2019 (8) TMI 437 - AT - Income Tax

Reopening of assessment u/s 147 - Validity of Direction of CIT(A) u/s 150 - period of limitation - limitation of six years provided in section 149 - HELD THAT - In the present case, the impugned order was passed on May 3, 2019. The assessment year involved is assessment year 2011-12. Thus, in accordance with the provisions of section 149(1)(b) of the Act, notice under section 148 could have issued by the end of assessment year 2018-19. This period had already elapsed when the impugned order came to be passed. Therefore, the law not permitting initiation of proceedings under section 147 when the order under appeal was passed, the direction of CIT(Appeals) is not in accordance with law. It is a nonest direction. It is well-settled that an appellate authority cannot confer jurisdiction which the Assessing Officer does not have, e. g., as in the case of an assessment being barred by limitation. See BENGAL TEA AND FABRICS LIMITED VERSUS ASSISTANT COMMISSIONER OF TAXES 1996 (9) TMI 110 - GAUHATI HIGH COURT Reopening u/s 147 on direction of superior Officer - As per the provisions of section 147 it is only if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, that he may assess or reassess such income. Thus, the reason to believe escapement of income has necessarily to be that of the AO only and not of any other authority. In CIT v. SFIL Stock Broking Ltd. 2010 (4) TMI 102 - DELHI HIGH COURT it has been held, inter alia, that the Assessing Officer cannot reopen a completed assessment merely because he has been directed to do so by a superior Officer. Therefore too, the direction issued by the learned CIT(A) cannot entitle the AO to initiate proceedings under section 147. Grievance of the assessee to be justified, the same is accepted. - Decided in favour of assessee.

Issues Involved:
1. Limitation period for issuing a direction under Section 150(2) read with Section 149 of the Income-tax Act, 1961.
2. Validity of the direction issued by the Commissioner of Income-tax (Appeals) under Section 150 of the Income-tax Act, 1961.
3. Jurisdiction and authority of the Assessing Officer to initiate reassessment proceedings based on the direction of the Commissioner of Income-tax (Appeals).
4. Consequences of the direction on reassessment proceedings and potential multiplicity of litigation.

Detailed Analysis:

Issue 1: Limitation Period for Issuing a Direction under Section 150(2) read with Section 149 of the Income-tax Act, 1961

The assessee contended that the limitation period of six years provided in Section 149 of the Income-tax Act, 1961, for the assessment year 2011-12 expired on March 31, 2018. Therefore, the Commissioner of Income-tax (Appeals) could not issue a direction to the Assessing Officer to initiate reassessment proceedings under Section 148 on May 3, 2019, as it was barred by limitation. The Tribunal agreed with the assessee, referencing multiple judicial decisions, including the case of Narayandas Tolani v. ITO, where it was held that directions under Section 150(1) are barred by limitation if the period for reopening the assessment had expired.

Issue 2: Validity of the Direction Issued by the Commissioner of Income-tax (Appeals) under Section 150

The Tribunal noted that the Commissioner of Income-tax (Appeals) annulled the assessment order but simultaneously directed the Assessing Officer to execute remedial action under Section 148, citing a strong case of income escapement under Section 50C. The Tribunal found this direction invalid as per Section 150(2), which restricts the applicability of Section 150(1) if the reassessment could not have been made at the time the appellate order was passed due to time limitations under Section 149. Since the limitation period had expired, the direction was deemed nonest and not in accordance with the law.

Issue 3: Jurisdiction and Authority of the Assessing Officer

The Tribunal emphasized that an appellate authority cannot confer jurisdiction on the Assessing Officer if it is barred by limitation. They cited the Gauhati High Court's decision in Bengal Tea and Fabrics Ltd. v. Asst. CIT, which held that an appellate authority cannot confer jurisdiction that the Assessing Officer does not possess. Additionally, the Tribunal referenced CIT v. SFIL Stock Broking Ltd., where it was held that the Assessing Officer must have an independent reason to believe that income has escaped assessment, and cannot act solely on the direction of a superior officer.

Issue 4: Consequences of the Direction on Reassessment Proceedings and Potential Multiplicity of Litigation

The Tribunal acknowledged the assessee's concern that the reassessment proceedings initiated based on the invalid direction would lead to unnecessary litigation and waste of resources. They concluded that the direction issued by the Commissioner of Income-tax (Appeals) would result in illegal reassessment proceedings and multiplicity of litigation, thereby justifying the stay on such proceedings.

Conclusion:

The Tribunal allowed the appeal, expunging the direction issued by the Commissioner of Income-tax (Appeals) under Section 150 of the Income-tax Act, 1961, as it was barred by limitation and not in accordance with the law. Consequently, the stay application was rejected as infructuous. The judgment underscores the importance of adhering to statutory time limits and the jurisdictional boundaries of tax authorities.

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