Income Tax Appellate Tribunal - Lucknow
Sri Sanjeep Jain, Kanpur vs Income Tax Officer, Ward-1(4), Kanpur on 24 August, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH 'SMC', LUCKNOW
BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND
SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER
ITA Nos.811 & 812/Lkw/2017
Assessment years:2003-04 & 2014-15
Sandeep Jain, Vs. Income Tax Officer,
C/o 24/4, The Mall, Ward 1(4), Kanpur
Kanpur
PAN: AERPJ 6157 J
(Appellant) (Respondent)
Appellant by Shri Ashish Jaiswal, Advocate
Respondent by Shri R.K. Vishwakarma, DR
Date of hearing 06/08/2018
Date of pronouncement 24/08/2018
ORDER
PER T. S. KAPOOR, A.M.
These are two appeals filed by the assessee against the separate orders of CIT(A) both dated 18/08/2017. These appeals were heard together and therefore, for the sake of convenience, a common and consolidated order is being passed.
2. The grounds of appeal taken by the assessee in I.T.A. No.811 & 812/Lkw/2017 are reproduced below:
"1 THAT THE ASSESSING OFFICER HAS ERRED IN REOPENING THE ASSESSMENT BASED UPON THE DIRECTION OF LEARNED CIT (APPEALS) IN THE ASSESSMENT YEAR 2004-05.
2 THAT THE ASSESSING OFFICER HAS ERRED IN REOPENING THE ASSESSMENT PROCEEDING BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT WHICH IS BARRED BY LIMITATION.
I.T.A. Nos.811 & 812/Lkw/2017 2 Assessment years:2003-04 & 2014-15 3 THAT THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF Rs. 1,56,660.00 UNDER SECTION 68 OF THE ACT MADE BY ASSESSING OFFICER.
4 THAT THE LEAREND CIT (APPEALS) HAS ERRED IN NOT PROVIDING PROPER AND ADEQUATE OPPORTUNITY TO THE APPELLANT."
2.1 The grounds of appeal taken by the assessee in I.T.A. No. 812/Lkw/2017 are reproduced below:
"1. That the learned CIT (Appeals) has erred in confirming the ad-hoc disallowance made by the assessing officer of Rs. 6,38,422.00 out of sales promotion expenses.
2. That the addition / disallowances made by the assessing officer and confirmed by learned cit (appeals) is highly excessive and arbitrary.
3. That the Learned CIT (appeals) has erred in not providing proper and adequate opportunity to the appellant."
3. At the outset, Learned A. R. invited our attention to the legal ground taken in ITA No. 811/Lkw/2017 and submitted that the notice issued u/s 148 of the Act was barred by limitation and in this respect our attention was invited to the copy of the assessment order, wherein the Assessing Officer had mentioned in his order that on the basis of appellate order passed by Learned CIT(A) dated 22.12.2015, the assessee was required to explain the cash credit u/s 68 of the Act to the extent of Rs.1,56,660/- relevant to F.Y. 2003-04. The Learned A.R. submitted that the notice u/s 147 of the Act was issued and served on the assessee on 31.03.2016 and the assessment year was 2003-04, which was beyond a period of six years as contemplated for reopening of assessment. The Learned A.R. submitted that the provision of Section 150(2) clearly puts an embargo on the Assessing Officer, wherein it has been stated that reassessment or re-computation can only be done by way of action u/s 148 of the Act if the re-computation itself could have been made at the time the order which was the subject to matter of the appeal I.T.A. Nos.811 & 812/Lkw/2017 3 Assessment years:2003-04 & 2014-15 by reason of any other provision limiting the time within which any action for reassessment is taken. In this respect, the Learned A. R. read the provisions of Section 150(1) and 150(2) of the Act. The Learned A.R. further submitted that the issue has now been settled by the third Member in the case of Emgeeyar Pictures (P.) Ltd. vs. DCIT, 70 taxmann.com 45 (Chennai- TM) and our attention was invited to Para 15 of the order. Our attention was further invited to an order of the I.T.A.T. Jaipur Bench in the case of Ramesh Chand Soni, HUF vs. Income Tax Officer, taxmann.com 71 (Jaipur- Trib.) wherein the Tribunal vide order dated 08.12.2017 has further passed the order in favour of the assessee.
4. The Learned D. R. on the other hand submitted that the Assessing Officer had taken the action, on the basis of a direction by Learned CIT(A) and within one year of the direction the assessment was reopened.
