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TMI Blog2003 (12) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary for the disposal of these appeals revolve in a narrow compass. The assessees herein owned substantial agricultural land at Sahebnagar in the outskirts of Hyderabad. The land was converted into house sites and sold during the assessment years under consideration. Income-tax returns were filed by the assessees wherein the income on the sale of plots was claimed to be not taxable on the ground that the income arises out of the sale of agricultural land and, hence, exempt from taxation. The Assessing Officer, however, made an assessment in the status of an 'association of persons' and treated the sale of plots as 'adventure in the nature of trade'. Protective assessments were also made in the year 1986, in the status of respective HUFs by treating the activity of the HUFs as 'adventure in the nature of trade'. 4. The ITAT, Hyderabad Bench however, set aside the orders on the ground that there was no element of trade in these transactions and hence the Assessing Officer was not justified in treating it as an 'adventure in the nature of trade' and that there was no question of the assessee forming 'association of persons'. 5. However, while disposing of the appeals filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its judgment dated 27-1-2000. Since some of the observations of the Hon'ble Court were taken aid of by both the parties in support of their respective contentions as to whether there was a 'finding or direction' by the ITAT, it may be useful to extract the operative portion of the judgment and, accordingly, it is extracted below: "In our view, the contention advanced on behalf of the assessee stems from a misconception as to the true scope and effect of the Tribunal's order. Let us analyse what the Tribunal has said: (1) It will be open to the ITO to examine the receipts of the incomes by all these assessees from the angle of computation of capital gains. (2) Surely if the assessees' liability arises on the ground of capital gains, they cannot escape therefrom. Having said thus, the Tribunal finally observed "but, this must be properly investigated and ascertained. We order accordingly". As far as extracts 1 and 2 are concerned, the Tribunal has only reiterated something obvious and which admits of no controversy. Whether the Tribunal had made such observation or not, it was undoubtedly open to the Assessing Officer to examine the question from the point of view of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity to the appellant. The proper course for the Assessing Officer would be to reopen the assessment under section 147 read with section 150(1) in case the capital gains if any from the sale of land are to be subjected to tax." 8. On an appeal by the revenue, the ITAT, A-Bench, Hyderabad affirmed the order of the learned DCIT (Appeals) wherein it was observed as under: "From the above observations and directions, it is clear that the Assessing Officer has to re-examine the issue afresh regarding the liability to capital gains tax. There is also specific direction to the Assessing Officer that the assessee would be entitled to make submissions before the Assessing Officer on this count who will dispose of the issue after providing the assessees opportunity of being heard. But, in utter violation of those directions, the Assessing Officer passed the order under section 154 without either deciding the issue or giving opportunity to the assessees. The said order was rightly cancelled by the DCIT (Appeals).... But however, this will not preclude the Assessing Officer to give effect to the order of the Tribunal passed on 15-11-1989, the Assessing Officer is directed to give effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) was not convinced with the submissions of the assessees and accordingly dismissed the appeals. In this regard, he observed as under: "12. Without going further into the merits of the arguments and plethora of case law relied upon by the appellant's counsel regarding the validity of notices issued under section 148 without jurisdiction, i.e., after expiry of the time-limit available under the Act. In an appeal filed by the appellant against a fresh assessment made by the officer in pursuance of a revisional order passed by the Commissioner in exercise of his power under section 263. The appellate authority is not competent to set aside such fresh assessment on the ground that the Commissioner's order was not valid unless such order of the Commissioner is held not sustainable in law by the competent appellate authority court as held by the Patna High Court in the case of CIT v. Anardei Devi reported in 173 ITR 69, 71. 13. In view of the above judgment, I am of the firm view that it may not be appropriate for me to adjudicate upon an order passed by the Assessing Officer as a consequence of clear and specific directions given by the CIT in his order dated 9-3-1999 pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggestion from the Appellate Tribunal to examine the issue from the angle of liability towards capital gains do not carry any force of law and thus cannot be equated to a finding or direction by the ITAT. Learned counsel has adverted our attention to para 8 of the order of the ITAT to emphasise that the Appellate Tribunal has merely left open the issue to the discretion of the Assessing Officer without giving any finding or direction. The following observations of the ITAT were referred to in this regard: "... It will be open to the ITO to examine the receipt of income by all these assessees from the angle of computation of capital gains." The learned counsel has also adverted our attention to the judgment of Hon'ble High Court of Andhra Pradesh to submit that the observations of the Tribunal were only with regard to facts which are obvious and admits of no controversy and even sans such observations, it was open to the Assessing Officer to examine the question from the point of capital gains provided the Assessing Officer had the power to make further assessment or reassessment. The Court further noticed that the observations of the Tribunal would not confer any power on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of capital gains." 