2017 (3) TMI 1244 - HC - Income Tax

Rectification of mistake - interpretation and consequence of expression from the date of orders sought to be amended, under Section 154 (7) - Held that - In our case there may exist more than one orders. As is evident from the fact that Section 154 (7) used expression order sought to be amended meaning thereby for the purpose of attracting Section 154 (7), such order which is sought to be amended, would determine period of limitation. In the present case, subsequent orders dated 31.12.2009 and 25.01.2011 were not in respect to assessment of other items but confined to limited issue of long term capital gain since that was the only aspect whereupon, Tribunal has remanded matter to A.A. Issue of set off etc. was not subject matter of consideration before A.A. when he passed orders dated 31.12.2009 and 25.01.2011. Assessee, in fact, wanted amendment in the original order dated 31.03.2006 and hence limitation would count from that order. We may also notice at this stage that Supreme Court s judgment in Hind Wire Industries Ltd. (1995 (1) TMI 2 - SUPREME Court) has been considered in Commissioner of Income-Tax Vs Alagendran Finance Ltd. (2007 (7) TMI 304 - SUPREME Court ) and it has been said therein that there may not be any doubt or dispute that once an order of assessment is reopened, previous assessment would be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceedings would deem to have been reopened. Learned counsel for Assessee also could not dispute that mistake regarding set off loss had occurred in the assessment order dated 31.03.2006 but on this aspect Assessee did not either carry dispute in appeal before CIT (A) or Tribunal or filed application for rectification within the period of limitation under Section 154 (7). Therefore, in the garb of remand order in relation to some other aspect, Assessee, could not have taken advantage of extension of limitation by seeking commencement thereof from the order passed by A.A. on the issue on which remand was made. - Decided against Assessee and in favour of Revenue

Issues Involved:
1. Interpretation and consequence of the expression "from the date of orders sought to be amended" under Section 154(7) of the Income Tax Act, 1961.
2. Whether the consequential order passed by the assessing authority suo-moto under Section 154 of the Act will be deemed to be the rectified order of the original assessment.
3. Justification of the Tribunal's holding that the consequential order passed by the assessing officer cannot be called a rectified order and the doctrine of merger would not apply.
4. Whether the word "order" in Section 154(7) means the original order or any order including the amended or rectified order.
5. Whether the application under Section 154 filed by the appellant was barred by time.
6. Whether the Tribunal misdirected itself in law by calculating limitation under Section 154(7) with reference only to the date of the original order of assessment.
7. Justification of the Tribunal's holding that the limitation can only start from the original assessment order for rectification and not from the date of the rectified order.
8. Whether the Tribunal was justified in holding that the order passed at the direction of the CIT (Appeals) and the Tribunal did not result in the merger of the original order.
9. Whether the Tribunal recorded perverse findings of fact and misinterpreted Section 154 of the Income Tax Act.

Detailed Analysis:

1. Interpretation and Consequence of the Expression "From the Date of Orders Sought to be Amended" under Section 154(7):
The court examined the meaning of the term "order" in the context of Section 154(7) and concluded that the word "order" has not been qualified in any way and does not necessarily mean the original order. It can be any order, including the amended or rectified order. This interpretation aligns with the Supreme Court's judgment in Hind Wire Industries Ltd. v. Commissioner of Income-Tax, which held that the word "order" includes even a rectified order.

2. Consequential Order Passed by the Assessing Authority Suo-Moto under Section 154:
The court analyzed whether the consequential order passed by the assessing authority to give effect to the remand report would be deemed the rectified order of the original assessment. It was concluded that subsequent orders were limited to the issue of "long term capital gain" and did not encompass other aspects of the original assessment. Therefore, the limitation period for rectification would commence from the original order.

3. Tribunal's Holding on Consequential Order and Doctrine of Merger:
The court upheld the Tribunal's decision that the consequential order passed by the assessing officer cannot be considered a rectified order, and the doctrine of merger would not apply. The remand by the Tribunal was limited to determining the fair market value of the land and did not affect other aspects of the original assessment.

4. Meaning of the Word "Order" in Section 154(7):
The court clarified that the word "order" in Section 154(7) could mean the original order or any subsequent order, including an amended or rectified order. However, in the present case, the rectification sought by the appellant pertained to the original order, and hence the limitation period would be calculated from the date of the original order.

5. Application under Section 154 Filed by the Appellant and Limitation:
The court found that the application under Section 154 filed by the appellant was barred by time since it was based on the original assessment order dated 31.03.2006. The subsequent orders were limited to the issue of "long term capital gain" and did not extend the limitation period for other aspects of the original assessment.

6. Tribunal's Calculation of Limitation under Section 154(7):
The court agreed with the Tribunal's approach of calculating the limitation period with reference to the date of the original order of assessment. The subsequent orders did not encompass the issue of set-off of capital loss, and hence the limitation period for rectification did not extend beyond the original order.

7. Limitation Starting from the Original Assessment Order:
The court upheld the Tribunal's decision that the limitation for rectification starts from the date of the original assessment order and not from the date of any subsequent orders unless those orders specifically addressed the issue sought to be rectified.

8. Tribunal's Holding on Merger of Original Order:
The court supported the Tribunal's view that the order passed at the direction of the CIT (Appeals) and the Tribunal did not result in the merger of the original order. The remand was limited to a specific issue, and the original order remained effective for other aspects.

9. Tribunal's Findings and Interpretation of Section 154:
The court concluded that the Tribunal did not record perverse findings of fact or misinterpret Section 154 of the Income Tax Act. The Tribunal's decision was based on a correct understanding of the law and the facts of the case.

Conclusion:
The court dismissed the appeal, confirming the Tribunal's judgment, and held that the appellant's application under Section 154 was barred by time. The limitation for rectification would commence from the original assessment order dated 31.03.2006, and the subsequent orders did not extend this limitation period. The appeal was found to lack merit and was accordingly dismissed.

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