5. Arguing the appeal in ITA No.812/Lkw/2017, the Learned A.R. submitted that the Assessing Officer has made ad-hoc disallowance equivalent 30% of sale promotion expenses, which is arbitrary and quite high, specifically, keeping in view, the fact that assessee had submitted books of account and had provided bills and vouchers. It was submitted that the Assessing Officer without pointing out any mistake in any vouchers or bills and without rejecting books of account has made ad-hoc disallowance, which was not warranted. The Learned A.R. further submitted that the expenses incurred during the year consideration were lower as compared to preceding year and therefore, the Assessing Officer should not have made the disallowance.
6. The Learned D.R. on the other hand heavily placed reliance on the order of the authorities below and submitted that before Ld. CIT(A) assessee had not submitted any books of account or vouchers despite specific direction.
I.T.A. Nos.811 & 812/Lkw/2017 4 Assessment years:2003-04 & 2014-15
7. We have heard the rival parties and have gone through the material placed on record. We first take ITA No.811/Lkw/2017. The limited issue to be decided in this appeal is as to whether the reassessment proceedings initiated by the Assessing Officer during the F.Y. 2015-16 for reopening the case relating to 2003-04 is legal or not. This question has already been decided by the Third Member in the case of Emgeeyar Pictures (P.) Ltd. vs. DCIT, 70 taxmann.com 45 (Chennai-TM). The Hon'ble Third Member has discussed the issue in detail and has decided the issue in favour of the assessee by holding as under:
"3. According to the Ld. counsel, in fact, when the appeal came before this Tribunal for the assessment years 2003-04 and 2004-05, this Tribunal found that the transfer took place in the year 2000. Therefore, the capital gain cannot be taxed for the assessment years 2003-04 and 2004-05. There is neither a finding that the capital gain has to be taxed in the assessment year 2001-02 nor any direction to assess the same in the assessment year 2001-02. Therefore, according to the Ld. counsel, the Assessing Officer cannot take the benefit of Section 150(1) of the Act for reopening the completed assessment after expiry of limitation provided in Section 149 of tijie Act. Referring to Section 150(1) of the Act, the Ld. counsel pointed out that the Assessing Officer may reopen the assessment notwithstanding anything contained in Section 149 of the Act by issuing a notice under Section 148, for the purpose of making an assessment or reassessment or re-computation in consequence of any finding or direction contained in the order passed by any authority in a proceeding under this Act. The only proceeding under this Act is appeal by the assessee before this Tribunal for the assessment years 2003-04 and 2004- 05 in I.T.A. Nos. 327 & 328/Mds/2010 and there is no finding or direction by this Tribunal to assess the capital gain arising out of transfer of the property in the assessment year 2001 -02.
4. Shri D. Anand, the Ld. counsel for the assessee, invited our attention to the order of this Tribunal dated 31.05.2010 and submitted that Section 150(1) of the Act should not be applied in a case where the assessment or reassessment or re-computation could not have been made at the time the order was passed by the Tribunal in view of limitation provided in Section 149 of the Act. In this case, according to the Ld. counsel, the order of the Tribunal was passed on 31.05.2010. The period of limitation for completing the assessment oil the reassessment is two years from the end of the assessment year in which the income was first assessable. The income was first assessable in the assessment year 2001-02. Therefore, at the best, the assessment order can be passed on or before 31.03.2005. The Assessing Officer passed the initial assessment order, after reopening I.T.A. Nos.811 & 812/Lkw/2017 5 Assessment years:2003-04 & 2014-15 under Section 147 of the Act, on 30.03.2006. The assessment was reopened for the second time under Section 150 of the Act, consequent to the order of this Tribunal for assessment years 2003-04 and 2004-05 dated 30.05.2010. Referring to the judgment of the Apex Court in CIT v. Greenworld Corporation [2009] 314 ITR 81/181 Taxman 111, the Ld. Counsel submitted that no notice under Section 148 should be issued since four years have elapsed from the end of the relevant assessment year. At the best, Assessing Officer can issue notice under Section 148 within a period of six years in case the income assessable to tax exceeded Rs. 1 lakh or more. ln this case, even the six-year period expired on 31.03.2008. Therefore, issue of notice under Section 147 r.w.s. 150 of the Act on 10.06.2011 is beyond the period of limitation.
