, the interpretation placed upon the observations of the Tribunal by the Hon'ble High Court gains Precedence over the other interpretations. The order of the ITAT dated 15-11-89 was the subject matter of consideration by the Hon'ble High Court and, in its judgment dated 27-1-2000, the Court categorically observed that the Tribunal merely made certain observations without conferring any power on the Assessing Officer to do something which it could not have otherwise done within the four corners of the Act. On a careful reading of the judgment of the Hon'ble High Court, we are of the firm view that the ITAT, in its order dated 15-11-89, did not record any, specific `finding or direction' within the meaning of Section 150(1)/153(3) of the Act. The observation was only to the effect that the Tribunal gave liberty to the Assessing Officer to examine the question of leviability of capital gains, if it is otherwise permissible under law. The income on sale of plots is not assessable either in different assessment years or in the hand of different persons and thus explanations 2 and 3 to Section 153(3) also do not come to the aid of the revenue to reopen the assessment beyond the normal period of limitation prescribed under Section 149 of the Act. Thus, we are of the opinion that the reopening of assessments and completion of the assessments under Section 143(3) read with Section 148 of the act are barred by limitation and therefore illegal and not sustainable. As a natural corollary, it follows that in exercise of powers vested in the Commissioner under Section 263 of the Act, an order which is non existent, being illegal and barred by limitation, cannot be revised and thus the orders passed under Section 263 are hereby quashed. Consequently, the orders passed by the Assessing Officer giving effect to the directions of revisional authority would no longer stand. Therefore, the second set of appeal filed by the assessee also deserve to be allowed.
26. Though it is not necessary to deal with other issues, the peculiar facts and the circumstances under which the assessments were reopened, revision orders passed and consequential orders were passed by the Assessing Officer, it is desirable to fortify our conclusions from the other angles also. Even if it is presumed that the order of the Tribunal contains a finding or direction, in so far as the first two assessment years are concerned, the reassessments are barred by limitation by virtue of Section 150(2) of the Act. In the case of ACIT v. Viswanatham (172 ITR 401 (AP) the Hon'ble A.P. High Court has analysed the provisions of Sections 150(1), 150(2) and Section 153, together with its explanations, and upon elaborate consideration of the matter, the Court observed that by the date the appellate authority gives a direction, the Assessing Officer should have power to initiate reassessment proceedings under he normal time frame mentioned in Section 149 of the Act. In the instant case, the time limit for issuance of notice under Section 148 expired on 31-3-85 and on 31-3-86 in respect of assessment years 1980-81 and 1981-82 respectively, whereas the order of the ITAT is dated 15-11-89. Thus, the reopening is not permissible in respect of the assessment years 1980-81 and 81-82, as per the decision of the jurisdictional High Court (cited supra).
27. It may also be noticed that in spite of the order of the Tribunal dated 15-11-89, the Assessing Officer has taken more than 5 years to issue notices under Section 148 of the Act. The notices were issued on 13-3-95 under Section 148 of the Act and assessments were completed on 28-3-97. Thus, there is abnormal delay in reopening the assessments and in completion of the same. Merely because the provisions of Section 150(1) and 153(3) do not provide for any specific time frame, it cannot be said that the Assessing Officer is empowered to reopen the assessments and complete them after abnormal delay, compared to the normal time frames set by the legislature in other provisions of the Act. In the case of K.P. Narayanappa Setty & Co. v. CIT (100 ITR 17), the Hon'ble Court observed that though no specific period, within which penalty may be levied, is fixed by the Indian Income-tax Act, 1922, there should not be any inordinate delay and penalty should be levied within a reasonable time. In our considered opinion, the same analogy applies to the instant case. Reasonable time, in the instant case can, at best, be considered to be four years (though we are not laying down any rigid principle of law) but the notices having been issued under Section 148 after 5 years from the date of order passed by ITAT, the proceedings can be said to be barred by limitation.
28. It may also be relevant to notice the observations of Hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. ITO (106 ITR 1) at page-10.
"It has been said that the taxes are the price that we pay for civilisation. If so, it is essential that those who are entrusted with the task of calculating and realzing that price should familiarize themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under Section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment."
Bearing in mind the observations of the Hon'ble High Court and the Apex Court, we are of the considered view that in the instant case, the reassessment proceedings were commenced after a considerable delay, reckoned from the order of the ITAT dated 15-11-89, and thus the notices and the consequential proceedings can be said to be barred by limitation, having not been taken up within a reasonable time frame. In the case of Foramer Fiance (supra), the observations of the Hon'ble High Court, which are affirmed by Hon'ble Supreme Court, are relevant to be noticed. The Hon'ble Court observed that a direction or finding as contemplated by Section 153(3) must be a finding necessary for the disposal of a particular case; to be a necessary finding it must be directly involved in the disposal of the case. This very issue was the subject matter of consideration by the Hon'ble High Court in RC No. 236 of 1990 wherein the question that was referred to Court was "whether the Tribunal was competent to direct the Assessing Officer to examine the case from the angle of leviability of capital gains" and the Court categorically observed that there was no such direction or finding and it was a mere observation.
29. Thus, looking from any angle, there is an abnormal delay in initiating the reassessment proceedings apart from the fact that the extended period of limitation cannot be availed of by the Assessing Officer in the cases on hand on account of the fact that there was no specific finding or direction given by the ITAT in its order dated 15-11-1989. Thus, reassessment orders passed by the Assessing Officer based on such illegal notice issued under Section 148 of the Act are barred by limitation and non est in law and consequently the revisional proceedings and the consequential orders passed by the Assessing Officer based on revisional proceedings, are also liable to be quashed since the root of these proceedings i.e., the reassessment orders are non est in law. The case-law relied upon by the learned DR are distinguishable on facts.
30. In the result, all the appeals of the assessees are allowed.