15. Alternatively, it was submitted that even if assuming that notices under section 148 read with section 150(1) were issued consequent to the orders of the ITAT dated 15-11-1989, such consequential orders should have been passed within two years from the end of the financial year for which the relevant orders of the ITAT were received by the CIT, according to the provisions of section 153(2A) of the Act. It was also contended that the reopened assessments ought to have been completed before 31-3-1992 whereas they were completed only on 28-3-1997 which date falls well beyond the period of limitation. It may be noticed that the assessee did not challenge the assessments made on 28-3-1997 because there was no cause of action at that stage; the assessments were completed without bringing to tax the income on the sale of the land on the ground that it was not liable to capital gains tax. However, it was contended that such invalid assessments can be challenged at any stage, when such assessments are the root cause for invoking jurisdiction under section 263 of the Act. In this regard, he relied upon the decision in the case of Gulabchand Motilal CIT [1988] 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for reopening the assessments. He further submitted that the finding or direction by the Tribunal was very much necessary for disposal of the appeal because it was inextricably linked to the main finding that the income on the sale of the plots is not liable to be taxed as business income. Learned DR has also referred to the order of the DCIT(A), B-Range, Hyderabad (page -14 of the assessee's paper book) to submit that even the first appellate authority has understood the order of the Tribunal dated 15-11-1989 as a direction to the Assessing Officer empowering the latter to reopen assessment under section 147 read with section 150(1) of the Act. He then referred to the judgment of Hon'ble High Court of Andhra Pradesh in RC No. 236 of 1990 to submit that the question referred to the Hon'ble High Court was only with regard to the power of the Tribunal to issue directions to the Assessing Officer to examine the leviability of capital gains and thus the Court was not called upon to decide whether it was a finding or direction. He has also adverted our attention to page 36 of assessee's paper book to submit that the Court has also understood that the observations of the Tribunal amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the issue, the learned counsel submitted that section 153(3) has to be read with section 153(2A) of the Act and thus the reassessment proceedings were barred by limitation. He further submitted that the observations of the Appellate Tribunal were correctly understood by the Hon'ble High Court as having no binding force on the Assessing Officer and thus it cannot be equated to a finding or direction within the meaning of section 150(1) of the Act. He has also submitted that the case-law relied upon by the learned DR are distinguishable on facts. 23. We have carefully considered the rival submissions and perused the record. Before we proceed to analyse the facts of the case, it may be relevant to notice the scope and ambit of the provisions concerning the reopening of the assessment and completion of such assessment. Section 149 of the Act provides time-limit for issuing notice under section 148; if the income chargeable to tax is likely to be less than Rs. 50,000, notice has to be issued within four years and if it is less than Rs. 1 lakh, proceedings can be initiated within 7 years from the end of the relevant assessment year. In the instant case, even for the last of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedence over the other interpretations. The order of the ITAT dated 15-11-1989 was the subject-matter of consideration by the Hon'ble High Court and, in its judgment dated 27-1-2000, the Court categorically observed that the Tribunal merely made certain observations without conferring any power on the Assessing Officer to do something which it could not have otherwise done within the four corners of the Act. On a careful reading of the judgment of the Hon'ble High Court, we are of the firm view that the ITAT, in its order dated 15-11-1989, did not record any, specific 'finding or direction' within the meaning of section 150(1)/153(3) of the Act. The observation was only to the effect that the Tribunal gave liberty to the Assessing Officer to examine the question of leviability of capital gains, if it is otherwise permissible under law. The income on sale of plots is not assessable either in different assessment years or in the hands of different persons and thus Explanations 2 and 3 to section 153(3) also do not come to the aid of the revenue to reopen the assessment beyond the normal period of limitation prescribed under section 149 of the Act. Thus, we are of the opinion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in completion of the same. Merely because the provisions of sections 150(1) and 153(3) do not provide for any specific time frame, it cannot be said that the Assessing Officer is empowered to reopen the assessments and complete them after abnormal delay, compared to the normal time frames set by the Legislature in other provisions of the Act. In the case of K.P. Narayanappa Setty Co. v. CIT [1975] 100 ITR 17, the Hon'ble Court observed that though no specific period, within which penalty may be levied, is fixed by the Indian Income-tax Act, 1922, there should not be any inordinate delay and penalty should be levied within a reasonable time. In our considered opinion, the same analogy applies to the instant case. Reasonable time, in the instant case, can, at best, be considered to be four years (though we are not laying down any rigid principle of law) but the notices having been issued under section 148 after 5 years from the date of order passed by ITAT, the proceedings can be said to be barred by limitation. 28. It may also be relevant to notice the observations of Hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1. "It has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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