5. The Ld. counsel for the assessee further submitted that Section 150(2) of the Act clearly says that if the time limit expired at the time of the order which was subject matter of appeal, then provisions of Section 150(1) of the Act is not applicable. In this case, according to the Ld. counsel, the order of the Tribunal was passed on 31.05.2010. The limitation period had already expired, therefore, no order can be passed under Section 150(1 ) of the Act in the guise of reopening under Section 147 of the Act. The Ld. counsel has also placed this reliance on the judgment of the Apex Court in K.M. Sharmav. HO [2002] 254 ITR 772/122 Taxman 426. Therefore, according to the Ld. counsel, the Assessing Officer ought not to have reopened the assessment in the guise of giving effect to the order of the Tribunal for the assessment years 2003-04 and 2004-05.
6. The Ld. counsel further submitted that the CIT (Appeals), referring to the contention of the assessee that there was no specific finding or direction of the Tribunal in the order dated 31.05.2010, observed that there was an inference that the finding of the ITAT is that the capital gain is to be taxed in assessment year 2001-02. According to the Ld. counsel, on the basis of the inference there cannot be any assessment under Section 150(1) of the Act. The language used by the Parliament is "finding or direction" of any authority under the provisions of the Income-tax Act. In his case there was no finding or direction by the ITAT. Therefore, there cannot be any inference that the Tribunal intended to tax the capital gain in the assessment year 2001-02. The Ld. counsel has also advanced his argument on merit and submitted that Section 5QC of the Act is applicable from assessment year 2003-04, and therefore, not applicable for the year (under consideration. The Ld. counsel also placed his reliance in the judgment of Madras High Court in CIT v. Vellore Electric Corpn. [2006] 287 ITR 50.
7. On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that on appeal by the assessee for assessment years 2003-04 and 2004-05, this Tribunal found that there was an agreement for joint development of property on 25.12.2000 and the assessee had also handed over the possession of the property to the builder on the same day. Therefore, this Tribunal found that the capital I.T.A. Nos.811 & 812/Lkw/2017 6 Assessment years:2003-04 & 2014-15 gain cannot be taxed in the assessment years 2003-04 and 2004-05 since the transfer, took placed in the assessment year 2001-02. On the basis of this observation, the Assessing Officer reopened the assessment under Section 150(1) r.w.s. 147 of the Act. Therefore, according to the Ld. D.R., there was a clear observation by this Tribunal that capital gain r as to be assessed in the assessment year 2001-02. Referring to the order of the CIT (Appeals), the Ld. D.R. pointed out that the CIT (Appeals), by placing reliance on the judgment of Karnataka High Courting. CIT v. Spences Hotel (P.) Ltd. [2007] 289 ITR 145/160 Taxman 360. found that notice issued for assessment year 1976-77 on 17.11.1998, on the basis of the finding of the Tribunal for the assessment year 1980-81, was found to be in order. The Ld. D.R. submitted that the CIT (Appeals) also referred to the judgment of Andhra Pradesh High Court in B.A.R. Abdul Rakman Saheb v. 7TO|[1975] 100 ITR 541 and submitted that sub-section (3) of Section 153 wipes the limitation provided in Section 153(1) and 153(2) of the Act. Referring to sub-section (2) to Section 153, the Ld. D.R. pointed out that if any income was excluded from the total income of the assessee for an assessment year, then for assessing tl at income for another assessment year should be considered as one made consequent to the order giving effect to the finding or direction contained in the order the higher authority. Therefore, according to the Ld. D.R., when the Assessing Officer passed an order giving effect to the order of the Tribunal for assessment years 2003-04 and 2004-05, it has to be deemed that the order of the assessment was passed giving effect to the finding contained in the order of this Tribunal. Therefore, according to the LI, D.R., the CIT (Appeals) has rightly confirmed the order of the Assessing Officer.
8. We have considered the rival submissions on either side and perused the relevant material on record. Initially the assessee filed the return of income for assessment year 2001-02 on 25.04.2005 consequent to-the notice issued under Section 148 of the Act, disclosing the loss of Rs. 56,758/-. However, the Assessing Officer reopened the assessment under Sec ion 147 of the Act and determined the loss at Rs. 2,4427- by an order dated 30.03.2006 instead of Rs. 56,758/- claimed by the assessee.
