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2021 (9) TMI 325 - HC - Income TaxReopening of assessment u/s 147 - assessee argued notice is beyond the period of limitation as prescribed - whether the assessee can assail the order of the AO rejecting the objections by filing writ petition under Article 226 of the Constitution of India? - correctness of the interim orders granted in the writ petitions - how the time limit prescribed under proviso to Section 153(2) read with Explanation 1(ii) is to be computed? - HELD THAT - The writ appeals were intra-court appeals before the Hon'ble Division Bench against the interim order granted in the writ petitions. On a perusal of the judgment/order passed by the Hon'ble Division Bench 2014 (7) TMI 605 - MADRAS HIGH COURT , it is not clear as to whether there was any interim order granted by the Hon'ble Division Bench staying the order of interim stay granted in those writ petitions - the assessee as well as the Revenue reconciled with the fact that the entire batch was clubbed together and heard. Therefore, we are convinced to state that the stand taken by the assessee before us as well as before the learned Single Bench is unacceptable. Hon'ble Supreme Court had observed that during the pendency of the appeal before it, stay of reassessment was granted, which was directed to be continued till the disposal of the writ petitions before the High Court. Assuming the learned Senior Counsel for the appellant is correct, after the order was passed by the Hon'ble Supreme Court, the order of stay stood revived, which would mean that even after, the order of stay was not extended beyond 08.06.2014, which is deemed to have been extended from 09.06.2014 pursuant to the judgment/order of the Hon'ble Supreme court dated 08.12.2016. In fact, the assessee was basking under the said interim order and therefore, it would not lie in the mouth of the assessee to now contend that the proceedings are barred by limitation The argument on behalf of the appellant wants us to adopt a laser edge approach and if such proposition is to be accepted, it would result in great prejudice to the litigant, who approaches the Court. There are several decisions which hold that even if the interim orders are not extended, as long as the matters are pending before the Court, the authorities, who are bound by the interim orders, though initially granted for a limited period, would always be guided by the fact that the main case is still pending and would await the decision of the Court. The Assessing Officer while completing the reassessment proceedings, has rightly made an observation that had he proceeded further without knowing as to what was the nature of the order passed by the Court, there is every likelihood that he would be hauled up for contempt. Thus, we find that the argument as projected by the appellant is wholly unacceptable and in the facts and circumstances of the case as we have elaborated above, such an argument can never be advanced by the appellant. The appellant having enjoyed the benefit of the interim order passed by the Hon'ble Supreme Court on 08.12.2016, restoring the position, which stood as on 08.06.2014, are not entitled to maintain a challenge to the reopening/reassessment on the ground of limitation. As pointed out by the Assessing Officer, the assessee in their letters dated 22.09.2014 and 23.10.2014, did not raise any objection regarding limitation, their prayer was to keep the proceedings in abeyance as they have filed Special Leave Petition before the Hon'ble Supreme Court. It is only on 24.10.2014, the date on which the reassessment order was passed, the assessee raised a plea regarding limitation. Simultaneously they were pursuing the matter before the Hon'ble Supreme Court and as could be seen from the judgment/order of the Hon'ble Supreme Court 2016 (12) TMI 878 - SUPREME COURT the appellant-assessee had the benefit of an order of stay of reassessment proceedings. Therefore, the assessee's plea that the proceedings are barred by limitation is absolutely frivolous and cannot be entertained and rightly rejected by the Assessing Officer as well as by the learned Single Bench. Therefore, the assessee has to necessarily avail the appellate remedy as against the order of reassessment dated 24.10.2014 and agitate all issues on merits except the contentions with regard to the limitation, which we have rejected in this appeal.
Issues Involved:
1. Reopening of assessment for the assessment year 2007-08. 2. Classification and taxation of interest income. 3. Receipt of lease rent and its tax implications. 4. Limitation period for reassessment proceedings. 5. Maintainability of writ petition challenging reassessment. Detailed Analysis: 1. Reopening of Assessment for the Assessment Year 2007-08: The assessee challenged the reopening of the assessment for the year 2007-08, contending that the issues raised by the Assessing Officer (AO) were already considered in the original assessment. The AO had classified interest income from bank deposits under 'income from other sources' instead of 'business income,' which was affirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that this did not constitute escapement of income as the issue was already part of the original assessment. 2. Classification and Taxation of Interest Income: The AO classified the interest income from bank deposits under 'income from other sources' rather than 'business income,' which the assessee had claimed. The CIT(A) upheld this classification but allowed the set-off of this income against business losses. The assessee contended that the AO's classification was incorrect and that the reassessment was merely a change of opinion, which is impermissible in law. 3. Receipt of Lease Rent and Its Tax Implications: The AO treated the lease transaction with M/s. DLF Properties Ltd. as a sale and proposed to tax the lease rent under 'capital gains' instead of 'business income' or 'income from other sources.' The assessee argued that the lease was for 66 years and should not be treated as a sale. The AO's approach was based on the Lease Deed and the decision in R.K. Palshikar (HUF) vs. CIT, which considered long-term leases as deemed sales. 4. Limitation Period for Reassessment Proceedings: The primary contention was that the reassessment order dated 24.10.2014 was barred by limitation. The assessee argued that the limitation period expired on 07.08.2014, considering the interim stay granted from 06.02.2013 to 08.06.2014. The AO contended that the limitation should be computed from the date of receipt of the Court's order (04.09.2014), making the reassessment within the permissible period. 5. Maintainability of Writ Petition Challenging Reassessment: The Revenue argued that the writ petition challenging the reassessment was not maintainable as the assessee had an effective alternate remedy of filing an appeal before the CIT(A). The Court agreed, stating that the assessee should exhaust the appellate remedy, which is not only effective but also allows for re-appreciation of facts and law. Judgment Summary: The Court dismissed the writ appeals, emphasizing that the challenge to the reassessment on merits should be addressed through the appellate remedy before the CIT(A). The Court found that the reassessment proceedings were not barred by limitation, as the limitation period should be computed from the date the Revenue received the Court's order. The Court upheld the liberty granted to the assessee to file an appeal before the CIT(A) within four weeks from the date of receipt of the judgment. Conclusion: The Court concluded that the assessee's plea regarding the limitation was frivolous and that the reassessment proceedings were valid. The assessee was directed to pursue the matter through the appellate process, where all issues on merits could be agitated except the limitation contention, which was rejected. The writ appeals were dismissed, and the assessee was granted liberty to file an appeal within the stipulated time.
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