2018 (5) TMI 237 - AT - Income Tax

Assessment framed being barred by time - period of limitation - whether the limitation for framing reassessment would start from the date when the Tribunal passed order dated 11.12.2000 or from the date when the Hon ble High Court issued direction to frame assessment de novo after quashing the finding of the Tribunal in respect of the issue of service of notice u/s 143(2)? - Held that - There is no dispute with regard to the fact that the order of the Tribunal was not challenged by the assessee. Now, at this stage, the assessee cannot be permitted to take a plea against the order passed by the Tribunal in respect of the observation of the Tribunal that the issue regarding service of notice would be subjected to the outcome of appeal preferred against the order of the Tribunal. The limitation is required to be reckoned from the date when the Hon ble High Court directed the AO to, frame the assessment. It is also a fact that the extension of framing of assessment was granted by the Hon ble High Court in a Misc. Petition filed in the main appeal. Therefore, the limitation would run when the last direction was given by the Hon ble High Court. No merit in the submissions of the assessee that the assessment so framed is time barred. Direct the Registry to fix the appeals for hearing on merit of the case related to other grounds raised by the assessee/revenue. - Decided against assessee.

Issues Involved:
1. Validity of the fresh assessment in light of the Supreme Court's directions.
2. Whether the fresh assessment order dated 12.07.2007 is barred by limitation under Section 153(2A) of the Income Tax Act, 1961.
3. Disallowance of 100% depreciation on leased assets (milk cans).
4. Consistency of the transaction acceptance by the department in the preceding year.
5. Burden of proof regarding the genuineness of the transaction.
6. Disallowance of deferred revenue expenses.
7. Levy of interest under Section 220(2) from the expiry of 35 days from the date of service of the original assessment order.

Detailed Analysis:

1. Validity of the Fresh Assessment:
The assessee contended that the Commissioner of Income-tax (Appeals) [CIT(A)] erred by not deciding the validity of the fresh assessment, overlooking the Supreme Court's directions dated 05.04.2007 in SLP(Civil) No.5740/2007. The CIT(A) should have determined whether the department was entitled to any extension of limitation under Section 153(2A) of the Income Tax Act, 1961.

2. Limitation of the Fresh Assessment Order:
The assessee argued that the fresh assessment order dated 12.07.2007 was barred by limitation under Section 153(2A) of the Income Tax Act, 1961. The CIT(A) overlooked the fact that in the absence of any stay granted by any court, the period of limitation had to be reckoned from the date of the ITAT order of 11.12.2000. The assessment order, therefore, being barred by limitation, was illegal and without jurisdiction.

3. Disallowance of 100% Depreciation on Leased Assets:
The CIT(A) upheld the action of the Assessing Officer (AO) by disallowing the claim of 100% depreciation of ?1,08,27,800/- on leased assets (milk cans), treating the entire transaction of purchase and lease of assets as bogus and non-genuine. The assessee contended that this disallowance was wrong and should be deleted.

4. Consistency of Transaction Acceptance:
The assessee argued that the CIT(A) erred in overlooking the fact that in the immediately preceding year (AY 2005-06), the same transaction with the same persons was accepted as genuine by the department in regular assessment and even in reassessment proceedings by eventually dropping the proceedings under Section 148. Therefore, the transaction should have been accepted as genuine on the basis of consistency.

5. Burden of Proof on Genuineness of Transaction:
The assessee contended that the CIT(A) failed to appreciate that the burden to prove the transaction as bogus and non-genuine lay on the department, which failed to bring any cogent material on record to disprove the transaction. The department's failure to discharge its onus should result in treating the transaction as genuine.

6. Disallowance of Deferred Revenue Expenses:
The CIT(A) confirmed the disallowance made by the AO of 20% of deferred revenue expenses of ?42,62,163/-. The assessee argued that this disallowance was wrong and contrary to the directions of the ITAT in its order dated 11.12.2000.

7. Levy of Interest Under Section 220(2):
The CIT(A) upheld the AO's action of levying interest under Section 220(2) from the expiry of 35 days from the date of service of the original assessment order and demand notice till the date of the fresh assessment order. The assessee argued that the interest charged under Section 220(2) was contrary to the provisions of Section 220(2) and CBDT Circular No.334 of 03.04.1982.

Tribunal's Decision on Limitation Issue:
The Tribunal noted that the Hon'ble Supreme Court in SLP(Civil) No. 5740/2007 dated 05.04.2007 allowed the assessee to raise the issue of limitation before the CIT(A). The Tribunal considered whether the limitation for framing reassessment should start from the date of the ITAT order (11.12.2000) or from the date of the Hon'ble High Court's direction (03.01.2005). The Tribunal held that the limitation should be reckoned from the date when the Hon'ble High Court directed the AO to frame the assessment. The Tribunal rejected the assessee's preliminary objection on the question of limitation and directed the Registry to fix the appeals for hearing on the merit of the case related to other grounds raised by the assessee/revenue.

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