9. The assessee filed appeals before this Tribunal against the orders of the lower authority for assessment years 2003-04 and! 2004-05 in IT.A. Nos. &27 & 328/Mds/2010. The main contention of the assessee before this Tribunal was that the capital gain arising out of the transfer of property cannot be taxed in the assessment years 2003-04 and 2004-05. This contention of the assessee was accepted by the Tribunal on the ground that the joint development agreement was entered into on 25.12.2000 and the possession of the property was also handed over on the very same day. Therefore, this Tribunal found that the capital gain cannot be taxed in assessment years 2003-04 and 2004-05. This order of the Tribunal was passed on 31.05|.2010. We have carefully gone through the provisions of Section 150(2) of the Act, which reads as follows:--
"150(1)....................................
I.T.A. Nos.811 & 812/Lkw/2017 7 Assessment years:2003-04 & 2014-15 (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of me appeal, reference or revision, as the case may be, was made by reason assessment, reassessment or recomputation may be taken."
10. In view of Section 150(2) the provisions of sub-section (1) of Section 150 of the Act is not applicable in respect of1 the assessment year in which the assessment, reassessment or re-computation could not have been made at the time the order, which was subject matter of the appeal, was passed by reason of any other provisions limiting the tune within which the action for reassessment or re-computation should be taken. In the case before us, Section 149 of the Act provides maximum of six years from the end of the relevant assessment year, in case the income chargeable to tax exceeds Rs. 1 lakh. The relevant assessment year is 2001-02 and the six years period from the end of the relevant assessment year expired on 31.03.2008, Therefore, the limitation for reopening under Section 147 of the Act expired on 31.03.2008 when the Tribunal passed the order on 31.05.2010. Therefore, this Tribunal is of the considered opinion that the Assessing Officer cannot take any advantage on the basis of the order of this Tribunal dated 31.05.2010 by invoking Section 150(1) of the Act. This Tribunal is of the considered opinion that the Assessing Officer can pass an order under Section 150(1) of the Act provided the appellate/revisional order was passed within the period of limitation available for reopening the assessment. In this case, on the date 0f appellate order, i.e. 31.05.2010, the limitation period had expired. Therefore, the order passed tjy the Assessing Officer by issuing notice for reopening the assessment on 10.06.2011 is barred by limitation.
11. We have carefully gone through the judgment of the Apex Court in KM. Sharma (supra). The Apex Court, after considering the provisions of Section 150(2) of the Act, found that sub-section (2) of Section 150 puts embargo on reopening assessments, which have attained finality on expiry of period of limitation. The Apex Court also found that sub-section (2) of Section 150 makes it clear that reassessment permissible under Section 150(1) of the Act would not be available to Department when the period of limitation for such assessment or reassessment has expired at the time it is proposed to be reopened. In this case, the Revenue proposed to reopen the assessment on 10.06.2011 by issuing a notice under Section 148 of the Act, on which date, the period of limitation was admittedly expired. The Apex Court further found that sub-section (2) of Section 150 insulates all assessments, which have become final and may have been found liable to reassessments or re-computation either on the basis of orders in proceedings under the Act or orders of Courts passed under any other law. In fact, the Apex Court has observed as follows:--
I.T.A. Nos.811 & 812/Lkw/2017 8 Assessment years:2003-04 & 2014-15 'We do not find the above reasoning of the High Court is sound. The plain language of sub section (2) of section 150 clearly restricts the application of sub-section (1) to enable the authority to reopen assessments which have not already become final on the expiry of the prescribed period of limitation under section
149. As is sought to be c one by the High Court, sub-section (2) of section 150 cannot be held applicable only to reassessnents based on orders "in proceedings under the Act" and not to orders of court "in proceedings under any other law". Such an interpretation would make the whole provision under section 150 discriminatory in its application to assessments sought to be reopened on the basis of orders under the Income-tax Act and other assessments proposed to be reopened on the basis of orders under any other law. The interpretation, which creates such unjust and discriminatory situation, las to be avoided. We do not find that sub-section (2) of section 150 has that result. Sub- section (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to sub- section (1), as is the Reasoning adopted by the High Court. Sub-section (2) aims at putting an embargo on reopening assessments, which have attained finality on the expiry of the prescribed period of limitation. Sub-section (2) hi putting such embargo refers to the whole of sub-section (1) meaning thereby to insulate all assessments, which have become final and may have beer, found liable to reassessments or recomputation either on the basis of orders in proceedings under the Act or orders 9f courts passed under any other law. The High Court, therefore, was in error in not reading the whole of the amended sub-section (1) into subsection (2) and coming to the conclusion that the reassessment proposed on the basis of the order of the court in proceedings under the Land Acquisition Act could be commenced even though the original assessments for pie relevant years in question have attained finality on the expiry of the period of limitation under section 149 of the Apt. On a combined reading of sub-section (1) as amended with effect from April 1, 1989, and sub-section (2) of section 150 as it stands, in our view, a fair and just interpretation would be that the authority under the Act has been empowered only to re-open assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section l49.'
