2021 (7) TMI 1205 - HC - Income Tax

Reopening of assessment u/s 147 - re-assessment were passed within or beyond the period of limitation - Time limit for completion of assessment, reassessment and recomputation u/s 153 - interim order passed by the Hon'ble Supreme Court stating that the re-assessment order shall not be framed if not framed so far - Denial of natural justice - HELD THAT - The knowledge or intimation to the competent authority through the respective learned counsels appearing on behalf of the parties to the lis is one aspect of the matter, which can be construed as non-official communications and cannot be taken into account for the purpose of reckoning the period of limitation under the provisions of the Act. Only when an official communication is effected with the seal of the Court concerned, then alone the period of limitation should reckon and not otherwise. If this administrative procedure is not consistently followed, then there is a possibility that every litigant or the department would take undue advantage of any such unofficial communications, which would lead to confusion and chaos and the sanctity of the period of limitation contemplated is diluted. Therefore, knowledge and oral communications or private communications would not be taken into consideration for the purpose of reckoning the period of limitation as contemplated under the provisions of the statute and only if such communications are officially effected, the said point is to be taken into account for the purpose of reckoning the period of limitation.' On the issue in the matter of reckoning the period of limitation which would have the binding effect and therefore, as per the judgment of the Constitution Bench of the Hon'ble Supreme Court of India, in the case of National Insurance Co. Ltd., Vs. Pranay Sethi and others, 2017 (10) TMI 1276 - SUPREME COURT the judgment of the Hon'ble Supreme Court of India is to be followed as precedent. Moreover, in the case cited supra, the Hon'ble Apex Court, in clear terms, held that mere pronouncement of the order would not be sufficient. The order must be signed, sealed, dated and communicated to the parties, enabling them to understand the reasons and the spirit of the order. This being the principles to be followed, there is no reason whatsoever to accept the contentions raised on behalf of the petitioner and the judgments relied on by the petitioner are of no avail, as the Hon'ble Apex Court, in clear terms, held the manner in which the period of limitation is to be reckoned. This being the factum established and principles to be followed, this Court has no hesitation in arriving a conclusion that the case of the petitioner deserves no appreciation. Principles of natural justice has been violated - It is not the case as if no opportunity was granted to the petitioner. Opportunity was given, but the petitioner has chosen to make a representation to the authorities that they are supposed to wait until the Hon'ble Supreme Court takes up his appeal for hearing. This Court is of the considered opinion that mere filing of an appeal before the High Court or Hon'ble Supreme Court would not preclude the competent authorities from exercising their powers, which is otherwise conferred under the provisions of the Act. Unless any interim order or otherwise is communicated to the authorities, they are bound to proceed under the provisions of the Act, in the manner known to law and therefore, mere filing of the case before the Hon'ble Supreme Court is not a ground to raise that the petitioner was not afforded with opportunity. Even, the petitioner has requested the authorities to wait. The petitioner has no right to make such a request to the Income Tax authorities, stating that they have preferred an appeal and therefore, they should not act under the provisions of the Act. The said submission deserves no merit consideration. The learned Standing Counsel, in this regard, made a submission that the SLP as per the petitioner, was filed on 08.10.2014 and it was taken up for hearing and an interim order was passed on 03.11.2014, after passing of an order of re-assessment by the competent authority on 21.10.2014. This apart, the petitioner has availed the opportunity and submitted their reply on 16.10.2014 and 20.10.2014. However, they made a request to stop all further proceedings till their appeal is taken up for hearing. This Court is of the considered opinion that the processes initiated under any statute need not be stalled unless there is an order from the competent higher authority or by the Court of law. Mere request in this regard is insufficient and if such a request is considered, the very spirit of the Act as well as the power of the authorities to continue the proceedings would be prejudiced and therefore, this Court is of an opinion that the opportunity provided by the respondent to the petitioner was not properly utilised, but they have utilised the same for the purpose of prolonging the proceedings. Therefore, this Court is of the considered opinion that the principles of natural justice has not been violated in this case, but the opportunities provided are not properly utilised by the petitioner, for which the respondent cannot be faulted. WP dismissed.

Summary

Issues Involved:
1. Validity of reassessment orders passed beyond the period of limitation under Section 153(2) of the Income Tax Act, 1961.
2. Interpretation of the period of limitation concerning the stay of assessment proceedings.
3. Alleged violation of principles of natural justice.

Detailed Analysis:

1. Validity of Reassessment Orders Passed Beyond the Period of Limitation:
The petitioner sought to set aside the reassessment orders dated 21.10.2014 for the Assessment Years 2005-06 and 2006-07, arguing that they were issued beyond the statutory period of limitation. The petitioner contended that the limitation period expired on 12.10.2014, based on the dismissal of their earlier writ petitions on 04.07.2014 and the 100 days stay granted by the court. The petitioner emphasized that the reassessment order should have been passed by 12.10.2014, not 21.10.2014.

2. Interpretation of the Period of Limitation Concerning the Stay of Assessment Proceedings:
The petitioner relied on Explanation 1, Sub Clause (ii) to Section 153 of the Act, which excludes the period during which the assessment proceeding is stayed by any court. The petitioner argued that the period of stay should be counted from the date of the stay order's vacation, not from when the order is communicated to the department. Several judgments were cited to support this, including those from the High Courts of Allahabad and Delhi, which emphasized that the limitation period restarts immediately after the stay is vacated, irrespective of the communication date.

Conversely, the respondents argued that the period of limitation should be reckoned from the date the order is officially communicated to the department. They contended that the Income Tax officials could only act upon receiving the court's order, not based on informal communications or knowledge of the order. The respondents cited the Supreme Court's judgment in Jeet Singh vs. Union of India, which supports the notion that official communication is necessary for the limitation period to commence.

3. Alleged Violation of Principles of Natural Justice:
The petitioner claimed a violation of natural justice, arguing that the reassessment orders were hurriedly passed without waiting for the Supreme Court's decision on their appeal. The petitioner had requested the Income Tax Department to hold off on further action until the Supreme Court's decision. However, the court found that the petitioner was given an opportunity to present their case and submit replies on 16.10.2014 and 20.10.2014. The court held that mere filing of an appeal does not preclude the authorities from exercising their statutory powers unless an interim order is communicated.

Conclusion:
The court dismissed the writ petitions, holding that the reassessment orders were passed within the period of limitation, as the limitation period should be reckoned from the date of official communication of the court's order. The court emphasized that official communication is essential for the limitation period to commence, as informal or private communications could lead to confusion and undermine the statutory provisions. The court also rejected the claim of a violation of natural justice, noting that the petitioner had been given sufficient opportunity to present their case. The court criticized the petitioner’s approach as a tactical method to delay proceedings and emphasized the importance of adhering to procedural requirements to maintain the integrity of the judicial process.