2014 (5) TMI 820 - HC - Income Tax

Validity of reassessment order u/s 147 - Bar of limitation as per proviso to Explanation 1 to 153(2) of the Act Held that - For computing the period of limitation the period during which the assessment proceedings is stayed shall be excluded - the concept of communication of the order of the Court cannot be imported - The exclusion of the period has been provided because of stay or injunction by any Court during which the assessment proceedings are stayed - The intention is clear that when the limitation for assessment has started it can be stayed only by an order or injunction of any Court and as soon as the order or injunction of the Court is vacated, the period of limitation shall re-start since after the vacation of the order of the Court, there is no embargo on the authorities to proceed with the assessment - The contention of the Revenue that the limitation will start again only when the order is communicated to the Department thus cannot be accepted. Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 are also part of the same statutory scheme - In Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 the statutory scheme provides for computing the period of limitation from the date when the order under sub-section (1) of Section 245D and 245Q is received by the Commissioner - the legislature has provided for excluding the period from the date of communication of the order where they so intended - The use of concept of communication of receiving the order in the same provision which is absent in Explanation 1 (ii) concerned clearly indicates that for the purposes of Explanation 1 (ii), the communication of the order of the Court vacating the stay order or injunction is not contemplated - The provisions of Section 153 (3) (ii) of the Act, 1961 are clear and explicit - where the assessment, re-assessment or re-computation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, the provisions of sub-section (1) (1a) and (1b) of the Act, shall not apply. Where the assessment, re-assessment or re-computation is made on the assessee or any person in consequence of or to give effect to any finding or direction in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act, the period of limitation as provided under Section 153 (2) of the Act, shall not be attracted - Relying upon Rajinder Nath Vs. Commissioner of Income Tax, Delhi 1979 (8) TMI 3 - SUPREME Court - In the order dated 01/8/1995, neither there is any finding nor there is any direction which can be relied on by the AO for framing the assessment - There being neither any direction nor any finding within the meaning of Section 153 (3) (ii) of the Act, the contention of the revenue the Revenue that there shall be no limitation for making assessment cannot be accepted Decided against Revenue.

Summary

Issues Involved:
1. Whether the assessment order dated 04/1/1996 was barred by limitation as per Section 153 of the Income Tax Act, 1961.
2. Whether the assessment order dated 04/1/1996 can be treated as an assessment made in consequence of or to give effect to any finding or direction contained in the High Court's order dated 01/8/1995.

Detailed Analysis:

1. Limitation of Assessment Order:
The primary issue was whether the assessment order dated 04/1/1996 was barred by limitation under Section 153 of the Income Tax Act, 1961. Notices under Section 147(a)/148 were issued on 08/11/1989, requiring the assessment to be completed by 31/3/1992. However, writ petitions filed by the assessee resulted in a stay on the assessment proceedings from 24/3/1992 to 01/8/1995. The Revenue argued that the limitation period should be computed from the date the High Court's order vacating the stay was communicated to the Department, which was 18/12/1995. The Court rejected this argument, stating that the limitation period starts from the date the stay is vacated, not from the date of communication. The Court emphasized that the statutory scheme under Explanation 1(ii) to Section 153 excludes the period during which the assessment proceeding is stayed by an order or injunction of any court. Thus, the assessment should have been completed by 30/9/1995, making the order dated 04/1/1996 beyond the prescribed period and hence barred by limitation.

2. Assessment Made in Consequence of High Court's Order:
The additional issue was whether the assessment order dated 04/1/1996 could be treated as being made in consequence of or to give effect to any finding or direction contained in the High Court's order dated 01/8/1995, thereby lifting the bar of limitation as per Section 153(3)(ii). The Court examined the High Court's order dated 01/8/1995, which dismissed the writ petitions due to non-substitution of the legal heirs of the deceased assessee. The Court found that the order did not contain any finding or direction that could be used to frame the assessment. The Court referred to the Supreme Court's interpretation in Rajinder Nath v. Commissioner of Income Tax, which clarified that a finding or direction must be necessary for the disposal of the case and directly involved in the disposal of the particular case. Since the High Court's order did not contain any such finding or direction, the provision of Section 153(3)(ii) was not applicable, and the assessment order could not be saved from being barred by limitation.

Conclusion:
The Court concluded that the assessment order dated 04/1/1996 was barred by limitation and could not be treated as an assessment made in consequence of or to give effect to any finding or direction contained in the High Court's order dated 01/8/1995. Therefore, all the appeals were dismissed in favor of the assessee and against the Revenue.