12. We have also carefully gene through the judgment of Karnataka High Court in Spences Hotel (R) Ltd. (supra). In the case before Karnataka High Court, it found that Section 150(1) of the Act begins with the words "notwithstanding anything contained u r Section 149". Therefore, the I.T.A. Nos.811 & 812/Lkw/2017 9 Assessment years:2003-04 & 2014-15 notice issued to the assessee, pursuant to the finding of the Tribunal with regard to escaped income for assessment, was found to be valid. Referring to Section 150(2) of the Act, the Karnataka High Court found that placing reliance on Section 150(2) was misplaced. The Karnataka High Court had no benefit of going through the subsequent judgment of Apex Court in KM. Sharma (supra). In view of finding of the Apex Court in K.M. Sharma (supra) as extracted above, the judgment of Karnataka High Court in Spences Hotel (P.) Ltd. (supra) may not be of any assistance to the Revenue.
13. Now coming to the judgment of Andhra Pradesh High Court in B.A.R. Abdul Rahman Saheb (supra), the assessee before he Andhra Pradesh High Court challenged the order of the Assessing Officer before the Appellate Assistant Commissioner, who allowed the appeal holding that the unexplained investment during the accounting years J156-57 and 1957-58 should be brought to tax in the assessment years 1957-58 and 1958-59 and the addition made in the assessment year 1959-60 could not be sustained. Subsequent to the order of the Appellate Assistant Commissioner, the Income Tax Officer issued notice on 20.03.1969 to show cause why the assessments for assessment years 1957-58 and 1958-59 should not be reopened and unexplained investments in the respective accounting years added. The assessee challenged the action of the Assessing Officer on the ground that the notice issued on 20.03.1969 for reopening Assessments for assessment years 1957-58 and 1958-59 were time barred and bad in law. The Andhra Pradesh High Court found that Explanation 2 to Section 153 of the Act provides for taking steps under Section 147 to assess lie income of another year without any limitation prescribed by Section 149 as regards the issue of notice under Section 148 of the Act. The Andhra Pradesh High Court had also 10 occasion to consider the subsequent judgment of Apex Court in KM Sharma (supra).
14. We have also gone through the judgment of Allahabad High Court in Ashwani Dhingra v. Chief CIT [2005] 276 ITR 98 [2004] 141 Taxman 651. In the case before Allahabad High Court, the assessee land was acquired by the Government of Punjab on 20.08.1973 under the Land Acquisition Act, 1984. The compensation was awarded on 12.09.1990 and 29.05.1993 by the orders of Punjab & Haryana High Court. Interest was also paid on 21.08.2001 from the date of taking over the possession of the land. Subsequently, the assessee shifted to Noida in the year 1991 and doing business there. After receiving the interest on the Compensation amount on 21.08.2001, the assessee filed revised return on 14.01.2001 for assessment years 1995-96 to 2001-02. The Assessing Officer reopened the assessment by issuing notice under Section 148 for the assessment years 1989-90 to 1994-95. The assessee challenged the notice before the Allahabad High Court on the ground that the assessments cannot be reopened. The Allahabad High Court, by placing judgment of Apex Court in K.M. Sharma (supra), found that the words "or by a court hi any I.T.A. Nos.811 & 812/Lkw/2017 10 Assessment years:2003-04 & 2014-15 proceeding under any other law" were inserted by Direct Tax Laws (Amendment) Act, 1987 with effect from 01.04.1989. The Allahabad High Court found that the notice was issued after 01.04J1989, i.e. after the amended Act came into effect from 01.04.1989 and accordingly, rejected the contention of the assessee.
15. We have also carefully gone through the judgment of Madras High Court in Vellore Electric Corporation (supra). In the case before the Madras High Court, the issue arose for consideration was whether the period of limitation prescribed for reopening the assessment was applicable even for an order passed by the Assessing Officer by invoking the provisions of Section 150 of the Act. The Madras High Court, by placing reliance on the judgment of the Apex Court in KM. Sharma (supra) found that the plain language of sub-section (2) of Section 150 clearly restricts the application of sub-Acction (1) of Section 150 to enable the authorities to reopen the assessments which have not already Become final on the expiry of the period of limitation prescribed under Section 149(2) of the Act. The Madras High Court further j found that the hold sub-section (1) of Section 150 insulates all assessments which have become final and may have been found liable for reassessment or re- computation on the basis of orders of the authorities under Income-tax Act or orders of High Court or under any other law. The Madras High Court further found that Section 150(1) as amended with effect from 01.04.1989 did not enable the authorities to reopen assessments which have become final due to the bar of limitation prior to 01.04.1989 and this position was equally applicable to reassessments proposed on the basis of order passed under the Act under any other law.
16. In view of the above finding of the Madras High Court, this Tribunal is of the considered opinion that the judgment of Allahabad High Court in Ashwani Dhingra (supra), the judgment of Karnataka High Court in Spences Hotel (P.) Ltd. (supra) and the judgment of Andhra Pradesh High Court in B.A.R. Abdul Rahman Saheb (supra) would not be applicable to the facts of the case.
17. We have also carefully gone through the judgment of the Apex Court in Greenworld Corpn. (supra). After referring to Section 150 of the Act, the Apex Court observed that if no proceedings before the authority or if the (assessment year hi question is not a subject matter which would fall for consideration, Section 150 of the Act will have no application. In fact, the Apex Court has observed as follows at para 60 to 67 of its judgment:--
'60. The aforementioned provision although appears to be of a very wide amplitude, but would not in terms of sections 147 and 148 of the Act can a proceeding can be initiated only within the period of limitation prescribed therefore as contained in section 149 of the Act.
61. Section 150(1) of the Act is an exception to the aforementioned provision. It brings within its ambit only such cases where reopening of I.T.A. Nos.811 & 812/Lkw/2017 11 Assessment years:2003-04 & 2014-15 the proceedings may be necessary to comply with an order of the higher authority. For the said purpose, the records of the proceedings must be before the appropriate authority. It must examine the records of the proceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before the higher authority, section 150 of the Act will have no application.
62. In ITO v. Murlidhar Bhagwan Das [1964] 52 ITR335 (SC)? it was held (page 339):
"The proceedings would! be in time, if the second proviso to section 34(3) of the Act could be invoked. The question, therefore, is what is the tme meaning of the terms of the second proviso to section 34(3) of the Act. if, reads:
'Provided further that nothing in this section limiting the time within which any action may be taken, or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to the assessment or reassessment made on the assessee or any person. In consequence of or to give effect to any finding o|* direction contained in an order under section 31, section 33, section 33A, Ejection 33B, section 66 section 66A. | ! Prima facie this proviso lifts the ban of limitation imposed by the other provisions of the section in the matter of taking an action in respect of or [making an order of assessment or reassessment falling within the scope off the said proviso. The scope of the proviso is con fined to an assessment or reassessment made on! the assessee or any person in consequence of an order to give effect to any finding or direction contained in any order made under section 31, i.e., in an appeal before the Assistant Appellate Comnissioner, under section 33, i.e., in an appeal before the Tribunal, under section 33A, i.e., in a revision before the Commissioner, under section 33B, i.e., in a revision before the Commissioner against an order of the Income-tax Officer, and under sections 66 and 66A, i.e., in a reference to the High Court and appeal against the High Court' s order to the Supreme Court. Learned counsel for the appellant contends that the scope of the proviso is only confined to the assessment of the year that is the subject-matter of the appeal or the revision, as the case may be. Learned counsel for the Department argues that the comprehensive phraseology used in the proviso takes in its the disposal of the appeal broad sweep any finding given by the appropriate authority necessary for or the revision, as the case may be, and to any direction given by the said authority to effectuate its finding and that the said finding or direction may be in respect of any year or any person. As (the phraseology used in the proviso is not clear or unambiguous, the question raised I.T.A. Nos.811 & 812/Lkw/2017 12 Assessment years:2003-04 & 2014-15 cannot be satisfactorily resolved without having a precise appreciation of a brief history of section 34 of the Act culminating in the enactment of the proviso in the present form."
63. This court noticed the development of law as also the fact that the decision of the Income-tax Officer given in a, particular year does not operate as resjudicata to opine (page 343):
"The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-section (3) of section 34, which deals with completion of an assessment, but would have been added to sub-section (1) thereof."
64. In regard to the question that what would be meaning of the term "finding" or "direction", it was held (page 345):
"A 'finding', therefore, can be only that which is (necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression direction cannot be construed in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under section 31. Under that section he can give directions, inter alia, under section 31(3)(b), (c) or (e) or section 31(4). The expression directions in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other tribunals can issue under the powers conferred on him For them under the respective sections. Therefore, the expression' finding1 as well as the expression ' direction' can be given full meaning, namely, that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate revisional authority, as the case may be, is empowered to give under the sections mentioned therein."
65. It was clarified that the words any person would refer to those who were not nominee parties to the appeal although this assessment of their income would depend upon the assessments of the assessee.
66. Mudholkar J., speaking for the minority, referred to this court' s decision in S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 wherein the I.T.A. Nos.811 & 812/Lkw/2017 13 Assessment years:2003-04 & 2014-15 validity of the aforementioned provisions was questioned; read down th& proviso appended to section 34(1) stating (page 349 of 52 ITR):
"No doubt, this court has recently held in S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 that the proviso in so far as it removes the bar of limitation with respect to persons other than the assessee, is invalid as it infringes the provisions of article 14 of the Constitution. That, however, is a question apart. What we have to consider is t le legislative intent, and for ascertaining it, it is legitimate to look also at that part of the enactment which has been held to be invalid."
67. To the similar effect are the decisions of this court in N.Kt Sivalingam Chettiar v. CIT [19671 ITR 14 (SC).
In the case before us, the Tribunal has not examined the records for the assessment year under consideration. Moreover, no (proceeding was before, the Tribunal for the year under consideration. Therefore, as held by the Apex Court, Section 150) of the Act is not applicable for the year under consideration. In other words!, the observation mad$ toy the Tribunal in the order dated 31,05.2010 cannot be considered either as "finding" or "direction".
18. We find that the Andhra Pradesh High Court in CIT v. G. Viswanadham [1988] 172 ITR 401/38 Taxman 142 considered an identical issue and observed as follows at pages 408 & 409 of ITR:-
"A reading of these Explanations clearly shows that they merely illustrate and clarify the meaning of the words "in consequence of or to give effect to any finding or direction" contained in an appellate, revisional or any other order. Explanation 2 says that where an appellate, revisional or other order excludes any .income from the total income of the assessee for an assessment year, the assessment of such income for another assessment year shall, for the purposes of both 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 order. Similarly, Explanation 3 says that where by an appellate, revisional or other order my income is excluded from the total income of one person and held to be the income of another person, the assessment ojf income of such other person shall, both 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[ order, provided, of course, such other person was given an opportunity of being heard before the said order was made. What is, however, clear is that Explanations 2 and 3 do not purport to obliterate jor remove the restriction contained in sub-section (2) of section 150. They, no doubt, refer to section 150, but for a limited purpose, mentioned above.
A review of the above provisions makes it clear that the Act provides certain time limits both for initiation of proceedings. The time limits for initation of such proceedings are contained in sections 149 and 150, while the time I.T.A. Nos.811 & 812/Lkw/2017 14 Assessment years:2003-04 & 2014-15 limits for completion of such proceedings are mentioned in sub sections (2) and (3) of section 153 sub-section (3) of section 153 is a proviso to sub- doubt, are relevant both for section 150 and section 153(3) but their purpose is merely to illustrate certain words occurring therein, and not to remove or obliterate the time limits prescribed in the several provisions referred to above.
Learned standing Counsel for the Revenue brought to our notice certain decisions, all of which appear to have been rendered with reference to Explanation 2 in section 153. In B. A.R. Abdul Rahman Saheb v. ITO [1975] 100 ITR 541, a Bench of this court held that the effect of section 150 and sub-section (3) of section 153 read with Explanation 2 is that, if any income is deleted from assessment by the order of a higher authority, or the ground that it is not the income of that year, steps may be taken under section 147 to asses it as the income of another year, without any limitation prescribed under section 149 as regard the issue of notice under section 148 or as to the completion of the assessment or reassessment prescribed by section 153. The Bench read subsection (2) of section 150 as providing that the provisions of sub-section (1) thereof will not apply to a case of assessment, reassessment or recomputation of income, if it related to an assessment year in respect of which assessment, reassessment, etc., could not have been made at the time when the order, which was the subject- matter of appeal, reference or revision, was made, by reason of the time limits fixed under section 153 for making the assessment, reassessment, etc. (vide paragraph 2 at page 545). It would immediately be seen that sub- section (2) of section 150 does not refer to section 153. It only refers to "any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken". The word "taken" refers only to initiation of proceedings and not to completion. Similarly, at page 547, the Bench observed:" the effect of section 150 and this sub-section (section 153(3)) read with Explanation 2 is that if any income is deleted from assessment n a higher proceeding on the ground that it is not the income of that year, steps may be taken under Section 147 to assess it as the income of another year, without any limitation applying to the issue of notice under section 148 or to the completion of the assessment or reassessment. .... "With great respect, we think that this observation overlooks the provisions I contained in sub-section (2) of section 150. However, inasmuch as the case before us is not one falling under Explanation 2 to section 153, we do not think it necessary to refer the matter to a larger Bench."
19. By respectfully following the judgment of the Apex Court in KM. Sharma (supra) and the 'c| Corporation (supra), this Tribunal is of the judgment of Madras High Court in Vellore Elects considered opinion that the order of the Assessing Officer is barred by limitation, therefore, the same cannot stand in the eyes of law. Accordingly, the orders of the lower authorities are set aside.
19. In the result, the appeal of the assessee is allowed."
I.T.A. Nos.811 & 812/Lkw/2017 15 Assessment years:2003-04 & 2014-15
8. We further find that this issue is covered in favour of the assessee by the order of I.T.A.T. Jaipur Bench in the case of Ramesh Chand Soni, HUF vs. Income Tax Officer (supra) vide order dated 08.12.2017. The head notes of the said tribunal are reproduced below:
"Section 150, read with section 149. of the income-tax Act, 1961 - Income escaping assessment - Assessment in pursuance of an order of appeal etc. (Limitation) - Assessment years-2001-02 and 2002-03 - Whether for purpose of computation of period of limitation for reassessment as prescribed in sub-section (2) of section 150, limitation provided under section 149 has to be counted from end of relevant assessment year till date of order which is subject matter of appeal wherein directions were passed - Held, yes - Whether, therefore, where directions, were passed by Tribunal then order of Commissioner (Appeals) was subject matter of appeal before Tribunal and therefore, order of Commissioner (Appeals) was relevant for purpose of section 150(2) and not Original assessment order - Held; yes [Para 7] [In favour of assessee]"
9. In the present case, undoubtedly, the case was reopened in view of CIT(A)'s order dated 22.12.2015 and on that date the assessment order for 2003-04 were already barred by limitation by the provisions of Section 149 of the Act. Therefore, we accept the contentions of the Learned A.R. and following the above judicial precedent allow the appeal of the assessee. Accordingly, appeal in ITA No.811/Lkw/2017 is allowed.
10. As regards, appeal in ITA No.812/Lkw/2017, we find that the Assessing Officer has passed the order u/s 143(3) of the Act without rejection of books of account and assessee during the course of assessment proceeding has produced the books of account including bills and vouchers and this fact has been noted by the Assessing Officer in his order itself. He simply disallowed 30% of the expenses under the head sales promotion to safeguard the leakage of Revenue. In his order, he did not point out any infirmity or defect in the books of account or vouchers. The Learned CIT(A), on the other hand has held that the assessee did not produce books of account and vouchers for re-
I.T.A. Nos.811 & 812/Lkw/2017 16 Assessment years:2003-04 & 2014-15 verification and re-estimation of the disallowance. The Learned CIT(A) could have examined the assessment record, wherein the assessee has filed complete details of vouchers to verify the genuineness of expenses and simply by holding that the assessee did not produce the books of account and vouchers, he sustained the addition. The findings of the Assessing Officer clearly states that the assessee had produced books of account and had also produced bills and vouchers, therefore, in view of these contradictions and for the sake of justice, we set aside the order to Learned CIT(A), who should pass a speaking order regarding the arbitrary disallowance made by the Assessing Officer. In nutshell, appeal filed in ITA No. 812/Lkw/2017 is allowed for statistical purposes.
11. In the result, appeal of the assessee in ITA No. 811/Lkw/2017 is allowed and ITA No.812/Lkw/2017 is allowed for statistical purposes.
(Order pronounced in the open court on 24/08/2018) Sd/. Sd/.
(PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR )
Judicial Member Accountant Member
Dated:24/08/2018
Aks/-
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. The CIT(A)
5. D.R., I.T.A.T., Lucknow Asstt. Registrar